<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Shorewood Packaging Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the filing
fee is calculated and state how it was determined.)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedules or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SHOREWOOD PACKAGING CORPORATION
277 PARK AVENUE
NEW YORK, NEW YORK 10172-0124
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 23, 1998
------------------------
TO THE STOCKHOLDERS OF SHOREWOOD PACKAGING CORPORATION
NOTICE is hereby given that the Annual Meeting (the "Meeting") of
Stockholders of SHOREWOOD PACKAGING CORPORATION (the "Company"), a Delaware
corporation, will be held at The Chase Manhattan Bank, 270 Park Avenue, 11th
Floor, Room C, New York, New York, on September 23, 1998 at 9:30 A.M. for the
following purposes:
1. To elect two directors comprising the Class III Directors to serve until
the 2001 Annual Meeting of Stockholders.
2. To consider and vote upon an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of common
stock from 40,000,000 to 60,000,000.
3. To consider and vote upon an amendment to the Company's 1995 Performance
Bonus Plan to extend its term for an additional period of three years.
4. To ratify the selection of Deloitte & Touche LLP as the independent
auditors of the Company for the fiscal year ending May 1, 1999.
5. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
All of the above matters are more fully described in the accompanying Proxy
Statement.
The Board of Directors has fixed the close of business on August 15, 1998
as the date for the determination of stockholders entitled to notice of, and to
vote at, the Meeting. A list of stockholders entitled to vote at the Meeting
will be open to examination by stockholders during ordinary business hours for a
period of ten (10) days prior to the Meeting at the executive offices of the
Company, 277 Park Avenue, New York, New York 10172-0124.
By order of the Board of Directors,
Andrew N. Shore
Secretary
New York, New York
August 20, 1998
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE
MEETING, YOU MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 3
SHOREWOOD PACKAGING CORPORATION
277 PARK AVENUE
NEW YORK, NEW YORK 10172-0124
------------------------
ANNUAL MEETING OF STOCKHOLDERS
------------------------
PROXY STATEMENT
APPROXIMATE DATE OF MAILING: AUGUST 20, 1998
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board" or the "Board of Directors") of Shorewood Packaging Corporation (the
"Company") for use at the Annual Meeting of Stockholders to be held at the time
and place set forth in the foregoing notice and at any adjournment thereof (the
"Meeting"). Only stockholders of record (the "Stockholders") of the Company's
common stock, $.01 par value per share (the "Common Stock"), at the close of
business on August 15, 1998 are entitled to notice of, and to vote at, the
Meeting. Proxies in the accompanying form, which are properly executed and duly
returned to the Company and not revoked prior to exercise, will be voted in
accordance with the instructions contained therein. If a Proxy is executed and
returned without instructions as to how it is to be voted, such Proxy will be
voted in favor of all proposals contained in this Proxy Statement. Each Proxy
granted pursuant to this solicitation is revocable and may be revoked at any
time prior to its exercise provided written notice of revocation is received by
the Secretary of the Company prior to the Meeting. A Stockholder who attends the
Meeting in person may, if he or she wishes, vote by ballot at the Meeting,
thereby canceling any Proxy previously given by such Stockholder.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting, present in person or
represented by proxy, shall constitute a quorum at the Meeting. Any Stockholder
present in person or by proxy who abstains from voting on any particular matter
described herein will be counted for purposes of determining a quorum. For
purposes of voting on the matters described herein, (i) directors shall be
elected by a plurality of the voting power present in person or represented by
proxy at the Meeting and entitled to vote and (ii) the other matters shall be
determined by the affirmative vote of the majority of the voting power present
in person or represented by proxy at the Meeting and entitled to vote on the
matter. With respect to the election of directors, only shares that are voted in
favor of a particular nominee will be counted towards such nominee's achievement
of a plurality. Shares present at the Meeting that are not voted for a
particular nominee, shares present by proxy where the Stockholder properly
withholds authority to vote for such nominee and broker non-votes will not be
counted towards such nominee's achievement of a plurality. With respect to any
of the other matters to be voted upon, if the Stockholder abstains from voting
or directs his or her proxy to abstain from voting, the shares are considered
present at the Meeting for such matter but, since they are not affirmative votes
for the matter, they will have the same effect as votes against the matter. With
respect to broker non-votes on any such matter, the shares are not considered
present at the Meeting for such matter and they are, therefore, not counted in
respect of such matter. Provided that a quorum is otherwise present, such broker
non-votes do have the practical effect of reducing the number of affirmative
votes required to achieve a majority for such matter by reducing the total
number of shares from which the majority is calculated.
All share information appearing in this Proxy Statement gives effect to a
3-for-2 stock split of the Company's Common Stock effected in May 1998, which
was paid in the form of a 50% stock dividend.
<PAGE> 4
PRINCIPAL STOCKHOLDERS
The outstanding voting stock of the Company as of July 1, 1998 consisted of
26,692,275 shares of Common Stock, with each share entitled to one vote.
Beneficial ownership has been determined for purposes herein in accordance with
Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), under which a person is deemed to be the beneficial owner of securities
if such person has or shares voting power or investment power in respect of such
securities or has the right to acquire beneficial ownership within 60 days. So
far as is known to the Company, the following were the only beneficial owners of
more than 5% of the outstanding Common Stock of the Company on such date:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------- ------------------ --------
<S> <C> <C>
Marc P. Shore(1)........................................... 5,002,228 18.74%
c/o Shorewood Packaging Corporation
277 Park Avenue New York, NY 10172-0124
Ariel Capital Management, Inc.(2).......................... 3,736,897 14.00%
307 North Michigan Avenue
Chicago, Illinois 60601
Franklin Resources, Inc.(3)................................ 1,449,802 5.43%
777 Mariners Island Blvd.
San Mateo, California 94404
</TABLE>
- ---------------
(1) Marc P. Shore is the President, Chairman and Chief Executive Officer of the
Company. The shares reflected in this column consist of: (1) 1,178,101
shares owned outright by Marc P. Shore, of which 85,650 shares are
restricted shares awarded pursuant to the Company's Long Term Incentive
Program and are subject to forfeiture (for a description of the restricted
shares, see "Executive Compensation -- Summary Compensation
Table -- Footnote (3)"); (2) 314,127 shares which could be acquired on or
within 60 days after July 1, 1998 upon the exercise of stock options granted
under the Company's incentive and stock option plans (collectively, the
"Incentive Plans"); (3) 743,850 shares held by the Estate of Paul B. Shore
(the "Estate") (see discussion below); (4) 2,700,000 shares held by the
Shore Family Partnership, L.P., a California limited partnership (the
"Family Partnership") (see discussion below); and (5) 66,150 shares held by
the Shore Trust (see discussion below).
Pursuant to the terms of the will of Paul B. Shore, the founder of the
Company who passed away in December 1995, Marc P. Shore has sole
decision-making power with respect to all shares of Common Stock included in
the Estate. The Estate held 743,850 shares of Common Stock as of July 1,
1998. Marc P. Shore disclaims beneficial ownership with respect to 743,850
of such shares.
The Family Partnership is an investment partnership for the benefit of Marc
P. Shore and the other children of Paul B. Shore. The Family Partnership
terminates on January 1, 2030, subject to earlier termination by operation
of law or under the terms of the Limited Partnership Agreement. By virtue of
his control over the Shore Family LLC, which is the sole general partner of
the Family Partnership, Marc P. Shore has effective decision-making power
with respect to all shares of Common Stock owned by the Family Partnership.
The Family Partnership owned 2,700,000 shares of Common Stock as of July 1,
1998. Marc P. Shore disclaims beneficial ownership as to 2,459,970 of such
shares.
Marc P. Shore serves as co-trustee of a trust which holds 66,150 shares of
Common Stock for the benefit of one other child of Paul B. Shore. As
co-trustee, Marc P. Shore shares decision-making authority with
2
<PAGE> 5
respect to any shares of Common Stock held by the trust. Marc P. Shore
disclaims beneficial ownership of all of such shares.
