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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[L O G O]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 24, 2000
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 26, 2000, at 10:00
A.M., for the following purposes:
(1) to elect four directors to serve until the 2003 annual meeting of
stockholders and one director to serve until the 2002 annual
meeting of stockholders; and
(2) to transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on March 8, 2000, 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. You may also vote by telephone. Instructions for this convenient voting
method are set forth on the enclosed proxy card.
By order of the Board of Directors:
J. P. Causey Jr.
Secretary
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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 26, 2000, and at any adjournments of such meeting. An annual
report, including financial statements for the year ended December 31, 1999, 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 $6,500, plus direct out-of-pocket expenses. Brokerage houses,
nominees and fiduciaries have been requested to forward proxy soliciting
material to the beneficial owners of the stock held of record by them, and the
Corporation will reimburse them for their charges and expenses.
The Corporation's charter authorizes the issuance of up to 60,000,000
shares of Common Stock ($1 par value) ("Common Stock") and 500,000 shares of
Preferred Stock ($100 par value). Only stockholders of record at the close of
business on March 8, 2000, 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 17,509,043 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 24, 2000.
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ELECTION OF DIRECTORS
(PROPOSAL 1)
The Corporation's Board of Directors is divided into three classes. At the
annual meeting, four directors are expected to be elected to Class II to hold
office for a term of three years and one director is expected to be elected to
Class I to hold office for a term of two years and, in each case, until their
respective successors are duly elected and qualified.
Information Concerning Nominees
Class II (to serve until the 2003 annual meeting of stockholders)
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
[PHOTO] James E. Rogers, 55 1999
President, SCI Investors, Inc., a private equity
investment firm; Director of Owens & Minor, Inc.,
Caraustar Industries, Inc., Virginia Management
Investment Corp. and Wellman, Inc.
[PHOTO] Wallace Stettinius, 67 1980
Retired (since 1995); former Chairman of the
Board, Cadmus Communications Corporation, a
graphic communications holding company; Director
of Cadmus Communications Corporation.
[PHOTO] Joseph P. Viviano, 61 1988
Vice Chairman (since 1999) and Director, Hershey
Foods Corporation, a manufacturer of confectionery
products; former President and Chief Operating
Officer (1993-1998), Hershey Foods Corporation;
Director of Harsco Corporation, Huffy Corporation
and R.J. Reynolds Tobacco Holdings Company, Inc.
[PHOTO] Harry H. Warner, 64 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 I (to serve until the 2002 annual meeting of stockholders)
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
[PHOTO] Sir David Fell, 57 2000
Chairman and Director, Northern Bank Limited, a
banking and financial services company (since
1998); Non-executive Chairman, Boxmore
International PLC, a printing and packaging
company (1998-2000); Head of the Northern Ireland
Civil Service and Second Permanent Under Secretary
of State in the Northern Ireland Office (1991-
1997); Director of Fred Olsen Energy ASA and
Dunloe Ewart plc.
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 five
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,
(i) in the case of Class II, the Board may reduce the size of the Class to the
number of remaining nominees, for whom the proxies will be voted, and (ii) in
the case of Class I, the Board may reduce the size of the Class, and no nominees
will be considered for election to such Class at the 2000 annual meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 1 TO
---
ELECT MESSRS. ROGERS, STETTINIUS, VIVIANO AND WARNER TO THE BOARD OF DIRECTORS
TO SERVE UNTIL THE 2003 ANNUAL MEETING AND TO ELECT SIR DAVID FELL TO THE BOARD
OF DIRECTORS TO SERVE UNTIL THE 2002 ANNUAL MEETING.
3
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Directors Continuing in Office
There are six directors whose present term of office will continue until
2001 or 2002, 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.
Class I (to serve until the 2002 annual meeting of stockholders)
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
[PHOTO] John W. Rosenblum, 56 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.
[PHOTO] Richard G. Tilghman, 59 1986
Vice Chairman and Director of SunTrust Banks,
Inc., a bank holding company (since 1999), and
Chairman of the Board, Crestar Financial
Corporation, a bank holding company; former Chief
Executive Officer, Crestar Financial Corporation.
[PHOTO] Hugh V. White, Jr., 66 1999
Senior Counsel, Hunton & Williams, the
Corporation's principal law firm (since 1999);
former Partner, Hunton & Williams; Director of
Pulaski Furniture Corporation.
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Class III (to serve until the 2001 annual meeting of stockholders)
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
[PHOTO] Robert L. Hintz, 69 1985
Chairman of the Board, R. L. Hintz and Associates,
a management services consulting firm; Director of
Arch Coal, Inc. and Reynolds Metals Company.
