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
JAMES RIVER CORPORATION OF VIRGINIA
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[James River
Logo] JAMES RIVER CORPORATION OF VIRGINIA
March 13, 1996
Dear Shareholder:
It is our pleasure to invite you to the Annual
Meeting of Shareholders of James River Corporation of
Virginia to be held at 10:00 A.M. IN THE MORNING
(Eastern daylight time) on THURSDAY, APRIL 25, 1996, at
THE RICHMOND MARRIOTT, 500 EAST BROAD STREET, RICHMOND,
VIRGINIA. Please note that this is a change from our
Company's typical afternoon meeting time. A Notice of
this Annual Meeting and a Proxy Statement covering the
formal business of the meeting are enclosed, along with
the Company's Annual Report to Shareholders for the
fiscal year ended December 31, 1995. During the meeting,
time will be provided for a review of operations for the
past year and items of general interest about the
Company.
It is important that your shares be represented at
the meeting whether or not you expect to attend;
therefore, please promptly sign, date and return the
proxy card in the accompanying postage-paid envelope.
Even though you execute this proxy, you may revoke it at
any time before it is voted. If you attend the meeting,
you will be able to vote in person if you wish to do so,
even if you have previously returned your proxy card.
We look forward to seeing you at the Annual
Meeting.
Sincerely,
/s/ MILES L. MILES
Miles L. Marsh
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
<PAGE>
[JAMES RIVER LOGO]
JAMES RIVER CORPORATION
OF VIRGINIA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 1996
TO THE SHAREHOLDERS OF
JAMES RIVER CORPORATION OF VIRGINIA
Notice is hereby given that the Annual Meeting of Shareholders of James
River Corporation of Virginia (the "Company") will be held in the morning at
10:00 a.m. on Thursday, April 25, 1996, at The Richmond Marriott, 500 East Broad
Street, Richmond, Virginia, for the following purposes:
1. To elect a Board of Directors consisting of ten (10) persons to serve
for the ensuing year;
2. To consider and vote upon a proposal to adopt the 1996 Stock Incentive
Plan;
3. To consider and vote upon a proposal to adopt the Director Stock
Ownership Plan;
4. To consider and vote upon a shareholder proposal concerning non-employee
director pension benefits, if presented;
5. To consider and vote upon a shareholder proposal concerning the
preparation of an equal employment report, if presented; and
6. To transact such other business as may properly come before the meeting.
The close of business on February 20, 1996, has been fixed as the record
date to determine the shareholders entitled to vote at the Annual Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED. Shareholders,
whether or not they expect to attend the meeting in person, are requested to
date, sign and return the enclosed proxy card in the envelope provided, on which
no postage is needed if mailed in the United States.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1995, is being mailed to you with this Notice and the Proxy
Statement.
You are cordially invited to attend the meeting.
By order of the Board of Directors,
CLIFFORD A. CUTCHINS, IV
CORPORATE SECRETARY
March 13, 1996
<PAGE>
JAMES RIVER CORPORATION
OF VIRGINIA
P. O. BOX 2218
RICHMOND, VIRGINIA 23218
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement, which is being mailed to shareholders on or about
March 13, 1996, is furnished in connection with the solicitation by the Board of
Directors of James River Corporation of Virginia ("James River" or the
"Company") of proxies in the form accompanying this Proxy Statement to be voted
at the Annual Meeting of Shareholders to be held at 10:00 a.m. on April 25,
1996, at The Richmond Marriott, 500 East Broad Street, Richmond, Virginia, and
any adjournment thereof.
Shareholders of record of the Company's common stock, par value $.10 per
share ("Common Stock"), and its Series P 9% Cumulative Convertible Preferred
Stock ("Series P Preferred Stock") at the close of business on February 20,
1996, will be entitled to receive notice of, and to vote at, the Annual Meeting
and any adjournment thereof. The Series P Preferred Stock is held in the form of
depositary shares, with each depositary share representing a one-hundredth
interest in a share of Series P Preferred Stock. As of February 20, 1996, there
were 84,921,918 shares of Common Stock and 16,664,366 depositary shares of
Series P Preferred Stock outstanding. Each share of Common Stock is entitled to
one vote on each matter presented to the shareholders. Each depositary share of
Series P Preferred Stock is entitled to .8547 of a vote on each matter presented
to the shareholders, voting as a single group with holders of Common Stock.
The Common Stock and depositary shares of Series P Preferred Stock
represented by each properly executed proxy will be voted in the manner
specified by the shareholder. If no specific instruction is received, a proxy,
when executed and not revoked, will be voted FOR the election of the nominated
directors, FOR the adoption of the 1996 Stock Incentive Plan, FOR the adoption
of the Director Stock Ownership Plan, and AGAINST each of the
shareholder-submitted proposals. Execution of the accompanying proxy will not
affect a shareholder's right to attend the Annual Meeting and vote in person.
Any shareholder giving a proxy has the right to revoke it at any time before it
is voted by submitting written notice of revocation or a new proxy.
Shares for which the holder has elected to withhold or abstain the proxies'
authority to vote, including shares held in street name that are not voted, will
count toward a quorum but will have no effect on the action taken other than the
proposals relating to the 1996 Stock Incentive Plan and Director Stock Ownership
Plan. With respect to these proposals, an abstention will have the effect of a
vote against the proposal.
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made initially by mail; however, the directors, officers
and employees of the Company and its subsidiaries may, without additional
compensation, solicit proxies by telephone, telegraph or personal interview. The
Company intends to engage Georgeson & Co. to solicit proxies from brokers, banks
and other institutional holders at an estimated fee of approximately $8,000 plus
reimbursable expenses.
ELECTION OF DIRECTORS
The Bylaws of the Company provide for a Board of Directors (the "Board")
consisting of ten members. Each of the directors will serve for a term which
will run until the next annual meeting of shareholders or until his or her
successor has been elected. Robert C. Williams, who has served as a director
since 1969 and has retired from employment with the Company effective December
31, 1995, and Joseph T. Piemont, who has served as a director since 1975 and has
reached the retirement age for directors, will not stand for re-election to the
Board of Directors in 1996. Each of the nominees listed below has been nominated
by the Nominating Committee of the Board. All nominees are standing for
re-election, other than Gary P. Coughlan and Richard L. Sharp, who are new
nominees in 1996. Although the Company anticipates that all of the nominees will
be able to serve, if at the time of the meeting any nominees are unable or
unwilling to serve, shares represented by properly executed proxies will be
voted at the discretion of the persons named therein for such other person or
persons as the Board of Directors may designate.
1
<PAGE>
INFORMATION ON NOMINEES
<TABLE>
<CAPTION>
DIRECTOR BUSINESS EXPERIENCE AND DIRECTORSHIPS
NAME AGE PRINCIPAL OCCUPATION SINCE IN OTHER PUBLIC COMPANIES
<S> <C> <C> <C> <C>
William T. Burgin 52 Partner, Bessemer Venture Partners, 1978 Has held present position for more
Wellesley Hills, Massachusetts than five years. Director of Gaileo
Electro-Optics Corporation.
Worley H. Clark, Jr. 63 President, W.H. Clark Associates, 1993 Retired from Nalco Chemical Company in
Ltd., Chicago, Illinois April 1994 where served as Chairman
and Chief Executive Officer. Director
of NICOR, Inc., Merrill Lynch &
Company, Inc., USG Corporation,
Bethlehem Steel Corporation and
Diamond Shamrock Corporation.
William T. Comfort, Jr. 58 Chairman, Citicorp Venture Capital, 1978 Has held present position for more
Ltd. and Court Square Capital, Ltd., than five years.
New York, New York (subsidiaries of
Citibank, N.A. and Citicorp)
Gary P. Coughlan 50 Senior Vice President, Finance and -- Has held present position for more
Chief Financial Officer, Abbott than five years.
Laboratories, Abbott Park, Illinois
(diversified health care company)
William V. Daniel 67 Retired Managing Director of Wheat 1969 Retired from Wheat First Butcher
First Butcher Singer, Richmond, Singer in June 1994. Prior to that
Virginia (investment banking and time, served as Managing Director of
financial services) Wheat First Butcher Singer. Director
of Crown Vantage Inc.
Bruce C. Gottwald(1) 62 Chairman and Chief Executive Officer, 1972 Has held present position since April
Ethyl Corporation, Richmond, Virginia 1994. From May 1992 to March 1994,
(petroleum additives business) served as President and Chief
Executive Officer of Ethyl
Corporation. Prior to May 1992, served
as President and Chief Operating
Officer of Ethyl Corporation. Director
of Ethyl Corporation, Dominion
Resources, Inc., CSX Corporation,
Tredegar Industries, Inc. and First
Colony Corporation.
Miles L. Marsh 48 Chairman, President and Chief 1995 Has held position as President and
Executive Officer of the Company Chief Executive Officer since October
1995 and position as Chairman since
January 1996. From 1991 to 1995,
served as Chairman and Chief Executive
Officer of Pet Inc. Director of
Hartmarx Corporation, GATX Corporation
and Whirlpool Corporation.
Robert M. O'Neil 61 Director, The Thomas Jefferson Center 1987 Has held present position for more
for the Protection of Free Expression, than five years.
Charlottesville, Virginia
Richard L. Sharp 48 Chairman, President and Chief -- Has held position as President and
Executive Officer, Circuit City Chief Executive Officer since 1986 and
Stores, Inc., Richmond, Virginia position as Chairman of the Board
since 1994. Director of Circuit City
Stores, Inc., S&K Famous Brands, Inc.
and Flextronic International, Ltd.
Anne Marie 49 Partner, McGuire, Woods, Battle & 1994 Has held present position for more
Whittemore(1)(2) Boothe, L.L.P., Richmond, Virginia than five years. Director of Owens &
(attorneys-at-law) Minor, Inc., USF&G Corporation, T.
Rowe Price Associates, Inc. and
Albemarle Corporation.
</TABLE>
(1) Member of the Executive Committee.
(2) McGuire, Woods, Battle & Boothe, L.L.P. serves as primary outside legal
counsel to the Company.
2
<PAGE>
VOTE REQUIRED
For the election of directors, the ten nominees receiving the greatest
number of affirmative votes cast at the Annual Meeting of Shareholders will be
elected.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met on twelve occasions during 1995, including two
meetings held by telephone. All members of the Board, except for Mr. Gottwald,
attended at least seventy-five percent, in the aggregate, of the meetings of the
Board and committees on which they served.
The Audit Committee of the Board, whose members are William T. Comfort, Jr.
(Committee Chairman), William T. Burgin and William V. Daniel, consists of only
non-employee directors and met on three occasions during 1995, including two
meetings held by telephone. Throughout the year, the Audit Committee meets
periodically with management, members of the Company's internal audit staff and
representatives of the Company's independent auditors. The Audit Committee
reviews the scope of internal and external audit activities and the results of
such audits and is responsible for making the annual recommendation to the Board
of Directors of the firm of independent accountants to be retained by the
Company.
The Compensation Committee, whose members are Robert M. O'Neil (Committee
Chairman), Worley H. Clark, Jr., William V. Daniel and Joseph T. Piemont,
consists of only non-employee directors. The Compensation Committee met on five
occasions during 1995 and is responsible for recommending the salaries and
compensation programs for executive officers to the Board of Directors. This
committee is also responsible for administering the Company's profit sharing
plan for salaried employees, its stock option plans and other benefit programs.
None of the members of the Compensation Committee are entitled to participate in
any of the Company's employee benefit plans.
The Nominating Committee members are Robert C. Williams (Committee
Chairman), Worley H. Clark, Jr., Bruce C. Gottwald and Anne Marie Whittemore.
This committee recommends to the Board of Directors the candidates for election
as directors of the Company. The Board of Directors also considers candidates
recommended by shareholders entitled to vote for the election of directors.
Shareholder recommendations (including the nominee's name, biographical data and
written consent to serve as a director if elected) should be submitted to the
Corporate Secretary of the Company.
COMPENSATION OF DIRECTORS
During 1995, each director, other than Mr. Marsh and Mr. Williams, received
an annual fee of $25,000 for serving as a director, plus reimbursement of
expenses incurred in connection with attending meetings. Effective April 25,
1996, the annual fee will be increased to $30,000. In addition, each director,
other than Mr. Marsh and Mr. Williams, received a fee of $2,000 for each Board
meeting attended, $1,000 for each Committee meeting attended, and $600 for
participating in each meeting held by telephone. Directors who are employees of
the Company do not receive any additional compensation for membership on, or
attending meetings of, the Board of Directors or its committees.
Effective as of May 1, 1983, the Company adopted the Deferred Compensation
Plan for Outside Directors (the "Deferred Plan") under which each non-employee
director could elect to defer not less than $10,000 of his annual director's
fees for a period of at least four years. Under the Deferred Plan, the Company
used the deferred director's fees to purchase life insurance policies on the
directors' lives and, in each case, agreed to make deferred payments which, in
the aggregate, were intended at the time the policy was purchased to be
generally equal, on an after-tax basis, to the proceeds of the policy. The plan
provides participating directors with benefits according to schedules set forth
in the plan or in individual agreements between the Company and each director.
The minimum benefit that a director may earn is a return of his deferred fees,
plus interest accrued at the six-month certificate of deposit rate in effect
from time to time. Under the Deferred Plan, the Company will pay the deferred
benefits beginning on dates selected by the participants at the time the
deferral elections were made and will pay death benefits to the beneficiary of a
participant who dies before beginning to receive the deferred benefits. Benefits
under the plan will generally be paid over a ten-year period. As of December 31,
1995, there are three directors who had elected to defer their compensation
under the Deferred Plan through June of 1997. The plan participants are
unsecured creditors of the Company and have no right to any specific assets of
the Company.
On February 15, 1996, the Board approved, subject to shareholder approval,
the Director Stock Ownership Plan which provides a portion of the directors'
compensation in Common Stock. (See the summary of the proposal to adopt the
Director Stock Ownership Plan herein for a brief description of its terms.) All
directors, other than Mr. Marsh, will be eligible to defer
3
<PAGE>
stock compensation pursuant to the Director Stock Ownership Plan. Directors'
compensation is administered by a committee whose members may, but need not, be
directors and whose members may not be participants in any directors'
compensation plan.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
The Company adopted the Stock Option Plan for Outside Directors in June
1989 and amended and restated the plan as of April 11, 1991. The plan, which
operates automatically according to its terms, provides for the grant of
nonstatutory options with terms of ten years to directors of the Company who are
not full-time employees of the Company or a subsidiary ("Outside Director"). The
Board of Directors is responsible for the plan's implementation but may not
exercise any discretion concerning its administration. The plan provides for an
initial grant of stock options for 3,000 shares of Common Stock to each person
who first becomes a member of the Board of Directors as an Outside Director
after June 8, 1989. The plan also provides for the grant of an option to
purchase 1,000 shares of Common Stock as of each April 15th to each Outside
Director who has been an Outside Director for at least nine months. All options
under the plan are granted at exercise prices equal to the fair market value of
the Common Stock on the date of grant and are exercisable immediately.
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
The Company adopted a Retirement Plan for Outside Directors effective as of
December 16, 1993, and amended the plan on February 18, 1994. The plan provides
benefits for Outside Directors who complete at least five years of service,
including service as a director of a predecessor company. An Outside Director
who meets this requirement will receive an annual retirement benefit from the
Company beginning on the later of (i) the date on which the Outside Director
attains age 65 or (ii) the date on which the Outside Director ceases to be a
director. The annual benefit will be equal to the annual retainer in effect on
the date the Outside Director ceases to be a director. The annual benefit will
be paid for a period of years equal to the lesser of (i) the Outside Director's
period of eligible service or (ii) ten years. An Outside Director may elect to
have the retirement benefit paid as a joint and 50% survivor form of payment
during such period. The plan is unfunded, and the Outside Directors are
unsecured creditors of the Company.
4
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table lists the number of shares of Common Stock beneficially
owned by each director, nominee, certain executive officers, and all current
directors and executive officers as a group as of February 20, 1996. No
directors, nominees or executive officers held any shares of preferred stock of
the Company as of that date.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED (1)(2) CLASS (11)
<S> <C> <C>
Directors:
William T. Burgin....................................................... 60,078(3) *
Worley H. Clark, Jr..................................................... 7,080 *
William T. Comfort, Jr.................................................. 11,128 *
William V. Daniel....................................................... 9,016(4) *
Bruce C. Gottwald....................................................... 108,128 *
Miles L. Marsh.......................................................... 83,333 *
Robert M. O'Neil........................................................ 8,428 *
Joseph T. Piemont....................................................... 8,928 *
Anne M. Whittemore...................................................... 4,564 *
Robert C. Williams...................................................... 558,074 *
Nominees:
Gary P. Coughlan........................................................ 1,000 *
Richard L. Sharp........................................................ 1,000 *
Other Named Executive Officers:
Clifford A. Cutchins, IV................................................ 72,532(5) *
James K. Goodwin........................................................ 70,407(6) *
Stephen E. Hare......................................................... 60,603(7) *
Norman K. Ryan.......................................................... 20,819(8) *
Ernest S. Leopold....................................................... 12,331(9) *
Ronald L. Singer........................................................ 35 *
All directors and executive officers as a group (17 persons).............. 1,113,757(10) 1.3%
</TABLE>
* Less than 1% of Class.
(1) Each person has sole voting and investment power over all of the shares
listed, except as set forth below. The number of shares for each director
(except Mr. Clark, Mr. Marsh, Ms. Whittemore and Mr. Williams) includes
8,128 shares that may be acquired within 60 days through the exercise of
stock options. Mr. Clark's, Mr. Marsh's, Ms. Whittemore's and Mr. Williams'
beneficial ownership includes 5,080, 83,333, 4,064 and 47,430 shares,
respectively, that may be acquired within 60 days through the exercise of
stock options.