(2) Represents shares held by investment advisory clients of Ariel Capital
Management, Inc. This information is based solely upon the contents of
filings under Section 13 of the Exchange Act made by Ariel Capital
Management, Inc.
(3) Represents shares held by open or closed-end investment companies or other
managed accounts which are advised by direct and indirect investment
advisory subsidiaries of Franklin Resources, Inc. This information is based
solely upon the contents of filings under Section 13 of the Exchange Act
made by Franklin Resources, Inc.
EXECUTIVE OFFICERS
The executive officers of the Company are identified in the table below.
Each executive officer of the Company serves at the pleasure of the Board of
Directors.
<TABLE>
<CAPTION>
YEAR
BECAME AN
EXECUTIVE
NAME AGE OFFICER POSITIONS
- ---- --- --------- ---------
<S> <C> <C> <C>
Marc P. Shore................... 44 1982 Chairman of the Board, Chief
Executive Officer and President
Floyd S. Glinert................ 69 1968 Executive Vice President --
Marketing and Director
Howard M. Liebman............... 56 1994 Executive Vice President, Chief
Financial Officer and Director
Charles Kreussling.............. 69 1966 Executive Vice President --
Manufacturing
Kenneth M. Rosenblum............ 55 1988 Senior Vice President -- Sales
William H. Hogan................ 39 1995 Vice President -- Finance/Corporate
Controller
Andrew N. Shore................. 45 1996 Vice President, General Counsel
and Secretary
</TABLE>
ELECTION OF DIRECTORS
At the Meeting, two directors comprising the Class III Directors are to be
elected for three-year terms expiring in 2001 and until their successors are
elected and qualified. The Board of Directors has designated Howard M. Liebman
and Marc P. Shore as nominees. Seymour Leslie, a Class III Director, has decided
not to seek re-election upon the expiration of his term. As of the date hereof,
the Board has no current intention to designate a nominee to fill the vacancy
created by the expiration of Seymour Leslie's term; however, the vacancy may be
filled at a later date. Proxies received from Stockholders will be voted, unless
authority to so vote is withheld, for the election of the nominees identified in
the following table. Authority to vote for any or all of the nominees may be
withheld in the manner indicated on the enclosed Proxy. If for any reason any of
the nominees becomes unavailable for election, the Proxies solicited will be
voted for such other nominees as are selected by the Board of Directors. The
Board of Directors has no reason to believe that any of the
3
<PAGE> 6
nominees will not be available or will not serve if elected. Set forth in the
following table is certain information with respect to (i) each nominee
nominated to serve as a Class III Director for a term to expire in 2001 and (ii)
the Class I Directors and the Class II Directors whose terms expire in 1999 and
2000, respectively. Each nominee described is presently a director of the
Company.
Howard M. Liebman, Executive Vice President and Chief Financial Officer of
the Company, was elected by the Board as a Class III Director to serve the
remainder of the term of Paul B. Shore, a Class III Director who passed away on
December 10, 1995. Each nominee for director at the Meeting, except for Mr.
Liebman, and each director in office after the Meeting, was previously elected
to the Board by the Stockholders of the Company.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
NAME AGE A DIRECTOR
---- --- ----------
<S> <C> <C>
NOMINEES
CLASS III: NEW TERM TO EXPIRE IN 2001
Howard M. Liebman........................................... 56 1996
Marc P. Shore............................................... 44 1982
DIRECTORS CONTINUING IN OFFICE
CLASS I: TERM TO EXPIRE IN 1999
Melvin L. Braun............................................. 76 1987
Floyd S. Glinert............................................ 69 1968
CLASS II: TERM TO EXPIRE IN 2000
R. Timothy O'Donnell........................................ 42 1991
Kevin J. Bannon............................................. 46 1992
William P. Weidner.......................................... 53 1993
</TABLE>
The Board of Directors recommends a vote FOR each of the nominees for
election as CLASS III DIRECTORS.
BIOGRAPHICAL INFORMATION
Certain information about the executive officers and directors of the
Company is set forth below. This information has been furnished to the Company
by the individuals named.
Marc P. Shore was elected Chairman of the Board and Chief Executive Officer
of the Company in January 1996 following the passing of his father, Paul B.
Shore, the founder of the Company. He has served as the President of the Company
since October 1991, and has been employed by the Company in various executive
capacities since 1982.
Howard M. Liebman joined the Company as Executive Vice President and Chief
Financial Officer in June 1994. He was elected as a director of the Company in
January 1996 to fill the vacancy created by the passing of Paul B. Shore. Mr.
Liebman is a Certified Public Accountant. Prior to joining the Company, Mr.
Liebman had been an audit partner for more than twenty years at the accounting
firm of Deloitte & Touche LLP, where he was actively involved in the Company's
account.
4
<PAGE> 7
Floyd S. Glinert has been employed by the Company since 1968. Mr. Glinert
is responsible for certain aspects of the Company's marketing management
including advertising, sales promotion and public relations. In addition, he is
responsible for the development and planning of new packaging opportunities.
Melvin L. Braun was a partner of Touche Ross & Co. (now known as Deloitte &
Touche LLP), New York, New York, and predecessor firms from 1950 until he
retired on September 1, 1987. Mr. Braun currently serves as a special assistant
to the Chairman and as a director of Conair Corp. He also acts as an independent
consultant to Euro-Russian Banking Corp. and its subsidiaries.
R. Timothy O'Donnell is the President of Jefferson Capital Group, Ltd., an
investment banking firm located in Richmond, Virginia. He has served in that
capacity since August 1989.
Kevin J. Bannon is an Executive Vice President and Chief Investment Officer
of The Bank of New York. From April 1979 to the present date, Mr. Bannon has
held various management positions with The Bank of New York. He is a Chartered
Financial Analyst.
William P. Weidner is the President of LVSI Development, Inc., a developer
of hotel and casino properties based in Las Vegas, Nevada. He assumed that
position in December 1995. From 1985 until December 1995, he served as the
President and Chief Operating Officer of Pratt Hotel Corporation, a worldwide
operator and developer of casino and resort properties. He also served as the
President of Hollywood Casino-Aurora, Inc., an operator of riverboat casinos,
from 1992 until December 1995.
Charles Kreussling has been employed by the Company since its inception in
1966 and has been an Executive Vice President of the Company since 1979. Mr.
Kreussling is responsible for the Company's overall manufacturing and plant
administration.
Kenneth M. Rosenblum joined the Company in 1969 as an account executive for
the music industry. From 1970 until 1993, Mr. Rosenblum served as Vice
President -- Sales of the Company. In 1993, he was promoted to Senior Vice
President -- Sales, Home Entertainment. In that capacity, he is responsible for
all sales to video, music and computer software accounts.
William H. Hogan joined the Company as Corporate Controller in June 1995,
and in October 1996 was elected Vice President -- Finance of the Company. Mr.
Hogan, a Certified Public Accountant, was a senior manager with the accounting
firm of Grant Thornton, LLP, from 1994 to 1995. From 1981 until 1994, Mr. Hogan
was employed by the accounting firm of Deloitte & Touche LLP, where he was
actively involved in servicing the Company. He was a senior manager with
Deloitte & Touche LLP from 1989 until 1994.
Andrew N. Shore joined the Company as General Counsel in June 1996. Mr.
Shore was elected Secretary of the Company in August 1996 and was appointed a
Vice President of the Company in November 1996. Prior to joining the Company,
Mr. Shore practiced law in Los Angeles, California, concentrating in the areas
of real estate finance and commercial law. For a period of two years prior to
joining the Company, Mr. Shore provided legal services to the Company. Prior to
engaging in private law practice, Mr. Shore served as general counsel of DeAnza
Group, Inc., a real estate investment firm.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Executive Committee which is currently composed of
Messrs. Marc P. Shore, Howard M. Liebman and Melvin L. Braun. During the year
ended May 2, 1998 ("fiscal year 1998"),
5
<PAGE> 8
Seymour Leslie served as a member of the Executive Committee; however, he is not
seeking re-election to the Board for an additional term. The Executive Committee
has the responsibility, between meetings of the Board, to take all actions with
respect to the management of the Company's business that require action by the
Board, except for certain specified matters that by law must be approved by the
entire Board. The Executive Committee also coordinates and implements financial
and other policies and reviews the status of all operational activities.