[PHOTO] Thomas H. Johnson, 50 1997
President and 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.
[PHOTO] Frank S. Royal, 60 1990
Physician; Director of Columbia/HCA Healthcare
Corporation, CSX Corporation, Dominion Resources,
Inc. and SunTrust Banks, Inc.
The Board of Directors meets regularly each quarter and following each
annual meeting of stockholders. During the last year, there were fourteen
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, Royal and Viviano. During the last year, there were
two meetings of the Executive Committee. The Executive Committee reviews various
matters and submits proposals or recommendations to the Board of Directors. The
Executive Committee is empowered to and does act for the Board of Directors on
certain matters.
Members of the Audit Committee are Messrs. Hintz (Chairman), Rogers,
Rosenblum, Royal and Stettinius. During the last year, there were three
meetings of the Audit Committee. The Audit Committee recommends an independent
accounting firm to be selected by the Board of Directors for the upcoming year.
The Audit Committee reviews and approves various audit functions including the
year-end audit performed by the Corporation's independent accountants. The
Corporation's internal auditors and independent accountants regularly report
directly to the Audit Committee.
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Members of the Executive Compensation Committee (the "Compensation
Committee") are Messrs. Viviano (Chairman), Hintz, Rosenblum and Tilghman.
During the last year, there were six 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. Royal (Chairman),
Stettinius, Tilghman and White. 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 2001 annual meeting must be received in writing by the Secretary
of the Corporation no earlier than January 8, 2001, and no later than February
2, 2001, 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, recommends 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 1999, all directors 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 $20,000 for Board service and an attendance fee of $1,500,
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 1,900 shares of Common
Stock at an exercise price of $30.34 was granted to each non-employee director
on May 1, 1999, and an option to purchase 2,100 shares of Common Stock will be
granted to each non-employee director on May 1, 2000. The exercise price of the
options to be granted in 2000 will be the average closing price of the Common
Stock for the 20 trading days preceding May 1, 2000. Options granted under the
1996 Plan will become exercisable on the day before the next succeeding annual
meeting of stockholders following the date of grant, 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, 2000 (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.
<TABLE>
<CAPTION>
Sole Voting and Aggregate
Investment Percentage
Name Power/(1)/ Other/(2)/ Total Owned/(3)/
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<S> <C> <C> <C> <C>
Sir David Fell..................... 0 0 0
Keith Gilchrist.................... 17,689 0 17,689
Robert L. Hintz.................... 12,100 0 12,100
Thomas H. Johnson.................. 92,969 62,562 155,531
Andrew J. Kohut.................... 75,337 6,050 81,387
Octavio Orta....................... 21,528 4,123 25,651
James E. Rogers.................... 1,000 0 1,000
John W. Rosenblum.................. 6,700 0 6,700
Frank S. Royal..................... 12,200 0 12,200
Wallace Stettinius................. 11,700 0 11,700
Richard G. Tilghman................ 7,314 704 8,018
William T. Tolley.................. 27,059 4,549 31,608
Joseph P. Viviano.................. 19,084 0 19,084
Harry H. Warner.................... 8,350 0 8,350
Hugh V. White, Jr.................. 1,000 12,400 13,400
All Directors, Nominees for
Director and Executive Officers
as a Group (18 persons).......... 455,057 99,897 554,954 3.2%
Lazard Freres & Co. LLC/(4)/
30 Rockefeller Plaza
New York, NY 10020.............. 868,500 91,100 959,600 5.2
Capital Research and
Management Company/(5)/
333 South Hope Street
Los Angeles, CA 90071............ 0 1,159,100 1,159,100 6.6
</TABLE>
_______________
/(1)/ Includes shares held in fiduciary capacities and (a) an aggregate
189,133 shares that may be acquired by the employee director 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 59,100 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 Schedule 13G, dated February 3, 2000, Lazard Freres
& Co. LLC ("Lazard Freres"), an investment advisor registered under the
Investment Advisers Act of 1940, beneficially owns 959,600 shares of Common
Stock. Lazard Freres reported that it exercises sole investment power with
respect to all such shares and sole voting power with respect to 868,500 of such
shares.
/(5)/ As reported in a Schedule 13G, dated February 10, 2000, Capital
Research and Management Company ("Capital Research"), an investment advisor
registered under the Investment Advisers Act of 1940, beneficially owns
1,159,100 shares of Common Stock as a result of acting as investment advisor to
various investment companies. Capital Research reported that it exercises sole
investment power with respect to all such shares and sole voting power with
respect to none of such shares.
