<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
FORT HOWARD CORPORATION
................................................................................
(Name of Registrant as Specified in Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement)
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 transactions 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:
....................................................................
[ ] 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 the registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________________
2) Form Schedule or Registration Statement No.:__________________________
3) Filing Party:_________________________________________________________
4) Date Filed:________________________
<PAGE>
[LOGO]
FORT HOWARD
MICHAEL T. RIORDAN
President
and
Chief Executive Officer
, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
that will be held on Tuesday, May 13, 1997, at 10:00 a.m., local time, in
Chicago, Illinois.
The enclosed notice and proxy statement contain details concerning the
business to be acted upon at the meeting. You will note that the Board of
Directors of the Company recommends (i) a vote "FOR" the election of three
directors to serve until the 2000 Annual Meeting of Stockholders and (ii) a vote
"FOR" the proposed amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock.
Please sign and return your proxy card in the enclosed postage-paid envelope at
your earliest convenience to assure that your shares will be represented and
voted at the meeting even if you cannot attend.
To help us plan for the meeting, please mark the appropriate box on
the accompanying proxy card telling us if you will be attending.
Sincerely,
Michael T. Riordan
<PAGE>
[LOGO]
FORT HOWARD
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS
OF FORT HOWARD CORPORATION
The Annual Meeting of Stockholders of Fort Howard Corporation will be
held at the Metropolitan Club, 66th Floor, Sears Tower, 233 South Wacker Drive,
Chicago, Illinois, on Tuesday, May 13, 1997, at 10:00 a.m., local time, for the
following purposes:
1. To elect three directors to serve until the 2000 Annual
Meeting of Stockholders;
2. To consider a proposed amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized
shares of Common Stock; and
3. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Stockholders of record at the close of business on March 17, 1997 are
entitled to notice of, and to vote at, the meeting and any adjournments thereof.
By Order of the Board of Directors
James W. Nellen II
Vice President and Secretary
Green Bay, Wisconsin
, 1997
EACH STOCKHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY
CARD PROMPTLY. IN THE EVENT A STOCKHOLDER DECIDES TO ATTEND THE MEETING, HE OR
SHE MAY, IF SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE>
FORT HOWARD CORPORATION
1919 SOUTH BROADWAY
GREEN BAY, WISCONSIN 54304
------------------------------
PROXY STATEMENT
------------------------------
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1997
------------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Fort Howard Corporation, a Delaware
corporation (the "Company"), to be voted at the Annual Meeting of Stockholders
of the Company (the "Annual Meeting") to be held at the Metropolitan Club, 66th
Floor, Sears Tower, 233 South Wacker Drive, Chicago, Illinois, on May 13, 1997,
at 10:00 a.m., local time, and at any adjournments thereof. The approximate
date on which this Proxy Statement and form of proxy are first being sent to
stockholders is, 1997.
Only holders of record of shares of Common Stock of the Company at the
close of business on March 17, 1997, are entitled to vote at the Annual Meeting
or any adjournments thereof. Each owner of record on the record date is
entitled to one vote for each share of Common Stock of the Company so held. The
presence, either in person or by properly executed proxy, of the owners of a
majority of the outstanding shares of Common Stock of the Company is necessary
to constitute a quorum at the Annual Meeting and to permit action to be taken by
the stockholders at such meeting. On February 14, 1997, there were 74,523,606
shares of Common Stock of the Company outstanding.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. Stockholders voting by proxy for the election of directors
nominated to serve until the 2000 Annual Meeting may vote in favor of all
nominees or withhold their votes as to all nominees or withhold their votes as
to specific nominees. Stockholders voting by proxy regarding the proposed
amendment to the Company's Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock may vote for or against the proposed
amendment or may withhold their vote. Stockholders should specify their choices
on the enclosed form of proxy. If no specific instructions are given with
respect to the matters to be acted upon, the shares represented by a signed
proxy will be voted FOR the election of all nominees for director and FOR the
proposed amendment to increase the number of authorized shares of Common Stock.
Directors will be elected by a plurality of the votes cast by the
holders of the shares of Common Stock voting in person or by proxy at the Annual
Meeting. Approval of the proposed amendment to increase the number of
authorized shares of Common Stock requires the affirmative vote of a majority of
the outstanding shares of Common Stock. Abstentions and broker non-votes will
be counted for purposes of determining the presence or absence of a quorum for
the transaction of business at the Annual Meeting and will not affect the
outcome of the vote for the election of directors. However, abstentions and
broker non-votes will have the practical effect as votes cast against the
proposed amendment to increase the number of authorized shares of Common Stock.
The Board of Directors of the Company knows of no business that will
be presented for consideration at the Annual Meeting other than the matters
described in this Proxy Statement. If any other matters are presented at the
Annual Meeting, the persons named in the proxy card will vote in accordance with
their judgment.
<PAGE>
All proxies delivered pursuant to this solicitation are revocable at
any time at the option of the persons executing them by giving written notice of
revocation to the Secretary of the Company at the address set forth above before
the Annual Meeting, by delivering another proxy bearing a later date or by
attending the Annual Meeting and voting in person.
ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Board of Directors of the Company is divided into three classes,
each class serving for a period of three years. The Board of Directors of the
Company has set the number of directors of the Company at nine.
One-third of the members of the Board of Directors are elected by the
stockholders annually. The directors whose terms will expire at the Annual
Meeting are Dudley J. Godfrey, Jr., Michael T. Riordan and Frank V. Sica, all of
whom have been nominated by the Board of Directors to stand for reelection as
directors to hold office until the 2000 Annual Meeting of Stockholders and until
their successors are elected and qualified.
Should any one or more of these nominees become unable to serve, or
for good cause will not serve, the Board of Directors may, unless the Board of
Directors by resolution provides for a lesser number of directors, designate a
substitute nominee or nominees, in which event the shares represented by all
valid proxies received may be voted for such substitute nominee or nominees.
The Board of Directors knows of no reason why any nominee may be unable to serve
as a director.
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE ELECTION OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR Dudley J.
Godfrey, Jr., Michael T. Riordan and Frank V. Sica as directors to hold office
until the 2000 Annual Meeting of Stockholders and until their successors are
elected and qualified. Proxies received by the Board of Directors will be so
voted unless stockholders specify a contrary choice in their proxy.
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
FOR TERMS EXPIRING AT THE 2000 ANNUAL MEETING
- --------------------------------------------------------------------------------
Dudley J. Godfrey, Jr. Director since 1995
Milwaukee, Wisconsin Age 70
Mr. Godfrey is an attorney and a principal in the law firm of Godfrey & Kahn
S.C., which he founded in 1956. Mr. Godfrey is also a Director of ARM Financial
Group, Inc., CLARCOR Inc. and Manpower, Inc.