In addition, the Company has an Audit Committee which is currently composed
of Messrs. Melvin L. Braun and R. Timothy O'Donnell, each of whom is not an
officer or employee of the Company or its subsidiaries. During fiscal year 1998,
Seymour Leslie served as a member of the Audit Committee; however, he is not
seeking re-election to the Board for an additional term. The Audit Committee has
the responsibility of recommending the Company's outside auditors, reviewing the
scope and results of audits, and examining procedures for ensuring compliance
with the Company's policies on conflicts of interest.
The Company has a Compensation and Stock Option Committee (the "Committee"
or the "Compensation Committee") which currently consists of Messrs. William P.
Weidner, Kevin J. Bannon and R. Timothy O'Donnell. In addition, during fiscal
year 1998 Seymour Leslie served as an alternate member with respect to any
matter in connection with which a regular member is by statute or regulation
deemed not to be disinterested. The Board of Directors intends to appoint a new
alternate member in respect of fiscal year 1999. No member or alternate member
of the Compensation Committee is a current or former officer or employee of the
Company or any of its subsidiaries. The Compensation Committee works closely
with the Board in establishing and implementing the Company's compensation
policies and practices. See "Report of Compensation Committee." Additionally, it
administers the Company's bonus and other compensation programs and the
Company's Incentive Programs under which employees of the Company are eligible
to receive stock options, restricted stock and other benefits.
The Company does not have a nominating committee.
MEETINGS OF THE BOARD
During fiscal year 1998, the Board of Directors held five meetings, of
which two meetings were held by telephone conference call, the Audit Committee
held one meeting and the Compensation Committee held one meeting. In addition,
during fiscal year 1998, the Board of Directors acted once by written consent of
its members. During fiscal year 1998, each of the directors attended at least
75% of the aggregate of (1) the total number of meetings of the Board (held
during the period that such director served) and (2) the total number of
meetings held by all committees of the Board on which such director served
(during the period that he served). The Company's directors discharge their
responsibilities throughout the year, not only at Board of Directors' and
committee meetings, but also through personal meetings and other communications,
including telephone contacts with the Chairman and others.
EQUITY SECURITIES BENEFICIALLY OWNED BY THE DIRECTORS AND NAMED EXECUTIVE
OFFICERS
According to information furnished to the Company as of July 1, 1998, the
directors of the Company, the Company's "named executive officers" (the "Named
Executive Officers") within the meaning of Item 402(a)(3) of Regulation S-K of
the Securities Act of 1933, as amended (the "Act"), and all directors and
executive officers as a group, beneficially owned shares of Common Stock of the
Company as set forth
6
<PAGE> 9
below. Beneficial ownership has been determined for purposes herein in
accordance with Rule 13d-3 of the Exchange Act under which a person is deemed to
be the beneficial owner of securities if such person has or shares voting power
or investment power in respect of such securities or has the right to acquire
beneficial ownership within 60 days.
<TABLE>
<CAPTION>
AMOUNT OF SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED OF CLASS
------------------------ ---------------- ---------
<S> <C> <C>
Marc P. Shore(1)......................................... 5,002,228 18.74%
Charles Kreussling(2).................................... 324,675 1.22%
Floyd S. Glinert(3)...................................... 262,200 (4)
R. Timothy O'Donnell(5).................................. 221,318 (4)
Howard M. Liebman(6)..................................... 212,828 (4)
Melvin L. Braun(7)....................................... 35,634 (4)
William P. Weidner(7).................................... 44,700 (4)
Kevin J. Bannon(7)....................................... 22,950 (4)
Kenneth M. Rosenblum(8).................................. 121,295 (4)
All directors and executive officers as a group
(11 persons)(9)(10).................................... 6,437,128 23.62%
</TABLE>
- ---------------
(1) See "Principal Stockholders -- Footnote (1)."
(2) Includes 90,000 shares owned by Charles Kreussling's wife, as to which Mr.
Kreussling disclaims beneficial ownership. The table does not include 750
shares owned by one of Mr. Kreussling's adult children who shares the same
household.
(3) Includes 4,500 shares owned by Floyd S. Glinert's wife, as to which Mr.
Glinert disclaims beneficial ownership.
(4) Less than 1%.
(5) Includes: (i) 450 shares owned by Mr. O'Donnell's wife as custodian for
their three minor children; (ii) 22,231 shares owned by Jefferson Capital
Group, Ltd. (of which Mr. O'Donnell is the President and a principal
stockholder); (iii) 37,500 shares which could be acquired on or within 60
days after July 1, 1998 upon the exercise of an option granted to Jefferson
Capital Group, Ltd.; and (iv) 13,200 shares which could be acquired on or
within 60 days after July 1, 1998 upon the exercise of options granted
under the Company's Incentive Plans. (See "Executive
Compensation -- Compensation of Directors").
(6) Includes (i) 113,474 shares which could be acquired on or within 60 days
after July 1, 1998 upon the exercise of stock options granted under the
Company's Incentive Plans (see "Executive Compensation -- Aggregated Option
Exercises and Fiscal Year-End Option Values"); (ii) 79,101 shares of
restricted stock awarded under the Company's Long-Term Incentive Program,
all of which are subject to forfeiture. (See "Executive
Compensation -- Summary Compensation Table-Footnote (3)"); and (iii) 6,150
shares held in a joint account with Mr. Liebman's wife.
(7) Includes 13,200 shares which could be acquired on or within 60 days after
July 1, 1998 upon the exercise of options granted under the Company's
Incentive Plans. (See "Executive Compensation -- Compensation of
Directors").
7
<PAGE> 10
(8) Includes: (i) 27,013 shares which could be acquired on or within 60 days
after July 1, 1998 upon the exercise of stock options granted under the
Company's Incentive Plans. (See "Executive Compensation -- Aggregated
Option Exercises and Fiscal Year-End Option Values"); and (ii) 5,178 shares
of restricted stock awarded under the Company's Long-Term Incentive
Program, all of which are subject to forfeiture. (See "Executive
Compensation -- Summary Compensation Table-Footnote (3)")
(9) The total number of directors and executive officers of the Company
includes two executive officers who were not included as Named Executive
Officers for fiscal year 1998.
(10) Includes 556,914 shares subject to stock options which could be acquired on
or within 60 days after July 1, 1998 and 184,929 shares of restricted stock
awarded pursuant to the Company's Long-Term Incentive Program, all of which
are subject to forfeiture. Does not include the shares held by Seymour
Leslie, presently a Class III Director of the Company, who is not seeking
re-election at the Meeting.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following summary compensation table sets forth certain information
concerning the compensation of the Named Executive Officers for each of the
three fiscal years during the period ending May 2, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM ALL OTHER
COMPENSATION(1) COMPENSATION AWARDS COMPENSATION(6)
----------------- ------------------------- ---------------
OPTIONS TO
RESTRICTED PURCHASE
SALARY BONUS STOCK AWARDS SHARES(4)
NAME AND PRINCIPAL POSITION YEAR* ($) ($) ($) (#) ($)
- --------------------------- ----- ------ ----- ------------ ---------- ---
<S> <C> <C> <C> <C> <C> <C>
Marc P. Shore.............. Fiscal 1998 800,000 302,000 -- -- 149,125(7)
Chairman of the Board, Fiscal 1997 815,385 450,000(2) -- 269,565(5) 155,520(7)
Chief Executive Officer Fiscal 1996 700,000 50,000 -- 44,565 11,720
and President
----------------------------------------------------------------------------
Floyd S. Glinert........... Fiscal 1998 299,988 -- -- -- 5,950
Executive Vice Fiscal 1997 305,757 -- -- -- 16,938
President -- Marketing Fiscal 1996 299,988 -- -- -- 16,041
and Director
----------------------------------------------------------------------------
Charles Kreussling......... Fiscal 1998 250,000 125,000 -- -- 15,964
Executive Vice Fiscal 1997 215,385 125,000 -- -- 18,449
President -- Fiscal 1996 200,000 100,000 -- -- 16,623
Manufacturing
----------------------------------------------------------------------------
Howard M. Liebman.......... Fiscal 1998 325,000 100,000 497,490(3) -- 214,970(8)(9)
Executive Vice President, Fiscal 1997 331,250 100,000 -- 26,737 142,043(8)(9)
Chief Financial Officer Fiscal 1996 275,000 100,000 -- 26,737 41,626(8)
and Director
----------------------------------------------------------------------------
Kenneth M. Rosenblum....... Fiscal 1998 163,366 125,000 -- -- 6,179
Senior Vice President -- Fiscal 1997 154,903 100,000 -- 43,507 5,895
Sales Fiscal 1996 134,992 -0- -- 6,007 3,512
----------------------------------------------------------------------------
</TABLE>
- ---------------
* 1997 was a 53-week year
(1) The aggregate amount of perquisites and other personal benefits for each of
the Named Executive Officers did not equal or exceed the lesser of either
$50,000 or 10% of the total of such individual's base salary and bonus, as
reported herein for the applicable fiscal years, and is not reflected in the
table.
