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
FORT JAMES CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[FORT JAMES LOGO]
March 16, 1998
Dear Shareholder:
It is our pleasure to invite you to the Annual Meeting of
Shareholders of Fort James Corporation to be held at 10:00 a.m.
(Eastern daylight time) on Thursday, April 23, 1998, in The Halsey
Family Lecture Hall at The Virginia Historical Society, 428 North
Boulevard, Richmond, Virginia. 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 28, 1997. 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. MARSH
------------------------
Miles L. Marsh
Chairman and Chief
Executive Officer
<PAGE>
[FORT JAMES LOGO]
Notice of Annual Meeting of Shareholders
to be held on April 23, 1998
TO THE SHAREHOLDERS OF
FORT JAMES CORPORATION
Notice is hereby given that the Annual Meeting of Shareholders of Fort
James Corporation (the "Company" or "Fort James") will be held at 10:00 a.m.
EDT on Thursday, April 23, 1998, in The Halsey Family Lecture Hall at The
Virginia Historical Society, 428 North Boulevard, Richmond, Virginia, for the
following purposes:
1. To elect a Board of Directors consisting of twelve (12) persons to serve
for the ensuing year; and
2. To transact such other business as may properly come before the meeting.
The close of business on February 23, 1998, 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 28, 1997, 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 16, 1998
<PAGE>
FORT JAMES CORPORATION
Corporate Headquarters: Executive Headquarters:
P. O. Box 2218 P.O. Box 89
Richmond, Virginia 23218 Deerfield, Illinois 60015-0089
Proxy Statement
GENERAL INFORMATION
This Proxy Statement, which is being mailed to shareholders on or about
March 16, 1998, is furnished in connection with the solicitation by the Board
of Directors of Fort James Corporation ("Fort James" 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. EDT on April 23, 1998, in The
Halsey Family Lecture Hall at The Virginia Historical Society, 428 North
Boulevard, Richmond, Virginia, and any adjournment thereof.
Shareholders of record of the Company's common stock, par value $.10 per
share ("Common Stock") at the close of business on February 23, 1998, will be
entitled to receive notice of, and to vote at, the Annual Meeting and any
adjournment thereof. As of February 23, 1998, there were 210,258,489 shares of
Common Stock outstanding. Each share of Common Stock is entitled to one vote on
each matter presented to the shareholders.
The Common 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. 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.
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, other methods of telecommunication
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 fifteen members. All of the directors are standing for
re-election except for Mr. Bruce C. Gottwald, Mr. Robert H. Niehaus and Mr.
Frank V. Sica. Proxies cannot be voted for a greater number of persons than the
twelve nominees named. The Bylaws of the Company will be amended to provide for
twelve directors following the Annual Meeting of Shareholders. Each of the
directors seeking re-election will serve for a term which will run until the
next annual meeting of shareholders or until his or her successor has been
elected. Each of the nominees listed has been nominated by the Nominating
Committee of the Board and is standing for re-election. 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>
Barbara L. Bowles 50 President, Kenwood Group, Inc., Chi- 1997 Has held present position for more
cago, Illinois (investment manage- than five years. Director of Black &
ment firm) Decker Corporation.
William T. Burgin 54 Partner, Bessemer Venture Partners, 1978 Has held present position for more
Wellesley Hills, Massachusetts (ven- than five years. Director of Galileo
ture capital partnership) Corporation and Scudder, Stevens and
Clark mutual funds.
James L. Burke 59 President, Chief Executive Officer and 1997 Has held present position since 1993.
a member of the Management Board Prior to 1993, served as President and
of Southeast Paper Manufacturing Com- Chief Operating Officer of Garden State
pany, Dublin, Georgia Paper Company.
Worley H. Clark, Jr. 65 President, W.H. Clark Associates, Ltd., 1993 Retired from Nalco Chemical Com-
Chicago, Illinois (consulting firm) pany in 1994 where he served as Chair-
man and Chief Executive Officer. Direc-
tor of NICOR Inc., Merrill Lynch &
Company, Inc., USG Corporation,
Bethlehem Steel Corporation, Ultramar
Diamond Shamrock Corporation and
Millennium Chemicals, Inc.
William T. Comfort, Jr. 60 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 54 Chief Financial Officer and Senior Vice 1996 Has held present position for more
President, Finance, Abbott Laborato- than five years.
ries, Abbott Park, Illinois (diversified
health care company)
William V. Daniel 69 Retired Managing Director of Wheat 1969 Retired from Wheat First Union Cor-
First Union Corporation, Richmond, poration in 1994. Prior to that time,
Virginia (investment banking and finan- served as Managing Director of Wheat
cial services) First Union Corporation.
Miles L. Marsh 50 Chairman and Chief Executive Offi- 1995 Has held position of Chief Executive
cer of the Company Officer since 1995 and position as Chair-
man since 1996. From 1991 to 1995,
served as Chairman and Chief Execu-
tive Officer of Pet Inc. Director of
GATX Corporation, Whirlpool Cor-
poration and Morgan Stanley, Dean
Witter, Discover & Co.
Robert M. O'Neil 63 Director, The Thomas Jefferson Cen- 1987 Has held present position for more
ter for the Protection of Free Expres- than five years.
sion, Charlottesville, Virginia
Michael T. Riordan 47 President and Chief Operating Offi- 1997 Has held present position since August
cer of the Company 1997. From 1996 to 1997 served as
President and Chief Executive Offi-
cer of Fort Howard Corporation and
in 1997 served as Chairman of the
Board of Fort Howard Corporation.
Prior to that time, from 1992 to 1996,
served as President and Chief Oper-
ating Officer of Fort Howard Corpo-
ration. Director of The Dial Corpora-
tion.