(2) The James River StockPlus Investment Plan (the "StockPlus Plan") reports
plan information on a unitized basis rather than a per share basis. For
purposes of calculating the number of shares beneficially owned for Mr.
Marsh, Mr. Williams and the other named executive officers, an estimate of
the number of shares held in the StockPlus Plan has been calculated based
on the closing stock price of $24.13 as of December 31, 1995, other than
Mr. Singer who disposed of such shares prior to the record date.
(3) Includes 3,000 shares held by his former spouse as custodian for their
children as to which he disclaims any beneficial interest.
(4) Includes 84 shares held by his spouse for which voting and investment power
is shared.
(5) Includes 57,404 shares that may be acquired within 60 days through the
exercise of stock options, 4,832 shares held in the StockPlus Plan and 900
shares held by his children for which voting and investment power is
shared.
(6) Includes 59,825 shares that may be acquired within 60 days through the
exercise of stock options, 1,630 shares held in the StockPlus Plan and 100
shares held by his children for which voting and investment power is
shared.
(7) Includes 51,153 shares that may be acquired within 60 days through the
exercise of stock options and 3,305 shares held in the StockPlus Plan.
(8) Includes 16,856 shares that may be acquired within 60 days through the
exercise of stock options.
(9) Includes 9,550 shares that may be acquired within 60 days through the
exercise of stock options and 2,752 shares held in trust for which voting
and investment power is shared.
(10) Includes 391,710 shares that may be acquired within 60 days through the
exercise of stock options, 18,909 shares held in the StockPlus Plan and
5,174 shares held in trust or by spouses and children for which voting and
investment power is shared.
5
<PAGE>
(11) Any Common Stock not outstanding but which can be acquired through the
exercise of options within 60 days by a shareholder named in the table is
deemed outstanding for the purpose of computing the percentage of
outstanding Common Stock owned by such shareholder but is not deemed
outstanding for the purpose of computing the percentage of Common Stock
owned by any other shareholder.
PRINCIPAL SHAREHOLDERS
The following table lists shareholders known by the Company to be the
beneficial owners of more than five percent of the outstanding Common Stock and
Series P Preferred Stock depositary shares as of the most recent practicable
date.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
TITLE NAME AND ADDRESS BENEFICIALLY PERCENT OF
OF CLASS OF BENEFICIAL OWNER OWNED CLASS (7)
<S> <C> <C> <C>
Common Stock The Bank of New York, as Trustee for the James 11,149,095(1) 13.1%
River StockPlus Investment Plan
One Wall Street
New York, New York 10286
Common Stock The Capital Group Companies, Inc. 6,740,890(2) 7.8%
333 South Hope Street
Los Angeles, California 90071
Common Stock FMR Corp. 7,390,194(3) 8.5%
82 Devonshire Street
Boston, Massachusetts 02109
Series P Preferred The Capital Group Companies, Inc. 1,350,000(4) 8.1%
Stock depositary 333 South Hope Street
shares Los Angeles, California 90071
Series P Preferred College Retirement Equities Fund 2,600,000(5) 15.6%
Stock depositary 730 Third Avenue
shares New York, New York 10017
Series P Preferred FMR Corp. 2,261,100(6) 13.6%
Stock depositary 82 Devonshire Street
shares Boston, Massachusetts 02109
</TABLE>
(1) Shares are voted by the Trustee as directed by the plan participant to whose
account such shares are credited. If no instructions are received from a
participant, the Trustee will vote those shares in such manner as it deems
appropriate. Information concerning the shares owned by The Bank of New
York, as of December 31, 1995, was obtained from a Schedule 13G dated
February 9, 1996. The Schedule 13G indicated that The Bank of New York had
shared voting and investment power for all of these shares which it holds as
Trustee for the Company's StockPlus Plan. The Bank of New York disclaimed
beneficial ownership of these shares.
(2) Information concerning the shares owned by The Capital Group Companies,
Inc., as of December 31, 1995, was obtained from a Schedule 13G dated
February 9, 1996. The Schedule 13G indicated that The Capital Group
Companies, Inc. beneficially owned 5,128,550 shares of Common Stock and
1,612,340 shares of Common Stock obtained through the assumed conversion of
the Series P Preferred Stock and the Series L $14.00 Cumulative Convertible
Exchangeable Preferred Stock ("Series L Preferred Stock") of the Company.
The Capital Group Companies, Inc., through its subsidiaries, had sole voting
power for 2,531,050 shares and had sole investment power for all 6,740,890
shares and disclaimed beneficial ownership of all 6,740,890 shares. The
Schedule 13G indicated that beneficial ownership of substantially all of
these shares arose through the investment management activities of Capital
Guardian Trust Company and the investment advisory services of Capital
Research and Management Services, subsidiaries of The Capital Group
Companies, Inc., which had investment power over such shares.
(3) Information concerning the shares owned by FMR Corp., as of December 31,
1995, was obtained from a Schedule 13G dated February 14, 1996. The Schedule
13G indicated that FMR Corp., through its wholly owned subsidiaries,
beneficially owned 5,215,375 shares of Common Stock, and 2,174,819 shares of
Common Stock through the assumed conversion of the Series P Preferred Stock
and the Series L Preferred Stock of the Company. FMR Corp., through its
wholly owned
6
<PAGE>
subsidiaries, had sole voting power for 272,187 shares and had sole
investment power for all 7,390,194 shares. The Schedule 13G indicated that
beneficial ownership of substantially all of these shares arose through the
investment advisory activities of Fidelity Management & Research Company
("Fidelity"), a wholly owned subsidiary of FMR Corp. The Schedule 13G
additionally reported that Mr. Edward C. Johnson III, Chairman of FMR Corp.,
and FMR Corp., through its control of Fidelity, each had sole investment
power for substantially all of the shares, but had no power to vote or
direct the voting of the shares owned directly by the funds. In addition,
the Schedule 13G reported that members of Mr. Johnson's family may be deemed
a controlling group with respect to FMR Corp.
(4) Information concerning the shares owned by The Capital Group Companies,
Inc., as of December 31, 1995, was obtained from a Schedule 13G, dated
February 29, 1996. The Schedule 13G indicated that The Capital Group
Companies, Inc. had no voting power for any of these shares, had sole
investment power for all of these shares and disclaimed beneficial ownership
of all the shares. The Schedule 13G, together with a letter from The Capital
Group Companies, Inc., indicated that beneficial ownership of substantially
all of these shares arose through the investment advisory activities of
Capital Research and Management Company, a subsidiary of The Capital Group
Companies, Inc., which had investment power over such shares.
(5) Information concerning the shares owned by College Retirement Equities Fund,
as of December 31, 1995, was obtained from a Schedule 13G dated February 1,
1996. The Schedule 13G indicated that the College Retirement Equities Fund
had sole voting and investment power for all of these shares.
(6) Information concerning the shares owned by FMR Corp., as of December 31,
1995, was obtained from a Schedule 13G dated February 14, 1996. The
information provided does not disclose the voting or investment power that
FMR Corp. or its wholly owned subsidiaries have for these shares. The
Schedule 13G indicated that beneficial ownership of substantially all of
these shares arose through the investment advisory activities of Fidelity.
The Schedule 13G additionally reported that Mr. Johnson and FMR Corp.,
through its control of Fidelity, each had sole investment power for
substantially all of the shares, but had no power to vote or direct the
voting of the shares owned directly by the funds. In addition, the Schedule
13G reported that members of Mr. Johnson's family may be deemed a
controlling group with respect to FMR Corp.
(7) Common Stock which is not outstanding, but which can be acquired through
conversion of convertible preferred stock within 60 days by a shareholder
named in the table, is deemed outstanding for the purpose of computing the
percentage of outstanding Common Stock owned by such shareholder but is not
deemed outstanding for the purpose of computing the percentage of Common
Stock owned by any other shareholder.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION (1) YEAR SALARY BONUS COMPENSATION (2) AWARD(S) (3) SARS COMPENSATION (4)
($) ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Miles L. Marsh 1995 184,615 150,000 0 1,606,250(5) 250,000 6,858
Chairman, President and 1994 0 0 0 0 0 0
Chief Executive Officer 1993 0 0 0 0 0 0
Robert C. Williams 1995 900,000 700,000 595,512 0 0 970,739
Retired Chairman, President 1994 900,000 275,000 44,585 0 45,720 62,260
and Chief Executive Officer 1993 824,615 0 0 252,000(5) 0 56,007
James K. Goodwin 1995 371,154 175,155 46,802 0 50,800 10,451
President, North American 1994 326,154 33,000 0 0 25,400 11,644
Consumer Products 1993 288,462 0 0 252,000(5) 0 6,780
Stephen E. Hare 1995 349,039 126,231 29,297 0 30,480 12,565
Senior Vice President, 1994 290,385 42,000 0 0 25,400 10,385
Corporate Finance and Chief 1993 222,308 0 0 201,600(5) 0 6,992
Financial Officer
Clifford A. Cutchins, IV 1995 290,769 129,730 35,106 0 25,400 11,096
Senior Vice President, 1994 250,769 39,000 0 0 20,320 7,891
General Counsel and 1993 220,000 0 0 184,800(5) 0 7,098
Corporate Secretary
Norman K. Ryan 1995 350,000 48,000 614,290 0 25,400 24,011
President, Packaging 1994 350,000 40,000 0 0 25,400 22,521
1993 323,077 0 0 252,000(5) 0 18,124
Ernest S. Leopold 1995(6) 228,462 243,222 0 0 0 19,945
Former Executive Vice President, 1994 330,000 40,000 0 0 20,320 23,825
Communications Papers 1993 313,846 0 0 157,500(5) 0 19,918
Ronald L. Singer 1995 511,538 0 382,071 0 0 1,643,577
Former Chief Executive Officer, 1994 498,077 200,000 110,849 0 0 5,400
Jamont N.V. 1993 400,000 200,000 0 0 0 12,900
</TABLE>
(1) The named executive officers include the current Chief Executive Officer
("CEO"), the retired CEO, the four other most highly compensated executive
officers as of December 31, 1995, and two former executive officers.
(2) The amounts disclosed herein for the fiscal year ended December 31, 1995,
represent the tax reimbursement associated with distributions for annuity
purchases made in 1995. These annuities were purchased pursuant to the
Supplemental Benefit Plan which is discussed herein under the heading
"Pension Plan." The amount disclosed for Mr. Singer also includes $190,097
for reimbursement of European cost of living expenses and $106,634 tax
reimbursement on such cost of living expenses.
(3) The number and value ($24.13 per unit) as of December 31, 1995, of the
restricted Common Stock holdings for the named executive officers were:
Miles L. Marsh, 50,311 units, $1,213,753; Robert C. Williams, 0 units, $0;
James K. Goodwin, 19,255 units, $464,527; Stephen E. Hare, 12,417 units,
$299,560; Clifford A. Cutchins, IV, 10,864 units, $262,094; Norman K. Ryan,
11,808 units, $284,868; Ernest S. Leopold, 0 units, $0; and Ronald L.
Singer, 0 units, $0. These units are hypothetical shares of Common Stock
that are currently subject to vesting restrictions under the Deferred Stock
Plan. Under the Deferred Stock Plan, the grantee's interest in the
hypothetical shares of Common Stock becomes vested in equal annual
increments over a period of time established for each grantee by the
Compensation Committee; the vesting schedules established for the named
executive officers range from two years to eight years. At the end of each
fiscal year,
8
<PAGE>
dividends which would have accrued on such shares are credited to each
grantee's account in the form of additional hypothetical shares. Upon
irrevocable election of the grantee at the time of the award, awards are
paid either (i) as amounts become vested or (ii) in installments upon
retirement or after age 65. Messrs. Marsh, Goodwin, Hare, Cutchins, Ryan,
Leopold and Singer elected a pre-retirement payout for a portion of their
grants.
(4) These amounts include Company contributions to the StockPlus Plan, the
Supplemental Deferral Plan, and an enhanced life insurance plan. The amount
disclosed for Mr. Marsh represents the Company's payment of the premium in
1995 on a term life insurance policy for his benefit. In addition, the
amount disclosed for Mr. Williams includes $900,000 for salary continuation
received as part of a Voluntary Separation Program (see description of
Voluntary Separation Program under the heading "Pension Plan" herein) and
$1,026 representing the Company's portion of the premium paid in 1995 on a
term life insurance policy for his benefit. The amount disclosed for Mr.
Singer includes $1,641,500 as additional compensation for past services and
relocation expenses. Company contributions allocated under the StockPlus
Plan and the Supplemental Deferral Plan, respectively, to the named
executive officers for 1995 were: Miles L. Marsh, $0 and $0; Robert C.
Williams, $5,400 and $27,037; James K. Goodwin, $0 and $7,961; Stephen E.
Hare, $5,400 and $7,165; Clifford A. Cutchins, IV, $3,614 and $6,663; Norman
K. Ryan, $5,400 and $7,000; Ernest S. Leopold, $5,400 and $5,317; and Ronald
L. Singer, $2,077 and $0. The remainder of the amounts disclosed for 1995,
if any, represent the Company contributions allocated to these individuals
under an enhanced life insurance plan offered to certain officers as an
alternative to the group universal life insurance plan.
(5) In October 1995, Mr. Marsh received a grant of 50,000 units representing
hypothetical shares of Common Stock under the Company's Deferred Stock Plan
which vest in equal increments over three years. In June 1993, certain named
executive officers received the following grants of units representing such
hypothetical shares under this plan which vest in equal annual increments
over the number of years indicated: Robert C. Williams, 12,000 units, two
years; James K. Goodwin, 12,000 units, eight years; Stephen E. Hare, 9,600
units, eight years; Clifford A. Cutchins, IV, 8,800 units, eight years;
Norman K. Ryan, 12,000 units, six years; and Ernest S. Leopold, 7,500 units,
five years.
(6) Mr. Leopold was an employee of the Company for the first eight months of
1995 and therefore only eight months of information is presented.
EMPLOYMENT AND RELATED COMPENSATION AGREEMENTS
The Company entered into an employment arrangement with Mr. Marsh as of
October 2, 1995, whereby he serves as President and Chief Executive Officer, and
effective January 1, 1996, also serves as Chairman. The arrangement provides Mr.
Marsh with an annual salary of not less than $800,000, subject to periodic
review by the Board, together with a bonus program. Under the bonus program, Mr.
Marsh will receive $50,000 per month from October 1995 through December 1996
with payments made in January 1996 for the preceding three months, and in
January 1997 for the preceding twelve months. Mr. Marsh will be included in the
Company's Management Incentive Plan beginning in 1996 and will receive the
greater of the amount calculated pursuant to his bonus program or the Company's
Management Incentive Plan. The arrangement provides for a stock option grant
under the Company's 1987 Stock Option Plan and a grant of hypothetical shares of
Common Stock under the Company's Deferred Stock Plan, as disclosed in the
Summary Compensation Table herein. The arrangement also provides that Mr.
Marsh's pensionable benefits under a supplemental benefit plan that vest in ten
years will be available for his retirement without actuarial reduction after ten
years. In the event of a "change-in-control" of the Company, the arrangement
provides that Mr. Marsh would receive salary and bonus payment continuation for
two years, immediate vesting of all stock options and deferred stock grants and
other specified benefits. Salary and bonus payments would also continue for two
years in the event of involuntary termination.
Mr. Williams has historically had an employment contract with the Company
that provides a minimum amount of salary to be paid during the term of the
contract. This contract contains clauses prohibiting him from competing,
directly or indirectly, with the Company or its subsidiaries during the term of
the contract or while he is entitled to receive any payments thereunder. The
Board of Directors approved the amendment of his contract for a term of
employment through December 1995. The contract provides that Mr. Williams will
receive an annual salary of not less than $900,000 effective July 1993. The
contract further provides that Mr. Williams will receive, in addition to his
benefits accrued under the Company's pension plan, $12,000 per year for ten
years, or an annuity of the equivalent actuarial value, upon his retirement at
or after age 65. In the event of his death prior to the receipt of all benefits
to which he is entitled, the remaining benefits will be paid to his
9
<PAGE>
spouse, if living, or to his estate. On January 1, 1993, the Company also
entered into an ancillary letter agreement with Mr. Williams which provides for
the continuation of certain existing benefits as post-retirement benefits; in
addition, Mr. Williams will be eligible to receive compensation as a
non-employee director in connection with his continuing to serve on the Board of
Directors after his retirement from employment. This agreement also provides for
a post-retirement consulting arrangement through March 31, 2002, for continuing
consulting services to the Board at an annual fee of $162,000; this fee will be
reduced by any amounts paid to him as a director of James River or its
affiliates.
Mr. Singer entered into a letter agreement with the Company on December 15,
1993, which was in effect until June 11, 1995, relating to his position as Chief
Executive Officer of Jamont N.V. ("Jamont"). The agreement states that Mr.
Singer's base salary will be $500,000 effective January 1, 1994, and that his
1994 variable compensation will be based upon Jamont's business return on equity
and a plan developed by Jamont. Pursuant to the agreement, Mr. Singer has
received certain reimbursements for costs incurred while living abroad which
generally are consistent with the payments received by other Company American
expatriates. On October 25, 1995, the Company and Mr. Singer entered into an
agreement relating to his separation from employment effective December 31,
1995. Under this agreement, the Company continued to provide Mr. Singer with the
remainder of his salary for 1995 and certain other benefits and allowances he
otherwise would have been entitled to during such period. In addition, the
Company agreed to pay Mr. Singer an allowance for his relocation and
outplacement services. Mr. Singer also received additional pay for services
rendered over the duration of his employment with the Company, as disclosed in
the Summary Compensation Table.