(2) In fiscal 1997, Marc P. Shore received a $450,000 bonus. Mr. Shore was
entitled to receive a cash bonus in excess of $1.2 million in fiscal 1997
under a five-year bonus plan of the Company (the "Bonus Plan"); however, Mr.
Shore waived such bonus and accepted the $450,000 bonus.
(3) Represents the dollar value on the date of grant of 30,000 shares of
restricted stock (the "Liebman Restricted Shares") awarded by the
Compensation Committee to Howard M. Liebman in October 1997 under the
Company's Long-Term Incentive Program. The value of the Liebman Restricted
Shares reported in this column was calculated by multiplying the closing
market price of the Common Stock as reported on the New York Stock Exchange
("NYSE") on the date of grant by the 30,000 Restricted
9
<PAGE> 12
Shares, without any adjustment for forfeiture or termination contingencies.
As of May 2, 1998, the 30,000 Restricted Shares were valued at $480,000
(calculated by multiplying the closing price of the Common Stock as reported
on NYSE on May 1, 1998 (the last trading day in the fiscal year) by the
30,000 Restricted Shares).
In addition, in July 1994 the Compensation Committee awarded restricted
stock to certain executives pursuant to the Company's Long-Term Incentive
Program. Set forth below are the number and value of the aggregate
restricted share holdings of each Named Executive Officer as of May 2, 1998.
Values were calculated by multiplying the closing price of the Common Stock
as reported on NYSE on May 1, 1998 (the last trading day in this fiscal
year) by the respective number of shares.
<TABLE>
<CAPTION>
NAMED EXECUTIVE OFFICER SHARES(#) VALUE($)
- ----------------------- ---------- ---------
<S> <C> <C>
Marc P. Shore(a)....................................... 25,650 410,400
Howard M. Liebman(b)................................... 44,101 705,616
Kenneth M. Rosenblum(c)................................ 5,178 82,848
</TABLE>
- ---------------
(a) In July 1994, 51,301 shares of restricted Common Stock were granted
to Mr. Shore, of which 25,651 vested on April 30, 1997 and 25,650
are due to vest on April 30, 2002.
(b) In July 1994, 28,204 shares of restricted Common Stock were granted
to Mr. Liebman, of which 14,103 vested on April 30, 1997 and 14,101
are due to vest on April 30, 2002. As indicated above, an additional
30,000 shares of restricted Common Stock were granted to Mr. Liebman
in October 1997.
(c) In July 1994, 10,357 shares of restricted Common Stock were granted
to Mr. Rosenblum, of which 5,179 vested on April 30, 1997 and 5,178
are due to vest on April 30, 2002.
The Liebman Restricted Shares awarded by the Compensation Committee in
October 1997 are subject to a four year vesting requirement based on the
performance of the Company's Common Stock or, alternatively, an eight year
employment vesting requirement. The shares of restricted stock awarded by
the Compensation Committee in July 1994 are subject to a three year vesting
requirement based on the performance of the Company's Common Stock or,
alternatively, an eight year employment vesting requirement. If the
grantee's employment terminates prior to vesting, the restricted shares
awarded to him will be forfeited. During the vesting period, the grantee may
not dispose of, but may vote, the restricted shares and is entitled to
receive any dividends paid on such shares.
(4) Stock options are granted under the terms and provisions of the Company's
Incentive Plans.
(5) In fiscal 1997, Marc P. Shore was awarded non-qualified stock options to
purchase 225,000 shares of the Company's Common Stock. In addition, in
fiscal 1997 Mr. Shore was granted 44,565 options under the Company's 1993
Incentive Program (the "1993 Program").
10
<PAGE> 13
(6) Amounts reported under this column include the dollar value of the
following:
<TABLE>
<CAPTION>
VALUE OF LIFE- CONTRIBUTIONS TO
INSURANCE 401(K) EMPLOYEE
NAME YEAR PREMIUMS(a)($) SAVINGS PLAN(b)($)
---- ---- -------------- ------------------
<S> <C> <C> <C>
Marc P. Shore...................... Fiscal 1998 15,170 6,500
Fiscal 1997 19,070 8,395
Fiscal 1996 7,895 3,825
------------------------------------------------------------
Floyd S. Glinert................... Fiscal 1998 -- 5,950
Fiscal 1997 10,538 6,400
Fiscal 1996 10,538 5,503
------------------------------------------------------------
Charles Kreussling................. Fiscal 1998 12,214 3,750
Fiscal 1997 11,841 6,608
Fiscal 1996 13,145 3,478
------------------------------------------------------------
Howard M. Liebman.................. Fiscal 1998 13,501 4,371
Fiscal 1997 13,281 8,449
Fiscal 1996 8,981 3,506
------------------------------------------------------------
Kenneth M. Rosenblum............... Fiscal 1998 1,800 4,379
Fiscal 1997 1,800 4,095
Fiscal 1996 1,800 3,512
------------------------------------------------------------
</TABLE>
- ---------------
(a) Reflects life-insurance premiums paid by the Company on behalf of the
Named Executive Officer.
(b) Reflects contributions to the Company's tax-qualified 401(k) Employee
Savings Plan that covers all employees who have completed 1,000 hours
of service and one year of employment.
(7) Includes (i) $120,817 paid in fiscal 1998 and $121,417 paid in fiscal 1997,
which represent the Company's share of premiums paid in the respective years
under a Split Dollar Life Insurance Arrangement for the benefit of Marc P.
Shore whereby the Company will generally recover in full its share of the
premiums upon the cancellation, or purchase by Mr. Shore, of the life
insurance policy or the payment of death benefits under the life insurance
policy and (ii) $6,638 paid in fiscal 1998 and in fiscal 1997, which
represent disability premiums paid by the Company in the respective years on
behalf of Marc P. Shore.
(8) Includes $108,114 earned in fiscal 1998, $30,959 earned in fiscal 1997 and
$29,139 earned in fiscal 1996 by a trust established by the Company for Mr.
Liebman's benefit, pursuant to which income earned on the trust principal is
accumulated for payment to Mr. Liebman upon his retirement from the Company.
For a description of the trust, see "Employment Agreements with Named
Executive Officers".
(9) Includes $88,984 paid in fiscal 1998 and $89,354 paid in fiscal 1997, which
represent the Company's share of premiums paid in the respective years under
a Split Dollar Life Insurance Arrangement for the benefit of Howard M.