Richard L. Sharp 50 Chairman and Chief Executive Offi- 1996 Has held position as Chief Executive
cer, Circuit City Stores, Inc., Rich- Officer since 1986 and position as Chair-
mond, Virginia (consumer electron- man of the Board since 1994. Direc-
ics company) tor of Circuit City Stores, Inc. and
Flextronics International, Ltd.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Director Business Experience and Directorships
Name Age Principal Occupation Since in Other Public Companies
- ---------------- ----- ------------------------------------ --------- ---------------------------------------
<S> <C>
Anne Marie 51 Partner, McGuire, Woods, Battle & 1994 Has held present position for more
Whittemore (1) 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) McGuire, Woods, Battle & Boothe, L.L.P. serves as outside legal counsel to
the Company.
Vote Required
For the election of directors, the twelve 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 eleven occasions during 1997, including four
meetings held by telephone. All members of the Board, except for Mr. Gottwald,
Mr. Niehaus and Mr. Sharp, 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 V. Daniel
(Committee Chairman), William T. Burgin, James L. Burke, Gary P. Coughlan,
Bruce C. Gottwald and Robert M. O'Neil, consists of only non-employee directors
and met on three occasions during 1997. 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 accountants. 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 for the firm of independent
accountants to be retained by the Company.
The Compensation Committee, whose members are Robert M. O'Neil (Committee
Chairman), Barbara L. Bowles, William T. Burgin, Worley H. Clark, Jr., William
V. Daniel and Richard L. Sharp, consists of only non-employee directors. The
Compensation Committee met on seven occasions during 1997 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 Management Incentive Plan, its stock incentive plan 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 Executive Committee, whose members are Miles L. Marsh (Committee
Chairman), Worley H. Clark, Jr., William T. Comfort, Jr., William V. Daniel and
Robert M. O'Neil, can exercise most of the powers and authorities of the full
Board of Directors in the management of the Company between regularly scheduled
board meetings.
The Finance Committee, whose members are William T. Comfort, Jr.
(Committee Chairman), Barbara L. Bowles, Gary P. Coughlan, Robert H. Niehaus,
Richard L. Sharp and Anne Marie Whittemore, consists of only non-employee
directors. The Finance Committee meets periodically to review the financial
strategy for the Company including balance sheet structure and overall
capitalization and related matters.
The Nominating Committee, whose members are Worley H. Clark, Jr.
(Committee Chairman), William T. Comfort, Jr., Bruce C. Gottwald, Miles L.
Marsh and Anne Marie Whittemore, met on one occasion during 1997. 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 who
follow the procedures set forth under the section entitled "Proposals for 1999
Annual Meeting." Shareholder recommendations (including the nominee's name,
biographical data and written consent to serve as a director if elected) should
be submitted to the Nominating Committee of the Company.
Compensation of Directors
During 1997, each director, other than Messrs. Marsh and Riordan, received
an annual fee of $30,000 for serving as a director, plus reimbursement of
expenses incurred in connection with attending meetings. In addition, each
director, other than Messrs. Marsh and Riordan, 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.
3
<PAGE>
Effective as of April 1996, the Company adopted the Director Stock
Ownership Plan which automatically pays 50 percent of the retainer fee for
non-employee directors in Common Stock ("automatic award") and also provides
each non-employee director with a means of electing to receive the remaining 50
percent of the retainer fee in Common Stock ("elective award"). The automatic
award will be the greater of (i) 250 shares of Common Stock or (ii) the number
of shares of Common Stock at its fair market value on an award date that equals
50 percent of the retainer fees payable for the "annual service period" (as
defined below). The elective award will be equal to the number of shares of
Common Stock at its fair market value on an award date that equals the
remaining 50 percent of the retainer fees payable for that annual service
period. These shares of Common Stock are restricted until the end of the annual
service period when they become vested, nonforfeitable and transferable. An
annual service period is the period from the date of the annual shareholders
meeting to the day preceding the next annual shareholders meeting. In addition,
each director may elect to defer the receipt of Common Stock awarded under this
plan beyond the vesting date. These deferred shares do not have voting rights
until distributed and are recorded in a "deferred stock account" as
hypothetical shares to be paid out as defined by such director's deferral
election. When a director becomes entitled to payment of his deferred stock
account, the Company will distribute the number of shares of Common Stock equal
to the number of hypothetical shares credited to the director's deferred stock
account. During 1997, all non-employee directors received 50 percent of the
retainer fee in Common Stock, except for Mr. Coughlan who received 100 percent
of the retainer fee in Common Stock.
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
non-statutory 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 of 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
eligible service. Eligible service is service as an Outside Director and
includes service as a director of a predecessor company. An Outside Director
who has met these requirements 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 equals 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 percent 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 Directors and Executive Officers
The following table lists the number of shares of Common Stock
beneficially owned by each director, certain executive officers, and all
current directors and executive officers as a group as of February 23, 1998. No
directors 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 (12)
- ----------------------------------------------------------------------- --------------------------- -----------
<S> <C>
Directors(3):
Barbara L. Bowles .................................................... 3,999 *
William T. Burgin .................................................... 62,078(4) *
James L. Burke ....................................................... 6,000 *
Worley H. Clark, Jr. ................................................. 9,469 *
William T. Comfort, Jr. .............................................. 13,128 *
Gary P. Coughlan ..................................................... 6,777 *
William V. Daniel .................................................... 11,016(5) *
Bruce C. Gottwald .................................................... 111,001 *
Miles L. Marsh ....................................................... 520,530(6) *
Robert H. Niehaus .................................................... 3,000 *
Robert M. O'Neil ..................................................... 11,301 *
Michael T. Riordan ................................................... 696,579(7) *
Richard L. Sharp ..................................................... 5,000 *
Frank V. Sica ........................................................ 3,000 *
Anne Marie Whittemore ................................................ 6,564 *
Other Named Executive Officers:
James K. Goodwin ..................................................... 259,298(8) *
Ernst A. Haberli ..................................................... 142,962(9) *
John F. Lundgren ..................................................... 167,003(10) *
All directors and executive officers as a group (27 persons) ......... 3,045,760(11) 1.4%
</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.