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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
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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 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 Corporation's executive
compensation program, the Compensation Committee strives to balance short- and
long-term incentive objectives with an appropriate amount of compensation that
is at risk. Depending on the level of the executive, the Corporation targets
between approximately one-half and two-thirds of executive compensation to be at
risk. 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
approximately two-thirds 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 1999 to be
fully deductible, 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.
1999 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 three container and
packaging companies, all of which are included in the Dow Jones Global
Containers & Packaging Industry Group Index used in the Stock Performance Graph.
The MCS Survey is used because it provides detailed compensation information by
job classification
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(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 mid-range 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 6% increase in Mr. Johnson's salary in 1999. 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
his achievement of individual goals, which primarily related to profitability,
managing cash flow, operating safely in compliance with applicable laws,
managing the Corporation's strategic shift from a commodity company to one
focused on becoming a global leader in specialty packaging and merchandising
services 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, 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 return on equity.
The Compensation Committee noted that the Corporation's financial results for
1999 showed improvement over the levels achieved in 1998, but were slightly
behind the Corporation's 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 also approves annual
------------------------
incentive awards to executive officers in the form of bonuses under the 1997
Incentive Plan. At the beginning of 1999, the Compensation Committee
established award guidelines composed of three distinct award components: (i)
the Corporation's business plan earnings per share ("EPS"), (ii) the business
plan earnings before interest and taxes ("EBIT") for each business unit, and
(iii) the individual officer's achievement of his or her individual goals. The
Compensation Committee also determined each officer's target award, which ranged
from 30% to 60% of base salary, with the CEO having a 60% target. The actual
awards for each individual award component could range from 0% to 200% of the
target award for each component depending on performance relative to the award
guidelines for the component. If performance under 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
determined the awards. The award guidelines established at the beginning of the
year for the CEO were based 75% on EPS and 25% on achievement of individual
goals. The incentive award for Mr. Johnson was $352,050 for 1999, which was
approximately 63% of his year-end base salary, compared to an incentive award of
approximately 67% of year-end base salary for 1998. Mr. Johnson's incentive
award was based upon the Corporation's EPS for 1999 and 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 (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 and other management employees
in the form of stock options, performance shares, stock awards and other
incentive opportunities under the 1997 Incentive Plan. Long-term incentive
awards are intended to align the executives' financial interests with those of
other stockholders by encouraging executive ownership of the Corporation's
stock, and focusing the executives' attention on the long-term growth and
financial success of the Corporation. 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
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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 Dow Jones Global Containers & Packaging
Industry Group Index 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 the overall performance of the Corporation and such
officer's potential to contribute in the future; and, in the case of stock
option awards, prior grant levels.
In 1999, the Compensation Committee granted nonqualified options to
purchase an aggregate of 360,400 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.
The Compensation Committee previously granted incentive award opportunities
and performance shares to Chesapeake's officers and other management employees
for the 1996-2000 performance cycle under the Long-Term Incentive Program. 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. In 1999, the Compensation Committee determined that, in light of the
Corporation's strategic shift from a commodity producer to a specialty packaging
and merchandising services company, the cash flow and sales or volume growth
goals that must be met in order to earn the incentive awards under the
performance cycle were no longer relevant performance measures. As a result, the
Compensation Committee approved a partial payment of the incentive award
opportunities under the performance cycle to recognize progress to date on the
goals and eliminated the balance of the incentive award opportunities. To
recognize the loss of incentive opportunities under this performance cycle, the
Compensation Committee increased the performance share award for each active
participant under the performance cycle. As a result, in 1999, Mr. Johnson
received a partial payment of $75,000 in settlement of his incentive award
opportunity for the 1996-2000 performance cycle and an additional 4,900
performance shares. The additional performance shares have the same vesting
criteria as those originally granted for the performance cycle. All performance
shares granted 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"). No
performance shares were earned under the 1996-2000 performance cycle during
1999.
During 1998 (or 1999 for certain newly hired managers), the Compensation
Committee made grants of restricted stock to the Corporation's officers and
other selected managers under the 1998-2001 performance cycle. In order to
receive these awards, the participants were required to place shares of 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 for Mr. Johnson,
for whom all such shares had 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
generally vests in 25% installments at the end of each
11
<PAGE>
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, 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 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 time-based restricted stock, in the event of the death,
disability or retirement of the participant. The Corporation achieved threshold
ROE measures in 1999 resulting in participants earning a total of 51,223 shares
of the performance-based restricted stock, of which Mr. Johnson earned 4,500
shares.