- --------------------------------------------------------------------------------
Michael T. Riordan Director since 1992
Green Bay, Wisconsin Age 46
Mr. Riordan is President and Chief Executive Officer of the Company and has held
these positions since October 1996. From March 1992 through September 1996,
Mr. Riordan served as President and Chief Operating Officer of the Company.
Prior to that time, he was a Vice President of the Company. Mr. Riordan is also
a Director of The Dial Corporation.
2
<PAGE>
- --------------------------------------------------------------------------------
Frank V. Sica Director since 1988
New York, New York Age 46
Mr. Sica has been a Managing Director of Morgan Stanley & Co. Incorporated
("MS&Co") since 1988. He is a Vice Chairman and Director of Morgan Stanley
Leveraged Equity Fund II, Inc. ("MSLEF II, Inc.") and Morgan Stanley Capital
Partners III, Inc. ("MSCP III"). Mr. Sica is also a Director of ARM Financial
Group, Inc., Consolidated Hydro, Inc., CSG Systems International, Inc.,
Highlands Gas Corporation, Ionica L3 Limited, Kohl's Corporation, PageMart
Wireless, Inc., SITA Telecommunications Holdings N.V. and Sullivan
Communications, Inc.
DIRECTORS WHOSE TERMS EXPIRE
AT THE 1999 ANNUAL MEETING
- -------------------------------------------------------------------------------
Dr. James L. Burke Director since 1995
Dublin, Georgia Age 58
Dr. Burke is President, Chief Executive Officer and a member of the Management
Board of Southeast Paper Manufacturing Company and has held such positions since
1993. Prior to that time, he was President and Chief Operating Officer of
Garden State Paper Company.
- --------------------------------------------------------------------------------
Kathleen J. Hempel Director since 1979
Green Bay, Wisconsin Age 46
Ms. Hempel is Vice Chairman and Chief Financial Officer of the Company and has
held such positions since March 1992. Prior to that time, she was Senior
Executive Vice President and Chief Financial Officer of the Company. Ms. Hempel
is also a Director of Whirlpool Corporation.
- --------------------------------------------------------------------------------
David I. Margolis Director since 1995
New York, New York Age 67
Until his retirement in February 1995, Mr. Margolis was Chairman of the Board
and Chief Executive Officer of Coltec Industries Inc, a manufacturer of
diversified industrial equipment. Mr. Margolis is also a Director of Burlington
Industries Inc. and Coltec Industries Inc.
DIRECTORS WHOSE TERMS EXPIRE
AT THE 1998 ANNUAL MEETING
- --------------------------------------------------------------------------------
Donald Patrick Brennan Director since 1988
New York, New York Age 56
Mr. Brennan has been an Advisory Director of MS&Co since January 1996. Prior to
that time, he was head of MS&Co's Merchant Banking Division and Chairman of
MSLEF II, Inc., MSCP III and Morgan Stanley Venture Capital II, Inc. Mr.
Brennan is also a Director of ITC Group, Inc., Jefferson Smurfit Corporation and
SITA Telecommunications Holdings N.V.
3
<PAGE>
- --------------------------------------------------------------------------------
Donald H. DeMeuse Director since 1978
Green Bay, Wisconsin Age 61
Mr. DeMeuse retired as Chairman of the Board of the Company effective March 1,
1997 and as Chief Executive Officer of the Company effective October 1, 1996.
He had held such positions since March 1992. Prior to that time, he was
President and Chief Executive Officer of the Company. Mr. DeMeuse is also a
Director of Associated Bank Green Bay.
- --------------------------------------------------------------------------------
Robert H. Niehaus Director since 1988
New York, New York Age 41
Mr. Niehaus has been a Managing Director of MS&Co since 1990. He is a Vice
Chairman and a Director of MSLEF II, Inc. and MSCP III. Mr. Niehaus is also a
Director of American Italian Pasta Company, Silgan Corporation, Silgan Holdings
Inc., Waterford Wedgwood UK, plc (Chairman) and Waterford Crystal Ltd.
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has approved and is recommending that the
stockholders approve an amendment to the Company's Restated Certificate of
Incorporation (the "Amendment"), in order to increase the number of authorized
shares of Common Stock from 100 million to 200 million shares, par value $.01
per share. The proposed Amendment would not increase the number of shares of
Preferred Stock of the Company above the 50 million shares, par value $.01 per
share, which is currently authorized.
Although there are sufficient shares to permit all presently
contemplated issuances, the Board believes that the Amendment is in the best
interests of the Company and its stockholders and will provide the Company with
flexibility of action in the future by assuring there will be sufficient
authorized but unissued shares of Common Stock available for issuance in
connection with potential stock dividends or splits, acquisitions, employee
benefit plans and other general corporate purposes without the necessity of
further stockholder action at any special or annual meeting.
The proposed Amendment provides that Section 4.1 of Article IV of the
Company's Restated Certificate of Incorporation be amended in its entirety to
read as follows:
"SECTION 4.1 Authorized Capital. Shares. The total
------------------ ------
number of shares of all classes of capital stock that the
Corporation shall have authority to issue is 250,000,000 shares,
of which (i) 200,000,000 shares shall be common stock, par value
$.01 per share ("Common Stock") and (ii) 50,000,000 shares shall
be preferred stock, par value $.01 per share ("Preferred Stock")."
Approval of the proposed Amendment requires the affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote and will
become effective upon the filing of a Certificate of Amendment with the
Secretary of State of the State of Delaware. Neither an abstention nor a broker
non-vote is an affirmative vote. Therefore, both will have the practical effect
as votes cast against the proposed Amendment.
The Board of Directors of the Company recommends a vote FOR the
proposed Amendment to increase the number of authorized shares of Common Stock.
Proxies received by the Board of Directors will be so voted unless stockholders
specify a contrary choice in their proxy.
4
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS;
MEETINGS AND COMPENSATION OF DIRECTORS
The Board of Directors held four meetings during 1996. All of the
directors attended at least 75% of the aggregate number of meetings of the Board
of Directors and of all committees of the Board of Directors on which they
served.
The Board of Directors has, among other committees, an Audit Committee
and a Compensation and Nominating Committee.
The Audit Committee. The Audit Committee, among other things,
-------------------
recommends to the Board of Directors the selection of the independent auditors
of the Company, reviews with the independent auditors the scope and results of
the Company's audits, approves the audit fees and reviews the adequacy and
effectiveness of the Company's internal auditing, accounting and financial
controls with the independent auditors and the Company's financial and
accounting staff. The Audit Committee is composed entirely of directors who are
not officers of the Company. The members of the Audit Committee are Dr. Burke
(Chairman), Mr. Godfrey and Mr. Niehaus. The Audit Committee met twice in 1996.