(2) The James River StockPlus Investment Plan (the "StockPlus Plan") and the
Fort Howard Profit Sharing Retirement Plan (the "Fort Howard Plan") report
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 and the other named executive officers, an estimate of the number of
shares held in the StockPlus Plan or the Fort Howard Plan has been
calculated based on the closing stock price of $37.50 as of December 28,
1997.
(3) The number of shares for each of Messrs. Burgin, Comfort, Daniel, Gottwald
and O'Neil includes 10,128 shares that may be acquired within 60 days
through the exercise of stock options. Ms. Bowles', Dr. Burke's, Mr.
Clark's, Mr. Coughlan's, Mr. Niehaus', Mr. Sharp's, Mr. Sica's and Ms.
Whittemore's beneficial ownership includes 3,000, 3,000, 7,080, 4,000,
3,000, 4,000, 3,000, and 6,064 shares, respectively, that may be acquired
within 60 days through the exercise of stock options. The number of shares
for Ms. Bowles, Messrs. Coughlan, Gottwald and O'Neil also includes 499,
998, 499 and 499 shares, respectively, of restricted stock issued under
the Director Stock Ownership Plan; shares deferred by directors under this
plan do not have voting rights and are therefore excluded from the number
of shares beneficially owned.
(4) Includes 3,000 shares held by his former spouse as custodian for their
children as to which he disclaims any beneficial interest.
(5) Includes 84 shares held by his spouse for which voting and investment power
is shared.
(6) Includes 216,667 shares that may be acquired within 60 days through the
exercise of stock options, 248,224 shares of restricted stock for which he
has voting rights and 1,217 shares held in the StockPlus Plan.
(7) Includes 438,969 shares that may be acquired within 60 days through the
exercise of stock options, 150,000 shares of restricted stock for which he
has voting rights and 2,287 shares held in the Fort Howard Plan.
5
<PAGE>
(8) Includes 125,626 shares that may be acquired within 60 days through the
exercise of stock options, 103,300 shares of restricted stock for which he
has voting rights, 3,360 shares held in the StockPlus Plan and 100 shares
held by his children for which voting and investment power is shared.
(9) Includes 29,167 shares that may be acquired within 60 days through the
exercise of stock options, 91,700 shares of restricted stock for which he
has voting rights and 1,056 shares held in the StockPlus Plan.
(10) Includes 46,747 shares that may be acquired within 60 days through the
exercise of stock options, 95,700 shares of restricted stock for which he
has voting rights and 6,192 shares held in the StockPlus Plan.
(11) Includes 1,231,674 shares that may be acquired within 60 days through the
exercise of stock options, 1,230,719 shares of restricted stock with
voting rights, 35,419 shares held in the StockPlus Plan, 3,612 shares held
in the Fort Howard Plan and 5,210 shares held in trust or by spouse and
children for which voting and investment power is shared.
(12) Any Common Stock not outstanding but which can be acquired through the
exercise of stock 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 as
of the most recent practicable date, which is based on information derived from
Schedules 13G filed by such beneficial owners with the Securities and Exchange
Commission ("SEC").
<TABLE>
<CAPTION>
Number of
Shares Percent
Title Name and Address Beneficially of
of Class of Beneficial Owner Owned Class (3)
- -------------- ----------------------------------- ------------------- ----------
<S> <C>
Common Stock FMR Corp. 17,440,719(1) 8.4%
82 Devonshire Street
Boston, Massachusetts 02109
Common Stock The Capital Group Companies, Inc. 11,982,440(2) 5.7%
333 South Hope Street
Los Angeles, California 90071
</TABLE>
- ---------
(1) At December 31, 1997, FMR Corp. ("FMR") beneficially owned 17,440,719
shares of Common Stock which included 73,035 shares of Common Stock
obtained through the assumed conversion of Series L Cumulative Convertible
Exchangeable Preferred Stock. FMR had sole investment power for all
17,440,719 shares and sole power to vote or direct the vote of 3,096,793
shares. 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. Mr.
Edward C. Johnson III, Chairman of FMR, FMR through its control of
Fidelity, and the funds, each had sole investment power for substantially
all of these shares, but neither Mr. Johnson nor FMR had the power to vote
or direct the voting of the shares owned directly by the funds which power
resides with the funds' Board of Trustees. In addition, members of Mr.
Johnson's family may be deemed a controlling group with respect to FMR.
(2) At December 31, 1997, The Capital Group Companies, Inc. ("The Capital
Group") beneficially owned 11,982,440 shares of Common Stock, which
included 120,380 and 941,560 shares of Common Stock obtained through the
assumed conversion of Series K Cumulative Convertible Exchangeable
Preferred Stock and Series L Cumulative Convertible Exchangeable Preferred
Stock, respectively. The Capital Group is the parent holding company of a
group of investment management companies that hold investment power and,
in some cases, voting power over these shares. The Capital Group, through
its subsidiaries, had sole voting power for 2,130,660 shares, sole
investment power for all 11,982,440 shares and disclaimed beneficial
ownership of all shares.
(3) Common Stock and convertible Preferred Stock not outstanding which can be
acquired through conversion privileges 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.