The CEO and named executive officers are eligible to participate in the
Company's Salary Continuation Plan which is available to substantially all
salaried employees of James River. This plan is used to provide salary
continuation benefits to employees in certain situations when an employee is
involuntarily separated from the Company due to the elimination of his position.
The number of weeks of salary continuance to be provided is determined pursuant
to a schedule outlined in the plan and is based on either length of service or
salary grade, whichever produces the greater benefit. Benefits under this plan
would only be provided to the CEO or named executive officers if they are not
covered under any other compensatory arrangement regarding salary continuation.
Mr. Williams received salary continuation payments in 1995 as part of a
Voluntary Separation Program offered to certain salaried employees.
10
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF POTENTIAL REALIZABLE
SECURITIES % OF TOTAL VALUE AT ASSUMED
UNDERLYING OPTIONS/SARS ANNUAL RATES OF STOCK
OPTIONS/ GRANTED TO EXERCISE PRICE APPRECIATION
SARS EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM (4)
NAME GRANTED (2)(3) FISCAL YEAR PER SHARE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
(#) ($) ($)
Miles L. Marsh 250,000 21.7% $ 32.25 10/3/05 5,070,463 12,849,549
Robert C. Williams 0 0 0 -- 0 0
James K. Goodwin 50,800 4.4% $ 26.27 7/25/05 839,270 2,126,875
Stephen E. Hare 30,480 2.6% $ 34.45 8/8/05 660,362 1,673,487
Clifford A.Cutchins, IV 25,400 2.2% $ 34.45 8/8/05 550,302 1,394,572
Norman K. Ryan 25,400 2.2% $ 34.45 8/8/05 550,302 1,394,572
Ernest S. Leopold 0 0 0 -- 0 0
Ronald L. Singer 0 0 0 -- 0 0
</TABLE>
(1) No stock appreciation rights ("SARs") were granted to any employee after
August 13, 1987, the plan termination date.
(2) Option grants under the 1987 Stock Option Plan become exercisable in three
equal cumulative annual amounts beginning one year after the grant date. The
Compensation Committee has vested one-third of Mr. Marsh's grant. The
exercise price for each option is equal to the fair market value per share
of the Common Stock on the grant date. The Company's stock option plans
provide for the acceleration of the vesting of options in certain
circumstances, including a merger, sale of assets or liquidation of the
Company or the participant's retirement, permanent disability or death.
(3) The Compensation Committee granted "Release Rights" with regard to these
nonstatutory options. Release Rights allow an optionee to release some of
his nonstatutory options and receive in cash the value (the excess of the
fair value over the exercise price) at the time of release of the number of
shares which would have been received upon the exercise of the released
options. The number of Release Rights granted is determined by a formula
designed to approximate the optionee's tax liability resulting from the
exercise of options. In addition, the holders of options have the right to
exchange previously owned shares of Common Stock, valued at the current
market price, to pay the exercise price of the options.
(4) These options are granted for a term of ten years and one day. The amounts
disclosed are the result of calculations at five and ten percent assumed
rates of appreciation permitted by the Securities and Exchange Commission
("SEC"); therefore, these amounts are not intended to forecast potential
future appreciation of the Company's Common Stock price. The amounts
disclosed are based on an assumed annual rate of appreciation in the Common
Stock price over a ten-year period. A zero percent gain in stock price
appreciation from the date of grant will result in zero dollars for the
optionee.
11
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES ACQUIRED VALUE AS OF 12/31/95 (1) AS OF 12/31/95 (2)
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
(#) ($) (#) (#) ($) ($)
Miles L. Marsh 0 0 0 250,000 0 0
Robert C. Williams 427,250 5,534,196 62,718 0 251,308 0
James K. Goodwin 12,000 190,440 59,825 67,734 172,825 139,621
Stephen E. Hare 21,666 362,539 51,153 47,414 242,008 139,621
Clifford A. Cutchins, IV 16,466 250,363 57,404 38,947 100,584 111,695
Norman K. Ryan 152,148 1,210,902 19,386 42,334 0 139,621
Ernest S. Leopold (3) 97,667 566,202 95,232 0 0 0
Ronald L. Singer (4) 34,000 1,043,020 0 0 0 0
</TABLE>
(1) No additional SARs may be issued under the Company's Stock Appreciation
Rights Plan, although SARs which were previously granted and are still
outstanding may be exercised in accordance with the provisions of the plan.
(2) The value of unexercised in-the-money Options/SARs as of December 31, 1995,
is equal to the fair market value of Common Stock on that date ($24.13 per
share) minus the exercise price.
(3) Mr. Leopold was an employee of the Company for the first eight months of
1995 and therefore only eight months of information is presented. The number
of securities underlying exercisable options or SARs is as of the end of
August 1995 for Mr. Leopold.
(4) The value realized for Mr. Singer includes the exercise of 100,000 Jamont
book value based SARs.
PENSION PLAN
The Company provides a pension plan for salaried employees under which
participating employees contribute 1% of their pensionable earnings. Pensionable
earnings include base salary, overtime compensation, profit sharing, bonuses and
commissions. Effective in 1995, under Internal Revenue Service regulations,
pensionable earnings over $150,000 are not taken into account for purposes of
calculating plan benefits, and the maximum annual benefit which may be paid to
any retiree from the plan, attributable to employer contributions, is $120,000.
These amounts may be increased to take into account increases in the cost of
living.
Annual benefits payable under the plan are currently equal to the product
of the participant's years of service while contributing to the plan, up to 35
years, multiplied by the sum of 1.05% of a participant's "Average Pay" (the
average of a participant's highest five consecutive years of pensionable
earnings) plus .65% of a participant's Average Pay in excess of covered
compensation (the average of the taxable Social Security wage bases during a
participant's work lifetime, up to 35 years). A participant will be vested in
the portion of benefits attributable to Company contributions (i) after five
years of service or (ii) if the participant's contributions remain in the plan
until retirement.
An alternative pension benefit formula may be used to calculate the pension
benefit for service through December 31, 1988, for employees who participated in
the plan prior to January 1, 1989. However, if the current formula provides a
greater benefit at retirement for such service, that formula will apply.
In 1995, the plan was amended to provide an enhanced retirement benefit for
certain participants at corporate and business headquarters locations, who were
age 50 with ten years of service as of July 1, 1995, pursuant to a Voluntary
Separation Program. The benefit formula equates to augmenting age and service by
five years, provided however that age and service do not exceed 65 years or 35
years, respectively, and includes the recognition of years of service for an
employee's service with any previous company acquired by James River.
The Company also maintains the Supplemental Benefit Plan which provides
eligible individuals with the difference between the benefits they actually
accrue under the pension plan and the benefits they would have accrued under
such plan
12
<PAGE>
but for the maximum benefit and compensation limitations imposed by law. The
Supplemental Benefit Plan also provides eligible individuals with a benefit that
approximates the additional benefit that would have been payable under the
pension plan had the benefit formula in effect on December 31, 1988, continued
in effect. The Supplemental Benefit Plan also provides an additional benefit for
certain Company executives representing the benefit for the officer's service
with a predecessor company, reduced by the total benefit payable to the officer
from James River's pension plans and pension plans of such predecessor company.
Participants in the Supplemental Benefit Plan are general creditors of the
Company. Benefits under the Voluntary Separation Program in excess of qualified
plan limits are payable from the Supplemental Benefit Plan. The supplemental
benefits are to be paid by the Company as the benefits become payable, except as
described below.
The Supplemental Benefit Plan provides that the accrued benefits under the
plan may be distributed at the discretion of the Company. The Company has made
distributions to certain eligible individuals providing each such individual
with an annuity, on an after tax basis, approximating the individual's accrued
benefit under the Supplemental Benefit Plan as of a specified date. Each annuity
will be payable by an insurance company under an annuity contract owned by the
individual. The amounts distributed for annuity purchases on an after tax basis
to the named executive officers during 1995 were: Miles L. Marsh, $0; Robert C.
Williams, $725,376; James K. Goodwin, $58,748; Stephen E. Hare, $35,685;
Clifford A. Cutchins, IV, $42,762; Norman K. Ryan, $717,504; Ernest S. Leopold,
$544,731; and Ronald L. Singer, $113,778. To the extent accrued benefits have
been distributed, the individual relinquishes his claims for those benefits
under the Supplemental Benefit Plan. Since the determination of an individual's
accrued benefit is made without regard to future actuarial increases, the
distributions may not represent the individual's total benefit to be received
under the Supplemental Benefit Plan. Mr. Marsh will accrue benefits under a
separate supplemental benefit plan based on a benefit formula of 50% of total
compensation after completion of ten years of service, offset by Social Security
and benefits under the Company's pension plan at his earliest retirement age,
which is currently estimated to be approximately $700,000 at the tenth year of
service. This benefit will be reduced proportionately for service less than ten
years.
The Company maintains a supplemental benefit trust for the exclusive
purpose of providing supplemental benefits to all participants in the
Supplemental Benefit Plan. The assets of the trust are subject to the claims of
the Company's creditors in the event of bankruptcy or insolvency.
APPROXIMATE ANNUAL PENSION BENEFIT AT AGE 65
<TABLE>
<CAPTION>
FINAL AVERAGE YEARS OF SERVICE
PAY 10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 32,210 $ 48,310 $ 64,420 $ 80,520 $ 96,620 $112,730
400,000 66,210 99,310 132,420 165,520 198,620 231,730
600,000 100,210 150,310 200,420 250,520 300,620 350,730
800,000 134,210 201,310 268,420 335,520 402,620 469,730
1,000,000 168,210 252,310 336,420 420,520 504,620 588,730
1,200,000 202,210 303,310 404,420 505,520 606,620 707,730
1,400,000 236,210 354,310 472,420 590,520 708,620 826,730
</TABLE>
The pensionable earnings for each of the named executive officers is not
materially different from the amounts disclosed as salary and bonus under annual
compensation in the Summary Compensation Table. The estimated years of benefit
service, as of normal retirement at age 65, for the named executive officers
are: Miles L. Marsh, 17 years; Robert C. Williams, 35 years; James K. Goodwin,
21 years; Stephen E. Hare, 29 years; Clifford A. Cutchins, IV, 24 years; Norman
K. Ryan, 35 years; Ernest S. Leopold, 35 years; and Ronald L. Singer, 13 years.
The above table shows the approximate annual pension benefit which would be
provided to salaried employees, under the benefit formula effective January 1,
1989, upon retirement at age 65 assuming that a single life annuity has been
elected, except for Mr. Marsh as described above. The amounts in the table are
not subject to reduction for Social Security or other offset amounts. The
pension table includes benefits under the Supplemental Benefit Plan, some of
which will be provided by the annuities purchased, if any, as described above.
13
<PAGE>
PERFORMANCE GRAPH
James River is subject to SEC rules which require all public companies to
present a graph of total investment return in their annual proxy statement. The
rules require a line graph which compares James River's five-year cumulative
shareholder return on its Common Stock with the Standard & Poor's ("S&P") 500
Stock Index and either a published industry index or an index of peer companies
selected by the Company. The graph below presents a comparison of James River's
performance with the S&P 500 Stock Index and the S&P Paper and Forest Products
Industry Index, assuming investments of $100 were made on December 31, 1990, and
that dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
JAMES RIVER CORPORATION OF VIRGINIA, S&P 500 INDEX,
AND S&P PAPER AND FOREST PRODUCTS INDUSTRY INDEX
[INSERT GRAPH HERE]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
James River $100.00 $ 78.48 $ 74.85 $ 80.27 $ 87.06 $106.03
S&P 500 Stock Index $100.00 $130.47 $140.41 $154.56 $156.60 $214.86
S&P Paper and Forest
Products Industry Index $100.00 $126.84 $145.03 $159.84 $166.55 $183.38
</TABLE>
14
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for ensuring that the design, development and approval of the
Company's executive compensation program is based primarily on objective
measures of performance at the corporate, business unit and individual level.
The Committee believes compensation should vary based on individual and Company
performance, be aligned to competitive peer groups and ultimately be driven by
the long-term interests of shareholders. The Committee's executive compensation
principles are as follows:
(Bullet) In general, base compensation will be aligned to median base
compensation levels at comparable organizations; they will,
however, exceed competitive levels when individuals exceed
expected performance levels.
(Bullet) As executives assume greater responsibilities, their compensation
packages will emphasize equity (stock options and restricted
stock) and variable cash compensation.
(Bullet) Executives will be rewarded for both financial and individual
performance on the basis of defined goals and objectives.
The executive compensation program consists of specific elements that, in
the aggregate, are market comparative and are aligned to short- and long-term
business objectives. For fiscal year 1995 the elements were base compensation,
performance bonus, profit sharing and stock ownership. With continued emphasis
on refining the executive compensation program into a strategic element of the
overall business plan, 1996 compensation elements have been modified to consist
of base compensation, management short-term cash incentives, and if approved by
shareholders, performance based stock options and restricted stock.
Section 162(m) of the Internal Revenue Code of 1986, as amended, which was
enacted in 1993, imposes a $1,000,000 limit on the amount that is deductible by
the Company with respect to compensation earned by the Chief Executive Officer
and each of the other named executive officers, unless specified plan design and
administration parameters are met. The Compensation Committee and management
will review, during 1996, the impact of these regulations on the design and
administration of current and prospective executive compensation programs.
To determine the Company's comparative position on each of the referenced
compensation elements, the Company participates in and uses various published
survey sources. In addition, the Company retained the services of an
international compensation consulting firm to conduct a comparative review of
the Company's compensation and broad-based benefit programs. Many of the
companies which participated in published surveys, and which were studied in the
comparative review, are included in the S&P 500 Stock Index. Several of the
surveyed companies are included in the S&P Paper and Forest Products Industry
Index.
BASE COMPENSATION
Base compensation is the base salary program that provides executives with
annual salaries which are, on average, at the median of consumer products and
forest paper industries' base salary information for positions of similar scope
and responsibility. The executive salaries are reviewed annually and are
adjusted periodically when survey information shows that executive salaries have
fallen below median salary information. This is the fixed component of the
executive total cash compensation program.
PERFORMANCE BONUS
The 1995 Performance Bonus Plan is designed as one of the two variable
components of the executive total cash compensation program. Awards may be
earned annually through the accomplishment of pre-established, individual
performance objectives. Participants are assigned target award percentages based
on their respective organizational salary grade. Target awards may be leveraged
up or down by 100%. Executives earned awards in 1995 based on their achievement
of their respective quantitative and qualitative performance objectives. This
plan was terminated as of December 31, 1995, effective January 1, 1996, and was
replaced by a management short-term cash incentive plan that emphasizes both
financial and individual performance measures.
15
<PAGE>
PROFIT SHARING
Profit sharing is the second short-term, variable cash component of the
executive total cash compensation program. This plan is intended to reinforce
the results of maximizing Company and business unit profitability by linking
awards directly to business unit and consolidated Company performance. The plan
provides for above-median variable pay when business unit and/or Company
performance exceeds pre-established objectives and below-median variable pay
when performance is below expectations. Under the profit sharing plan in effect
for the year ended December 31, 1995, specific business unit return on equity
("ROE") is correlated with a percentage of pretax profits to determine profit
sharing pools for each business unit. The aggregate of the business unit profit
sharing pools may not exceed a pool amount hypothetically generated on the basis
of the consolidated financial statements. Awards, if any, were distributed from
each business unit pool to business unit employees. The corporate pool and fiber
business pool are based on a pro rata share of each business unit pool.
Profit sharing awards, traditionally, have been distributed to all salaried
employees in amounts commensurate with their organizational salary grade.
Executive awards have varied in size on the basis of the generation of pretax
profits and ROE. Ideally, the plan is designed to generate executive target
awards that will approximate median short-term cash awards, as published in
consumer products, forest paper and general industry surveys, when the Company
attains a 15% ROE. As a result of the Company's 5.71% ROE performance in 1995,
profit sharing awards were paid to participants, including the executive
officers. This plan was terminated at the end of December 1995, effective
January 1, 1996.
STOCK OWNERSHIP
The stock option program is viewed as a long-term incentive plan used to
align executive efforts and rewards with the maximization of Company performance
and increases in shareholder value. By design, the plan rewards executives only
when shareholders benefit from stock appreciation.
Key employees, including the executive officers, are eligible to
participate in this plan. Options are usually granted on an annual basis, with
terms of ten years, and generally vest in equal installments over a period of
three years. Options generally may not be exercised unless the individual
remains an employee of the Company for at least one year after the grant date.
All stock options are granted with an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant.
Individual awards under the stock option program are determined by salary
grade and influenced by individual performance. The target awards established at
each salary grade reflect published general industry survey data. Individual
target option awards, when aggregated, total the number of options assigned to
all plan participants for any given grant. Within this parameter, individual
awards may be adjusted up or down, within the Committee's judgement, based on
individual performance assessment.
During 1995, the Compensation Committee authorized stock option grants to
key employees, including the executive officers. The number of options granted
to executives was based on average option grant face values awarded to consumer
products, forest paper and general industry executives with positions of similar
scope and responsibility. No further options will be granted under this plan if
the shareholders approve the 1996 Stock Incentive Plan.
DEFERRED STOCK PLAN
The primary objective of the Deferred Stock Plan is to encourage plan
participants to continue as employees of the Company and to promote its success.
The plan is also designed as a supplemental retirement plan by allowing
participants to defer receipt of their vested awards until retirement. All
dividends are reinvested in order to accumulate additional shares of deferred
stock.
It is the intent of the Compensation Committee to authorize awards under
the program every five years. There have been three grants under this plan since
its inception - in 1984, 1989 and 1993. Participation is generally limited to
those senior level executives with significant policy and decision making
responsibility. Each participant in the Deferred Stock Plan is issued an award
of hypothetical shares of the Company's Common Stock. The awards vest over
varying lengths of time, but not longer than eight years. The actual award value
realized by the participant depends on his or her continued employment with the
Company and the performance of the Common Stock.