Executive Compensation Committee
- --------------------------------
Joseph P. Viviano, Chairman
Robert L. Hintz
John W. Rosenblum
Richard G. Tilghman
Certain Agreements With Executive Officers
The Corporation has entered into certain agreements with the following
executive officers named in the Summary Compensation Table.
Agreements with Officers
- ------------------------
During June 1999, the Compensation Committee reviewed potential executive
employment agreements (the "Agreements") between the Corporation and its
officers, including the Named Executive Officers (as defined under the caption
"Summary of Cash and Certain Other Compensation" below), and approved the
Agreements during September 1999. The term of the Agreements will expire on
December 31, 2002 (in the case of the Named Executive Officers and selected
other officers), or December 31, 2001 (in the case of all other officers). The
term of the Agreements will be extended automatically each year for an
additional year, unless the Corporation advises the officer, before September 1
of each year, that it does not wish to extend the Agreement. The Agreements
provide for the payment of a severance benefit and continued participation in
certain benefit plans if the officer is terminated without cause (as defined in
the Agreements) or resigns with good reason (as defined in the Agreements)
following a change in control (as defined below under the caption "Definition of
Change in Control") or the sale or other divestiture of the officer's business
unit. The severance payment equals a multiple of the officer's base salary and
a multiple of his targeted annual incentive payment, less amounts payable to the
officer under the Benefits Continuation Plan (described below). The multiple is
three for the Named Executive Officers and selected other officers and two for
the remaining officers. The Named Executive Officers and selected other
officers also will be entitled to additional credit under the Corporation's
Executive Supplemental Retirement Plan if the officer becomes entitled to
benefits following a change in control or the sale or other divestiture of the
officer's business unit. The Agreements also provide for the payment of a
severance benefit and continued participation in certain benefit plans if the
officer is terminated without cause (as defined in the Agreements) before a
change in control or the sale or other divestiture of the officer's business
unit. In such event the severance benefit is a multiple of the officer's base
salary and a multiple of his targeted annual payment, less amounts payable to
the officer under the Benefits Continuation Plan (with a multiple of three for
Messrs. Johnson, Gilchrist and Orta and a multiple of two for Messrs. Kohut and
Tolley and selected other officers) or up to two times base salary (for the
remaining officers). The Agreements also provide for indemnification of the
officer for any excise taxes that may become due under Section 4999 of the
Internal Revenue Code and the reimbursement of legal fees incurred by the
officer in enforcing the Agreements. The Agreements include a covenant against
the disclosure of confidential information by the officer and, if the officer is
terminated before a change in control, a covenant restricting competition by the
officer.
The Agreements for Messrs. Johnson and Gilchrist are in the form of
amendments to their existing employment agreements, which are described below.
12
<PAGE>
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. During the term of the
agreement, Mr. Johnson may participate in the benefit programs available to
executive officers generally.
Agreement with Mr. Gilchrist
- ----------------------------
In connection with the acquisition of Field Group plc, the Corporation
entered into a Service Agreement with Mr. Gilchrist. The agreement provides for
his employment as Chief Executive - Field Group plc, or other capacity of like
status as the Corporation may require, with a base salary of not less than
$346,801 and a target annual incentive of 50% of his base salary. The agreement
provides that the Corporation or Mr. Gilchrist may terminate Mr. Gilchrist's
employment with not less than 36 months notice and that Mr. Gilchrist's
employment shall cease upon his attainment of age 60. The agreement provides
that Mr. Gilchrist shall participate in the Field Group Pension Scheme, have the
use of an automobile provided by the Corporation, receive medical and life
insurance coverage as the Corporation considers appropriate, and be entitled to
26 vacation days per year. The agreement also contains customary non-compete,
non-solicitation, confidentiality, and inventions and improvements provisions.