6
<PAGE>
EXECUTIVE COMPENSATION
-------------------------------------------
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------
Awards
-------------------------
Annual Compensation Securities
--------------------------------------------- Restricted Underlying
Name and Other Annual Stock Options/ All Other
Principal Position Year Salary Bonus Compensation (1) Award(s) (2) SARs Compensation (3)
- ----------------------------- ------------- --------- ---------------- ------------------------------- ----------- ----------------
($) ($) ($) ($) (#) ($)
<S> <C>
Miles L. Marsh 1997 923,846 1,673,050 78,623 5,520,043 0 33,258
Chairman and 1996 858,462 900,000 575,888 3,966,000 100,000 30,905
Chief Executive Officer 1995 184,615 150,000 0 1,606,250 250,000 6,858
Michael T. Riordan 1997 607,692 825,000 384,754 6,457,500 250,000 31,991
President and 1996(4) 458,654 467,500 1,676 490,000 171,875 32,029
Chief Operating Officer 1995(4) 378,846 486,563 1,641 0 137,500 22,088
John F. Lundgren 1997 362,077 537,192 111,535 2,289,276 0 12,975
President, European 1996 317,308 282,750 160,922 1,454,200 30,000 12,531
Consumer Products 1995 255,287 65,000 107,930 463,125 40,000 8,083
James K. Goodwin 1997 409,692 463,858 0 2,448,684 0 19,125
President, North American 1996 400,000 195,000 0 1,586,400 30,000 18,071
Consumer Products 1995 371,154 175,155 46,802 0 50,800 10,451
Ernst A. Haberli 1997 346,539 501,552 62,556 2,289,276 0 12,747
Executive Vice President and 1996 287,404 310,960(5) 0 1,697,000 50,000 5,511
Chief Financial Officer 1995 0 0 0 0 0 0
</TABLE>
- ---------
(1) The amount disclosed herein for the fiscal years ended December 28, 1997,
and December 29, 1996, for Mr. Marsh represents reimbursement of
relocation costs. The amount disclosed herein for the fiscal year ended
December 28, 1997, for Mr. Riordan represents reimbursement of relocation
costs ($190,083), membership fees ($116,175) and tax payments ($78,496).
The amount disclosed herein for the fiscal years ended December 31, 1996,
and December 31, 1995, for Mr. Riordan represents reimbursement for tax
payments. The amount disclosed herein for all years presented for Mr.
Lundgren represents international assignment equalization payments. The
amount disclosed herein for the fiscal year ended December 31, 1995, for
Mr. Goodwin represents the tax reimbursement associated with distributions
for annuity purchases made in 1995 pursuant to the Supplemental Benefit
Plan, which is discussed herein under the heading "Pension Plan". The
amount disclosed herein for the fiscal year ended December 28, 1997, for
Mr. Haberli represents reimbursement for membership fees.
(2) The number and value ($37.50 per unit) as of December 28, 1997, of the
restricted Common Stock holdings for the named executive officers were:
Miles L. Marsh, 265,881 units, $9,970,538; Michael T. Riordan, 150,000
units, $5,625,000; John F. Lundgren, 107,424 units, $4,028,400; James K.
Goodwin, 114,998 units, $4,312,425; and Ernst A. Haberli, 105,270 units,
$3,947,625. These units are either restricted shares of Common Stock or
hypothetical shares of Common Stock that are currently subject to vesting
restrictions under the 1996 Stock Incentive Plan or the Deferred Stock
Plan, respectively.
Historically under the Deferred Stock Plan, the grantee's interest in the
hypothetical shares of Common Stock became 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 ranged from two to eight years. In 1997, the Deferred Stock Plan
was frozen and the vesting terms were accelerated so that all shares were
fully vested. At the end of each fiscal year, dividends which would have
accrued on such shares are credited to each grantee's account in the form of
additional hypothetical shares. In 1996, Mr. Haberli received 15,000 units
and in 1995, Mr. Marsh and Mr. Lundgren received 50,000 and 15,000 units,
respectively, under this plan. 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. Each of the named
executive officers elected a pre-retirement payout for his grants.
7
<PAGE>
Under the 1996 Stock Incentive Plan, the grantee's interest in restricted
shares of Common Stock becomes vested in annual vesting percentages, which
vary by quartile, ranging from zero to 40 percent based upon the Company's
Total Shareholder Return performance as ranked with its peer group companies
defined herein under the heading "Performance Graph." These shares will vest
after eight years, except in the case of Messrs. Marsh and Riordan, whose
shares are forfeited after seven years if they have not vested prior to the
term date. In August 1997, Messrs. Marsh, Riordan, Lundgren, Goodwin and
Haberli received a grant of 128,224, 150,000, 51,700, 55,300, and 51,700
restricted shares of Common Stock, respectively, under the Company's 1996
Stock Incentive Plan. In July 1996, Messrs. Marsh, Lundgren, Goodwin and
Haberli received a grant of 150,000, 55,000, 60,000, and 50,000 restricted
shares of Common Stock, respectively, under the Company's 1996 Stock
Incentive Plan.
(3) These amounts include Company contributions to the StockPlus Plan, the Fort
Howard Plan (Mr. Riordan only) the Supplemental Deferral Plan and an
enhanced life insurance plan. Company contributions allocated to the named
executive officers for 1997 under the StockPlus Plan, the Fort Howard Plan
(Mr. Riordan only) and the Supplemental Deferral Plan were: Miles L.
Marsh, $5,700 and $27,558; Michael T. Riordan, $8,759 and $23,232; John F.
Lundgren, $5,700 and $7,275; James K. Goodwin, $5,700 and $8,989; and
Ernst A. Haberli, $5,589 and $7,158, respectively. The remainder of the
amounts disclosed for 1997, if any, represents 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.
(4) In August 1997, Fort Howard Corporation was merged into a wholly-owned
subsidiary of James River Corporation of Virginia ("James River").
Effective with the merger, James River was renamed Fort James Corporation.
Compensation information for Mr. Riordan for 1996 and 1995 represents his
compensation at Fort Howard Corporation. The number of securities
underlying options/SARs for 1996 and 1995 have been converted from Fort
Howard common stock to Fort James Common Stock at the exchange rate of
1.375.