The number of shares granted to a recipient is determined by taking a
percentage of a recipient's salary, based on the number of years until
retirement, and dividing that amount by the fair market value per share on the
date of the grant. These
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formula driven amounts are then adjusted, either up or down, to reflect an
individual's qualitative and quantitative performance. No deferred stock awards
were granted to the named executive officers under this plan in 1995, except for
Mr. Marsh as discussed below. No further shares will be granted under this plan
if the shareholders approve the 1996 Stock Incentive Plan.
CEO COMPENSATION
MR. WILLIAMS' COMPENSATION
BASE COMPENSATION
Mr. Williams' annual base salary for 1995 was $900,000 and has not been
adjusted since 1993.
PROFIT SHARING/PERFORMANCE BONUS
Mr. Williams was awarded a $700,000 bonus by the Committee which was a
combined award from the Profit Sharing and Performance Bonus Plans. The award
was based on ROE performance of the Company and the Committee's discretionary
assessment of Mr. Williams' achievements against his individual objectives.
STOCK OPTIONS/PREFERRED STOCK
As dictated by Company policy, Mr. Williams did not receive stock options
or deferred stock grants in 1995 because of his imminent retirement.
MR. MARSH'S COMPENSATION
BASE COMPENSATION
Mr. Marsh's annual base salary is $800,000. The Committee having reviewed
comparative salary information from published surveys representing consumer
products, forest paper and general industry organizations believes Mr. Marsh's
salary is comparable with other positions with similar scope and responsibility.
PROFIT SHARING/PERFORMANCE BONUS
In lieu of participating in the Profit Sharing Plan and Performance Bonus
Plan, Mr. Marsh received as part of his employment arrangement $150,000 for the
portion of fiscal 1995 in which he was an employee of the Company. His
employment arrangement also provides for a bonus program for his service during
1996. During 1996, Mr. Marsh will participate in a new management short-term
cash incentive plan which specifically ties his short-term cash award
opportunities to financial and individual performance objectives. Mr. Marsh will
receive the greater of the amount calculated pursuant to his bonus program or
the management short-term cash incentive plan for his service during 1996.
STOCK OPTIONS/DEFERRED STOCK
The Committee granted Mr. Marsh 250,000 stock options at a grant price of
$32.25 on October 2, 1995, his employment date with the Company. One-third of
the options have vested and the remaining options will vest in equal
installments on the second and third anniversary of the grant. In addition, Mr.
Marsh received 50,000 deferred stock shares at a grant price of $32.13. These
shares will also vest over a three year period. The Committee believes that
these awards are a significant portion of Mr. Marsh's compensation package, and
appropriately align Mr. Marsh's compensation package with the objective of
maximizing shareholder value creation.
Submitted by the Compensation Committee of the Board of Directors:
Robert M. O'Neil (Committee Chairman)
Worley H. Clark, Jr.
William V. Daniel
Joseph T. Piemont
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COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and SEC regulations
require the Company's directors, certain officers and greater than ten percent
shareholders to file reports of ownership on Form 3 and changes in ownership on
Forms 4 or 5 with the SEC. The Company undertakes to file such forms for its
directors and officers pursuant to powers of attorney given to certain
attorneys-in-fact. Such directors, officers and ten percent shareholders are
also required by SEC rules to furnish the Company with copies of all Section
16(a) reports they file.
Based solely on its review of copies of such reports received or written
representations from such officers, directors and ten percent shareholders, the
Company believes that, during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to its directors, officers and ten
percent shareholders were met, except for four late Form 4 filings. These
filings were for Mr. Williams to report the gift of 1,500 shares; for Mr. Ryan
to report the sale of 180 shares for his grandchildren; for Mr. Leopold to
report the exercise of 4,572 Stock Appreciation Rights and for Mr. Leopold to
report the open market sale of 2,500 shares.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. served as the Company's independent accountants
during the Company's fiscal year ended December 31, 1995. Upon the
recommendation of the Audit Committee, the Board of Directors has appointed
Coopers & Lybrand L.L.P. to serve as the independent accountants of the Company
for its fiscal year ending December 29, 1996. A representative of Coopers &
Lybrand L.L.P. is expected to be present at the Annual Meeting of Shareholders.
He will have an opportunity to make a statement if he so desires and will be
available to answer appropriate questions from shareholders.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1995, is being mailed to you with this Notice and Proxy Statement.
No part of the Annual Report shall be regarded as proxy soliciting material.
PROPOSAL RELATED TO THE 1996 STOCK INCENTIVE PLAN
INTRODUCTION
On February 15, 1996, the Board of Directors of the Company approved,
subject to shareholder approval, the 1996 Stock Incentive Plan (the "1996
Plan"). Unless terminated earlier by the Board of Directors, the 1996 Plan will
terminate on February 14, 2006. Until the 1996 Plan is approved by shareholders,
no stock options, restricted stock or incentive stock shall be awarded.
The purpose of the 1996 Plan is to further the long-term stability and
financial success of the Company by attracting and retaining key management
employees and employees of the Company, its subsidiaries and foreign affiliates,
who can contribute to the financial success of those corporations. It is
believed that ownership of Common Stock will stimulate the efforts of those
employees upon whose judgment, interest and efforts the Company and its
subsidiaries and foreign affiliates is and will be largely dependent upon for
the successful conduct of their business. It is also believed that awards
granted to such employees under the 1996 Plan will also further the
identification of those employees' interests with those of the Company's
shareholders.
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The principal features of the 1996 Plan are summarized below. This summary
is qualified by reference to the complete text of the 1996 Plan, which is
attached as Exhibit A.
GENERAL
The 1996 Plan authorizes the reservation of an aggregate of 5,146,774
authorized, but unissued, shares of Common Stock, of which only 1,000,000 are
additional shares not previously reserved. The 5,146,774 shares of Common Stock
reserved include 1,146,774 shares available for the grant of options under the
Company's 1987 Stock Option Plan (the "1987 Plan") that will not be granted and
1,000,000 shares reserved for issuance under the Company's Deferred Stock Plan
that will not be awarded. The 5,146,774 shares reserved also includes 2,000,000
shares allocable to options that are expected to expire or otherwise terminate
unexercised under the 1987 Plan and awards of Common Stock under the Deferred
Stock Plan that are expected to be forfeited. Shares allocable to options
granted under the 1996 Plan that expire or otherwise terminate unexercised and
shares that are forfeited pursuant to restrictions on restricted stock,
incentive stock or deferred stock awarded under the 1996 Plan may again be
subjected to an award under this 1996 Plan. For purposes of determining the
number of shares that are available for awards under the 1996 Plan, such number
shall, if permissible under Rule 16b-3 promulgated under Section 16(b) of the
Securities Exchange Act of 1934 ("Rule 16b-3"), include the number of shares
surrendered by a participant or retained by the Company in payment of applicable
withholding taxes.
Adjustments will be made in the number of shares which may be issued under
the 1996 Plan in the event of a future stock dividend, stock split or similar
pro rata change in the number of outstanding shares of Common Stock or the
future creation or issuance to shareholders generally of rights, options or
warrants for the purchase of Common Stock or the Company's preferred stock.
The Common Stock is traded on the New York Stock Exchange, and on February
20, 1996, the closing price was $27.00.
ELIGIBILITY
All present and future employees of the Company, its subsidiaries and
foreign affiliates who hold positions with management responsibilities are
eligible to receive incentive awards under the 1996 Plan. The Company estimates
that it has approximately 300 such employees (eight of whom are executive
officers).
ADMINISTRATION
The 1996 Plan will be administered by a committee comprised of directors of
the Company who are not eligible to participate in the 1996 Plan or any similar
plan of the Company. It is anticipated that the committee will be the
Compensation Committee. The committee has the power and complete discretion to
determine when to grant awards, which eligible employees will receive awards,
whether the award will be an incentive or nonstatutory stock option, restricted
stock or incentive stock (as described below), and the number of shares to be
allocated to each award. The committee may impose conditions on the exercise of
options, and may impose conditions, other restrictions and requirements as it
may deem appropriate on the transfer of restricted stock and incentive stock,
including the right to reacquire shares issued pursuant to an award.
STOCK OPTIONS
Options to purchase shares of Common Stock granted under the 1996 Plan may
be incentive stock options or nonstatutory stock options. Incentive stock
options qualify for favorable income tax treatment under Section 422 of the
Internal Revenue Code of 1986, as amended, (the "Code"), while nonstatutory
stock options do not. The exercise price of a nonstatutory stock option may not
be less than 85%, and the exercise price of an incentive stock option may not be
less than 100% (or, in the case of an incentive stock option granted to a 10%
shareholder, 110%), of the fair market value of the Common Stock on the date of
the option grant. The value of incentive stock options, based on the exercise
price, that can be exercisable for the first time in any calendar year under the
1996 Plan, or any other similar plan maintained by the Company, is limited to
$100,000.
The committee will determine the exercise period of options awarded,
provided, however, that incentive stock options may not be exercised after the
earliest of (i) ten years (or, in the case of an incentive stock option granted
to a 10% shareholder, five years) from the date on which the incentive stock
option was granted, (ii) three months from the optionee's
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termination of employment with the Company for reasons other than death or
disability, or (iii) one year from the optionee's termination of employment on
account of death or disability. The Committee may grant options with a provision
that an option not otherwise exercisable will become exercisable upon a "change
of control," as defined in the 1996 Plan. In general, "change of control" means
the acquisition of 20% or more of the Common Stock or voting securities by a
person or group and certain changes in the membership of the Board of Directors.
If the option so provides, an optionee may exercise an option (i) by paying
the purchase price in cash; (ii) by delivering or causing to be withheld from
the option, shares of Common Stock; (iii) by delivering a promissory note or
(iv) by making appropriate arrangements through a broker for delivery of the
exercise price. The committee may also provide for a replacement feature in the
option whereby an employee who exercises an option by delivering already owned
shares of Common Stock will be automatically granted a new replacement option
equal in amount to the number of shares delivered to exercise the option with an
exercise price equal to the fair market value of the Common Stock on the date of
delivery and otherwise having the same terms. The replacement option will not
have a replacement feature.
RESTRICTED STOCK
Restricted stock issued pursuant to the 1996 Plan will be subject to the
following general restrictions: (i) none of such shares may be sold,
transferred, pledged or otherwise encumbered or disposed of until the
restrictions on such shares shall have lapsed or been removed under the
provisions of the 1996 Plan and (ii) if a holder of restricted stock ceases to
be employed by the Company, he will forfeit any shares of restricted stock on
which the restrictions have not lapsed or been otherwise removed. The number of
shares of restricted stock subject to outstanding awards at any time may not
exceed 1,584,108 less the number of shares of restricted stock with respect to
which restrictions have previously lapsed other than through forfeiture.
The committee will establish restrictions on each restricted share which
may include the lapsing of such restrictions at the end of a specified period of
time, the meeting of performance goals, the disability, death or retirement of
the participant, or a change of control. In addition, the committee may at any
time, in its sole discretion, accelerate the time at which any or all
restrictions will lapse or remove any and all such restrictions.
INCENTIVE STOCK
The committee may establish performance programs with fixed goals and
designate key employees as eligible to receive incentive stock if the goals are
achieved. Incentive stock will only be issued in accordance with the program
established by the committee. More than one performance program may be
established by the committee and they may operate concurrently or for varied
periods of time. A participant may participate in more than one program at the
same time. A participant who is eligible to receive incentive stock has no
rights as a shareholder until incentive shares are received.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Code imposes a $1,000,000 limitation on the amount of
the annual compensation deduction allowable to a publicly held company with
respect to its CEO and each of its other four most highly compensated executive
officers. An exception is provided for performance-based compensation if
statutory provisions pertaining to stockholder approval (and related disclosure)
and outside director administrative requirements are met. In order to qualify
compensation recognized upon the exercise of a nonstatutory stock option for the
performance-based exception under Code section 162(m), the 1996 Plan limits the
number of shares which can be made subject to the grant of an option to an
employee in any calendar year to 300,000 and requires that the 1996 Plan be
administered by two or more directors who are "outside directors" within the
meaning of Code section 162(m) and regulations thereunder.
TRANSFERABILITY OF AWARDS
All options and rights to receive incentive stock and restricted shares
during the applicable period of restriction, awarded under the 1996 Plan are
generally not transferable other than by will or by the laws of descent and
distribution.
AMENDMENT OF THE 1996 PLAN AND AWARDS
The Board may amend the 1996 Plan in such respects as it deems advisable;
provided that, if and to the extent required by Rule 16b-3, the shareholders of
the Company must approve any amendment that would (i) materially increase the
benefits
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accruing to participants under the 1996 Plan or (ii) materially increase the
number of shares of Common Stock that may be issued under the 1996 Plan or (iii)
materially modify the requirements of eligibility for participation in the 1996
Plan. Awards granted under the 1996 Plan may be amended with the consent of the
recipient so long as the amended award is consistent with the terms of the 1996
Plan.
FEDERAL INCOME TAX CONSEQUENCES
An employee will not incur federal income tax when he or she is granted a
nonstatutory stock option or incentive stock option. Upon exercise of a
nonstatutory stock option, an employee generally will recognize compensation
income, which is subject to income tax withholding by the Company, equal to the
difference between the fair market value of the Common Stock on the date of the
exercise and the option price. The committee has authority under the 1996 Plan
to include provisions allowing the employee to elect to have a portion of the
shares he would otherwise acquire upon exercise of an option withheld to cover
his withholding tax liabilities. The election will be effective only if approved
by the committee and made in compliance with other requirements set forth in the
1996 Plan. When an employee exercises an incentive stock option, he generally
will not recognize income subject to tax, unless he is subject to the
alternative minimum tax.
An employee may deliver shares of Common Stock instead of cash to acquire
shares under an incentive stock option or nonstatutory stock option, without
having to recognize taxable gain (except in some cases with respect to
"statutory option stock") on any appreciation in value of the shares delivered.
"Statutory option stock" is stock acquired upon the exercise of incentive stock
options. However, if an employee delivers shares of "statutory option stock" in
satisfaction of all, or any part, of the exercise price under an incentive stock
option, and if the applicable holding periods of the "statutory option stock"
have not been met, he will be considered to have made a taxable disposition of
the "statutory option stock."
Generally, an employee will not incur federal income tax when he is granted
restricted stock until the restrictions imposed have lapsed. An employee who is
eligible to receive incentive stock if performance goals are met will not incur
federal income tax until the incentive stock is received. In general, an
employee who has received shares of restricted stock will include in his gross
income as compensation income an amount equal to the fair market value of the
shares of restricted stock at the time the restrictions lapse or are removed. An
employee who receives shares of incentive stock will include in his gross income
as compensation income an amount equal to the fair market value of the shares of
incentive stock on the date of transfer to the employee. Generally, such amounts
will be included in income in the tax year in which such event occurs, but
special tax rules may apply in the case of an insider that would defer
recognition of income until the restricted stock or incentive stock could be
sold by the insider without incurring a liability under section 16(b) of the
Securities Exchange Act of 1934. The income recognized will be subject to income
tax withholding by the Company.
Assuming the employee's compensation is otherwise reasonable and that
exceptions to the new statutory limitations on compensation deductions by
publicly held companies (as discussed above) imposed by Section 162(m) of the
Code apply, the Company usually will be entitled to a business expense deduction
at the time and in the amount that the recipient of an award recognizes ordinary
compensation income in connection therewith. In some cases, such as the exercise
of a nonstatutory option, the Company's deduction may be contingent upon the
Company's meeting withholding tax requirements. The 1996 Plan is intended to
qualify for the Code section 162(m) exception so that compensation income
recognized upon the exercise of a nonstatutory option will be performance based.
Incentive stock awarded under the 1996 Plan may qualify for the performance
based exception but the regulations under Code section 162(m) generally exclude
restricted stock from this exception. No deduction is allowed in connection with
an incentive stock option, unless the employee disposes of Common Stock received
upon exercise in violation of the holding period requirements.
This summary of federal income tax consequences of nonstatutory stock
options, incentive stock options, restricted stock and incentive stock does not
purport to be complete. There may also be state and local income taxes
applicable to these transactions.
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VOTE REQUIRED
The adoption of the 1996 Stock Incentive Plan requires the affirmative vote
of the holders of a majority of the shares present or represented by properly
executed and delivered proxies and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE
1996 STOCK INCENTIVE PLAN
IS IN THE BEST INTEREST OF ALL SHAREHOLDERS AND,
ACCORDINGLY, RECOMMENDS A VOTE FOR THE ADOPTION OF THE PROPOSED
1996 STOCK INCENTIVE PLAN.
PROPOSAL RELATED TO THE DIRECTOR STOCK OWNERSHIP PLAN
INTRODUCTION
On February 15, 1996, the Board of Directors adopted, subject to
shareholder approval, the Director Stock Ownership Plan (the "Director Stock
Plan"). The Director Stock Plan, which will be administered by the Board, will
become effective April 25, 1996, if approved by the shareholders of the Company.
If approved, the Director Stock Plan will terminate upon the earlier of (a) the
adoption of a resolution of the Board terminating the Director Stock Plan, (b)
the date shares are no longer available for issuance under the Director Stock
Plan or (c) the tenth anniversary of the Director Stock Plan's effective date.
The purpose of the Director Stock Plan is to increase the level of
ownership of the Company's Common Stock by non-employee directors. The Director
Stock Plan replaces the Company's practice of paying non-employee director
retainer fees solely in cash by automatically paying 50% of such fees in Common
Stock and providing non-employee directors with a means of electing to receive
the balance of retainer fees in Common Stock.
The Director Stock Plan authorizes an aggregate maximum of 100,000 shares
of Common Stock for the award of restricted stock to eligible members of the
Company's Board of Directors.