Liebman whereby the Company will generally recover in full its share of the
premiums upon the cancellation, or purchase by Mr. Liebman, of the life
insurance policy or the payment of death benefits under the life insurance
policy.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides certain summary information concerning stock
option exercises during the fiscal year ended May 2, 1998 by the Named Executive
Officers and the value of unexercised stock options held by the Named Executive
Officers as of May 2, 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED "IN THE MONEY"
NUMBER OF OPTIONS AT FISCAL OPTIONS AT FISCAL
SHARES YEAR END(1)(#) YEAR END(2)($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marc P. Shore............. 67,500 584,550 302,987 55,705 1,275,876 236,699
Floyd S. Glinert.......... -- -- -0- -0- -0- -0-
Charles Kreussling........ -- -- -0- -0- -0- -0-
Howard M. Liebman......... -- -- 91,790 48,421 414,020 224,755
Kenneth M. Rosenblum...... 15,000 138,650 18,012 37,509 86,707 185,893
</TABLE>
- ---------------
(1) Represents the aggregate number of stock options held as of May 2, 1998
which could and could not be exercised on that date pursuant to the terms of
the stock option agreements related thereto and the Incentive Plans.
(2) Values were calculated by multiplying (i) the respective number of shares by
(ii) the closing market price of the Common Stock as reported on NYSE on May
1, 1998 (the last trading day of the fiscal year) less the exercise price
per share, without any adjustment for any termination or vesting
contingencies.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Marc P. Shore
Marc P. Shore, the Company's Chairman, Chief Executive Officer and
President, and the Company entered into a five-year employment agreement,
effective as of May 3, 1998, which supersedes and replaces Mr. Shore's
employment agreement with the Company effective as of May 1, 1995 (the "Prior
Employment Agreement"). The terms of the employment agreement are substantially
similar to those contained in the Prior Employment Agreement, except that the
agreement grants Mr. Shore a signing bonus in the aggregate amount of $1
million, in the form of a $1 million non-interest bearing loan, the repayment of
which will be forgiven ratably over his five-year employment period if Mr. Shore
continues to be employed with the Company at the end of each such year. If a
"change in control" of the Company, as defined in the agreement, occurs at any
time during the last two years of the agreement, the term of the agreement will
be automatically extended for an additional two years. The agreement grants Mr.
Shore an annual base salary of $800,000 per annum, subject to periodic increases
at the discretion of the Board of Directors. Mr. Shore's annual base salary is
currently $800,000. Mr. Shore is also entitled to participate in the Company's
Bonus Plan, a five-year plan, pursuant to which he is eligible to receive
performance bonuses of up to $2 million per covered year if certain
pre-established thresholds are met. The agreement also authorizes the Company to
grant Mr. Shore discretionary bonuses outside of the scope of the Bonus Plan. If
Mr. Shore's employment by the Company is terminated in connection with a "change
in control" of the Company, as defined in the agreement, he would be entitled to
a lump sum payment equal to approximately three times his average annual
compensation, as defined in the agreement, during the Base Period. The agreement
requires the Company to maintain term life insurance on the life of Mr. Shore
and to carry supplemental disability insurance for his benefit. Simultane-
12
<PAGE> 15
ously with the authorization of Mr. Shore's employment agreement by the Board,
the Company granted to Mr. Shore options to purchase 250,000 shares of Common
Stock. In addition, Mr. Shore was entitled to receive a bonus in excess of $1.2
million under the Bonus Plan on account of fiscal year 1997. However, he elected
to forego that bonus and accepted a bonus of $450,000. In addition, Mr. Shore
earned a bonus of $302,000 on account of fiscal year 1998. (See "Executive
Compensation -- Summary Compensation Table").
Howard M. Liebman
The Company and Howard M. Liebman entered into a five-year employment
agreement effective as of May 3, 1998, which supersedes and replaces Mr.
Liebman's employment agreement with the Company dated as of June 3, 1994 (the
"Prior Employment Agreement"). The terms of the employment agreement are
substantially similar to those contained in the Prior Employment Agreement. If a
"change in control" of the Company, as defined in the agreement, occurs at any
time during the last two years of the agreement, the term of the agreement will
be automatically extended for an additional two years. Pursuant to the
employment agreement, Mr. Liebman is entitled to receive an annual base salary
of $450,000, subject to periodic increases at the discretion of the Board. The
agreement provides that if Mr. Liebman's employment by the Company is terminated
in connection with a "change in control" of the Company, as defined in the
agreement, Mr. Liebman will be entitled to receive a lump sum payment equal to
approximately three times his average annual compensation, as defined in the
agreement, during the Base Period. Simultaneously with the authorization of Mr.
Liebman's employment agreement by the Board, the Company granted to Mr. Liebman
options to purchase 100,000 shares of Common Stock. The Company has also
established a trust, pursuant to which income earned on the trust principal fund
of $300,000 is accumulated for payment to Mr. Liebman upon his retirement from
the Company, with the principal fund then being returned to the Company.
However, the assets of the trust are subject to claims of creditors of the
Company in the event of its insolvency. The trust earned $108,114 in fiscal year
1998.
COMPENSATION OF DIRECTORS
During the fiscal year ended May 2, 1998, each director who was not an
officer or an employee of the Company (an "Outside Director") received a
director's fee of $8,000 per annum plus $2,000 for attendance at each meeting of
the Board of Directors and $1,000 for attendance at each meeting of a committee
of the Board of Directors, other than Board or committee meetings held by
telephone conference call. All directors of the Company are also reimbursed for
expenses. Under the 1993 Program, as amended in fiscal year 1997, the full Board
of Directors, in its discretion, is authorized to grant to each Outside Director
options to purchase shares of the Company's Common Stock, at option prices equal
to the fair market value of the Company's Common Stock on the date of grant.
During fiscal year 1998, each Outside Director received an option to purchase
4,000 shares of Common Stock pursuant to the 1993 Program. The vesting of the
options and certain other terms of the options are determined by the full Board
of Directors in its discretion. Typically, the terms of the options provide that
the options are exercisable in full immediately upon the death of the grantee or
retirement from the Board by reason of disability or upon a "change of control"
of the Company (as defined in the 1993 Program). The options have a term of ten
years, subject to early termination in the event the grantee retires or is
removed from the Board.
13
<PAGE> 16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs. William P.
Weidner, Kevin J. Bannon and R. Timothy O'Donnell. During fiscal year 1998,
Seymour Leslie served as an alternate member of the Compensation Committee;
however, he is not seeking re-election at the Meeting. The Board of Directors
intends to appoint a new alternate member in respect of fiscal year 1999. No
member of the Company's Compensation Committee is a current or former officer or
employee of the Company or any of its subsidiaries. There are no compensation
committee interlocks between the Company and any other entities involving any of
the executive officers or directors of such other entities.
Jefferson Capital Group, Ltd. ("Jefferson Capital"), an investment banking
firm of which R. Timothy O'Donnell is the President and a principal stockholder,
has served as an investment advisor to the Company on various matters.
The Bank of New York, of which Kevin J. Bannon is an Executive Vice
President, is a participant in the Company's lending syndicate. The aggregate
amount of The Bank of New York's participation in the Company's outstanding
borrowings pursuant to credit facilities as at the end of fiscal year 1998 was
approximately $19,686,578. The Bank of New York also acts as the Company's
transfer agent.
CERTAIN TRANSACTIONS
In May 1995, the Company loaned $2.0 million to Marc P. Shore, the
Chairman, Chief Executive Officer and President of the Company. The loan is due
on May 4, 2000 and bears interest payable quarterly at the Applicable Federal
Rate, as defined, adjusted monthly. Mandatory prepayments of the loan are
required if Mr. Shore's compensation exceeds certain specified thresholds. The
Compensation Committee waived the required prepayment for 1998. The aggregate
principal amount outstanding under this loan as at the end of fiscal year 1998
was $2.0 million.
In May 1997, the Company guaranteed a portion of an $8.5 million loan made
by The Chase Manhattan Bank to Marc P. Shore in connection with his purchase of
certain real estate. The Company's maximum liability under the guaranty is $3.0
million. The guaranty will terminate at such time as $4.3 million of the loan
has been repaid by Mr. Shore, provided that: (i) the unpaid portion of the loan
is less than 75% of the then fair market value of the related real estate which
was mortgaged to secure the loan; (ii) Mr. Shore's annual compensation meets or
exceeds the level of annual compensation at the date of the guaranty; and (iii)
there are no defaults under the loan agreement. Pursuant to the terms of the
loan agreement, a prepayment of $2.0 million was originally required to be made
in each of November 1997, February 1998 and May 1998, with the remaining balance
due in August 1998. In consideration for the Company's guaranty, Mr. Shore
agreed to pay to the Company a monthly fee of 1% per annum of the outstanding
guaranty amount and to reimburse the Company for expenses incurred in connection
with the guaranty. In December 1997 and May 1998, the underlying loan agreement
was modified, waiving the November 1997 and May 1998 payments and increasing the
August 1998 payment to $6.5 million from the original amount of $2.5 million.