(5) Includes $83,125 for a signing bonus.
Employment Agreements
As part of the merger transaction with Fort Howard Corporation (the
"Merger"), and to ensure the continuing dedication of the service of its
executives, the Company entered into certain employment agreements with those
executive officers named in the Summary Compensation Table. Effective on August
13, 1997, the date the Merger became effective (the "Effective Date") these
employment agreements replaced and superseded the executive's prior employment
agreements. Each agreement provides the named executive officer with a base
salary, a base bonus, participation in the Company's incentive, savings and
retirement plans, practices, policies and programs, as well as eligibility in
employee benefits plans, applicable generally to other peer executives of the
Company. The employment agreements are effective for a three-year period and
extend automatically for additional three-year periods unless notice to the
contrary is given.
Except for the employment agreement of Mr. Riordan, if an executive's
employment is terminated other than for "cause," death or "disability," or if
the executive terminates his employment for "good reason" or the Company fails
to renew the employment agreement and the executive thereafter terminates his
employment (a "Nonrenewal Termination"), the Company is obligated to pay the
executive a lump sum cash payment. The payment shall be in an amount equal to
the sum of (i) his accrued unpaid salary plus a prorated annual bonus based on
the highest of his prior three years' annual bonuses (the "Minimum Bonus"),
together with any previously deferred compensation and other nonqualified plan
balances (collectively, "Accrued Obligations") not yet paid, plus (ii) three
times (or two times in the event of a Nonrenewal Termination) the combined
amount of the executive's then-annual base salary and Minimum Bonus. In
addition, shares of Company restricted common stock granted under the Fort
James 1996 Stock Incentive Plan (the "Restricted Stock") and any other unvested
or unexercisable stock-based awards granted prior to the employment period
("Prior Stock Awards") would immediately vest and/or become exercisable. The
executive also would receive a supplemental retirement/pension payment based on
additional amounts he would have received under certain retirement plans had he
remained employed for three additional years, or two additional years in the
case of a Nonrenewal Termination, and the executive and his family would be
entitled to continued coverage under the Company's benefit plans for a minimum
of three years, or two years in the case of a Nonrenewal Termination.
Upon termination of any executive's employment for "cause," or if an
executive terminates without "good reason," he would be entitled to his then
unpaid Accrued Obligations (excluding the prorated Minimum Bonus) and certain
other benefits. Upon death or termination due to "disability", the executive
(or his estate) would be entitled to any unpaid Accrued Obligations and certain
other benefits, and the Restricted Stock and any Prior Stock Awards would vest
and/or become exercisable. The employment agreements further provide that the
executives will be made whole on an after-tax basis with respect to certain
excise taxes, which may be imposed upon payments under the agreement.
8
<PAGE>
Mr. Riordan's employment agreement contains termination of employment
provisions similar to those described above, except that Mr. Riordan's
performance shares granted under the Fort James 1996 Stock Incentive Plan (the
"Performance Shares") and options granted to him at the Effective Date (the
"Commencement Options"), in addition to his Restricted Stock, would vest and/or
become immediately exercisable upon termination of employment by the Company
other than for "cause," or due to death or "disability" or if Mr. Riordan
terminates for "good reason." In addition, Mr. Riordan's employment agreement
provides he is entitled to terminate his employment for any reason during the
first two years of his employment period, at which time he would receive the
payments and benefits described above in connection with a termination for
"good reason." In such event, however, the vesting and/or exercisability of his
Restricted Stock, Performance Shares and Commencement Options would not be
accelerated.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
------------------------------------------------------------- Value at Assumed
Number of Annual Rates of Stock
Securities % of Total Price Appreciation
Underlying Options/SARs for Option Term (3)
Options/ Granted to Exercise -------------------------------
SARs Employees in Price Expiration
Name Granted (1)(2) Fiscal Year Per Share Date 5% 10%
- -------------------- ---------------- -------------- ----------- ----------- ------------ -------------
(#) ($) ($)
<S> <C>
Miles L. Marsh 0 0 0 0 0 0
Michael T. Riordan 250,000 75.2% $ 43.05 8/12/07 6,768,478 17,152,653
John F. Lundgren 0 0 0 0 0 0
James K. Goodwin 0 0 0 0 0 0
Ernst A. Haberli 0 0 0 0 0 0
</TABLE>
- ---------
(1) The option grants under the 1996 Stock Incentive Plan become exercisable in
two equal cumulative annual amounts beginning one year after the grant
date. 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.
(2) The holders of options have the right to exchange previously owned mature
shares of Common Stock (defined as owned for at least six months), valued
at the current market price, to pay the exercise price of the options.
(3) 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 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 assumed rates of
appreciation of the Company's 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.
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
as of 12/28/97 as of 12/28/97 (1)
Shares Acquired Value ------------------------------- ------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ----------------- --------- ------------- --------------- ------------- --------------
(#) ($) (#) (#) ($) ($)
<S> <C>
Miles L. Marsh 0 0 216,667 133,333 1,428,002 990,498
Michael T. Riordan(2) 11,000 483,000 548,086 250,000 12,151,208 0
John F. Lundgren(3) 29,300 249,940 50,659 28,333 401,651 231,765
James K. Goodwin 0 0 125,626 31,933 1,878,391 356,058
Ernst A. Haberli 0 0 29,167 20,833 350,755 244,496
</TABLE>
- ---------
(1) The value of unexercised in-the-money Options/SARs as of December 28, 1997,
is equal to the fair market value of Common Stock on that date ($37.50 per
share) minus the exercise price.
(2) The value realized for Mr. Riordan related to Fort Howard stock equivalents
exercised in accordance with plan provisions upon the consummation of the
merger.