The principal features of the Director Stock Plan are summarized below.
This summary is qualified by reference to the complete text of the Director
Stock Plan, which is attached as Exhibit B.
ELIGIBILITY
A director will be eligible to participate in the Director Stock Plan if
the director is not otherwise an employee of the Company or any subsidiary and
was not an employee of the Company or subsidiary for a period of at least one
year before the date of an award under the Director Stock Plan (a "non-employee
director"). Nine non-employee members of the Board and nominees, therefore,
presently qualify to receive an award under the Director Stock Plan.
AWARDS OF RESTRICTED SHARES
On the May 1 following the Annual Meeting of the Company's shareholders on
April 25, 1996, and on each May 1 thereafter (the "Award Date"), each
non-employee director elected or re-elected at the annual meeting will
automatically be entitled to receive, as of the Award Date instead of cash with
respect to 50% of the non-employee director's retainer fees payable on account
of the director's "annual service period," the greater of (a) 250 shares of
Common Stock or (b) the number of whole shares of Common Stock that, when
multiplied by the fair market value of the Common Stock as of the Award Date,
shall as nearly as possible equal, but not exceed, 50% of the non-employee
director's retainer fees payable with respect to that annual service period (the
"Automatic Award"). The "annual service period" begins on the date of the annual
shareholders meeting and ends on the day immediately preceding the next
following annual shareholders meeting.
With respect to the remaining 50% of the non-employee director's retainer
fees, each non-employee director (except certain eligible directors as discussed
below) may, at any time during the 120-day period before the beginning of the
annual service period to which the retainer fees relate, elect to receive as of
the annual Award Date, instead of cash, the number of whole shares of Common
Stock that, when multiplied by the fair market value of the Common Stock shall
as nearly as possible equal but not exceed the remaining 50% of the eligible
director's retainer fees payable with respect to that annual
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service period (the "Elective Award"). A director who has previously made an
election under the Company's Deferred Compensation Plan for Outside Directors to
defer the receipt of retainer fees that is still in effect may not elect to
receive an Elective Award.
In both of the foregoing award computations, the fair market value of
Common Stock means the average of the high and low trading prices of the Common
Stock, as reported in the WALL STREET JOURNAL, for the annual Award Date.
The shares of Common Stock received by a non-employee director pursuant to
the Automatic Award or an Elective Award generally will be restricted and will
be forfeitable and nontransferable until the end of the annual service period.
However, Automatic and Elective Awards, and the restricted stock to which the
awards relate, will become vested and nonforfeitable before the end of the
annual service period if the director ceases to be a non-employee director on
account of death, disability or retirement from the Board at age 65 or as a
result of a change of control. The Director Stock Plan generally defines change
of control as the acquisition of 20% or more of the Common Stock or voting
securities by a person or group and certain changes in the membership of the
Board of Directors.
DEFERRAL ELECTION
A non-employee director may elect to defer payment of part or all of his
award. A non-employee director will designate, at the time of deferral, that the
payment be made either (i) as of the first day of the calendar year that is at
least three years after the date of the award or (ii) when the non-employee
director ceases to be a member of the Board of Directors. Special distribution
rules apply when a deferral election is in effect for successive service
periods. If an eligible director elects to defer receipt of all or part of the
awards, the Company will establish a book account in the director's name to
which will be recorded the hypothetical number of shares of Common Stock for
which receipt has been deferred (the "deferred stock account"). No actual shares
of Common Stock will be issued for these deferred shares. If the non-employee
director continues to be a member of the Board of Directors during the annual
service period following the date of the awards, the director will receive
payment of his deferred stock account based on his election. The director also
will be entitled to receive payment of his deferred stock account upon (i)
retirement from the Board of Directors at or after attaining age 65, (ii) death
or disability while serving as a member of the Board of Directors or (iii)
termination from the Board of Directors as a result of a change of control (as
defined in the Director Stock Plan and described above). If a director ceases to
be a member of the Board of Directors for any other reason during the annual
service period following the date of the award, the hypothetical shares credited
to his deferred stock account will be forfeited.
When a director becomes entitled to payment of his deferred stock account,
the Company will distribute that number of whole shares of Common Stock that is
equal to the number of hypothetical whole shares of Common Stock then credited
to his deferred stock account. Shares of Common Stock so distributed will not be
subject to any restrictions.
If at any time under the Director Stock Plan there are not sufficient
shares available to fully permit the Automatic and Elective grants and
restricted stock awards (taking into account Common Stock issuable pursuant to
previously made deferral elections), Elective Awards will be void and Automatic
Awards will be reduced pro rata (to zero if necessary) so as not to exceed the
number of shares available.
TRANSFERABILITY OF RESTRICTED STOCK
Restricted stock awarded under the Director Stock Plan generally will
become nonforfeitable and transferable at the end of the annual service period
if the holder is then a non-employee director and may not be assigned or
otherwise transferred before the date it becomes transferable and nonforfeitable
by its terms. Under certain circumstances (described above), the restricted
stock may become transferable and nonforfeitable before the end of the annual
service period to which the award relates.
AMENDMENT OF THE DIRECTOR STOCK PLAN
The Board may suspend, discontinue, revise or amend the Director Stock Plan
provided, however, to the extent required by Rule 16b-3, no revision or
amendment may increase the number of shares subject to the Director Stock Plan
or materially increase the benefits accruing under the Director Stock Plan,
without the approval of the Company's shareholders.
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FEDERAL INCOME TAX CONSEQUENCES
Generally, federal income tax is not incurred when a non-employee director
receives an award of restricted stock unless the director makes an election
under Section 83(b) of the Internal Revenue Code to have the award taxed as
compensation income at fair market value on the award date. When the restricted
stock becomes nonforfeitable, if no election has been made under Section 83(b),
the shares of restricted stock will be subject to tax based on their fair market
value on the later of (a) the date the restricted stock becomes unforfeitable or
(b) the date the director could sell the shares without incurring a liability
under Section 16(b) of the Securities Exchange Act of 1934. If the director has
deferred the receipt of restricted stock to a date in the future (see Deferral
Election above), the shares will be subject to tax based on their fair market
value on the later of (a) the date of receipt, or (b) the date the director
could sell the shares without incurring a liability under Section 16(b) of the
Securities Exchange Act of 1934. The Company will be entitled to a tax deduction
in an amount equal to the amount of ordinary income recognized by the eligible
director.
The foregoing discussion of federal income tax aspects is only a summary
and based upon interpretations of the existing laws, regulations and rulings
which could be materially altered with the enactment of any new tax legislation.
This summary of federal income tax consequences of stock options and the award
of restricted stock does not purport to be complete. There may also be state and
local income taxes applicable to these transactions.
NEW PLAN BENEFITS
DIRECTOR STOCK OWNERSHIP PLAN
<TABLE>
<CAPTION>
NAME AND POSITION (1) DOLLAR VALUE (2) NUMBER OF UNITS
<S> <C> <C>
($)
Directors and Nominees:
William T. Burgin 15,000 (3)
Worley H. Clark, Jr. 15,000 (3)
William T. Comfort, Jr. 15,000 (3)
Gary P. Coughlan 15,000 (3)
William V. Daniel 15,000 (3)
Bruce C. Gottwald 15,000 (3)
Robert M. O'Neil 15,000 (3)
Richard L. Sharp 15,000 (3)
Anne M. Whittemore 15,000 (3)
</TABLE>
(1) Only non-employee Directors are eligible to participate in the Director
Stock Ownership Plan.
(2) The dollar value represents 50% of the annual retainer fee of $30,000
effective April 25, 1996.
(3) The number of units is determined based upon the greater of 250 shares
of Common Stock or the fair market value of Common Stock calculated as
the average of the high and low trading prices of the Common Stock as
reported in the WALL STREET JOURNAL for the annual award date.
VOTE REQUIRED
The adoption of the Director Stock Ownership Plan requires the affirmative
vote of the holders of a majority of the shares present or represented by
properly executed and delivered proxies and entitled to vote at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ADOPTION OF THE PROPOSED DIRECTOR STOCK OWNERSHIP PLAN.
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SHAREHOLDER PROPOSAL
CONCERNING NON-EMPLOYEE DIRECTOR PENSION BENEFITS
Mr. William Steiner, 4 Radcliff Drive, Great Neck, New York, 11024, owner
of 700 shares of James River Common Stock, has informed management of his
intention to present for action at the Annual Meeting the following resolution:
PROPOSED RESOLUTION (REPRODUCED AS PROPOSED)
RESOLVED, that the shareholders assembled in person and by proxy, recommend
(i) that all future non-employee directors not be granted pension benefits and
(ii) current non-employee directors voluntarily relinquish their pension
benefits.
PROPONENT'S STATEMENT OF SUPPORT
Aside from the usual reasons, presented in the past, regarding "double
dipping," that is outside (non-employee) directors who are in almost all cases
amply rewarded with their pension at their primary place of employment, and in
many instances serving as outside pensioned directors with other companies,
there are other more cogent reasons that render this policy as unacceptable.
Traditionally, pensions have been granted in both the private and public
sectors for long time service. The service component usually represents a
significant number of hours per week. The practice of offering pensions for
consultants is a rarity. Outside director's service could logically fit the
definition of consultants and pensions for this type of service is an abuse of
the term.
But more importantly, outside directors, although retained by corporate
management, namely the CEO, are in reality representatives of shareholders.
Their purpose is to serve as an impartial group to which management is
accountable. Although outside directors are certainly entitled to compensation
for their time and expertise, pensions have the pernicious effect of
compromising their impartiality. In essence, pensions are management's grants to
outside directors to insure their unquestioning loyalty and acquiescence to
whatever policy management initiates, and at times, serving their own self
interests. Thus, pensions become another device to enhance and entrench
management's controls over corporate policies while being accountable only to
themselves. I am a founding member of the Investors Rights Association of
America and I feel this practice perpetuates a culture of corporate management
"cronyism" that can easily be at odds with shareholder and company interest.
A final note in rebuttal to management's contention that many companies
offer their outside directors pensions, so they can attract and retain persons
of the highest quality. Since there are also companies that do not offer their
outside directors pensions, can management demonstrate that those companies that
offer pensions have a better performance record than their non-pensioned peers?
In addition, do we have any evidence of a significant improvement in corporate
profitability with the advent of pensions for outside directors?
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION
POSITION OF THE BOARD OF DIRECTORS OF THE COMPANY
The best interests of James River and its shareholders are clearly served
by having the most talented, experienced and committed individuals serving as
outside directors. As a result of extensive study by management, the Company
Retirement Plan for Outside Directors was made effective as of December 16,
1993, and amended on February 18, 1994. The plan provides benefits for Outside
Directors who complete at least five years of eligible service. According to a
1995 survey by Spencer Stuart, a nationally known executive search consulting
firm, 80% of 100 major U.S. industrial corporations surveyed have adopted
retirement plans for outside directors. The Board believes that such plans have
become increasingly necessary to attract and retain quality directors to serve
on boards.
Management has determined that paying a retirement benefit is appropriate
since it provides not only an incentive to join the Board, but to remain on the
Board for a period of time in order to gain the experience and knowledge of
James River's complex business. Payment of retirement benefits also recognizes
the ever-increasing time commitment, diligence, and risks associated with Board
service. This plan, like all benefit plans offered by James River, is reviewed
and reconsidered on a regular basis.
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The Board also opposes the proposal because it would require the
termination of retirement benefits being paid to directors who have already
retired and cancellation of retirement benefits that have accrued for directors
who are currently serving. The Company's Retirement Plan for Outside Directors
was an inducement for non-employee directors to join and remain in service on
the Board. To ask such directors to relinquish already earned benefits would be,
in the Board's view, an act of bad faith and a breach of a contractual
commitment.
Your Board believes that in order to stay competitive and to attract top
quality persons to serve, the Retirement Plan for Outside Directors should
remain in place.
VOTE REQUIRED
If presented to the shareholders for consideration, no second to the
proposal being required, adoption of this proposal requires the affirmative vote
of a majority of the votes cast for or against this proposal at the Annual
Meeting of Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
SHAREHOLDER PROPOSAL ON EQUAL EMPLOYMENT REPORT
Christian Brothers Investment Services, Inc. ("CBIS"), 675 Third Avenue,
New York, New York, 10017-5704, owner of 43,450 shares of James River Common
Stock, has informed management of its intention to present the following
resolution at the Annual Meeting:
PROPONENT'S STATEMENT OF SUPPORT AND RESOLUTION (REPRODUCED AS PROPOSED)
In 1994 corporations spent more than $2.2 billion on legal fees and related
discrimination settlements. Also the Equal Employment Opportunity Commission
(EEOC) reported that over 155,000 discrimination complaints were filed in 1994.
The high cost of legal expenses, the potential loss of government contracts and
both the social and financial consequences of a damaged corporate image from
discrimination allegations has placed this issue high upon a priority list for
shareholders. Companies must better reflect the marketplace, the customer,
trading partners, and the diverse workforce through all levels of its
organization.
CEO's from 28 major companies have cited changing demographics of the labor
force, the diverse national consumer market, and rapid globalization of the
marketplace as reasons for expanding diversity. Over 100 major employers
publicly report on work diversity and EEO-1 information. Corporate publications
available to their shareholders such as; Capital Cities/ABC's COMMITMENT REPORT
for shareholders, Kmart Corporation's REFLECTIONS OF AMERICA, U.S. Air's
AFFIRMING WORKPLACE DIVERSITY, Amoco's DIVERSE WORK FORCE and Sears' CORPORATE
RESPONSIBILITY REPORT, just to name a few, are disclosing EEO statistics for
public review.
Many California corporations provide this data voluntarily, including all
of the regulated utilities and most of the major banks. Southern California
Edison, for example, has informed the Glass Ceiling Commission that it supports
public reporting of this kind.
The bi-partisan Glass Ceiling Commission was established to study and make
recommendations on the Glass Ceiling by 1995. Concerned investors have closely
watched the development of this study. Secretary of Labor, Robert Reich, and a
21 member Glass Ceiling Commission released a report called "Good For Business:
Making Full Use of The Nation's Human Capital." This report is an important
analysis for shareholders because it shows that in the U.S. we select from less
than 1/2 the total talent in our workforce. For example, women and minorities
who represent over 57% of the workforce represent only 3% of the executive
management positions. This is a serious deficiency in our ability to select the
most talented people for our top management positions. It affects our
competitive position if we stifle this gifted portion of our workforce.
Through this resolution we are asking our company to report to shareholders
the progress we have made and the obstacles we still have to overcome.
Be it resolved: A report shall be prepared at a reasonable cost, by
September, 1996, excluding confidential information and shall focus on the
following areas:
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1. A copy of the consolidated EE0-1 report for 1993, 1994 and 1995 are
available to shareholders upon request.
2. Report the number of discrimination complaints and lawsuits concerning
race, gender and the physically challenged. The cost to the company and
shareholders from discrimination lawsuits and alternatives to resolve
the issue.
3. Report any federal audit, corporate management review, and letter of
compliance with corrective measures enacted to protect the company's
government contracts and legal penalties.
4. Report to shareholders on race, ethnicity and gender among top
management.
5. A description of any policies and programs utilizing the purchase of
goods and services from minority- and/or female-owned business
enterprises.
POSITION OF THE BOARD OF DIRECTORS OF THE COMPANY
James River is strongly committed to equal employment opportunity as
evidenced by its policy and programs. Company policy is to select and place
employees on the basis of qualification for work to be performed, without regard
to age, race, color, sex, religion, national origin, status as a qualified
individual with a disability, or any other status protected by law. Employment
practices that unlawfully discriminate against any employee or applicant for
employment are prohibited throughout the corporation. The equal employment
opportunity policy is communicated to employees in various Company documents,
such as James River's Standards of Business Conduct, employee newsletters and
manuals and labor contracts, and by postings on bulletin boards. Managers are
instructed to base employment and promotional decisions in accordance with
Company policy.
James River participates in a variety of programs and initiatives that
support its policy of equal employment opportunity. These include: mentor and
intern programs, career counseling, curriculum development, cultural awareness,
leaves of absence for dependent care, flexible work schedules and telecommuting
and cross-functional training. In addition, James River has established
relationships with certain minority organizations and educational institutions
to enhance its efforts to attract talented candidates for employment. James
River not only contributes money to educational initiatives designed to enhance
educational and employment opportunities for minorities, but is involved in
leadership and advocacy roles to promote such opportunities; the Company has
been recognized for its initiatives by numerous awards.
James River has adopted affirmative action policies and programs throughout
the Company which include programs to recruit qualified females and ethnic
minorities. Recruiting agencies, labor unions and suppliers of goods and
services are advised of these programs and are asked to cooperate in meeting our
affirmative action goals. Additionally, James River has a minority vendor
program encouraging the purchase of goods and services from minority- and/or
female-owned business enterprises. The Company provides detailed statistical
information on equal employment opportunity to the government agencies through
the Equal Employment Opportunity reports. Any material claim or litigation is
already disclosed in the Company's Annual Report.
Your Board believes that James River's commitment to equal employment
opportunity is exemplary and is part of its ordinary business operations. In
light of the fact that James River already spends significant resources to
produce and file over 50 reports, and given the Company's existing policies and
initiatives, the Board believes that producing additional reports, as CBIS
proposes, would neither advance the Company's business performance or its
commitment to equal employment opportunity, and the resources required to comply
with the proposal would far exceed any shareholder value.
A similar proposal was rejected by 90.8% of the votes cast for or against
the proposal when it was previously submitted at the Annual Meeting held on
April 20, 1995.