The Compensation and Nominating Committee. The Compensation and
-----------------------------------------
Nominating Committee reviews and approves all salary arrangements and other
remuneration for executive officers of the Company. It is also responsible for
the administration of the Fort Howard Corporation 1995 Stock Incentive Plan (the
"Stock Incentive Plan"), the Fort Howard Corporation Management Incentive Plan
(the "MIP") and the Fort Howard Corporation Supplemental Retirement Plan. The
Compensation and Nominating Committee also recommends to the Board of Directors
candidates for election to the Board of Directors. The Compensation and
Nominating Committee will consider recommendations for nominees for director
submitted by stockholders. The Compensation and Nominating Committee is
composed entirely of directors who are not officers of the Company. The members
of the Compensation and Nominating Committee are Mr. Brennan (Chairman), Mr.
Margolis and Mr. Niehaus. The Compensation and Nominating Committee met three
times in 1996.
Compensation of Directors. Officers of the Company who are also
-------------------------
directors do not receive any fee or remuneration for services as members of the
Board of Directors or of any committee of the Board of Directors. Nonmanagement
directors other than Mr. Brennan, Mr. Niehaus and Mr. Sica, each of whom has
waived compensation for his services as a director, receive a $30,000 annual
fee, $2,000 for each Board meeting attended and $1,000 for each committee
meeting attended. The Company pays 50% of the annual fee in the form of cash
and 50% of the annual fee in the form of shares of Common Stock pursuant to the
Company's 1995 Stock Plan for Non-Employee Directors. The payment of the cash
portion of the annual fee may be deferred by any director at such director's
election pursuant to the Company's Deferred Compensation Plan for Non-Employee
Directors until the earlier of (i) the date of termination of such director's
service as a non-employee director, (ii) the date specified by such director in
his deferred election form, or (iii) the date of such director's death. In
addition, the Company reimburses all of its directors for their travel expenses
in connection with their attendance at Board and committee meetings.
5
<PAGE>
OWNERSHIP OF COMMON STOCK BY MANAGEMENT
The following table sets forth information as of February 14, 1997,
with respect to beneficial ownership of the Company's outstanding shares of
Common Stock by each director, each of the Named Executive Officers (as defined
below), and the directors and executive officers of the Company as a group.
Except as otherwise noted below, each of the directors and executive officers
has sole voting and investment power with respect to the shares he or she owns.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED OF CLASS
---- --------------------- ---------
<S> <C> <C>
Donald Patrick Brennan........................... 0 -- %
James L. Burke................................... 1,918 *
Donald H. DeMeuse................................ 810,449(a) 1.1
Andrew W. Donnelly............................... 197,477(a) *
Dudley J. Godfrey, Jr............................ 4,918(b) *
Kathleen J. Hempel............................... 617,691(a) *
David I. Margolis................................ 6,018 *
James W. Nellen II............................... 156,439(a) *
Robert H. Niehaus................................ 0 --
Daniel J. Platkowski............................. 155,843(a) *
Michael T. Riordan............................... 223,337(a) *
John F. Rowley................................... 132,973(a) *
Frank V. Sica.................................... 0 --
All directors and executive officers as a group 2,416,778(a) 3.2%
(14 persons)................................
</TABLE>
- ---------------------------
* Less than 1%.
(a) Includes the following numbers of shares which the designated director or
Named Executive Officer has the right to acquire within 60 days upon the
exercise of stock options: Mr. DeMeuse, 643,237 shares; Mr. Donnelly,
178,827 shares; Ms. Hempel, 585,347 shares; Mr. Nellen, 121,989 shares; Mr.
Platkowski, 127,858 shares; Mr. Riordan, 193,608 shares; Mr. Rowley,
121,923 shares; and all directors and executive officers as a group,
2,048,314 shares.
(b) Includes 2,000 shares held in a trust over which Mr. Godfrey exercises
shared voting and investment power.
6
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of December 31, 1996,
with respect to persons known to the Company to be the beneficial owners of more
than five percent of the Company's outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED(a) OF CLASS
- ---------------- ------------------------ ---------
<S> <C> <C>
Morgan Stanley Group Inc................. 19,354,905(b) 26.0%
1585 Broadway
New York, New York 10036
State of Wisconsin Investment Board...... 7,035,000(c) 9.5
P.O. Box 7842
Madison, Wisconsin 53707
Mellon Bank, N.A., as Trustee for First 5,477,586 7.4
Plaza Group Trust (d).................
1 Mellon Bank Center
Pittsburgh, Pennsylvania 15258
FMR Corp................................. 3,851,700(e) 5.2
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- --------------------------
(a) Stock ownership information is based upon information set forth in the
beneficial owner's Schedule 13G report, filed with the Securities and
Exchange Commission with respect to beneficial ownership of the Company's
Common Stock as of December 31, 1996.
(b) Includes 2,316,299 shares held directly by Morgan Stanley Group Inc.
("Morgan Stanley Group") and 15,110,144 shares held directly by The Morgan
Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"). Morgan Stanley
Leveraged Equity Fund II, Inc. is the sole general partner of MSLEF II and
is a wholly owned subsidiary of Morgan Stanley Group. Also includes
1,387,678 shares held directly by Fort Howard Equity Investors II, L.P. and
540,784 shares held directly by Fort Howard Equity Investors, L.P. Morgan
Stanley Equity Investors Inc. is the sole general partner of both of these
partnerships and is a wholly owned subsidiary of Morgan Stanley Group.
(c) State of Wisconsin Investment Board has sole voting and investment power
with respect to shares beneficially owned.
(d) Mellon Bank, N.A. acts as the trustee (the "Trustee") for First Plaza Group
Trust ("First Plaza"), a trust under and for the benefit of certain
employee benefit plans of General Motors Corporation ("GM") and its
subsidiaries. These shares may be deemed to be owned beneficially by
General Motors Investment Management Corporation ("GMIMCo"), a wholly owned
subsidiary of GM. GMIMCo's principal business is providing investment
advice and investment management services with respect to the assets of
certain employee benefit plans of GM and its subsidiaries and with respect
to the assets of certain direct and indirect subsidiaries of GM and
associated entities. GMIMCo is serving as First Plaza's investment manager
with respect to these shares and in that capacity it has the sole power to
direct the Trustee as to the voting and disposition of these shares.
Because of the Trustee's limited role, beneficial ownership of the shares
by the Trustee is disclaimed.
(e) Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp., is the beneficial owner of 3,497,500 shares as a
result of acting as investment advisor to various investment companies.
Each of FMR Corp. and Edward C. Johnson 3d, Chairman of FMR Corp., through
its control of Fidelity and the Fidelity funds (the "Funds"), has sole
power to dispose of the 3,497,500 shares owned by the Funds. Neither FMR
Corp. nor Mr. Johnson has the sole power to vote or direct the voting of
the shares owned directly by the Funds, which power resides with the Funds'
Boards of Trustees. Fidelity carries out the voting of the shares under
written guidelines established by the Funds' Boards of Trustees. Fidelity
Management Trust Company ("Fidelity Trust"), a wholly-owned subsidiary of
FMR Corp., is the beneficial owner of 354,200 shares as a result of its
serving as investment manager of the institutional account(s). Each of FMR
Corp. and Mr. Johnson, through its control of Fidelity Trust, has sole
dispositive power over 354,200 shares and sole power to vote or to direct
the voting of 159,900 shares, and no power to vote or to direct the voting
of 194,300 shares owned by the institutional accounts referred to
above.