(3) The value realized for Mr. Lundgren related to the exercise of 29,300
Jamont N.V. book value based SAR's.
9
<PAGE>
Pension Plan
The Company provides a defined benefit pension plan for salaried employees
other than (a) those employees who were eligible for participation in the Fort
Howard Profit Sharing Retirement Plan (the "Fort Howard Plan") on August 13,
1997, and (b) employees hired after that date whose place of employment is a
former Fort Howard Corporation facility. Effective January 1, 1997, the pension
plan was amended to be noncontributory. Prior to 1997, employees participating
in the pension plan contributed 1% of their pensionable earnings. Pensionable
earnings include base salary, overtime compensation, bonuses and commissions.
In 1998 pensionable earnings over $160,000 per year will not be taken into
account for purposes of calculating pension plan benefits. The maximum annual
benefit, which may be paid to any retiree from the pension plan, attributable
to employer contributions in 1997 was $125,000 per year and is $130,000 per
year in 1998.
Annual benefits payable under the plan are currently equal to the product
of the participant's years of service while participating in the plan, up to 35
years, multiplied by the sum of 1.05 percent of the participant's "Average Pay"
(the average of a participant's highest five consecutive years of pensionable
earnings) plus .65 percent 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 had made contributions to the plan
which remained 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.
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 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 Fort James' pension plans and pension plans of such
predecessor companies. Participants in the Supplemental Benefit Plan are
general creditors of the Company. The supplemental benefits are to be paid by
the Company as the benefits become payable. The Supplemental Benefit Plan
provides that the accrued benefits under the plan may be distributed at the
discretion of the Company.
Messrs. Marsh and Riordan participate in a separate supplemental benefit
plan based on a benefit formula of 50 percent of total compensation upon
reaching age 55, offset by Social Security and qualified pension plan benefits
at their earliest retirement age, which is currently estimated to be
approximately $700,000 for Mr. Marsh at the seventh year of service and
$500,000 for Mr. Riordan at the eighth year of service. This benefit will be
reduced for service less than seven or eight 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>
Years of Service
Final Average ----------------------------------------------------------------------------
Pay 10 15 20 25 30 35
- -------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C>
$ 200,000 $ 32,100 $ 48,150 $ 64,200 $ 80,250 $ 96,300 $112,350
400,000 66,100 99,150 132,200 165,250 198,300 231,350
600,000 100,100 150,150 200,200 250,250 300,300 350,350
800,000 134,100 201,150 268,200 335,250 402,300 469,350
1,000,000 168,100 252,150 336,200 420,250 504,300 588,350
1,200,000 202,100 303,150 404,200 505,250 606,300 707,350
1,400,000 236,100 354,150 472,200 590,250 708,300 826,350
</TABLE>
The pensionable earnings for each of the named executive officers are 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 who participate in the pension plan are: Miles L. Marsh, 17 years;
John F. Lundgren, 34 years; James K. Goodwin, 20 years; and Ernst A. Haberli,
18 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 and Mr. Riordan as described above. The amounts
in the table are not subject to reduction for Social
10
<PAGE>
Security or other offset amounts. The pension table includes benefits under the
Supplemental Benefit Plan, some of which will be provided by annuities
purchased in 1995.
The Company also maintains the Fort Howard Plan for employees who were
eligible to participate in that plan prior to August 13, 1997, and employees
hired afterwards at a former Fort Howard Corporation facility. Participants in
the Fort Howard Plan are not eligible to participate in the James River
Corporation Retirement Plan for Salaried Employees. The Fort Howard Plan is a
defined contribution plan under which Company contributions are allocated to
employees' plan accounts pursuant to a formula based on several factors
including the participant's service and the amount of a participant's
contributions to the plan. In 1997, the Company contributed $8,759 to Mr.
Riordan's Fort Howard Plan account. Total Company contributions to the Fort
Howard Plan for all executive officers who participated in that plan were
$34,428 in 1997.
PERFORMANCE GRAPH
Fort James 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 Fort James' 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 Company selected a peer group comprised of the
following companies: American Greetings Inc., Boise Cascade Corporation,
Champion International Corporation, Chesapeake Corporation, The Clorox Company,
Colgate-Palmolive Company, Georgia-Pacific Corporation, H.J. Heinz Company,
International Paper Corporation, Jefferson Smurfit Corporation, Kimberly Clark
Corporation, Mead Corporation, The Procter & Gamble Company, Sara Lee
Corporation, and Westvaco Corporation. Fort Howard Corporation, which was
included in the peer group last year, is not included in the peer group this
year because it was merged with a wholly-owned subsidiary of James River
Corporation of Virginia ("James River") on August 13, 1997. Effective with the
merger, James River was renamed Fort James Corporation. Tambrands, Inc., which
was included in the peer group last year, is not included in the peer group
this year because it was merged into a wholly-owned subsidiary of The Procter &
Gamble Company during 1997.
The graph below presents a comparison of Fort James' performance with the
S&P 500 Stock Index and the Peer Group, assuming investments of $100 were made
on December 31, 1992, and that dividends were reinvested.
Comparison of Five Year Cumulative Total Return Among
Fort James Corporation, S&P 500 Stock Index
And the Peer Group
[GRAPH]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C>
FORT JAMES $100.00 $107.24 $116.31 $141.66 $198.72 $233.25
S&P 500 STOCK INDEX $100.00 $110.08 $111.53 $153.45 $188.68 $251.63
PEER GROUP $100.00 $103.10 $111.54 $141.90 $174.24 $242.94
</TABLE>
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
oversees the design and approval of the Company's executive compensation
programs and ensures that these programs are linked with the objective
performance measures at the corporate, business unit and, in the case of the
CEO, individual level. The Committee believes compensation should vary on the
basis of performance, should be aligned to comparable peer groups, and should
ultimately be driven by the short and long term interests of stockholders. The
Committee reviewed and revised the executive compensation principles and
strategies after the culmination of the merger between James River Corporation
of Virginia and Fort Howard Corporation. These principles and strategies are as
follows:
Principles
o Executives will be rewarded for the achievement of financial and
individual results against clearly defined goals and objectives.
o As executives assume greater responsibilities, their total compensation
packages will be subject to greater risk and, consequently, greater
leverage.
o Shareholder value creation must be an important link in the design of
the executive compensation package.
o The various components of the executive compensation package must
attract, retain, and motivate key executives, and aid in maintaining an
entrepreneurial spirit by members of the management team.