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 Named Executive
Officers, 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,
the 1997 Incentive Plan and the Agreements, "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; (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; (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. 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, 1997, 1998
and 1999, 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 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, 1999 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 1999 $541,000 $352,050 $103,577 50,000 $214,500 $13,182
President & Chief 1998 512,500 349,790 18,251 $ 418,500 50,000 4,000
Executive Officer and 1997 208,333 106,600 31,735 1,350,000 50,000 52,159
Director
(since August 1997)
Keith Gilchrist/(6)/ 1999 272,541 146,409 230,800 15,000 29,760 664
Executive Vice President
- - European Packaging
(since March 1999)
Octavio Orta 1999 296,500 121,200 5,766 15,000 102,300 14,500
Executive Vice President 1998 93,333 50,000 306,900 15,000
- - Display & Packaging
(since September 1998)
Andrew J. Kohut 1999 237,500 116,140 10,000 177,300 8,129
Senior Vice 1998 231,500 81,865 306,900 5,000 6,255
President - Strategic 1997 223,000 55,000 188,250 9,500 14,094 6,458
Development
William T. Tolley 1999 224,000 123,919 10,000 143,700 7,761
Senior Vice 1998 210,000 113,595 6,789 251,100 10,000 4,000
President - Finance 1997 200,000 135,600 21,836 156,875 14,500 11,344 39,224
& Chief Financial
Officer
</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. Kohut and
Tolley.
/(2)/ The amounts for Mr. Johnson represent reimbursement of club fees and
dues, including taxes on the reimbursement, for 1999, and reimbursement of taxes
on relocation payments for 1998 and 1997, each in accordance with his employment
agreement. Amounts for Messrs. Orta and Tolley represent reimbursement of taxes
on relocation payments. None of the other 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.
/(3)/ The amounts appearing in the Restricted Stock Awards column represent
the value of time-based restricted stock awards granted during 1999, 1998 and
1997 based on the closing price for the Corporation's Common Stock on the date
of grant. As of December 31, 1999, the number and value (based on the closing
price of $30.50 for the Common Stock on such date) of shares of restricted stock
held by the Named Executive Officers were as follows: Mr. Johnson, 45,500
shares, $1,387,750; Mr. Gilchrist, 8,107 shares, $247,264; Mr. Orta, 13,034
shares, $397,537; Mr. Kohut, 8,962 shares, $273,341; and Mr. Tolley, 6,511
shares, $198,586. 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 for each of Mr. Orta and
Mr. Kohut, and 7,200 shares for Mr. Tolley vest in annual installments over four
years, (b) restricted stock awards in 1999 for 6,400 shares for Mr. Gilchrist
vest in annual installments over three years, and (c) 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 for 1999 represent
the value of performance-based restricted stock earned in 1999 with respect to
the 1998-2001 performance cycle under the 1997 Incentive Plan, based on the
Corporation's financial performance, and the partial payment of incentive awards
with respect to the 1996-2000 performance cycle under the 1993 Incentive Plan to
recognize the Corporation's achievement to date of the goals under the 1996-2000
performance cycle. The value of the performance-based restricted stock is based
on the closing price for the Common Stock of $31.00 on December 13, 1999, the
date that the awards were deemed to have been earned. The amounts for 1997
represent the value of restricted stock and stock units earned in 1997 with
respect to the 1996-2000 performance cycle under the 1993 Incentive Plan. The
amounts for 1997 are based on the closing price for the Common Stock of $34.375
on December 31, 1997. No awards were earned in 1998.
/(5)/ "All Other Compensation" for 1999 includes the following: (a) the
Corporation's 50% matching contributions under the Corporation's 401(k) Savings
Plan for Salaried Employees of the following amounts made to the Named Executive
officers: Messrs. Johnson, Orta, Kohut and Tolley, $4,000; and Mr. Gilchrist,
$0; (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, $9,182; Mr. Gilchrist, $0; Mr. Orta, $0; Mr.
Kohut, $4,129; and Mr. Tolley, $3,761; (c) Field Group's payment to Mr.
Gilchrist under its Profit Related Employee Share Scheme in the amount of $664;
and (d) reimbursement of relocation expenses for Mr. Orta in the amount of
$10,500.
/(6)/ Mr. Gilchrist is compensated in British pounds. The amounts listed
in the Salary, Bonus and All Other Compensation columns in U.S. dollars for Mr.
Gilchrist are based on the average exchange rate for the period April 1999
through December 1999.
14
<PAGE>
Stock Options and SARs
The following table contains information concerning the grants of options
and SARs made during 1999 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 13.9% $27.64 4/15/09 $0 $869,000 $2,202,500
Keith Gilchrist 15,000 4.2 27.64 4/15/09 0 260,700 660,750
Octavio Orta 15,000 4.2 27.64 4/15/09 0 260,700 660,750
Andrew J. Kohut 10,000 2.8 27.64 4/15/09 0 173,800 440,500
William T. Tolley 10,000 2.8 27.64 4/15/09 0 173,800 440,500
</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 issued under the 1997 Incentive
Plan and become exercisable in one-third installments on each of the first three
anniversaries of the date of grant.