7
<PAGE>
CERTAIN TRANSACTIONS
Stockholders Agreement
The Company, Morgan Stanley Group, MSLEF II, certain other investors
and certain management investors (each, a "Holder") have entered into a
stockholders agreement dated as of March 1, 1995 (the "Stockholders Agreement"),
which contains certain restrictions with respect to the transferability of
Common Stock by certain parties thereunder and certain registration rights
granted by the Company with respect to such shares.
Pursuant to the terms of the Stockholders Agreement, MSLEF II and Fort
Howard Equity Investors II, L.P. each have the right to have a designee
nominated for election to the Company's Board of Directors at any annual meeting
of the Company's stockholders, so long as MSLEF II or Fort Howard Equity
Investors II, L.P., as the case may be, does not already have a designee as a
member of the Board of Directors at the time of such annual meeting. In
addition, in the event of a vacancy on the Board of Directors created by the
resignation, removal or death of a director nominated by MSLEF II or Fort Howard
Equity Investors II, L.P., such stockholders have the right to have a designee
nominated for election to fill such vacancy.
Pursuant to the terms of the Stockholders Agreement, in the event that
one or more Holders (other than the management investors) (each, a "Controlling
Stockholder") sell a majority of the shares of Common Stock subject to the
Stockholders Agreement to a third party, certain other Holders have the right to
elect to sell on the same terms the same percentage of such other Holder's
shares to the third party as the Controlling Stockholder is selling of its
shares of Common Stock. In addition, if a Controlling Stockholder sells all of
its shares of Common Stock to a third party, the Controlling Stockholder has the
right to require that certain remaining Holders sell all of their shares to the
third party on the same terms.
Pursuant to the terms of the Stockholders Agreement, Holders of
specified percentages of Common Stock are entitled to certain demand
registration rights ("Demand Rights") with respect to shares of Common Stock
held by them; provided, however, that the Company (or purchasers designated by
the Company) shall have the right to purchase at fair market value the shares
which are the subject of Demand Rights in lieu of registering such shares of
Common Stock. In addition to the Demand Rights, Holders are, subject to certain
limitations, entitled to register shares of Common Stock in connection with a
registration statement prepared by the Company to register its equity
securities. The Stockholders Agreement contains customary terms and provisions
with respect to, among other things, registration procedures and certain rights
to indemnification granted by parties thereunder in connection with the
registration of Common Stock subject to such agreement.
Other transactions
MS&Co served as lead underwriter of the primary and secondary offering
of the Company's Common Stock in May 1996 for which it received underwriting
fees of approximately $3 million. MS&Co also periodically provides financial
advisory services for the Company for which it receives customary fees.
Mr. Godfrey is a principal in the law firm of Godfrey & Kahn S.C.,
which provided legal services to the Company during 1996 and received fees from
the Company in an immaterial amount.
8
<PAGE>
COMPENSATION AND NOMINATING COMMITTEE REPORT
ON EXECUTIVE OFFICER COMPENSATION
The Compensation and Nominating Committee is responsible for
oversight and administration of executive compensation. The Company's
compensation and benefit programs are designed to:
. Tie executive pay to shareholder value creation through the use of equity-
based incentives;
. Link pay to performance by placing a significant portion of compensation at
risk;
. Align the Company's compensation plans to its business objectives and to
the business environment;
. Measure executives' success in attaining those business objectives; and
. Attract, retain, and motivate key executives of the Company.
As a newly public Company in 1995, the Compensation and Nominating Committee
recognized that a transition period was necessary to fully achieve the
objectives it had established. In 1996, the Compensation and Nominating
Committee more fully developed its objectives to consider a number of factors
with respect to executive compensation. These factors are discussed in more
detail in this Report. The Compensation and Nominating Committee believes that
the actions taken in 1996 with respect to the executive compensation program are
consistent with its objectives.
COMPONENTS OF COMPENSATION
With respect to each component of compensation, the Compensation and Nominating
Committee considers a number of factors in determining the appropriate level,
mix, and form of compensation for its executive officers. One such factor is a
reference to the total compensation levels paid to similarly situated executives
of a peer group of companies (the "Peer Group") with which the Company competes
for executive talent. The Compensation and Nominating Committee does not have an
objective of targeting either total compensation or each component of
compensation at a specified level. Rather, the Compensation and Nominating
Committee utilizes compensation survey information as a general framework for
comparison.
The companies comprising the Peer Group consist of similarly sized diversified
paper, consumer packaged goods and manufacturing companies, and companies with
similar capital structures. Some of these companies are also included in the
industry indices set forth in the Performance Graph on page 12.
The compensation package is designed so that annual and long-term incentives
constitute a majority of the total compensation package.
BASE SALARIES
Executive officer base salaries generally will be reviewed on a 12-month cycle.
Base salary increases will be based on a qualitative evaluation of the following
factors: level of responsibility, time in position, prior experience,
individual performance, internal equity, and a comparison of salaries paid
within the Peer Group. There is no specified weighting of the factors
considered.
ANNUAL INCENTIVES
The Company's MIP is structured to reinforce and reward participants for
achieving exceptional performance which the Compensation and Nominating
Committee believes is critical as a newly public company. Thus,
9
<PAGE>
annual incentive awards with respect to the executive officers may be above the
median of the Peer Group, if target levels of performance based on a
predetermined formula are achieved or exceeded. Awards are reduced
significantly if target levels of performance are not achieved.
Key employees, including all executive officers, participate in the MIP. Awards
under the MIP are based on overall Corporate performance; however, except for
the Chief Executive Officer's award, the Chief Executive Officer, in his sole
discretion, may adjust an award plus or minus 20% based on a subjective
assessment of individual performance. The Compensation and Nominating Committee
reserves the right to adjust the Chief Executive Officer's award based on its
subjective assessment of the Chief Executive Officer's individual performance.
For 1996, each MIP participant was assigned an annual incentive target award
based on the achievement of an established operating income goal. Target awards
ranged from 20% to 75% of base salary. The Compensation and Nominating Committee
considered the following factors in determining the size of the target awards:
importance of achieving critical financial performance in the short-term within
a highly leveraged environment, the risk/reward structure that is necessary to
achieve the Compensation and Nominating Committee's objectives, balance of short
and long-term incentives, internal equity, position of the participant, and a
reference to the size of awards in the Peer Group. There is no quantitative or
specified weighting of the factors considered.
For 1996, the Compensation and Nominating Committee established a target
corporate performance goal that was ambitious and represented a significant
increase in operating income over the prior year. The Compensation and
Nominating Committee believed it was important for the incentive plan goals to
focus executives' attention on the leverage inherent in the financial structure
of the Company. Accordingly, the Compensation and Nominating Committee
determined that it was critical to achieve the target performance goal.