Strategies
o Generally, base compensation will be aligned to median base compensation
levels for positions of similar scope at comparable organizations.
o Short-term incentives will be used to align variable cash with short-term
business objectives. Variable cash awards will increase as business and
individual results are above plan and decrease when business and
individual results are below plan.
o Equity instruments (stock options, performance shares, and restricted
shares) will be used to align a significant portion of the executives'
total compensation with the Company's long-term strategy of continued
shareholder value creation.
The executive compensation program consists of specific elements that, in
the aggregate, are market comparative and, as outlined above, are aligned to
short and long term business objectives. For 1997, the executive total
compensation package consists of base compensation, management short-term cash
incentives, stock options and performance shares and restricted shares. 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 of compensation that is
deductible by the Company with respect to the Chief Executive Officer and each
of the four named executive officers, unless specified plan design and
administration parameters are met. Currently, the Company's stock option plan
complies with section 162(m). The Compensation Committee is reviewing design
alternatives for the management short-term cash incentive plan, and the
consequences of these alternatives as they relate to executive and financial
performance and corporate tax deductions.
To determine the Company's comparative position on each of the specified
compensation elements, the Company participates in and uses various published
survey sources. Many of the companies participating in these published surveys
are included in the S&P 500 Stock Index. Several of the surveyed companies are
included in Fort James' peer group.
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 jobs 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.
12
<PAGE>
MANAGEMENT SHORT-TERM CASH INCENTIVES
James River Corporation of Virginia
The 1997 Management Incentive Plan is the short-term cash incentive
component of the former James River Corporation executive compensation program.
This plan is designed to provide an added incentive to plan participants for
aligning their decisions, efforts, and results to the Company's business
objectives. Eligibility in the plan, as approved by the Compensation Committee,
is determined by organizational salary grades and comparable market practices
for positions with similar scope and responsibility. A target award percentage
is assigned to each management level salary grade. Target awards under this
plan range from 15 to 80 percent of base salary depending on a participant's
salary grade level. Participants may earn awards up to a maximum of 200 percent
of their target awards. The named executive officers, depending on
organizational responsibilities, may earn awards based on Company performance
that is determined within a matrix that includes the Company's earnings per
share (EPS) and/or income from operations against plan for of each of the
Company's five business units. Executives earned awards in 1997 as a result of
meeting, and in some instances, exceeding pre-established financial and
individual objectives.
Fort Howard Corporation
The Fort Howard Management Incentive Plan is the short-term cash component
of the former Fort Howard Corporation executive compensation program. This plan
is designed to reinforce and reward participants for achieving exceptional
performance against an established operating income goal. Executive awards will
be higher or lower than Fort Howard's peer group, on a formulated basis, if
performance against the pre-established operating income objective is above or
below plan, respectively. Key employees, including executive officers,
participate in the Management Incentive Plan. For 1997, each participant under
the plan was assigned an annual incentive target award ranging from 21.5 to 90
percent of base salary. Target awards are determined based on a combination of
comparative data for like positions in Fort Howard's peer group, position
accountabilities, and internal equity. Executives may earn awards up to a
maximum of 150 percent of their target awards. Also, awards under this plan,
including the CEO's award, may be adjusted plus or minus 20 percent based on a
subjective assessment of individual performance.
Executives earned awards in 1997 as a result of the Company exceeding the
pre-established operating income objectives. None of the executive awards were
adjusted using the subjective assessment as the plan permits. This plan was
terminated at the end of 1997.
STOCK OPTIONS
James River Corporation of Virginia
Stock options granted under the 1996 James River Corporation of Virginia
Stock Incentive Plan, now known as the Fort James Corporation 1996 Stock
Incentive Plan, are used to align executive performance and compensation with
Company performance and shareholder value. The following equity instruments may
be granted under this plan subject to Compensation Committee approval: stock
options, restricted stock, performance stock and incentive stock. By design,
grants under this plan provide value to executives when shareholders benefit
from stock price appreciation.
Key employees, including the executive officers, are eligible to
participate in this plan. Stock options are generally granted on a biennial
basis, with terms of ten years, and generally vest in equal installments over a
period of two years. Stock options usually 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 approved by the Compensation Committee and
granted with an exercise price equal to the fair market value of the Company's
Common Stock on the date of grant. The size of an individual stock option grant
is determined by individual performance, salary grade and general industry
survey data.
Except for Mr. Riordan, stock options were not granted to executives
during 1997. The last Company stock option grant was July 1, 1996.
Fort Howard Corporation
The Fort Howard Corporation Stock Incentive Plan provides that stock
options, stock appreciation rights, restricted stock, performance shares, stock
equivalents, and dividend equivalents may be granted to key individuals who are
in a position to contribute to the future success of Fort Howard Corporation.
Equity grants are intended to reward executives for the continued creation of
shareholder value.
13
<PAGE>
Stock options are typically granted on an annual basis and vest in equal
installments over a five-year period from the grant date. All stock options are
granted with an exercise price equal to the fair market value of the Fort
Howard Common Stock on the date of grant. Individual stock option grants are
determined by considering overall corporate performance, individual performance
and general industry survey data. This plan was frozen as of the end of 1997
and no further awards will be granted under this plan.