VOTE REQUIRED
If presented to the shareholders for consideration, no second to the
proposal being required, adoption of this proposal requires the affirmative vote
of a majority of the votes cast for or against this proposal at the Annual
Meeting of Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
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OTHER MATTERS THAT MAY COME BEFORE THE MEETING
The Company has no present knowledge of any other matters to be presented
at the Annual Meeting of Shareholders. If any other matters should properly come
before the meeting, and any adjournment thereof, it is the intention of the
persons named in the accompanying proxy to vote such proxy with respect to any
such other matter in accordance with their best judgment.
PROPOSALS FOR 1997 ANNUAL MEETING
Any shareholder desiring to make a proposal to be acted upon at the 1997
Annual Meeting of Shareholders must present such proposal to Clifford A.
Cutchins, IV, the Corporate Secretary of the Company, whose address is P.O. Box
2218, Richmond, Virginia 23218, not later than November 13, 1996, in order for
the proposal to be considered for inclusion in the Company's Proxy Statement.
Any such proposal must meet the applicable requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder.
The Company's Bylaws prescribe the procedure that a shareholder must follow
to nominate directors or to bring other business before shareholders' meetings.
For a shareholder to nominate a candidate for director at the 1997 Annual
Meeting of Shareholders, notice of nomination must be given to the Corporate
Secretary of the Company not earlier than December 1, 1996, but before January
1, 1997. The notice must describe various matters regarding the nominee,
including the name, address, and occupation and the number of shares of Common
Stock held by such person. For a shareholder to bring other business before the
1997 Annual Meeting of Shareholders, notice must be given to the Corporate
Secretary of the Company between December 1, 1996, and January 1, 1997, and must
include a description of the proposed business, the reasons therefore, and other
specified matters. However, if the shareholder wishes a proposal to be
considered for inclusion in the Company's Proxy Statement, such proposal must be
presented not later than November 13, 1996, as explained above. Any shareholder
may obtain a copy of the Company's Bylaws, without charge, upon written request
to the Corporate Secretary.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1995, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
MAY BE OBTAINED BY ANY SHAREHOLDER AFTER APRIL 15, 1996, FREE OF CHARGE, UPON
WRITTEN REQUEST TO JAMES RIVER CORPORATION OF VIRGINIA, ATTENTION: INVESTOR
RELATIONS, P.O. BOX 2218, RICHMOND, VIRGINIA 23218, OR BY CALLING (804)
343-4900.
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EXHIBIT A
JAMES RIVER CORPORATION OF VIRGINIA
1996 STOCK INCENTIVE PLAN
JAMES RIVER CORPORATION OF VIRGINIA (the "Company") hereby adopts this
James River Corporation of Virginia 1996 Stock Incentive Plan.
1. PURPOSE. The purpose of the James River Corporation of Virginia 1996
Stock Incentive Plan (the "Plan") is to further the long term stability and
financial success of the Company by attracting and retaining key management
employees and employees of the Company and its Subsidiaries and Foreign
Affiliates who can contribute to the financial success of those corporations
through the use of stock incentives. It is believed that ownership of Company
Stock will stimulate the efforts of those employees upon whose judgment,
interest and efforts the Company and its Subsidiaries and Foreign Affiliates is
and will be largely dependent for the successful conduct of their business. It
is also believed that awards granted to such employees under this Plan will also
further the identification of those employees' interests with those of the
Company's shareholders.
The Plan has been adopted by the Board of Directors of the Company and
subject to the approval of the Company's shareholders. The Plan is intended to
conform to the provisions of Securities and Exchange Commission Rule 16b-3
("Rule 16b-3").
2. DEFINITIONS. As used in the Plan, the following terms have the meanings
indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Applicable Withholding Taxes" means the aggregate amount of federal,
state and local income and payroll taxes that the Company is required
to withhold in connection with any exercise of an Option or the
award, lapse of restrictions or payment with respect to Restricted
Stock or Incentive Stock.
(c) "Award" means the award of an Option, Restricted Stock or Incentive
Stock under the Plan.
(d) "Beneficiary" means the person or persons entitled to receive a
benefit pursuant to an Award upon the death of a Participant
determined under Section 19.
(e) "Board" means the Board of Directors of the Company.
(f) "Change of Control" means:
(i) The acquisition by any unrelated person of beneficial ownership
(as that term is used for purposes of the Act) of 20% or more of
the then outstanding shares of common stock of the Company or the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors. The term "unrelated person" means any person other
than (x) the Company and its Subsidiaries, (y) an employee
benefit plan or trust of the Company or its Subsidiaries, and (z)
a person who acquires stock of the Company pursuant to an
agreement with the Company that is approved by the Board in
advance of the acquisition, unless the acquisition results in a
Change of Control pursuant to subsection (ii) below. For purposes
of this subsection, a "person" means an individual, entity or
group, as that term is used for purposes of the Act.
(ii) Any tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any
combination of the foregoing transactions, the persons who were
directors of the Company before such transactions shall cease to
constitute a majority of the Board of Directors of the Company
or any successor to the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the committee appointed to administer the Plan as
provided in Section 16.
(i) "Company" means James River Corporation of Virginia.
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(j) "Company Stock" means common stock of the Company. In the event of a
change in the capital structure of the Company (as provided in
Section 15), the shares resulting from such a change shall be deemed
to be Company Stock within the meaning of the Plan.
(k) "Corporate Change" means a consolidation, merger, dissolution or
liquidation of the Company, a Subsidiary or Foreign Affiliate, or a
sale or distribution of assets or stock (other than in the ordinary
course of business) of the Company, a Subsidiary or Foreign
Affiliate; provided that, unless the Committee determines otherwise,
a Corporate Change shall only be considered to have occurred with
respect to Participants whose business unit is affected by the
Corporate Change.
(l) "Date of Grant" means the date as of which an Award is made by the
Committee.
(m) "Disability" or "Disabled" means, as to an Incentive Stock Option, a
Disability within the meaning of Section 22(e)(3) of the Code. As to
all other Incentive Awards, the Committee shall determine whether a
Disability exists and such determination shall be conclusive.
(n) "Fair Market Value" means (i) if the Company Stock is traded on an
exchange, the mean of the highest and lowest registered sales prices
of the Company Stock on the exchange on which the Company Stock
generally has the greatest trading volume, or (ii) if the Company
Stock is traded in the over-the-counter market, the mean between the
closing bid and asked prices as reported by NASDAQ. Fair Market Value
shall be determined as of the applicable date specified in the Plan
or, if there are no trades on such date, the value shall be
determined as of the last preceding day on which the Company Stock is
traded.
(o) "Foreign Affiliate" means an entity that is not organized under the
laws of the United States, or any state thereof or any political
subdivision of any state, and in which the Company has, directly or
indirectly, a substantial interest.
(p) "Incentive Stock" means Company Stock awarded when performance goals
are achieved pursuant to an incentive plan established by the
Committee as provided in Section 8.
(q) "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable Federal income tax
treatment under, Code section 422.
(r) "Insider" means a person subject to Section 16(b) of the Act.
(s) "Nonstatutory Stock Option" means an Option that does not meet the
requirements of Code section 422, or that is otherwise not intended
to be an Incentive Stock Option and is so designated.
(t) "Option" means a right to purchase Company Stock granted under the
Plan, at a price determined in accordance with the Plan.
(u) "Parent" means, with respect to any corporation, a parent of that
corporation within the meaning of Code section 424(e).
(v) "Participant" means any employee who receives an Award under the
Plan.
(w) "Replacement Feature" means a feature of an Option, as described in
the Participant's stock option agreement, that provides for the
automatic grant of a Replacement Option in accordance with the
provisions of Section 9(b).
(x) "Replacement Option" means an Option granted to a Participant equal
to the number of shares of already owned Company Stock that are
delivered by the Participant to exercise an Option, as described in
Section 9(b).
(y) "Restricted Stock" means Company Stock awarded upon the terms and
subject to the restrictions set forth in Section 7.
(z) "Rule 16b-3" means Rule 16b-3 of the Act. A reference in the Plan to
Rule 16b-3 shall include a reference to any corresponding subsequent
rule or any amendments to Rule 16b-3 enacted after the effective date
of the Plan.
(aa) "Subsidiary" means an entity of which the Company owns 50% or more of
the total combined voting power of all classes of stock.
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(bb) "10% Shareholder" means a person who owns, directly or indirectly,
stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary of
the Company. Indirect ownership of stock shall be determined in
accordance with Code section 424(d).
3. GENERAL. The following types of Awards may be granted under the Plan:
Options, Restricted Stock and Incentive Stock. Options granted under the Plan
may be Incentive Stock Options or Nonstatutory Stock Options.
4. STOCK. Subject to Section 15 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of 5,146,774 shares of Company Stock, which
shall be authorized, but unissued, shares. The 5,146,774 shares reserved for
issuance under the Plan include 1,146,774 shares available for the grant of
options under the Company's 1987 Stock Option Plan (the "1987 Plan") that will
not be granted and 1,000,000 shares reserved for issuance under the Company's
Deferred Stock Plan which will not be awarded. The 5,146,774 shares reserved
also includes 2,000,000 shares allocable to Options that are expected to expire
or otherwise terminate unexercised under the 1987 Plan and awards under the
Deferred Stock Plan that are expected to be forfeited. Shares allocable to
Options granted under the Plan that expire or otherwise terminate unexercised
and shares that are forfeited pursuant to restrictions on Restricted Stock or
Incentive Stock awarded under the Plan may again be subjected to an Award under
this Plan. For purposes of determining the number of shares that are available
for Awards under the Plan, such number shall, if permissible under Rule 16b-3,
include the number of shares surrendered by a Participant or retained by the
Company in payment of Applicable Withholding Taxes.
5. ELIGIBILITY.
(a) Any employee of the Company or a Subsidiary or Foreign Affiliate who,
in the judgment of the Committee, has contributed or can be expected to
contribute to the profits or growth of the Company shall be eligible to
receive Awards under the Plan. Directors of the Company who are
employees and are not members of the Committee are eligible to
participate in the Plan. The Committee shall have the power and
complete discretion, as provided in Section 16, to select eligible
employees to receive Awards and to determine for each employee the
terms, conditions and nature of the Award and the number of shares to
be allocated to each employee as part of the Award. The Committee is
expressly authorized to make an Award to a Participant conditioned upon
the surrender for cancellation of an existing Award.
(b) The grant of an Award shall not obligate the Company or any Subsidiary
or Foreign Affiliate to pay an employee any particular amount of
remuneration, to continue the employment of the employee after the
grant or to make further grants to the employee at any time thereafter.
(c) When granting Awards to employees of a Foreign Affiliate, the Committee
shall have complete discretion and authority to grant such Awards in
compliance with all present and future laws of the country or countries
that may apply to the grant of the Award or the issuance of Company
Stock pursuant to the Award. Such authorization shall extend to and
includes establishing one or more separate sub-plans which include
provisions not inconsistent with the Plan that comply with statutory or
regulation requirements imposed by the foreign country or countries of
the Foreign Affiliate or in which Participants employed by the Foreign
Affiliate reside.
6. STOCK OPTIONS.
(a) Whenever the Committee deems it appropriate to grant Options, notice
shall be given to the eligible employee stating the number of shares
for which Options are granted, the Option price per share, whether the
Options are Incentive Stock Options or Nonstatutory Stock Options, and
the conditions to which the grant and exercise of the Options are
subject. This notice, when duly accepted in writing by the Participant,
shall become a stock option agreement between the Company and the
Participant.
(b) The Committee shall establish the exercise price of Options. The
exercise price of a Nonstatutory Stock Option shall be not less than
85% of the Fair Market Value of the shares of Company Stock covered by
the Option on the Date of Grant. The exercise price of an Incentive
Stock Option shall be not less than 100% of the Fair Market Value of
such shares on the Date of Grant; provided that if the Participant is a
10% Shareholder, the exercise price of an Incentive Stock Option shall
be not less than 110% of the Fair Market Value of such shares on the
Date of Grant.
(c) An employee may not receive awards of Options under the Plan with
respect to more than 300,000 shares of Company Stock during any
calendar year.
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(d) Options may be exercised in whole or in part at such times as may be
specified by the Committee in the Participant's stock option agreement.
The Committee may impose such vesting conditions and other requirements
as the Committee deems appropriate, and the Committee may include such
provisions regarding a Change of Control or Corporate Change as the
Committee deems appropriate.
(e) The Committee shall establish the term of each Option in the
Participant's stock option agreement. The term of an Incentive Stock
Option shall not be longer than ten years from the Date of Grant,
except that an Incentive Stock Option granted to a 10% Shareholder may
not have a term in excess of five years. No Option may be exercised
after the expiration of its term or, except as set forth in the
Participant's stock option agreement, after the termination of the
Participant's employment. The Committee shall set forth in the
Participant's stock option agreement when, and under what
circumstances, an Option may be exercised after termination of the
Participant's employment.
(f) An Incentive Stock Option, by its terms, shall be exercisable in any
calendar year only to the extent that the aggregate Fair Market Value
(determined at the Date of Grant) of the Company Stock with respect to
which Incentive Stock Options are exercisable by the Participant for
the first time during the calendar year does not exceed $100,000 (the
"Limitation Amount"). Incentive Stock Options granted after 1986 under
the Plan and all other plans of the Company and any parent or
Subsidiary of the Company shall be aggregated for purposes of
determining whether the Limitation Amount has been exceeded. The Board
may impose such conditions as it deems appropriate on an Incentive
Stock Option to ensure that the foregoing requirement is met. If
Incentive Stock Options that first become exercisable in a calendar
year exceed the Limitation Amount, the excess Options will be treated
as Nonstatutory Stock Options to the extent permitted by law.
(g) If a Participant dies and if the Participant's stock option agreement
provides that part or all of the Option may be exercised after the
Participant's death, then such portion may be exercised by the personal
representative of the Participant's estate during the time period
specified in the stock option agreement.
(h) The Committee may, in its discretion, grant Options containing a
Replacement Feature as described in Section 9(b) and may amend
previously granted Nonstatutory Stock Options to provide such a
Replacement Feature.
7. RESTRICTED STOCK AWARDS.
(a) Whenever the Committee deems it appropriate to grant a Restricted Stock
Award, notice shall be given to the Participant stating the number of
shares of Restricted Stock for which the Award is granted and the terms
and conditions to which the Award is subject. This notice, when
accepted in writing by the Participant, shall become an Award agreement
between the Company and the Participant. Certificates representing the
shares shall be issued in the name of the Participant, subject to the
restrictions imposed by the Plan and the Committee. A Restricted Stock
Award may be made by the Committee in its discretion without cash
consideration.
(b) The Committee may place such restrictions on the transferability and
vesting of Restricted Stock as the Committee deems appropriate,
including restrictions relating to continued employment and financial
performance goals. Without limiting the foregoing, the Committee may
provide performance acceleration parameters under which all, or a
portion, of the Restricted Stock will vest on the Company's achievement
of established performance objectives. Restricted Stock may not be
sold, assigned, transferred, disposed of, pledged, hypothecated or
otherwise encumbered until the restrictions on such shares shall have
lapsed or shall have been removed pursuant to subsection (c) below.
(c) The Committee may provide in a Restricted Stock Award, or subsequently,
that the restrictions will lapse if a Change of Control or Corporate
Change occurs. The Committee may at any time, in its sole discretion,
accelerate the time at which any or all restrictions will lapse or may
remove restrictions on Restricted Stock as it deems appropriate.
(d) A Participant shall hold shares of Restricted Stock subject to the
restrictions set forth in the Award agreement and in the Plan. In other
respects, the Participant shall have all the rights of a shareholder
with respect to the shares of Restricted Stock, including, but not
limited to, the right to vote such shares and the right to receive all
cash dividends and other distributions paid thereon. Certificates
representing Restricted Stock shall bear a legend referring to the
restrictions set forth in the Plan and the Participant's Award
agreement. If stock dividends are declared on
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Restricted Stock, such stock dividends or other distributions shall be
subject to the same restrictions as the underlying shares of Restricted
Stock.
(e) The number of shares of Restricted Stock subject to outstanding awards
at any time may not exceed 1,584,108 less the number of shares of
Restricted Stock with respect to which restrictions have previously
lapsed (other than through forfeiture).
8. INCENTIVE STOCK AWARDS.
(a) Incentive Stock may be issued pursuant to the Plan in connection with
incentive programs established from time to time by the Committee. The
Committee shall establish such performance criteria as it deems
appropriate as a prerequisite for the issuance of Incentive Stock. A
Participant who is eligible to receive Incentive Stock will have no
rights as a shareholder before receipt of the Incentive Stock
certificates. Incentive Stock may be issued without cash consideration.
A Participant's interest in an incentive program or the contingent
right to receive Incentive Stock may not be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered.
(b) The Committee may provide in the incentive program, or subsequently,
that Incentive Stock will be issued if a Change of Control or Corporate
Change occurs, even though the performance goals set by the Committee
have not been met.
9. METHOD OF EXERCISE OF OPTIONS.
(a) Options may be exercised by giving written notice of the exercise to
the Company, stating the number of shares the Participant has elected
to purchase under the Option. Such notice shall be effective only if
accompanied by the exercise price in full in cash; provided that, if
the terms of an Option so permit, the Participant may (i) deliver
Company Stock that the Participant has owned for at least six months
(valued at Fair Market Value on the date of exercise), or cause shares
of Company Stock (valued at their Fair Market Value on the date of
exercise) to be withheld in satisfaction of all or any part of the
exercise price, (ii) deliver a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly
to the Company, from the sale or loan proceeds with respect to the sale
of Company Stock or a loan secured by Company Stock, the amount
necessary to pay the exercise price and, if required by the Committee,
Applicable Withholding Taxes, or (iii) deliver an interest bearing
promissory note, payable to the Company, in payment of all or part of
the exercise price, together with such collateral and subject to such
terms as may be required by the Committee at the time of exercise. The
interest rate under any such promissory note shall be equal to the
minimum interest rate required at the time to avoid imputed interest to
the Participant under the Code.