/(3)/ The exercise price was set at the average of the closing prices of the
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 1999, 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 $27.64 starting price $ 45.02 $ 71.69
Per share gain 17.38 44.05
Aggregate hypothetical gain that would be realized by all
stockholders (based on 21,551,191 shares outstanding on
April 16, 1999) 374,559,700 949,329,964
Aggregate hypothetical gain on options granted to the Named
Executive Officers if assumed prices are achieved 1,738,000 4,405,000
Hypothetical aggregate gains for the Named Executive
Officers as a percentage of all stockholders' gains 0.5% 0.5%
</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 1999, and
unexercised options and SARs held by them on December 31, 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/SARs at
Year-End Year-End (1)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable/(2)/ Unexercisable/(2)/
---- ----------- -------- ------------------ ------------------
<S> <C> <C> <C> <C>
Thomas H. Johnson 0 $0 50,000/100,000 $ 0/$143,000
Keith Gilchrist 0 0 0/15,000 0/42,900
Octavio Orta 0 0 5,000/25,000 0/42,900
Andrew J. Kohut 0 0 48,000/16,500 212,005/28,600
William T. Tolley 0 0 13,000/21,500 0/28,600
</TABLE>
____________________
/(1)/ The value of unexercised in-the-money options/SARs represents
the positive spread between the December 31, 1999, closing price of Common Stock
($30.50) 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, 1999, 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 in the event of the 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 awards made to the
Named Executive Officers during 1999 of performance shares for the 1996-2000
performance cycle and performance-based restricted stock for the 1998-2001
performance cycle.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Performance
Number of or Other Period Estimated Future Share Payouts
Shares, Units or Until Maturation ------------------------------
Name Other Rights or Payout Threshold Target Maximum
---- ------------ --------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Thomas H. Johnson/(1)/ 4,900 shares 9/13/99-12/31/00 490 4,900 4,900
Keith Gilchrist/(2)/ 4,800 shares 1998-2001 960 4,800 4,800
Octavio Orta/(1)/ 0
Andrew J. Kohut/(1)/ 4,100 shares 9/13/99-12/31/00 410 4,100 4,100
William T. Tolley/(1)/ 3,300 shares 9/13/99-12/31/00 330 3,300 3,300
</TABLE>
____________________
/(1)/ The awards to Messrs. Johnson, Kohut and Tolley reflect performance
shares awarded under the Long-Term Incentive Program for the 1996-2000
performance cycle in consideration of the loss of certain incentive
opportunities that were canceled in 1999. See "Compensation Committee Report on
Executive Compensation - Long-Term Incentive Programs."
/(2)/ The award to Mr. Gilchrist consists 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. Mr. Gilchrist was also granted
time-based restricted stock under the 1998-2001 performance cycle that vests at
the end of each year from 1999 to 2001. This time-based restricted stock is
included under "Restricted Stock Awards" in the Summary Compensation Table. All
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 in the 1997 Incentive Plan).
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/(1)/
------------------------------------------------------------------------------------------
Years of Credited Service/(3)/
------------------------------------------------------------------------------------------
Annual
Compensation/(2)/ 5 10 15 20 25
- ------------------ ------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 20,000 $ 40,000 $ 60,000 $ 80,000 $ 96,000
400,000 40,000 80,000 120,000 160,000 192,000
600,000 60,000 120,000 180,000 240,000 288,000
800,000 80,000 160,000 240,000 320,000 384,000
1,000,000 100,000 200,000 300,000 400,000 480,000
</TABLE>
_________________
/(1)/ All Named Executive Officers, except Mr. Gilchrist, are participants
in the Corporation's funded retirement plan for salaried employees and its
unfunded supplemental retirement plan. Mr. Gilchrist participates in the Field
Group Pension Scheme, as described below.
/(2)/ 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.
/(3)/ The years of credited service for the Named Executive Officers as of
March 1, 2000, were: Mr. Johnson, 2; Mr. Orta, 1; Mr. Kohut, 20; and Mr.
Tolley, 3. Mr. Gilchrist has 18 years of credited service under the Field Group
Pension Scheme.
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.
As an employee of Field Group plc, a subsidiary of the Corporation, Mr.
Gilchrist participates in the Field Group Pension Scheme (the "Pension Scheme").
The objective of the Pension Scheme is to provide an annual retirement benefit
at normal retirement age, which is age 60 for Mr. Gilchrist, of approximately
67% of pensionable earnings. Pensionable earnings approximate base salary for
Mr. Gilchrist. At Mr. Gilchrist's option, part of the benefit may be exchanged
for a lump sum cash payment (within U.K. Inland Revenue limits) at retirement.