Stock options were not granted to employees during 1997.
Performance Stock
Performance stock was granted under the Fort James Corporation 1996 Stock
Incentive Plan. The intent of this plan is described in the previous section.
Key employees, including the executive officers, are eligible to receive
performance shares under this plan. Shares are granted approximately every four
years, with terms of eight years. Shares granted under this plan will vest
after eight years, except in the cases of Messrs. Marsh and Riordan, whose
shares are forfeited after seven years if the shares have not vested prior to
the grant term date. Dividend equivalents accrue on the granted shares and are
paid out accordingly for the shares that vest at the end of each annual
performance period.
Share vesting may be accelerated if the Company's financial performance is
in one of the top three quartiles of the Company's peer group. Annual vesting
percentages, which vary by quartile, range from 0 to 40 percent. Company
performance, for vesting purposes, is defined as Total Shareholder Return (TSR)
quartile ranking against the TSR ranking of each peer group company.
Executives received a performance stock grant on August 13, 1997.
Restricted Stock
Restricted stock was granted under the Fort James Corporation 1996 Stock
Incentive Plan. The intent of this plan is described in the Stock Option
section above. Key employees, including the executive officers, are eligible to
receive restricted shares under this plan. Restricted stock is not granted on a
frequent or regular basis. Restricted stock granted under this plan vests in
equal installments over a consecutive three year period from the grant date.
Dividends are distributed on all shares, whether vested or unvested, at the
same time shareholders receive dividends.
Executives received a restricted stock grant on August 13, 1997.
MR. MARSH'S COMPENSATION
Base Compensation
Mr. Marsh's annual base salary is $940,000. 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 to other salaries of positions with similar scope and
responsibility found in the consumer products and forest paper industries.
Management Short-term Cash Incentives
Mr. Marsh received an incentive award of $1,673,050 under the 1996
Management Incentive Plan as a result of the Company having exceeded its
pre-established EPS objectives for 1997 and the Committee's assessment of Mr.
Marsh's performance.
Stock Options/Performance Shares
The Committee granted Mr. Marsh 64,112 shares of performance stock and
64,112 shares of restricted stock on August 13, 1997. The vesting provisions of
both grants are outlined above.
Compensation Committee of the Board of Directors:
Robert M. O'Neil, (Chairman)
Barbara L. Bowles
William T. Burgin
Worley H. Clark, Jr.
William V. Daniel
Richard L. Sharp
14
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 initial 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 on its filing of such reports and on written representations from
such officers, directors and ten percent shareholders, the Company believes
that, during the fiscal year ended December 28, 1997, all applicable Section
16(a) filing requirements were met, except for three late filings. In January
and February, 1998, Mr. Neihaus, Mr. Riordan, and Mr. Sica each filed an
amended Form 3 to correct each of the initial Form 3's which had been filed on
a timely basis.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. served as the Company's independent accountants
during the Company's fiscal year ended December 28, 1997. 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 27, 1998. 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 28, 1997, is being mailed to you with this Notice and Proxy Statement.
No part of the Annual Report shall be regarded as proxy soliciting material.
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 1999 ANNUAL MEETING
Any shareholder desiring to make a proposal to be acted upon at the 1999
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 16, 1998, 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 1999
Annual Meeting of Shareholders, notice of nomination must be given to the
Corporate Secretary of the Company not earlier than December 1, 1998, but
before January 1, 1999. 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 1999 Annual Meeting of Shareholders, notice must be given to the
Corporate Secretary of the Company between December 1, 1998, and January 1,
1999, 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 16, 1998, 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 28, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
MAY BE OBTAINED BY ANY SHAREHOLDER AFTER APRIL 15, 1998, FREE OF CHARGE, UPON
WRITTEN REQUEST TO FORT JAMES CORPORATION, ATTENTION: INVESTOR RELATIONS, P.O.
BOX 2218, RICHMOND, VIRGINIA 23218, OR BY CALLING (804) 343-4900.
15
<PAGE>
PROXY
Fort James Corporation
Proxy Solicited by the Board of Directors
(See Appointment of Proxies on the Reverse)
The Board of Directors recommends a vote FOR item 1.
1. Election of Directors.
FOR [ ] WITHHELD [ ]
Nominees: Bowles, Burgin, Burke, Clark, Comfort, Coughlan, Daniel,
Marsh, O'Neil, Riordan, Sharp and Whittemore
FOR, except vote WITHHELD from the following nominees:
- -------------------------------------------------------------------------------
In their discretion, the proxies appointed on the reverse are authorized to vote
upon such other business as may properly come before the meeting.
Please see reverse for information on how unmarked proxy cards are voted.
- -------------------------
(Signature)
- ------------------------- Date: _______________________, 1998
(Signature)
Please sign as name appears below, date and return this Proxy in the enclosed
envelope. When signing as attorney, executor, trustee or other representative
capacity, state full title.
<PAGE>
Appointment of Proxies
By signing on the reverse, Clifford A. Cutchins, IV, Daniel J. Girvan and
Ernst A. Haberli are appointed as proxies (each with power to act alone and
with power of substitution) and are authorized to represent and vote, as
directed, all voting securities of Fort James Corporation held of record by
such signer on February 23, 1998 upon all matters properly coming before the
Annual Meeting of Shareholders to be held on April 23, 1998 and any adjournment
thereof.
Voting Unmarked Proxy Cards
For participants in the Fort Howard Corporation Profit Sharing Retirement Plan
and the Harmon Assoc. Corp. Profit Sharing Plan, proxy cards which are unmarked
or unsigned will be voted by the Trustee in the same proportion as the shares
held for other participants for which proper instructions have been received.
For all other shareholders, signed but unmarked proxy cards will be voted in
accordance with the Board of Directors' recommendation.