Performance at 95% of target would result in a significant reduction in the MIP
award for the executive officers. Performance above target would result in an
increased award, but the amount of the award would be subject to an overall
limitation specified by the Compensation and Nominating Committee, regardless of
the extent to which maximum performance was exceeded.
Amounts awarded were based upon the Company exceeding its maximum operating
income goal. Although the MIP permits the awards to be adjusted as described
above based on a subjective assessment of individual performance, no such
adjustments to the executive officer awards were made for 1996.
LONG-TERM INCENTIVES
The Stock Incentive Plan provides that stock options, stock appreciation rights,
restricted stock, performance shares, stock equivalents, and dividend
equivalents may be granted to key individuals who are in a position to
contribute to the future success of the Company. Long-term incentives are
intended to reward executives for past performance and to motivate them in the
future by providing executives with an incentive to increase shareholder value,
thereby aligning pay to shareholder interests.
To advance its objective of retaining key employees, stock option grants vest on
a pro rata basis over a five-year period from the date of grant. Options also
have an exercise price equal to the fair market value of the stock on the date
of grant.
In determining the stock option award size for the executive officers, the
Compensation and Nominating Committee considered the outstanding overall
Corporate performance of the Company in 1996, the importance of focusing
executives on the future growth of the Company and increasing shareholder value,
and a comparison to annual award sizes of the Peer Group. No specified weighting
was assigned to the factors considered. The Compensation and Nominating
Committee also considered the recommendation of the Chief Executive Officer with
respect to stock option awards based on the Chief Executive Officer's evaluation
of internal equity and retention issues, and his subjective assessment of
individual performance and potential.
10
<PAGE>
COMPENSATION OF THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Mr. DeMeuse retired as Chief Executive Officer effective October 1, 1996 and as
Chairman of the Board effective March 1, 1997. Mr. Riordan was named Chief
Executive Officer effective October 1, 1996.
COMPENSATION FOR MR. DEMEUSE
Mr. DeMeuse had an employment agreement with the Company which took effect in
1993. Mr. DeMeuse's employment agreement provided for a minimum base annual
salary and participation with respect to incentive awards.
Based on a comparison to the Peer Group, the Compensation and Nominating
Committee did not adjust Mr. Demeuse's base salary in 1996. Relative to the Peer
Group, his base salary was in the upper quartile. In addition to base salary,
Mr. Demeuse earned a bonus for 1996 under the MIP based on the Company exceeding
its maximum operating income goal. No stock options were granted to Mr. DeMeuse
in 1996. Based on the results of the analysis comparing 1995 actual compensation
levels within the Peer Group, Mr. DeMeuse's total compensation approximated the
75th percentile of other chairmen of the board and chief executive officers of
the Peer Group.
COMPENSATION FOR MR. RIORDAN
Upon being named Chief Executive Officer, the Compensation and Nominating
Committee took two actions to provide Mr. Riordan with compensation
commensurate with his responsibilities as Chief Executive Officer. First, Mr.
Riordan's base salary was increased from $425,000 to $550,000. The Compensation
and Nominating Committee deemed it necessary to move Mr. Riordan's salary to a
level that is more consistent with base salaries of chief executive officers in
the Peer Group. After the salary increase, Mr. Riordan's base salary ranks below
the median of the base salaries of the chief executive officers in the Peer
Group.
Second, Mr. Riordan was awarded 12,000 shares of restricted stock and 8,000
restricted stock equivalents. In addition to recognizing Mr. Riordan's
additional responsibilities as Chief Executive Officer, the Compensation and
Nominating Committee also wanted to increase Mr. Riordan's direct stock
ownership in the company to more closely align his compensation to the interests
of shareholders. The restricted stock and restricted stock equivalents vest at
the rate of 20% per year.
In addition to base salary, Mr. Riordan earned a bonus for 1996 under the MIP
based on the Company exceeding its maximum operating income goal. Consistent
with the criteria for determining the size of the stock option awards for all
participants, the Compensation and Nominating Committee awarded Mr. Riordan a
stock option for 125,000 shares.
The compensation analysis comparing 1995 compensation levels within the Peer
Group was conducted when Mr. Riordan held the position of President and Chief
Operating Officer. Based on this analysis, Mr. Riordan's total compensation
ranked above the median relative to other president and chief operating officers
of the Peer Group.
Mr. Riordan has an employment agreement which was amended and restated in
December 1996. The terms of the employment agreement are summarized on page 16.
POLICY WITH RESPECT TO QUALIFYING COMPENSATION FOR DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code generally limits to $1,000,000 the
tax deductible compensation paid for a particular year to the Chief Executive
Officer and to each of the four highest-paid executive officers who are employed
as executive officers on the last day of such year (the "Covered Executive
Officers"). Presently, because of the application of certain transition rules,
the Company does not expect any of the Covered Executive Officers' compensation
to be subject to the deductibility limit. While it is the Compensation and
Nominating Committee's
11
<PAGE>
intention to maximize the deductibility of compensation paid to executive
officers to the extent the Compensation and Nominating Committee deems
appropriate, the Compensation and Nominating Committee may, from time to time,
reevaluate its policy with respect to Section 162(m).