The February 1998 payment was made.
Bryan Shore Resnick, the sister of Marc P. Shore and Andrew N. Shore, is a
travel agent with Reliable Travel, a travel agency which provides travel
services to the Company. Based upon information provided to the Company by
Reliable Travel, in fiscal year 1998, Reliable Travel earned approximately
$135,374 in commissions, of which approximately $67,687 was paid to Bryan Shore
Resnick. Such commissions were
14
<PAGE> 17
earned in the ordinary course of business and, to the best knowledge of the
Company, the services performed were at terms no less favorable to the Company
than had the services been provided by an unrelated third party.
In April 1998, the Company loaned $630,000 to Howard M. Liebman in
connection with his purchase of a new residence. The loan is evidenced by a note
which is secured by a first priority mortgage on the property. The Company's
interest in the mortgage is insured by a title insurance company. The loan bears
interest at the rate of 6.5% per annum. Interest is payable annually on August 1
of each year commencing August 1, 1999. The final payment of principal and
interest is due August 1, 2013. In addition, the Company may accelerate
repayment of the loan in the event Mr. Liebman sells the property prior to
maturity or ceases to be employed by the Company. The aggregate principal amount
outstanding under this loan as at the end of fiscal year 1998 was $630,000.
SECTION 16(a) REPORTING UNDER THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of the Common Stock of
the Company to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the exchange on which the Common Stock is
listed for trading. Executive officers, directors and more than ten percent
stockholders are required by regulations promulgated under the Exchange Act to
furnish the Company with copies of all Section 16(a) reports filed. Based solely
on the Company's review of copies of the Section 16(a) reports filed for the
fiscal year ended May 2, 1998, the Company believes that all reporting
requirements applicable to its executive officers, directors, and more than ten
percent stockholders were complied with for the fiscal year ended May 2, 1998,
except that (i) Mr. Melvin L. Braun failed to timely file a report in respect of
the sale of 2,919 shares of Common Stock in January 1997; (ii) Mr. Floyd S.
Glinert failed to timely file a report in respect of the sale of 7,500 shares of
Common Stock in June 1997; and (iii) Mr. Marc P. Shore failed to timely file a
report in respect of the transfer in December 1997 of 66,150 shares of Common
Stock held by the Shore Trust, of which Mr. Shore serves as co-trustee, and in
respect of the sale of 270,000 shares of Common Stock from the Estate of Paul B.
Shore in June 1997.
15
<PAGE> 18
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the Company's cumulative stockholder return on the Common Stock for the last
five years with the cumulative total return during the same period of (i) the
Russell 2000 Index and (ii) a peer group selected by the Compensation Committee
consisting of: R.R. Donnelley & Sons Co., International Paper Co., Gibraltar
Packaging Group, Graphic Industries, Sonoco Products, Co., Union Camp
Corporation and Westvaco Corporation (the "Peer Group").
The Company has a 52-53 week fiscal year ending on the Saturday closest to
April 30th of each fiscal year. Accordingly, for purposes of the line graph, the
Company has selected as the "measurement period" the period beginning on May 1,
1993 and ending on May 2, 1998.
Cumulative total returns are calculated assuming that $100 was invested on
May 1, 1993 in each of the Common Stock, the Russell 2000 Index and the Peer
Group, and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SHOREWOOD PACKAGING CORPORATION, RUSSELL 2000 INDEX
AND SELECTED PEER GROUP
INDEXED RETURNS FOR THE FIVE-YEAR PERIOD ENDED MAY 2, 1998
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SHOREWOOD
(FISCAL YEAR COVERED) PACKAGING CORP PEER GROUP INDEX RUSSELL 2000 INDEX
<S> <C> <C> <C>
1993 100 100 100
1994 152.63 99.74 114.82
1995 165.79 123.41 123.11
1996 176.32 133.98 163.88
1997 192.11 138.13 163.96
1998 252.63 175.23 233.45
</TABLE>
16
<PAGE> 19
The Customer Selected Stock List is made up of the following securities:
GIBRALTAR PACKAGING GROUP
GRAPHIC INDUSTRIES INC.
INTERNAT PAPER CO.
R.R. DONNELLEY & SONS CO.
SONOCO PRODUCTS CORP.
UNION CAMP CORP.
WESTVACO CORP.
17
<PAGE> 20
REPORT OF COMPENSATION COMMITTEE
OVERALL POLICY
The Company's executive compensation program is designed to be closely
linked to corporate performance and the total return to stockholders over the
long-term. To that end, the Company has developed an overall compensation
strategy and specific compensation plans which tie executive compensation to the
Company's success in meeting specified objectives and to appreciation in the
Company's stock price. The overall objectives are to attract and retain the best
possible executive talent, motivate key executives to achieve the goals inherent
in the Company's business strategy, link executive and stockholder interests
through participation in the Company's Long-Term Incentive Plan (the "LTIP") and
provide a compensation package that recognizes individual contributions as well
as overall business results.
Each year the Compensation Committee conducts a review of the Company's
executive compensation program. The review includes a comparison of the
Company's executive compensation, corporate performance, stock price
appreciation and total return to stockholders with a peer group of public
corporations that represent the Company's direct competitors for executive
talent. The annual compensation reviews permit an ongoing evaluation of the link
between the Company's performance and its executive compensation in the context
of the compensation programs of other companies. The peer group presently
utilized by the Compensation Committee is the Peer Group. See "Stock Performance
Graph."
The Compensation Committee approves the compensation of executive officers
of the Company, including the individuals whose compensation is detailed in this
Proxy Statement. In reviewing the individual performance of the executive
officers of the Company whose compensation is detailed in this Proxy Statement,
the Compensation Committee takes into account the views of Mr. Marc P. Shore,
the Chairman and Chief Executive Officer of the Company, and the other members
of the Board of Directors.
The key elements of the Company's executive compensation during the last
fiscal year consisted of base salary, an annual bonus and grants of stock
options and restricted stock under the LTIP. The Compensation Committee's
policies with respect to each of these elements, are discussed below. In
addition, while the elements of compensation described below are considered
separately, the Compensation Committee takes into account the full compensation
package afforded by the Company to each individual.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION PLANS
It is the policy of the Compensation Committee to have the executive
compensation plans of the Company treated as fully tax deductible under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") whenever,
in the judgment of the Committee, to do so would be consistent with the business
objectives of those plans. All compensation paid during fiscal year 1998 was, in
fact, fully tax deductible. The Compensation Committee, however, has granted
awards which may not be fully tax deductible, and reserves the right to grant
future compensation awards in such amounts as it may deem appropriate in the
exercise of its business judgment, notwithstanding whether those awards are
fully tax deductible.
18
<PAGE> 21
BASE SALARIES AND ANNUAL BONUSES
Base salaries and annual bonuses for executive officers are determined by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for executive
talent, including a comparison of base salaries for comparable positions at
other companies in the Peer Group. Annual salary adjustments and bonuses, if
any, are determined by evaluating the performance of the Company and of each
executive officer, and by taking into account added responsibilities. The
Compensation Committee, where appropriate, also considers non-financial
performance measures. These include increases in market share, manufacturing
efficiency gains, improvements in product quality and improvements in relations
with customers, suppliers and employees. These factors are afforded varying
levels of significance by the Committee depending upon the circumstances. All
final determinations are subjective.