The Corporation contributes an amount equal to approximately 19% of Mr.
Gilchrist's pensionable earnings, and Mr. Gilchrist contributes approximately 6%
of his pensionable earnings, to the Pension Scheme. Mr. Gilchrist's accrued
benefit at December 31, 1999, was approximately $167,449. This amount is
determined in British pounds and has been converted into U.S. dollars based on
the average exchange rate for the period April 1999 through December 1999.
17
<PAGE>
Certain Relationships and Related Transactions
During 1998, in connection with the employment of Mr. Octavio Orta as the
Corporation's Executive Vice President - Display & Packaging, the Corporation
unconditionally guaranteed the repayment of a third party loan to Mr. Orta in
the principal amount of $600,000. On April 15, 1999, Mr. Orta repaid the loan
in full and the Corporation was released from its guarantee.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed of Messrs. Viviano (Chairman),
Hintz, Rosenblum and Tilghman. No member of the Compensation Committee had
relationships, or engaged in transactions, with the Corporation during 1999 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 1999, 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 1999, with the exception of one late filing of a
Form 4 by Mr. Jack C. King, former Vice President - Forest Resources, for June
1999.
18
<PAGE>
Performance Graph
The Corporation's Proxy Statement for the 1999 Annual Meeting of
stockholders presented a performance graph that compared the Corporation's
cumulative total stockholder return for the five year period ended December 31,
1998, to the S&P Midcap 400 Composite Index and the S&P Midcap 400 Paper &
Forest Products Group Index. In light of the Corporation's strategic refocusing
from a paper and forest products company to a global specialty packaging and
merchandising services company, the Corporation determined that the Dow Jones
Global Containers & Packaging Industry Group Index is a more appropriate
comparison for the performance of the Common Stock than the S&P Midcap 400 Paper
& Forest Products Group Index. Rules of the SEC require that if an index is
selected that is different from an index used for the immediately-preceding
year, the Corporation's total return must be presented in the performance graph
for both the newly selected index and the index used in the immediately-
preceding year. Accordingly, the following graph is presented to compare the
cumulative total return for the Common Stock to the cumulative total return of
the S&P Midcap 400 Composite Index, the Dow Jones Global Containers & Packaging
Industry Group 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, 1994, and that
all dividends were reinvested.
5 Year Comparison: Chesapeake Corporation vs. S&P Midcap 400
Index vs. Dow Jones Global Containers & Packaging Index vs. S&P
Midcap 400 Paper & Forest Index
[GRAPH]
(December 31st of each year)
'94 '95 '96 '97 '98 '99
Chesapeake Corporation 100 92 100 113 124 105
S&P Midcap 400 Index 100 131 156 206 246 282
Dow Jones Global Containers
& Packaging Index 100 99 109 99 92 96
S&P Midcap 400 Paper &
Forest Index 100 118 121 131 129 145
19
<PAGE>
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS
Any proposal submitted by a stockholder for inclusion in the proxy
materials for the annual meeting of stockholders in 2001 must be delivered to
the Corporation at its principal office in Richmond, Virginia, not later than
November 24, 2000.
In addition to any other applicable requirements, for business to be
properly brought before the 2001 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 23, 2001. 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. Alternatively, you may choose to vote by telephone. Instructions for
this convenient voting method are set forth on the enclosed proxy card.
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, 2000
20
<PAGE>
NOTICE
and
PROXY STATEMENT
for the
ANNUAL MEETING
of
STOCKHOLDERS
To Be Held
April 26, 2000
[LOGO]
<PAGE>
CHESAPEAKE CORPORATION
RICHMOND, VIRGINIA 23218
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders, April 26, 2000
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 8,
2000, at the annual meeting of stockholders to be held at 10:00 a.m. on April
26, 2000, 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 Marking Proxy
[Logo] Chesapeake
ADMITTANCE CARD
ANNUAL STOCKHOLDERS MEETING
APRIL 26, 2000, 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.
CHESAPEAKE CORPORATION
RICHMOND, VIRGINIA 23218
Proxy Solicited on Behalf on the Board of Directors
for the Annual Meeting of Stockholders, April 26, 2000
<PAGE>
CHESAPEAKE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<S> <C> <C> <C>
For All
1.Election of Directors: For Withhold Except
Nominees: 01-James E. Rogers, 02-Wallace Stettinius, / / / / / /
03-Joseph P. Viviano, 04-Harry H. Warner (each for
Class II to serve until the 2003 annual meeting of stockholders)
and 05-Sir David Fell (for Class I to serve until the 2002 annual
meeting of stockholders)
</TABLE>
_______________________________________________
(Except for nominee(s) written above)
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 proposal 1.