COMPENSATION AND NOMINATING COMMITTEE
Donald Patrick Brennan, Chairman
David I. Margolis
Robert H. Niehaus
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
for the period from March 9, 1995 (the date the Company became a public company)
through December 31, 1996 to the cumulative total returns for the S&P 500
Composite Index ("S&P 500 Index") and the S&P 500 Household Products and the S&P
500 Paper and Forest Products Group Indices combined and weighted equally
("Household Products/Paper and Forest Products Combined Indices"). The graph
assumes an investment of $100 in the Common Stock of the Company and in each
index as of March 9, 1995, and the reinvestment of all dividends. The line graph
is not intended to be indicative of future stock performance.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
FROM MARCH 9, 1995 THROUGH DECEMBER 31, 1996 AMONG
FORT HOWARD CORPORATION, S&P 500 INDEX AND
HOUSEHOLD PRODUCTS/PAPER AND FOREST PRODUCTS COMBINED INDICES
[GRAPH APPEARS HERE]
Household Products/
Paper and Forest
S&P 500 Products Combined
Date Fort Howard Index Indices
----------- ------- -------------------
March 9, 1995...... $100.00 $100.00 $100.00
December 31, 1995.. $187.50 $129.83 $119.05
December 31, 1996.. $230.73 $159.57 $141.78
12
<PAGE>
EXECUTIVE COMPENSATION
The following table presents information concerning compensation paid
for services to the Company during 1996 and the two prior fiscal years to the
current and former Chief Executive Officer, the four other most highly
compensated executive officers and one other former executive officer (the
"Named Executive Officers") of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------
Annual Compensation Awards
----------------------------------- -------------------------
Number of
Other Annual Restricted Securities All Other
Compen- Stock Underlying Compen-
Name and Principal Position Year Salary Bonus sation(a) Awards Options/SARs sation(b)
---- ------- ----- --------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald H. DeMeuse........... 1996 $750,000 $825,000 $1,963 0 0 $85,824
Chairman (through 1995 750,000 973,125 2,648 0 100,000 70,687
February 28, 1997) and 1994 750,000 307,500 7,802 0 0 69,366
Chief Executive Officer
(through September 30,
1996)
Michael T. Riordan.......... 1996 $458,654 $467,500 $1,676 490,000 (c) 125,000 $32,029
Chief Executive Officer 1995 378,846 486,563 1,641 0 100,000 22,088
(as of October 1, 1996) 1994 375,000 153,750 4,671 0 0 21,400
and President
Kathleen J. Hempel.......... 1996 $480,000 $528,000 $ 359 0 50,000 $33,640
Vice Chairman and 1995 480,000 622,800 289 0 50,000 27,891
Chief Financial Officer 1994 480,000 196,800 1,036 0 0 27,311
John F. Rowley.............. 1996 $251,539 $275,000 $ 134 0 25,000 $17,828
Executive Vice 1995 250,000 324,375 103 0 20,000 14,688
President 1994 237,885 96,350 338 0 0 13,676
Daniel J. Platkowski........ 1996 $235,385 $258,500 $ 119 0 22,000 $17,251
Senior Vice President 1995 221,154 285,450 70 0 15,000 13,490
1994 210,769 77,900 405 0 0 12,607
James W. Nellen II 1996 $220,769 $242,000 $ 252 0 22,000 $15,866
Vice President, 1995 220,000 285,450 77 0 15,000 13,097
General Counsel and 1994 205,577 84,050 63 0 0 11,998
Secretary
Andrew W. Donnelly(d)....... 1996 $330,000 $363,000 $ 214 0 0 $22,951
Former Executive 1995 330,000 428,175 880 0 20,000 19,026
Vice President 1994 330,000 135,300 162 0 0 18,603
- --------------
</TABLE>
(a) Consists of amounts reimbursed for the payment of taxes.
(b) Consists of Company contributions to the Company's profit sharing plan and
supplemental retirement plan.
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<PAGE>
(c) Consists of a grant of Restricted Stock and Stock Equivalents pursuant to,
and as defined in, the Stock Incentive Plan. The Restricted Stock granted
to Mr. Riordan, subject to certain exceptions, will vest and the
restrictions thereon will lapse on a pro rata basis on each of the first
five anniversaries of the date of grant. Mr. Riordan has the right to
receive cash dividends (if any) on the Restricted Stock, however, stock
dividends (if any) will be treated as additional shares under his award and
will be subject to the same restrictions and other terms and conditions
that apply to the Restricted Stock with respect to which such dividends are
issued. The Stock Equivalents granted to Mr. Riordan will also, subject to
certain exceptions, vest on a pro rata basis on each of the first five
anniversaries of the date of grant. Each such Stock Equivalent entitles
Mr. Riordan to a cash payment equal to the fair market value of a share of
Common Stock on the applicable vesting date as promptly as practicable
following such date.
(d) Mr. Donnelly's status as an executive officer terminated on October 18,
1996. For a description of his resignation agreement, see "Employment and
Related Agreements."
The following table presents information concerning grants of stock
options pursuant to the Stock Incentive Plan made during the 1996 fiscal year to
each of the Named Executive Officers. No stock appreciation rights were granted
under the Stock Incentive Plan during 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------
Percent of
Number of Total
Securities options/SARs
Underllying Granted to Exercise or
Options/SARs Employees in Base Grant Date
NAME Granted(a) 1996 Price($/Sh) Expiration Date Present Value(b)
----- ------------ -------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Donald H. DeMeuse 0 - - - -
Michael T. Riordan 125,000 16.7% $27.75 12/09/06 $1,087,500
Kathleen J. Hempel 50,000 6.7 27.75 12/09/06 $ 435,000
John F. Rowley 25,000 3.3 27.75 12/09/06 $ 217,500
Daniel J. Platkowski 22,000 2.9 27.75 12/09/06 $ 191,400
James W. Nellen II 22,000 2.9 27.75 12/09/06 $ 191,400
Andrew W. Donnelly 0 - - - -
</TABLE>
- ----------------
(a) All grants consisted of nonqualified stock options with a term of 10 years
granted pursuant to the Stock Incentive Plan. Subject to certain conditions,
the options vest and become exercisable as to 20% of such options on each of
the first five anniversaries of the date of grant. Exercisability of the
options is accelerated in the event of a Named Executive Officer's death,
disability, termination by the Company without "cause" (as defined for
purposes of the Stock Incentive Plan) or, unless otherwise determined by the
Compensation and Nominating Committee, upon a "change in control" (as
defined below under "1995 Stock Incentive Plan"). Notwithstanding the
foregoing, no option may be exercised within the first six
14
<PAGE>
months following the date of grant. The Compensation and Nominating
Committee has the discretion to accelerate the exercisability of any options
granted under the Stock Incentive Plan.
(b) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options reflected in the above table include the following: (i) an
option exercise price of $27.75, equal to the fair market value of the
underlying stock on the date of grant; (ii) an expected weighted average
option life equal to five years; (iii) an interest rate of 6.07% that
represents the interest rate on a U.S. Treasury security on the date of
grant with a maturity date corresponding to that of the expected weighted
average option life; and (iv) volatility of 19.26% calculated using daily
stock prices of the companies comprising the Household Products/Paper and
Forest Products Combined Indices in the five year period preceding 1997. The
ultimate values of the options will depend on the future market price of the
Company's stock, which cannot be forecasted with reasonable accuracy. The
actual value, if any, an optionee will realize upon exercise of an option
will depend on the excess of the market value of the Company's Common Stock
over the exercise price on the date the option is exercised. There is no
assurance that the value realized by an optionee will be at or near the
value estimated by the Black-Scholes model or any other model applied to
value the options.
The following table presents information concerning unexercised stock
options for the Named Executive Officers. No stock options were exercised by the
Named Executive Officers during 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised In-the-Money
Held at December 31, 1996 Options Held at December 31, 1996(a)
----------------------------- ------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- -------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Donald H. DeMeuse..... 643,237 0 $7,139,299 0
Michael T. Riordan.... 193,608 205,000 2,005,140 $635,000
Kathleen J. Hempel.... 585,347 90,000 7,060,358 317,500
John F. Rowley........ 121,923 41,000 1,342,947 127,000
Daniel J. Platkowski.. 127,858 34,000 1,420,362 95,250
James W. Nellen II.... 121,989 34,000 1,348,130 95,250
Andrew W. Donnelly.... 178,827 0 1,953,353 0
</TABLE>
- -------------
(a) The value of unexercised in-the-money options represents the positive spread
between the December 31, 1996 closing price of the Common Stock of $27.6875
per share as reported on the Nasdaq National Market System ("NASDAQ") and
the exercise price of unexercised options. The actual amount, if any,
realized upon exercise of options will depend upon the market price of the
Common Stock relative to the per share exercise price at the time the option
is exercised. There is no assurance that the values of unexercised in-the-
money options reflected in this table will be realized.