In establishing the annual base salary of Marc P. Shore, the Company's
Chairman and Chief Executive Officer, the Committee also took into account a
comparison of base salaries of chief executive officers of the Peer Group, the
Company's results of operations, the performance of the Company's Common Stock
and the subjective assessment by the members of the Committee of Mr. Shore's
individual performance.
The Committee has established, with the approval of the Board and the
Stockholders, a performance Bonus Plan for the benefit of Marc P. Shore, for the
five fiscal years beginning in fiscal year 1996. The Committee has recommended
and the Board has approved an amendment to the Bonus Plan to extend the term of
the Bonus Plan for an additional period of three years, commencing in fiscal
year 1999 and continuing through fiscal year 2003. Stockholders will be asked to
approve the amendment to the Bonus Plan elsewhere in this Proxy Statement. The
Bonus Plan provides for the grant of graduated performance bonuses, up to $2
million per annum, to Mr. Shore based upon yearly comparisons of the Company's
earnings from operations plus depreciation and amortization. Bonuses pursuant to
the Bonus Plan are payable only if certain pre-established thresholds are met.
The Bonus Plan is based solely upon the performance criteria described above.
For a more detailed description of the Bonus Plan, see "Approval of Amendment to
1995 Performance Bonus Plan to Extend its Term". Mr. Shore earned a bonus in the
amount of $302,000 in respect of fiscal year 1998 under the Bonus Plan. (See
"Executive Compensation -- Summary Compensation Table"). In addition to the
Bonus Plan, the Committee may grant general discretionary bonuses to Mr. Shore.
LONG TERM INCENTIVE PLANS
Pursuant to the 1993 Incentive Program, approved by the Stockholders in
1993, the Committee adopted the LTIP which allows various types of awards keyed
to corporate performance, including stock options (focus on absolute growth in
shareholder value) and Restricted Shares (focus on relative growth in
shareholder value), subject to performance-based contingencies, which are made
available in amounts which the Committee determines to be competitive based on
the competitive market analyses described above.
STOCK OPTIONS
Under the LTIP and the Company's other Incentive Plans, stock options are
periodically granted to the Company's employees, including executive officers.
The Compensation Committee sets guidelines for the size of the stock option
awards based on similar factors, including competitive compensation data, as are
used to determine base salaries and bonuses, if any. In the event of poor
corporate performance, the Compensation Committee can elect not to award stock
options. Final determinations are subjective.
19
<PAGE> 22
Stock options are designed to align the interests of executives with those
of the stockholders. Stock options are granted with an exercise price equal to
the market price of the Common Stock on the date of grant and generally vest in
increments over a period of four or five years. This approach is designed to
incentivize the creation of stockholder value over the long term since the full
benefit of the compensation package cannot be realized by the option recipients
unless stock price appreciation occurs over a number of years.
PERFORMANCE BASED RESTRICTED STOCK
Under the LTIP, awards of restricted stock are made preceding a three-year
or four-year performance period. The Committee, together with the Company's
Chief Executive Officer, determine the size of the awards based on the same
competitive compensation data as are used to determine base salaries and
bonuses. Final determinations are subjective. At the end of the three-year or
four-year performance period, some or all of the shares of restricted stock may
vest depending upon the Company's relative shareholder growth compared to that
of the Peer Group over the same period. The Peer Group for grants of restricted
stock through fiscal year 1998 consists of the same companies that make up the
peer group for the stock performance graph. See "Stock Performance Graph."
Shares that do not vest, due to relative shareholder performance, will vest at
the end of eight years assuming continued employment. Initial grants of
restricted stock were made during fiscal year 1995, of which the first
performance based vesting opportunity arose in April 1997 and the remaining
shares are due to vest in April 2002. Additional grants of restricted stock were
made during fiscal year 1998 to certain key employees and executives. See
"Executive Compensation -- Summary Compensation Table -- Footnote (3)."
Compensation Committee
KEVIN J. BANNON
R. TIMOTHY O'DONNELL
WILLIAM P. WEIDNER
20
<PAGE> 23
APPROVAL OF AMENDMENT TO
CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED SHARES OF COMMON STOCK
PROPOSED AMENDMENT
The Board has approved an amendment to Article Fourth of the Company's
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
to increase the authorized shares of Common Stock from 40,000,000 to 60,000,000
shares, subject to the approval by the Company's Stockholders at the Meeting. If
the proposed amendment is approved by the Stockholders, the text of the first
sentence of Article Fourth of the Certificate of Incorporation would be amended
to read as follows:
"FOURTH: The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 65,050,000 shares, consisting
of 50,000 shares of Series A Preferred Stock, par value $10 per share (the
"Series A Preferred Stock"), 5,000,000 shares of Preferred Stock, par value $10
per share (the "Preferred Stock") and 60,000,000 shares of Common Stock, par
value $0.01 per share (the "Common Stock")."
As of July 1, 1998, there were 40,000,000 shares of Common Stock
authorized, 26,692,275 shares outstanding, 4,431,274 shares reserved for
issuance, 7,624,074 shares held in treasury and 1,252,377 shares available for
issuance.
REASONS FOR PROPOSED AMENDMENT
The proposed amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock has been recommended by
the Board to assure that an adequate supply of authorized and unissued shares of
Common Stock is available for corporate purposes, such as financing acquisitions
with capital stock, declaring stock splits or stock dividends, raising
additional equity capital and granting awards pursuant to employee benefit
plans, and for such other corporate purposes as may arise. The Board believes it
needs the ability to effect these types of transactions without the delay
involved in obtaining Stockholder approval. Following a 3-for-2 stock split of
the Company's Common Stock in May 1998, which was paid in the form of a 50%
stock dividend, the Company nearly exhausted the 40,000,000 shares of Common
Stock previously authorized.
If approved by the Stockholders, the additional authorized shares of Common
Stock would be available for issuance at the discretion of the Board without
further Stockholder approval (subject to applicable rules of NYSE or any stock
exchange on which the Company's securities may then be listed), without the
delay and expense incident to holding a special meeting of stockholders to
consider any specific issuance. However, the rules of NYSE currently require
stockholder approval of issuances of common stock under certain circumstances.
The additional shares of Common Stock for which approval is being sought
would have the same rights and privileges as the other shares of Common Stock
presently outstanding. Under the Company's Certificate of Incorporation,
Stockholders do not have preemptive rights. Therefore, the effects of the
authorization of additional shares of Common Stock may include dilution of the
voting power of currently outstanding shares of capital stock and reduction of
the portion of dividends and liquidation proceeds payable to the holders of
currently outstanding shares of capital stock. In addition, the increase in the
number of authorized shares of
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Common Stock could have the effect of deterring a future takeover attempt.
However, the proposed amendment to the Certificate of Incorporation is not the
result of any specific effort to obtain control of the Company, and the Company
has no current intention to use the increase in authorized Common Stock for
anti-takeover purposes.
The Board recommends a vote FOR approval of the proposed amendment to the
Company's Certificate of Incorporation to increase the authorized shares of
Common Stock.
APPROVAL OF AMENDMENT TO
1995 PERFORMANCE BONUS PLAN
TO EXTEND THE TERM UNTIL 2003
The Compensation Committee has recommended and the Board of Directors has
approved an amendment to the Company's performance bonus plan for Mr. Marc P.
Shore, the Company's Chief Executive Officer and President, known as the 1995
Performance Bonus Plan (as amended, the "1995 Bonus Plan"). The 1995 Bonus Plan
became effective on May 1, 1995 and has a term of five (5) years. The amendment
would extend the term of the 1995 Bonus Plan for an additional period of three
(3) years (i.e., until 2003); all other terms of the 1995 Bonus Plan will remain
unchanged. The 1995 Bonus Plan was adopted in recognition of Mr. Shore's pivotal
role in providing strategic and organizational leadership to the Company. The
Board believes that an annual bonus plan is an important vehicle to measure the
yearly performance of Mr. Shore and to reward him for the actual results
achieved during the year. Subject to Stockholder approval of the amendment to
the 1995 Bonus Plan, Mr. Shore will continue to be the only individual eligible
to participate in the 1995 Bonus Plan.