(b) If a Participant exercises an Option that has a Replacement Feature by
delivering already owned shares of Company Stock, the Participant shall
automatically be granted a Replacement Option. The Replacement Option
shall be subject to the following provisions:
(i) The Replacement Option shall cover the number of shares of
Company Stock delivered by the Participant to exercise the
Option;
(ii) The Replacement Option will not have a Replacement Feature;
(iii) The exercise price of shares of Company Stock covered by a
Replacement Option shall be not less than 100% of the Fair
Market Value of such shares on the date the Participant delivers
shares of Company Stock to exercise the Option; and
(iv) The Replacement Option shall be subject to the same restrictions
on exercisability as those imposed on the underlying Option and
such other restrictions as the Committee deems appropriate.
(c) Notwithstanding anything herein to the contrary, Awards shall always be
granted and exercised in such a manner as to conform to the provisions
of Rule 16b-3.
10. DEFERRAL OF PAYMENT.
(a) Regardless of whether provided for in the Award agreement, the
Committee may defer payment of a Participant's benefit under the Plan
if and to the extent that the sum of (i) the Participant's Plan
benefit, plus (ii) all other compensation paid or payable to the
Participant for the fiscal year in which the Plan benefit would
otherwise be paid
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exceeds the maximum amount of compensation that the Company may deduct
under Code section 162(m) with respect to the Participant for the year.
If deferred by the Committee, the benefit shall be paid in the first
fiscal year of the Company in which the sum of the Participant's Plan
benefit and all other compensation paid or payable to the Participant
does not exceed the maximum amount of compensation deductible by the
Company under Code section 162(m). This Section shall only apply to
Participants and Plan benefits covered by Code section 162(m).
(b) The Committee may defer payment of part or all of a Plan benefit with
respect to a Participant who is an Insider, to the extent necessary or
appropriate to comply with Rule 16b-3.
(c) The Committee shall have sole discretion to determine whether and to
what extent Plan benefits are to be deferred pursuant to this Section,
how such deferred amounts are to be calculated and when deferred
amounts shall be paid. The Committee's determination shall be final and
binding.
11. APPLICABLE WITHHOLDING TAXES. Each Participant shall agree, as a
condition of receiving an Award, to pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, all Applicable Withholding
Taxes with respect to the Award. Until the Applicable Withholding Taxes have
been paid or arrangements satisfactory to the Company have been made, no stock
certificates (or, in the case of Restricted Stock, no stock certificates free of
a restrictive legend) shall be issued to the Participant. As an alternative to
making a cash payment to the Company to satisfy Applicable Withholding Tax
obligations, the Committee may establish procedures permitting the Participant
to elect to (a) deliver shares of already owned Company Stock or (b) have the
Company retain that number of shares of Company Stock that would satisfy all or
a specified portion of the Applicable Withholding Taxes. Any such election shall
be made only in accordance with procedures established by the Committee and, in
the case of an Insider, in accordance with Rule 16b-3.
12. NONTRANSFERABILITY OF AWARDS.
(a) In general Awards, by their terms, shall not be transferable by the
Participant except by will or by the laws of descent and distribution
or except as described below. Options shall be exercisable, during the
Participant's lifetime, only by the Participant or by his guardian or
legal representative.
(b) Notwithstanding the provisions of (a) and subject to applicable
securities laws, the Committee may grant Nonstatutory Stock Options
that permit, or amend Nonstatutory Stock Options to permit, a
Participant to transfer the Options to one or more immediate family
members, to a trust for the benefit of immediate family members or to a
partnership whose only partners are immediate family members.
Consideration may not be paid for the transfer of Options. The
transferee of an Option shall be subject to all conditions applicable
to the Option prior to its transfer. The agreement granting the Option
shall set forth the transfer conditions and restrictions. The Committee
may impose on any transferable Option and on stock issued upon the
exercise of an Option such limitations and conditions as the Committee
deems appropriate. Except to the extent otherwise permitted by Rule
16b-3, Options that are intended to be exempt from Section 16(b) of the
Act pursuant to Rule 16b-3 may not be transferable except by will or by
the laws of descent and distribution.
13. EFFECTIVE DATE OF THE PLAN. This Plan shall be effective February 15,
1996, subject to approval by the Company's shareholders. Until the Plan is
approved by the Company's shareholders and all applicable federal and state
securities laws have been complied with and the shares of Company Stock have
been listed on the stock exchange or exchanges where traded, no Options shall be
exercisable and no Award shall be made that would result in the issuance of
shares of Company Stock.
14. TERMINATION, MODIFICATION, CHANGE. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on February 14, 2006.
No Awards shall be made under the Plan after its termination. The Board may
terminate the Plan or may amend the Plan in such respects as it shall deem
advisable; provided, that, if and to the extent required by Rule 16b-3, no
change shall be made that increases the total number of shares of Company Stock
reserved for issuance pursuant to Awards granted under the Plan (except pursuant
to Section 15), expands the class of persons eligible to receive Awards, or
materially increases the benefits accruing to Participants under the Plan,
unless such change is authorized by the shareholders of the Company.
Notwithstanding the foregoing, the Board may unilaterally amend the Plan and
Awards as it deems appropriate to ensure compliance with Rule 16b-3 and to cause
Incentive Stock Options to meet the requirements of the Code and regulations
thereunder. Except as provided in the preceding sentence, a termination or
amendment of the Plan shall not, without the consent of the Participant,
adversely affect a Participant's rights under an Award previously granted to
him.
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15. CHANGE IN CAPITAL STRUCTURE.
(a) In the event of a stock dividend, stock split or combination of shares,
spin-off, reclassification, recapitalization, merger or other change in
the Company's capital stock (including, but not limited to, the
creation or issuance to shareholders generally of rights, options or
warrants for the purchase of common stock or preferred stock of the
Company), the number and kind of shares of stock or securities of the
Company to be issued under the Plan (under outstanding Awards and
Awards to be granted in the future), the exercise price of Options, and
other relevant provisions shall be appropriately adjusted by the
Committee, whose determination shall be binding on all persons. If the
adjustment would produce fractional shares with respect to any Award,
the Committee may adjust appropriately the number of shares covered by
the Award so as to eliminate the fractional shares.
(b) In the event the Company distributes to its shareholders a dividend, or
sells or causes to be sold to a person other than the Company or a
Subsidiary shares of stock in any corporation (a "Spinoff Company")
which, immediately before the distribution or sale, was a majority
owned Subsidiary of the Company, the Committee shall have the power, in
its sole discretion, to make such adjustments as the Committee deems
appropriate. The Committee may make adjustments in the number and kind
of shares or other securities to be issued under the Plan (under
outstanding Awards and Awards to be granted in the future), the
exercise price of Options, and other relevant provisions, and, without
limiting the foregoing, may substitute securities of a Spinoff Company
for securities of the Company. The Committee shall make such
adjustments as it determines to be appropriate, considering the
economic effect of the distribution or sale on the interests of the
Company's shareholders and the Participants in the businesses operated
by the Spinoff Company. The Committee's determination shall be binding
on all persons. If the adjustment would produce fractional shares with
respect to any Award, the Committee may adjust appropriately the number
of shares covered by the Award so as to eliminate the fractional
shares.
(c) If a Change of Control or Corporate Change occurs, the Committee may
take such actions with respect to outstanding Awards as the Committee
deems appropriate. These actions may include, but shall not be limited
to, accelerating the vesting and payment of Awards, releasing
restrictions on Awards, and accelerating the expiration dates of
Options. The effectiveness of such acceleration or release of
restrictions shall be conditioned upon the consummation of the
applicable Change of Control or Corporate Change.
(d) Notwithstanding anything in the Plan to the contrary, the Committee may
take the foregoing actions without the consent of any Participant, and
the Committee's determination shall be conclusive and binding on all
persons for all purposes. The Committee shall make its determinations
consistent with Rule 16b-3 and the applicable provisions of the Code.
16. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by a Committee consisting of two or more
outside directors of the Company, who shall be appointed by the Board.
The Board may designate the Compensation Committee of the Board, or a
subcommittee of the Compensation Committee, to be the Committee for
purposes of the Plan. If and to the extent required by Rule 16b-3, all
members of the Committee shall be "disinterested persons" as that term
is defined in Rule 16b-3, and the Committee shall be comprised solely
of two or more "outside directors" as that term is defined for purposes
of Code section 162(m). If any member of the Committee fails to qualify
as an "outside director" or (to the extent required by Rule 16b-3) a
"disinterested person," such person shall immediately cease to be a
member of the Committee and shall not take part in future Committee
deliberations. The Committee from time to time may appoint members of
the Committee and may fill vacancies, however caused, in the Committee.
(b) The Committee shall have the authority to impose such limitations or
conditions upon an Award as the Committee deems appropriate to achieve
the objectives of the Award and the Plan. Without limiting the
foregoing and in addition to the powers set forth elsewhere in the
Plan, the Committee shall have the power and complete discretion to
determine (i) which eligible employees shall receive an Award and the
nature of the Award, (ii) the number of shares of Company Stock to be
covered by each Award, (iii) whether Options shall be Incentive Stock
Options or Nonstatutory Stock Options, (iv) whether to include a
Replacement Feature in an Option and the conditions of any Replacement
Feature, (v) the Fair Market Value of Company Stock, (vi) the time or
times when an Award shall be granted, (vii) whether an Award shall
become vested over a period of time, according to a performance-based
vesting schedule or otherwise, and when it shall be fully vested,
(viii) the terms and conditions under which restrictions imposed
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upon an Award shall lapse, (ix) whether a Change of Control or
Corporate Change exists, (x) the terms of incentive programs,
performance criteria and other factors relevant to the issuance of
Incentive Stock or the lapse of restrictions on Restricted Stock or
Options, (xi) when Options may be exercised, (xii) whether to approve a
Participant's election with respect to Applicable Withholding Taxes,
(xiii) conditions relating to the length of time before disposition of
Company Stock received in connection with an Award is permitted, (xiv)
notice provisions relating to the sale of Company Stock acquired under
the Plan, and (xv) any additional requirements relating to Awards that
the Committee deems appropriate. Notwithstanding the foregoing, no
"tandem stock options" (where two stock options are issued together and
the exercise of one option affects the right to exercise the other
option) may be issued in connection with Incentive Stock Options.
(c) When granting Awards to employees of a Foreign Affiliate, the Committee
shall have complete discretion and authority to grant such Awards in
compliance with all present and future laws of the country or countries
that may apply to the grant of the Award or the issuance of Company
Stock pursuant to the Award.
(d) The Committee shall have the power to amend the terms of previously
granted Awards so long as the terms as amended are consistent with the
terms of the Plan and, where applicable, consistent with the
qualification of an Option as an Incentive Stock Option. The consent of
the Participant must be obtained with respect to any amendment that
would adversely affect the Participant's rights under the Award, except
that such consent shall not be required if such amendment is for the
purpose of complying with Rule 16b-3 or any requirement of the Code
applicable to the Award.
(e) The Committee may adopt rules and regulations for carrying out the
Plan. The Committee shall have the express discretionary authority to
construe and interpret the Plan and the Award agreements, to resolve
any ambiguities, to define any terms, and to make any other
determinations required by the Plan or an Award agreement. The
interpretation and construction of any provisions of the Plan or an
Award agreement by the Committee shall be final and conclusive. The
Committee may consult with counsel, who may be counsel to the Company,
and shall not incur any liability for any action taken in good faith in
reliance upon the advice of counsel.
(f) A majority of the members of the Committee shall constitute a quorum,
and all actions of the Committee shall be taken by a majority of the
members present. Any action may be taken by a written instrument signed
by all of the members, and any action so taken shall be fully effective
as if it had been taken at a meeting.
17. ISSUANCE OF COMPANY STOCK. The Company shall not be required to issue
or deliver any certificate for shares of Company Stock before (i) the admission
of such shares to listing on any stock exchange on which the Company Stock may
then be listed, (ii) receipt of any required registration or other qualification
of such shares under any state or federal law or regulation that the Company's
counsel shall determine is necessary or advisable, and (iii) the Company shall
have been advised by counsel that all applicable legal requirements have been
complied with. The Company may place on a certificate representing Company Stock
any legend required to reflect restrictions pursuant to the Plan, and any legend
deemed necessary by the Company's counsel to comply with federal or state
securities laws. The Company may require a customary written indication of a
Participant's investment intent. Until a Participant has been issued a
certificate for the shares of Company Stock acquired, the Participant shall
possess no shareholder rights with respect to the shares.
18. RIGHTS UNDER THE PLAN. Title to and beneficial ownership of all
benefits described in the Plan shall at all times remain with the Company.
Participation in the Plan and the right to receive payments under the Plan shall
not give a Participant any proprietary interest in the Company or any Subsidiary
or any of their assets. No trust fund shall be created in connection with the
Plan, and there shall be no required funding of amounts that may become payable
under the Plan. A Participant shall, for all purposes, be a general creditor of
the Company. The interest of a Participant in the Plan cannot be assigned,
anticipated, sold, encumbered or pledged and shall not be subject to the claims
of his creditors.
19. BENEFICIARY. A Participant may designate, on a form provided by the
Committee, one or more beneficiaries to receive any payments under Awards of
Restricted Stock or Incentive Stock after the Participant's death. If a
Participant makes no valid designation, or if the designated beneficiary fails
to survive the Participant or otherwise fails to receive the benefits, the
Participant's beneficiary shall be the first of the following persons who
survives the Participant: (a) the Participant's surviving spouse, (b) the
Participant's surviving descendants, PER STIRPES, or (c) the personal
representative of the Participant's estate.
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20. NOTICE. All notices and other communications required or permitted to
be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows (a) if to the Company -- at its principal business address to the
attention of the Secretary; (b) if to any Participant -- at the last address of
the Participant known to the sender at the time the notice or other
communication is sent.
21. INTERPRETATION. The terms of this Plan and Awards granted pursuant to
the Plan are subject to all present and future regulations and rulings of the
Secretary of the Treasury or his delegate relating to the qualification of
Incentive Stock Options under the Code or compliance with Code section 162(m),
to the extent applicable, and they are subject to all present and future rulings
of the Securities Exchange Commission with respect to Rule16b-3. If any
provision of the Plan or an Award conflicts with any such regulation or ruling,
to the extent applicable, the Committee shall cause the Plan to be amended, and
shall modify the Award, so as to comply, or if for any reason amendments cannot
be made, that provision of the Plan and/or the Award shall be void and of no
effect.
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EXHIBIT B
JAMES RIVER CORPORATION OF VIRGINIA
DIRECTOR STOCK OWNERSHIP PLAN
JAMES RIVER CORPORATION OF VIRGINIA (the "Company"), hereby adopts the
James River Corporation of Virginia Director Stock Ownership Plan.
1. PURPOSE. The purpose of the Director Stock Ownership Plan is to increase
the level of ownership of the Company's common stock by non-employee directors.
The Plan replaces the practice of paying director retainer fees solely in cash
by paying 50% of such fees in Company common stock and providing eligible
directors with a means of electing to receive the balance of retainer fees in
Company common stock, all as set forth in the Plan. The Plan has been adopted by
the Board of Directors of the Company subject to approval by the Company's
shareholders. The Plan is intended to conform to the provisions of Rule 16b-3 of
the Securities Exchange Act of 1934, as amended, or any replacement rule in
effect from time to time ("Rule 16b-3").
2. DEFINITIONS. As used in the Plan, the following terms have the meanings
indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Annual Meeting Date" means the date of the annual meeting of the
Company's shareholders as fixed pursuant to the Company's bylaws.
(c) "Award" means the award of Restricted Stock under the Plan.
(d) "Award Date" means May 1. The first Award Date shall be the May 1
next following the date of the 1996 Annual Meeting Date. If the
Annual Meeting Date is not in the month of April, the Award Date
shall be the first day of the month next following the Annual Meeting
Date.
(e) "Board" means the Board of Directors of the Company.
(f) "Change of Control" means:
(i) The acquisition by any unrelated person of beneficial ownership
(as that term is used for purposes of the Act) of 20% or more of
the then outstanding shares of common stock of the Company or the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors. The term "unrelated person" means any person other
than (x) the Company and its Subsidiaries, (y) an employee
benefit plan or trust of the Company or its Subsidiaries, and (z)
a person who acquires stock of the Company pursuant to an
agreement with the Company that is approved by the Board in
advance of the acquisition, unless the acquisition results in a
Change of Control pursuant to subsection (ii) below. For purposes
of this subsection, a "person" means an individual, entity or
group, as that term is used for purposes of the Act.
(ii) As a result of, or in connection with, any tender or exchange
offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing
transactions, the persons who were directors of the Company
before such transactions shall cease to constitute a majority of
the Board of Directors of the Company or any successor to the
Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" means James River Corporation of Virginia or any successor
corporation.
(i) "Company Stock" means common stock of the Company. In the event of a
change in the capital structure of the Company (as provided in
Section 9), the shares resulting from such a change shall be deemed
to be Company Stock within the meaning of the Plan.
(j) "Deferred Stock" means hypothetical shares of Company Stock deferred
pursuant to a deferral election pursuant to Section 7.
(k) "Deferred Stock Account" means an account maintained on the books of
the Company to record Deferred Stock.
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(l) "Disability" or "Disabled" means a physical or mental condition that
prevents a director from performing services as a member of the
Board. The Board shall determine whether a Disability exists and such
determination shall be conclusive.
(m) "Effective Date" means the date the Plan is approved by the Company's
shareholders.
(n) "Election Period" means the 120-day period immediately preceding the
first day of a Service Period, or such other period as may be
permissible under Rule 16b-3 promulgated under the Act or may be
appropriate under the Code, as determined by the Board.