15
<PAGE>
EMPLOYMENT AND RELATED AGREEMENTS
The Named Executive Officers (other than Messrs. DeMeuse and Donnelly)
are parties to employment agreements with the Company (the "Employment
Agreements") which were amended and restated on December 13, 1996. The
Employment Agreements contain customary employment terms, have an initial term
that expires on December 31, 1999 (December 31, 2001, in the case of Mr.
Riordan), provide for automatic one-year extensions (unless notice not to extend
is given by either party at least six months prior to the end of the effective
term), and provide for base annual salaries in an amount at least equal to such
Named Executive Officer's base salary on December 13, 1996 and participation in
certain annual incentive bonus arrangements. Prior to the date hereof, such
annual incentive bonuses have been provided for under the MIP. In the event of
the termination of the employment of a Named Executive Officer by the Company
without "cause" (other than by reason of death or disability) or by such Named
Executive Officer for "good reason" (as such terms are defined in the Employment
Agreements), the Employment Agreements provide that such Named Executive Officer
would receive his or her full base salary for a period (in each case, the
"Severance Period") of three years, in the case of Mr. Riordan and Ms. Hempel,
and one year in the case of the other Named Executive Officers (two years if
such termination follows a "change in control" of the Company (as defined below
under "1995 Stock Incentive Plan"). In addition, during the Severance Period,
such Named Executive Officer would continue to receive bonus payments for three
years, in the case of Mr. Riordan and Ms. Hempel, and for one year in the case
of the other Named Executive Officers (two years if such termination follows a
"change in control" of the Company), the amount of which is based on the average
of the bonuses paid under the MIP for the three-year period prior to the date of
termination. During the Severance Period, such Named Executive Officer would
also continue to participate in all other compensation and benefit plans of the
Company and would be entitled to outplacement assistance. Each of the Employment
Agreements also includes noncompetition and confidentiality provisions.
The Company formerly maintained employment agreements with each of
Messrs. DeMeuse and Donnelly. Mr. DeMeuse retired as an executive officer and
employee of the Company effective March 1, 1997. In connection with his
retirement, the Company has agreed to provide Mr. DeMeuse and his spouse with
medical and dental coverage for the remainder of their respective lifetimes.
The employment agreement with Mr. Donnelly has been superseded by the
Resignation Agreement discussed below.
Andrew W. Donnelly, formerly an Executive Vice President of the
Company, resigned as an executive officer of the Company effective as of October
18, 1996 and as an employee of the Company effective as of December 31, 1996.
Under a letter agreement with the Company (the "Resignation Agreement"), Mr.
Donnelly will continue to receive his base salary until October 18, 1998, and
will receive a cash bonus for 1997 in lieu of participation for such year in the
MIP. Mr. Donnelly will receive an additional amount for 1997 in lieu of any
benefits that he would have received for such year under the Company's
retirement plans. The Resignation Agreement also provides for Mr. Donnelly's
continued participation in the Company's group health plan until the earlier of
October 18, 1998 or the date on which he obtains other coverage, as well as the
continuation of his group life insurance coverage until October 18, 1998. Mr.
Donnelly has agreed to serve as a consultant to the Company until December 31,
1998. The Resignation Agreement also includes noncompetition and
confidentiality restrictive covenants.
MANAGEMENT INCENTIVE PLAN
Participation in the MIP is based upon individual selection by the
Compensation and Nominating Committee from among the full-time salaried
employees who, in the judgment of the Chief Executive Officer, serve in key
executive, administrative, professional or technical capacities. Awards are
based upon the extent to which the Company's financial performance during the
year has met or exceeded certain performance goals specified by the Compensation
and Nominating Committee. The Compensation and Nominating Committee may
alternatively grant a discretionary bonus. A participant must be employed by the
16
<PAGE>
Company on the last day of the year in order to receive a bonus for such year,
except in the case of death, disability or retirement after age 55, in which
case such participant would receive a pro rata bonus. In the event of
termination of a participant's employment without "cause" (as defined in the
MIP) within two years following a "change in control" (as defined below under
"1995 Stock Incentive Plan"), participants would receive a pro rata bonus for
such year equal to the maximum award amount for which such participant was
eligible.
1995 STOCK INCENTIVE PLAN
The Stock Incentive Plan provides for the granting of incentive and
nonqualified stock options, stock appreciation rights, restricted stock,
performance shares, stock equivalents and dividend equivalents (individually, an
"Award" or collectively, "Awards"). Employees who are eligible to receive Awards
are those officers or other key employees with potential to contribute to the
future success of the Company or its subsidiaries. A total of 3,359,662 shares
of Common Stock may be issued pursuant to Awards under the Stock Incentive Plan,
subject to adjustment in accordance with the terms of the Stock Incentive Plan.
The only Awards that have been granted to date under the Stock
Incentive Plan are nonqualified stock options and a grant of restricted stock
and stock equivalents to Michael T. Riordan in September 1996. In the event of a
change in control and except as the Compensation and Nominating Committee (as
constituted prior to such change in control) may expressly provide otherwise,
all stock options then outstanding will become fully exercisable, all
restrictions on the restricted stock then outstanding will lapse and will be
fully vested and all stock equivalents then outstanding will be fully vested
(except for any stock options, restricted stock or stock equivalents granted
within six months of the Change in Control). For purposes of the Stock Incentive
Plan, a "change in control" shall have occurred when (A) any person (other than
(x) the Company, any subsidiary of the Company, any employee benefit plan of the
Company or of any subsidiary of the Company, or any person or entity organized,
appointed or established by the Company or any subsidiary of the Company for or
pursuant to the terms of any such plans, (y) Morgan Stanley Group, MSLEF II,
Fort Howard Equity Investors, L.P., Fort Howard Equity Investors II, L.P., or
any of their respective affiliates or (z) any general or limited partner of
MSLEF II, Fort Howard Equity Investors, L.P. or Fort Howard Equity Investors II,
L.P.), alone or together with its affiliates and associates (collectively, an
"Acquiring Person"), shall become the beneficial owner of 20% or more of the
then outstanding shares of Common Stock or the combined voting power of the
Company's then outstanding voting securities (except pursuant to an offer for
all outstanding shares of Common Stock at a price and upon such terms and
conditions as a majority of the Continuing Directors (as defined below)
determine to be in the best interests of the Company and its stockholders (other
than an Acquiring Person on whose behalf the offer is being made)), or (B)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors and any new director (other than a
director who is a representative or nominee of an Acquiring Person) whose
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved
(collectively, the "Continuing Directors"), no longer constitute a majority of
the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Nominating Committee are Donald
Patrick Brennan, Robert H. Niehaus and David I. Margolis. Mr. Brennan and Mr.