The 1995 Bonus Plan is designed to comply with the exception for qualified
performance-based compensation under Section 162(m) of the Code, which, but for
this exception, limits the tax deductibility of compensation paid to officers
named in this Proxy Statement in excess of $1 million per year. Under the 1995
Bonus Plan, for each of the eight fiscal years commencing with fiscal year 1996
(each an "Award Year"), Mr. Shore is entitled to a graduated bonus (the
"Performance Bonus") based upon a comparison of the Company's earnings from
operations plus depreciation and amortization (the "Performance Measure") in
that Award Year with the immediately preceding fiscal year. Bonuses are payable
only if pre-established thresholds are met. The size of the Performance Bonus is
tied to the level of the Company's performance, as measured by the Performance
Measure, with the larger bonuses available only in the case of truly superior
results. The maximum Performance Bonus payable in respect of any Award Year
under the 1995 Bonus Plan is $2,000,000. The grant of a Performance Bonus will
result in ordinary income for Mr. Shore and all applicable tax liabilities
(Federal, state, local, Social Security and Medicare). The Performance Bonus
will be prorated in respect of any Award Year in which Mr. Shore's employment by
the Company is terminated for any reason but for cause.
The 1995 Bonus Plan is administered by the Compensation Committee, which is
composed entirely of directors who are not officers or employees of the Company.
The Committee must certify that performance thresholds have been satisfied
before any payments may be made under the 1995 Bonus Plan. The Committee may
make adjustments in the performance thresholds to account for extraordinary
results in the Company's operations in a particular Award Year or for other
reasons it may deem equitable, so long as such actions do
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not jeopardize the tax-deductibility of the compensation awarded under the 1995
Bonus Plan pursuant to Section 162(m) of the Code.
Mr. Shore earned a bonus in the amount of $302,000 in respect of fiscal
year 1998 under the 1995 Bonus Plan.
Notwithstanding any provision in the 1995 Bonus Plan to the contrary, the
1995 Bonus Plan may only be operated in a manner that allows all awards under
the 1995 Bonus Plan to be deductible by the Company under Section 162(m) of the
Code.
At the Meeting, the Stockholders will be asked to approve an amendment to
the 1995 Bonus Plan to extend its term for an additional period of three years.
The Board of Directors recommends a vote FOR approval of the amendment to
the 1995 Bonus Plan.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, certified public accountants, have been appointed by
the Board of Directors, upon recommendation of the Audit Committee of the Board
of Directors, as independent auditors for the Company to examine and report on
its financial statements for the fiscal year ending May 1, 1999, which
appointment is being submitted to the Stockholders for ratification at the
Meeting. Representatives of Deloitte & Touche LLP are expected to be present at
the Meeting, with the opportunity to make a statement if they desire to do so,
and to be available to respond to appropriate questions. The appointment of the
independent auditors will be ratified if it receives the affirmative vote of the
holders of a majority of shares of the Common Stock of the Company present at
the Meeting, in person or by proxy. Submission of the appointment of the
auditors to the Stockholders for ratification will not limit the authority of
the Board of Directors to appoint another accounting firm to serve as
independent auditors if the present auditors resign or their engagement is
otherwise terminated.
The Board of Directors recommends a vote FOR the appointment of Deloitte &
Touche LLP as independent auditors for the fiscal year ending May 1, 1999.
STOCKHOLDERS' PROPOSALS
Any proposal by a Stockholder of the Company intended to be presented at
the 1999 Annual Meeting of Stockholders must be received by the Company at its
principal executive office not later than April 30, 1999 for inclusion in the
Company's proxy statement and form of proxy relating to that meeting. Any such
proposal must also comply with the other requirements of the proxy solicitation
rules of the Securities and Exchange Commission.
ANNUAL REPORT
Concurrently with the mailing of these Proxy Materials, the Company is
mailing a copy of its Annual Report to Stockholders for the fiscal year ended
May 2, 1998. Such Annual Report is not to be regarded as proxy solicitation
material.
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UPON WRITTEN REQUEST BY A STOCKHOLDER ENTITLED TO VOTE AT THE 1998 ANNUAL
MEETING, THE COMPANY WILL FURNISH THAT PERSON WITHOUT CHARGE WITH A COPY OF THE
FORM 10-K ANNUAL REPORT FOR 1998 WHICH IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO. If the
person requesting the report was not a Stockholder of Record on August 15, 1998,
the request must contain a good faith representation that the person making the
request was a beneficial owner of the Common Stock of the Company at the close
of business on such date. Requests should be addressed to Shorewood Packaging
Corporation, Investor Relations Department, 277 Park Avenue, New York, New York
10172-0124.
OTHER BUSINESS
Management does not know of any other matters to be brought before the
Meeting except those set forth in the notice thereof. If other business is
properly presented for consideration at the Meeting, it is intended that the
proxies will be voted by the persons named therein in accordance with their
judgment on such matters.
SOLICITATION AND EXPENSES OF SOLICITATION
Officers and employees of the Company may solicit proxies. Proxies may be
solicited by personal interview, mail, telegraph and telephone. No compensation
will be paid by the Company to any person in connection with the solicitation of
proxies. Brokers, bankers and other nominees will be reimbursed for out-of-
pocket and other reasonable clerical expenses incurred in obtaining instructions
from beneficial owners of the Company's stock. The cost of preparing this Proxy
Statement and all other costs in connection with solicitation of proxies for the
Annual Meeting of Stockholders are being borne by the Company.
Even if you plan to attend the Meeting in person, please sign, date and
return the enclosed proxy promptly. If you attend the Meeting, your proxy will
be voided at your request and you can vote in person. A postage-paid
return-addressed envelope is enclosed for your convenience.
Your cooperation in giving this matter your immediate attention and in
returning your proxies will be appreciated.
By order of the Board of Directors,
Andrew N. Shore
Secretary
August 20, 1998
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SHOREWOOD PACKAGING CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 23, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints MARC P. SHORE and ANDREW N. SHORE or
either of them, each with full power of substitution, proxies of the
undersigned to vote all shares of Common Stock, par value $.01 per share, of
Shorewood Packaging Corporation (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be
held on the 23rd day of September 1998 at 9:30 a.m. at The Chase Manhattan
Bank, 270 Park Avenue, 11th Floor, Room C, New York, New York, and at all
adjournments thereof, as fully and with the same force and effect as the
undersigned might or could do if personally present thereat. Said proxies
are instructed to vote as follows.
THE PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED, IT WILL BE VOTED FOR ALL OF THE ABOVE PROPOSALS.
SHOREWOOD PACKAGING CORPORATION
P.O. BOX 11344
NEW YORK, N.Y. 10203-0344
<TABLE>
<CAPTION>
/ /
<S> <C> <C> <C>
1. The election of all nominees FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
for directors listed below. listed below / / for all nominees listed below / /
Nominees: Marc P. Shore and Howard M. Liebman
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME
IN THE SPACE PROVIDED BELOW.)
*Exceptions _____________________________________________________________________________________________________________________
2. The approval of an amendment to the Company's Certificate of 3. The approval of an amendment to the Company's 1995 Performance
Incorporation to increase the number of authorized shares of Bonus Plan to extend its term for an additional period of
common stock from 40,000,000 to 60,000,000. three years.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
4. The ratification of the selection of Deloitte & Touche LLP as 5. In accordance with their best judgment with respect to any
the independent auditors of the Company for the fiscal year other business that may properly come before the meeting.
ending May 1, 1999.
Change of address
FOR / / AGAINST / / ABSTAIN / / and or Comments,
mark here.
(Please sign exactly as name appears
hereon. Proxies should be dated when
signed. When shares are held by joint
tenants, both should sign. When signing
as attorney, as executor, administrator,
trustee or guardian, please give
full title as such. Only authorized
officers should sign for a corporation.
If shares are registered in more than
one name, each joint owner should sign.)
Dated:____________________________, 1998
________________________________________
(Signature)
________________________________________
(Signature if held jointly)
VOTES MUST BE INDICATED (X)
IN BLACK OR BLUE INK / X /
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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</TABLE>