(o) "Eligible Director" means a director who is not, and for at least one
year before the date of an Award was not, an employee of the Company,
the Parent or a Subsidiary.
(p) "Fair Market Value" means (i) if the Company Stock is traded on an
exchange, the mean of the highest and lowest registered sales prices
of the Company Stock on the exchange on which the Company Stock
generally has the greatest trading volume, or (ii) if the Company
Stock is traded in the over-the-counter market, the mean between the
closing bid and asked prices as reported by NASDAQ. Fair Market Value
shall be determined as of the applicable date specified in the Plan
or, if there are no trades on such date, the value shall be
determined as of the last preceding day on which the Company Stock is
traded.
(q) "Parent" means, with respect to any corporation, a parent of that
corporation within the meaning of Code section 424(e).
(r) "Participant" means any Eligible Director entitled to receive an
Award under the Plan.
(s) "Restricted Stock" means Company Stock awarded upon the terms and
subject to the restrictions set forth in the Plan.
(t) "Retainer Fees" means the amount of compensation payable to each
Eligible Director with respect to services rendered to the Company as
a director during a Service Period. Such term does not include fees
for attending meetings of the Board or committees of the Board.
(u) "Rule 16b-3" means Rule 16b-3 promulgated under the Act. A reference
in the Plan to Rule 16b-3 shall include a reference to any
corresponding subsequent rule or any amendments to Rule 16b-3 enacted
after the effective date of the Plan.
(v) "Service Period" means the period beginning with the Annual Meeting
Date on which an Eligible Director is elected or reelected to the
Board and ending on the day next preceding the next Annual Meeting
Date.
(w) "Subsidiary" means an entity of which the Company owns 50% or more of
the total combined voting power of all classes of stock.
(x) "Vesting Period" means the period that begins on the first date of
the Service Period to which an Award relates and ends on the last day
of the Service Period. Awards made with respect to each Service
Period are subject to a separate Vesting Period.
3. ELIGIBILITY. Only Eligible Directors are eligible to participate in the
Plan.
4. AUTOMATIC AND ELECTIVE SHARE AWARDS.
(a) As of each Award Date, each Participant will receive with respect to
50% of the Participant's Retainer Fees payable with respect to that
Service Period the greater of (i) 250 shares of Restricted Stock, and
(ii) the number of shares of Restricted Stock determined by dividing an
amount equal to 50% of the Participant's Retainer Fees payable for the
Service Period by the Fair Market Value of Company Stock as of the
Award Date.
(b) Except as provided in (e), by filing an election in writing with the
Company during the Election Period, a Participant may receive, instead
of cash, with respect to the remaining 50% of the Participant's
Retainer Fees payable with respect to that Service Period, the number
of shares of Restricted Stock determined by dividing an amount equal to
the remaining 50% of the Participant's Retainer Fees for that Service
Period by the Fair Market Value of Company Stock as of the Award Date.
Subject to and as long as required to comply with Rule 16b-3, (i) the
election shall be irrevocable with respect to Retainer Fees for the
initial Service Period to which the election relates and may be made
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effective until revoked with respect to Retainer Fees for succeeding
Service Periods, (ii) a revocation of a prior election may be made by
filing a writing to that effect with the Company, and (iii) such
revocation shall only be effective with respect to Retainer Fees earned
for the Service Periods following the date of revocation. The Board may
establish alternative election procedures consistent with and
permissible under Rule 16b-3.
(c) Company Stock shall automatically be awarded under the Plan as
described above. If at any time there may not be sufficient shares
available under the Plan to permit automatic Awards as described above
(after taking into account Company Stock reserved for issuance with
respect to Deferred Stock), elective awards shall be void and the
automatic Awards shall be reduced pro rata (to zero, if necessary) so
as not to exceed the number of shares then available under the Plan.
(d) The Company Stock awarded under the Plan shall be restricted as
described in Section 6 below.
(e) The remaining 50% of the Retainer Fees otherwise payable in cash to a
Participant who has previously made an irrevocable election pursuant to
the Company's Directors Deferred Compensation Plan to defer the receipt
of Retainer Fees shall be governed by the terms of that election and no
election under (b) shall be permissible while such prior election is in
effect.
5. STOCK. The Company has reserved an aggregate of 100,000 shares of
Company Stock for issuance pursuant to the Plan. The aggregate number is subject
to adjustment as provided in Section 9. In the event of a change in the capital
structure of the Company (as provided in Section 9), the shares resulting from
such change shall be deemed to be Company Stock within the meaning of the Plan.
The aggregate number of shares of Company Stock reserved shall be reduced by the
issuance of shares under the Plan, and, to the extent permitted by Rule 16b-3,
shall be increased if and to the extent a Participant forfeits Restricted Stock
under the Plan.
6. RESTRICTIONS ON COMPANY STOCK.
(a) All Company Stock granted under the Plan shall be restricted as
described in this Section. Generally, each Participant shall become
vested in Company Stock awarded each year pursuant to Section 4 at the
end of the Vesting Period applicable to the Award if the Participant
continues to be a member of the Board through the Vesting Period. Each
Award is subject to a separate Vesting Period and all Awards made with
respect to a Service Period become nonforfeitable and transferable on
the last day of the Service Period to which the Award relates. In
addition, a Participant shall become vested in such Company Stock
during the Vesting Period (i) upon retirement from the Board of
Directors at or after age 65, (ii) if the Participant dies or becomes
Disabled while serving as a member of the Board of Directors, or (iii)
if the Participant ceases to be a member of the Board of Directors as a
result of a Change of Control. If the Participant ceases to be a member
of the Board of Directors for any reason other than one described in
the preceding sentence during the Vesting Period following the Award
Date, the Participant's right to the Restricted Stock shall be
forfeited.
(b) Shares of Company Stock that are restricted as described in this
Section 6 may not be sold, assigned, transferred, disposed of, pledged,
hypothecated or otherwise encumbered until the Restricted Stock becomes
vested.
(c) When Restricted Stock is issued, a certificate representing the shares
shall be issued in the name of the Participant, subject to the
restrictions imposed by the Plan. The Secretary of the Company shall
hold the certificates for the benefit of the Participant. In other
respects, the Participant shall have all the rights of a shareholder
with respect to the shares of Restricted Stock, including, but not
limited to, the right to vote such shares and the right to receive all
cash dividends. Certificates representing Restricted Stock shall bear a
legend referring to the restrictions set forth in the Plan. If stock
dividends or other non-cash distributions are declared on restricted
Company Stock, such stock dividends or other distributions shall be
subject to the same restrictions as the underlying shares of Company
Stock.
7. DEFERRED STOCK.
(a) During the Election Period before the date on which an Award of Company
Stock is to be made pursuant to Section 4(a) or (b), a Participant may
elect to defer payment of part or all of his Award. If a Participant
wishes to defer only part of an Award, the deferral must apply to at
least 40% of the aggregate number of shares covered by the Award
pursuant to Sections 4(a) and (b). A Participant shall designate, at
the time of the deferral, that payment shall be made either (i) as of
the January 1st that is at least three years after the date of the
deferral election, or (ii) when the Participant ceases to be a member
of the Board of Directors or another distribution event occurs as
described below.
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If a deferral election remains in effect for successive Service
Periods, payment shall be deemed deferred until the later of (i) the
distribution date specified with respect to Awards made for the first
Service Period for which the deferred election is effective, and (ii)
the January 1st that is three years after the first day of the Service
Period to which the deferrals relate. The deferral election shall be
irrevocable as to Awards previously made and shall be made by filing a
written election with the Company during the Election Period.
(b) If a Participant makes an election pursuant to (a), the Company shall
credit to the Participant's Deferred Stock Account as of the Award Date
the number of hypothetical shares of Company Stock equal to the number
of shares of Company Stock that otherwise would have been granted
pursuant to the Award. No actual shares of Company Stock or other
certificates shall be issued. A Participant's interest in such Director
Deferred Stock may not be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered.
(c) When a cash dividend is paid on Company Stock, each Participant will be
paid in cash an equal amount with respect to each share of Deferred
Stock credited to the Participant's Deferred Stock Account. Each
Director's Deferred Stock Account shall be adjusted to take into
account any stock dividends or other non-cash distributions pursuant to
Section 9 below.
(d) If a Participant who has elected to defer Company Stock pursuant to
this Section 7 continues to be a member of the Board of Directors
through the Vesting Period, the Participant shall receive payment of
the Director's Deferred Stock Account on the first to occur of: (i) the
distribution date specified by the Participant at the time the deferral
election is made, as described in Section 7(a), or (ii) the date on
which the Participant ceases to be a member of the Board of Directors.
In addition, the Participant shall become entitled to receive payment
of the Participant's Deferred Stock Account if (i) the Participant
retires from the Board of Directors at or after attaining age 65, (ii)
the Participant dies or becomes disabled while serving as a member of
the Board of Directors or (iii) the Participant ceases to be a member
of the Board of Directors as a result of a Change of Control. If the
Participant ceases to be a member of the Board of Directors for any
reason other than one described in the preceding sentence during the
Vesting Period following the Award Date, the Deferred Stock
attributable to that Award credited to the Participant's Deferred Stock
Account shall be forfeited.
(e) If a Participant has the right to receive payment of the Participant's
Deferred Stock Account pursuant to subsection (d) above, the Company
shall distribute to the Participant that number of whole shares of
Company Stock that is equal to the number of hypothetical whole shares
of Company Stock that are then credited to the Participant's Deferred
Stock Account, adjusted for mandatory share withholding as provided in
Section 10. The shares of Company Stock so distributed shall not be
subject to the restrictions described in Section 6.
8. ISSUANCE OF COMPANY STOCK. The Company shall not be required to issue or
deliver any certificate for shares of Company Stock before (i) approval of the
Plan by the Company's shareholders, (ii) the admission of such shares to listing
on any stock exchange on which the Company Stock may then be listed, or listing
of such shares for trading on the NASDAQ National Market System, (iii) receipt
of any required registration or other qualification of such shares under any
state or federal law or regulation that the Company's counsel shall determine is
necessary or advisable, and (iv) the Company is satisfied that all applicable
legal requirements have been complied with. The Company may place on a
certificate representing Company Stock any legend required pursuant to Section
6, and any legend deemed necessary by the Company's counsel to comply with
federal or state securities laws. No shares of Company Stock shall be issued
under the Plan unless the Participant pays to the Company, or makes arrangements
satisfactory to the Company regarding the payment of, any applicable withholding
or other taxes. Until the Participant has been issued a certificate for the
shares of Company Stock acquired, the Participant shall possess no shareholder
rights with respect to the shares.
9. EFFECT OF STOCK DIVIDENDS AND OTHER CHANGES IN CAPITAL STRUCTURE.
Appropriate adjustments shall be made automatically to the number and kind of
shares to be issued under the Plan, and any other relevant provisions of the
Plan if there are any changes in the Company Stock by reason of a stock
dividend, stock split, combination of shares, spin-off, reclassification,
recapitalization, merger, consolidation or other change in the Company's capital
stock (including, but not limited to, the creation or issuance to shareholders
generally of rights, options or warrants for the purchase of common stock or
preferred stock of the Company). If the adjustment would produce fractional
shares, the fractional shares shall be eliminated by rounding to the nearest
whole share. The adjustments shall be made in a manner consistent with Rule
16b-3. Any such adjustments shall neither enhance or diminish the rights of a
Participant.
B-4
<PAGE>
10. MANDATORY SHARE REDUCTION FOR INCOME TAXES. Whenever shares of
Restricted Stock become distributable under the Plan without restrictions, the
number of shares of Restricted Stock to be so distributed shall be reduced and
the Company shall retain that number of whole shares of Restricted Stock the
Fair Market Value of which on the date of distribution would be necessary to
satisfy the Company's federal and state income tax obligations arising in that
year if the Participant were then a common law employee.
11. ADMINISTRATION OF THE PLAN. The Board of Directors shall be responsible
for the proper implementation of the Plan. The Board of Directors shall not
exercise any discretion with respect to the administration of the Plan, except
as may be permitted by Rule 16b-3. The Board of Directors shall have all powers
vested in it by the terms of the Plan. Any decision of the Board of Directors
with respect to the Plan shall be final and conclusive. The Board of Directors
may act only by a majority of its members in office, except that the members may
authorize any one or more of their number or any officer of the Company to
execute and deliver documents on behalf of the Board of Directors. The Board of
Directors may consult with counsel, who may be counsel to the Company, and shall
not incur any liability for action taken in good faith in reliance upon the
advice of counsel.
12. EXPIRATION AND TERMINATION OF THE PLAN. Company Stock shall be awarded
under the Plan until the Plan is terminated by the Board of Directors or until
such earlier date when termination of the Plan shall be required by law. If not
sooner terminated, the Plan shall terminate automatically on the tenth
anniversary of the Effective Date.
13. AMENDMENTS. The Board of Directors may from time to time make such
changes in and additions to the Plan as it may deem appropriate; provided that,
if and to the extent required by Rule 16b-3, no change shall be made that
increases the total number of shares reserved for issuance under the Plan
(except pursuant to Section 9), changes the class of persons eligible to receive
Company Stock, or materially increases the benefits accruing to Participants
under the Plan, unless such change is authorized by the shareholders of the
Company. If required by Rule 16b-3, the Plan may not be amended periodically,
and in no event more often than every six months, except for amendments required
to comply with changes in the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code") or the rules thereunder. The Board may unilaterally
amend the Plan as it deems appropriate to ensure compliance with Rule 16b-3 and
to cause awards of Company Stock pursuant to the Plan to meet the applicable
requirements of the Internal Revenue Code. Except as provided in the preceding
sentence, the termination of the Plan or any change or addition to the Plan
shall not, without the consent of any Participant who is adversely affected
thereby, alter any Restricted Stock awards previously made to the Participant
pursuant to the Plan.
14. RIGHTS UNDER THE PLAN. Title to and beneficial ownership of all
benefits described in the Plan shall at all times remain with the Company.
Participation in the Plan and the right to receive Restricted Stock under the
Plan shall not give a Participant any proprietary interest in the Company, or
any Subsidiary or any of their assets, nor ensure that the Participant will be
nominated for election to the Board in the future. No trust fund shall be
created in connection with the Plan (other than a trust fund that does not
change the characterization of the Plan as an "unfunded" plan under the Internal
Revenue Code), and there shall be no required funding of amounts that may become
payable under the Plan. A Participant shall, for all purposes, be a general
creditor of the Company. The interests of a Participant under the Plan cannot be
assigned, anticipated, sold, encumbered or pledged and shall not be subject to
the claims of his creditors.
15. NOTICE. All notices and other communications required or permitted to
be given under the Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows: (a) if to the Company, at its principal business address, to the
attention of the Secretary; (b) if to any Participant, at the last address of
the Participant known to the sender at the time the notice or other
communication is sent.
16. GOVERNING LAW/INTERPRETATION. Generally, the Plan shall be governed by
the laws of the Commonwealth of Virginia. The terms of this Plan are also
subject to all present and future rulings of the Securities Exchange Commission
with respect to Rule 16b-3. If any provision of the Plan would cause the Plan to
fail to meet the requirements of Rule 16b-3, then that provision of the Plan
shall be void and of no effect.
B-5
<PAGE>
[LOGO] JAMES RIVER CORPORATION
James River Corporation has two programs for shareholders which you may find of
interest:
Dividend Reinvestment Plan
This plan is available to holders of record of Common Stock. It allows your
dividends to be reinvested in additional shares of the Company's stock on a
commission-free basis.
Direct Deposit Program
This program allows your dividends to be automatically deposited into your
account at the financial institution you designate, and it is available to
holders of record of both common and preferred stock. Many shareholders find
this to be a very convenient method to obtain quick access to dividend payments.
For additional information on either of these programs, please contact our
transfer agent, Norwest Bank, at (800) 468-9716.
*********************************PROXY CARD*******************************
PROXY
JAMES RIVER CORPORATION OF VIRGINIA
PROXY SOLICITED BY THE BOARD OF DIRECTORS
THE UNDERSIGNED APPOINTS CLIFFORD A. CUTCHINS, IV, DANIEL J. GIRVAN, AND
STEPHEN E. HARE (EACH WITH POWER TO ACT ALONE AND WITH POWER OF SUBSTITUTION)
AS PROXIES AND AUTHORIZES THEM TO REPRESENT AND VOTE, AS DIRECTED, ALL VOTING
SECURITIES OF JAMES RIVER CORPORATION OF VIRGINIA HELD OF RECORD BY THE
UNDERSIGNED ON FEBRUARY 20, 1996 UPON ALL MATTERS PROPERLY COMING BEFORE THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 1996, AND ANY
ADJOURNMENT THEREOF.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3.
1. Election of Directors FOR [ ] WITHHELD [ ]
Nominees: Burgin, Clark, Comfort, Coughlan, Daniel, Gottwald, Marsh, O'Neil,
Sharp, and Whittemore
FOR, except vote WITHHELD from the following nominees:
2. Adopt the 1996 Stock Incentive Plan FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Adopt the Director Stock Ownership Plan FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 4 AND 5.
4. Shareholder Proposal -- Non-employee Director Pension Benefits
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Shareholder Proposal -- Equal Employment Report
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Please date and sign the reverse side)
(continued from other side)
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD
OF DIRECTORS' RECOMMENDATIONS.
Please sign exactly as name
appears at left. Executors,
trustees, etc., should so
indicate when signing. If a
corporation, sign in full
corporate name by authorized
officer. If a partnership, sign
in partnership name by
authorized person.
Dated _________________, 1996
______________________________
(Signature)
______________________________
(Signature)
PLEASE SIGN, DATE, AND RETURN
THIS PROXY IN THE ENCLOSED
ENVELOPE.