Niehaus are employed by MS&Co as an Advisory Director and a Managing
Director, respectively. See "Committees of the Board of Directors--The
Compensation and Nominating Committee."
17
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and persons who own more
than 10% of the Company's Common Stock to report their ownership and changes in
their ownership of the Company's Common Stock to the Securities and Exchange
Commission. Directors, officers and greater than 10% stockholders also are
required to furnish the Company with copies of all Section 16(a) forms they
file. Specific due dates for these reports have been established by the
Securities and Exchange Commission and the Company is required to report in this
proxy statement any failure of its directors, executive officers and greater
than 10% stockholders to file by these dates.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no other reports
were required, the Company believes that all such filing requirements were
satisfied by its officers, directors and greater than 10% stockholders, except
that one report was filed late by each of Andrew W. Donnelly, Leeway & Co. and
Morgan Stanley Group.
18
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP was the Company's independent public accountant
for 1996. Arthur Andersen LLP is expected to have a representative at the Annual
Meeting. This representative will be available to respond to appropriate
questions at that time and will have an opportunity to make a statement, if he
or she so desires. The Board of Directors has selected Arthur Andersen LLP to
audit the Company's accounts for 1997.
EXPENSES OF SOLICITATION
All expenses incurred in connection with the solicitation of proxies
will be borne by the Company. The Company has engaged ChaseMellon Shareholder
Services, L.L.C. to assist with the solicitation of proxies for an estimated fee
of $4,250, plus expenses. The Company will request brokerage houses, custodians,
fiduciaries and nominees to forward proxy materials to their principals and will
reimburse them for their reasonable expenses in doing so. Solicitation may also
be undertaken by mail, telephone and personal contact by directors, officers and
employees of the Company without additional compensation.
ChaseMellon Shareholder Services, L.L.C., the Company's transfer agent
and registrar, will receive and tabulate proxies and will provide
representatives to act as inspectors of election at the Annual Meeting.
STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company on or before November
24, 1997, to be eligible for inclusion in the Company's proxy statement and
proxy relating to that meeting. Proposals should be addressed to James W. Nellen
II, Secretary, Fort Howard Corporation, 1919 South Broadway, Green Bay,
Wisconsin 54304.
Under the Company's Certificate of Incorporation and By-Laws,
stockholders desiring to nominate persons for election as directors or bring
other business before the annual meeting must deliver or mail a notice to the
Secretary that must be received at the principal executive offices of the
Company not less than 60 days nor more than 90 days prior to the anniversary
date of the immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for a date that is
not within 30 days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth day following the day on which such notice of the date
of the annual meeting is mailed or such public disclosure of the date of the
annual meeting is made, whichever first occurs. Stockholders' notices must
contain the specific information set forth in the Certificate of Incorporation
and the By-Laws. Stockholders will be furnished a copy of the Company's
Certificate of Incorporation and By-Laws without charge upon written request to
the Secretary of the Company.
OTHER INFORMATION
As to any other matter or proposal that may properly come before the
meeting, including voting for the election of any person as a director in place
of a nominee named herein who becomes unable to serve or for good cause will not
serve, and voting on proposals omitted from the proxy statement pursuant to the
rules of the Securities and Exchange Commission, it is intended that proxies
received will be voted in accordance with the discretion of the proxy holders.
The Annual Report to Stockholders of the Company for the fiscal year
ended December 31, 1996, which includes financial statements, is enclosed. The
Annual Report does not form any part of the material for the solicitation of
proxies.
19
<PAGE>
ANY STOCKHOLDER WHO DESIRES A COPY OF THE COMPANY'S 1996 ANNUAL REPORT
ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY OBTAIN A COPY
(EXCLUDING EXHIBITS) WITHOUT CHARGE BY ADDRESSING A WRITTEN REQUEST TO THE
PUBLIC AFFAIRS DEPARTMENT, FORT HOWARD CORPORATION, P.O. BOX 19130, GREEN BAY,
WISCONSIN 54307-9130.
By Order of the Board of Directors
James W. Nellen II
Vice President and
Secretary
Green Bay, Wisconsin
, 1997
20
<PAGE>
FORT HOWARD CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 1997
The undersigned hereby appoints Michael T. Riordan, Kathleen J. Hempel and
James W. Nellen II, or any of them, proxies of the undersigned, with full
power of substitution, to vote all shares of Common Stock of Fort Howard
Corporation that the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held on Tuesday, May 13, 1997, at 10:00 a.m., local time, at
the Metropolitan Club, Sears Tower, 66th Floor, 233 South Wacker Drive, Chicago.
Illinois, and at any adjournments thereof. The proxies have the authority to
vote such stock as directed on the reverse side hereof with respect to the
proposals set forth in the Proxy Statement with the same effect as though the
undersigned were present in person and voting such shares. The proxies are
further authorized in their direction to vote upon such other business as may
properly come before the Annual Meeting of Stockholders, and any adjournments
thereof. The undersigned hereby revokes all proxies heretofore given to vote at
the Annual Meeting of Stockholders and any adjournment thereof.
PLEASE INDICATE ON THE REVERSE SIDE OF THIS CARD HOW YOUR STOCK IS TO BE VOTED.
UNLESS YOU OTHERWISE INDICATE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
ALL NOMINEES FOR DIRECTOR AND "FOR" THE AMENDMENT TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 100 MILLION TO 200 MILLION SHARES IN THE
PROPOSALS SET FORTH ON THE REVERSE SIDE OF THIS CARD. YOUR SHARES CANNOT BE
VOTED UNLESS YOU SIGN THIS CARD.
(CONTINUED, AND TO BE SIGNED ON THE REVERSE SIDE)
FOLD AND DETACH HERE
<PAGE>
QS
This proxy, when properly executed, will be vote as directed. If no direction is
given, shares of Common Stock will be voted "FOR" each of the proposals set
forth below.
The Board of Directors recommends a vote "FOR" each of the proposals
set forth below.
1. Election of Directors. The nominees are Dudley J. Godfrey, Jr., Michael T.
Riordan and Frank V. Sica.
FOR All Nominees WITHHOLD Authority To FOR except WITHHOLD authority to
Vote For All Nominees vote for the following nominees(s):
[_] [_]
-----------------------------------
2. Approval of the proposed Amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 100 million to 200 million shares.
FOR AGAINST ABSTAIN
[_] [_] [_]
Please indicate whether you will be attending the
annual meeting in person:
Will Attend Will Not Attend
[_] [_]
SIGNATURES(S)_________________________
______________________________________
DATED:___________________________ 1997
IMPORTANT: Please sign EXACTLY as
name(s) appear hereon. Joint Owners
should each sign. When signing as
executor, administrator, trustee,
guardian, attorney or corporate
officer, please give full title.
FOLD AND DETACH HERE