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 the proposal presented.
Dated: _________________________________________, 2000
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.
. There is NO CHARGE for this call.
. On a touch tone telephone call TOLL FREE 1-877-587-0758 24 hours a day - 7
days a week.
. You will be asked to enter a Control Number which is located on the middle-
left of this form.
OPTION #1: To vote as the Board of Directors recommends on the proposal: Press
1.
Your vote will be confirmed and cast as you directed. END OF CALL.
OPTION #2: To withhold your vote, press 0. You will hear these instructions:
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.
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, 2000
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, 9/th/ & Main Streets, Richmond, Virginia, on Wednesday, April
26, 2000, 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
DETACH PROXY CARD HERE
[ ]
The Board of Directors Unanimously Recommends a Vote FOR the Following Proposal:
<TABLE>
<S> <C> <C> <C>
(1) Election of FOR all nominees [ ] WITHHOLD AUTHORITY to vote for [ ] *EXCEPTIONS [ ]
directors: listed below all nominees listed below.
</TABLE>
Nominees: James E. Rogers, Wallace Stettinius, Joseph P. Viviano, Harry H.
Warner (each for Class II to serve until the 2003 annual meeting of
stockholders), and Sir David Fell (for Class I to serve until the 2002 annual
meeting of stockholders).
(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) 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:___________________________, 2000
________________________________________
________________________________________
(Please sign, date and return this Votes MUST be indicated [ ]
card in the enclosed envelope.) (x) in Black or Blue ink.
<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, 2000
Dear Plan Participant:
The instruction card to vote your Chesapeake Corporation common stock held
in the Georgia-Pacific Tissue 401(k) Plan for Salaried Employees or the Georgia-
Pacific Tissue 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, 9/th/ & Main Streets, Richmond, Virginia, on Wednesday, April
26, 2000, 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
DETACH PROXY CARD HERE
[ ]
The Board of Directors Unanimously Recommends a Vote FOR the Following Proposal:
<TABLE>
<S> <C> <C> <C>
(1) Election of FOR all nominees [ ] WITHHOLD AUTHORITY to vote for [ ] *EXCEPTIONS [ ]
directors: listed below all nominees listed below.
</TABLE>
Nominees: James E. Rogers, Wallace Stettinius, Joseph P. Viviano, Harry H.
Warner (each for Class II to serve until the 2003 annual meeting of
stockholders), and Sir David Fell (for Class I to serve until the 2002 annual
meeting of stockholders).
(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) 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:________________________, 2000
_______________________________________
_______________________________________
(Please sign, date and return this Votes MUST be indicated [ ]
card in the enclosed envelope.) (x) in Black or Blue ink.
<PAGE>
TO: THE BANK OF NEW YORK
Trustee of the Georgia-Pacific Tissue 401(k) Plan for Salaried Employees
and the Georgia-Pacific Tissue 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 Georgia-Pacific Tissue
401(k) Plan for Salaried Employees and the Georgia-Pacific Tissue 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>
March 24, 2000
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 26, 2000. 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 24, 2000. 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 24, 2000. Any notice of change must be timely,
contain your name and 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 26, 2000 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 the following
proposal:
(1) Election of four directors for a three year term. Class II (to serve
until the 2003 annual meeting of stockholders):
James E. Rogers, Wallace Stettinius, Joseph P. Viviano, Harry H. Warner
Election of one director for a two year term. Class I (to serve until the
2002 annual meeting of stockholders):
Sir David Fell
<TABLE>
<CAPTION>
<S> <C> <C>
[ ] FOR [ ] WITHHOLD [ ] EXCEPTIONS: Withhold vote
all nominees listed above vote for all nominees on the following nominee(s) only
__________________________
</TABLE>
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 YOUR
CHOICES LIKE THIS [X]
Name:
Shares
Signature_____________________________ Date _______________________, 2000
PLEASE MAIL THESE INSTRUCTIONS IN THE ENCLOSED ENVELOPE TO ASSOCIATED BANK
<PAGE>
April 10, 2000
A REMINDER
----------
Dear Stockholder:
Proxy material for the annual meeting of stockholders of Chesapeake
Corporation was sent to you under date of March 24, 2000.
According to our records, your proxy for this meeting, which will be held
on Wednesday, April 26, 2000, 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,
J. P. Causey Jr.
Secretary
kmh
Enclosure
