<PAGE>
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 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
GAYLORD CONTAINER CORPORATION
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(Name of Registrant as Specified in Its Charter)
GAYLORD CONTAINER CORPORATION
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchang Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
[LOGO]
GAYLORD CONTAINER CORPORATION
PROXY STATEMENT
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held
February 8, 1995
You are cordially invited to attend the annual meeting of stockholders
of Gaylord Container Corporation (the "Company") which will be held on
Wednesday, February 8, 1995 at 10:00 a.m. Chicago time at 520 Lake Cook Road,
Deerfield, Illinois 60015, for the following purposes:
1. To elect eight Class B directors of the Company to serve for a
term expiring at the 1996 Annual Meeting of Stockholders;
2. To approve an increase in the number of shares of the Company's
Class A Common Stock available under the Gaylord Container
Corporation 1989 Long-Term Incentive Plan;
3. To ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors; and
4. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on December 16,
1994 as the record date for determining the stockholders entitled to notice
of and to vote at the meeting or any adjournment or adjournments thereof. A
list of such stockholders will be available for examination by any
stockholder for any purpose germane to the meeting during normal business
hours at the Company's corporate headquarters, 500 Lake Cook Road, Suite 400,
Deerfield, Illinois 60015, for a period of 10 days prior to the meeting.
It is important that your shares be represented at the meeting
regardless of the size of your holdings. Whether or not you plan to attend
the meeting, we urge you to mark, date and sign the enclosed proxy. An
envelope is enclosed for your convenience which, if mailed in the United
States, requires no postage.
David F. Tanaka
Secretary
Deerfield, Illinois
December 28, 1994
YOU ARE URGED TO MARK, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY. THE PROXY IS REVOCABLE
AT ANY TIME PRIOR TO ITS USE.
<PAGE>
GAYLORD CONTAINER CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
February 8, 1995
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Gaylord Container Corporation (the "Company") of
proxies for use at the annual meeting of stockholders of the Company to be
held at 10:00 a.m. Chicago time on February 8, 1995 at 520 Lake Cook Road,
Deerfield, Illinois 60015 and at any adjournment or adjournments thereof.
Proxies properly executed and returned in a timely manner will be voted at
the meeting in accordance with the directions noted thereon. If no direction
is indicated, proxies will be voted FOR the election of the nominees named
herein as directors, FOR the proposal to increase the number of shares
available under the Gaylord Container Corporation 1989 Long-Term Incentive
Plan (the "1989 Plan"), FOR the appointment of Deloitte & Touche LLP as the
Company's independent auditors and on any other business as may properly be
brought before the annual meeting and any adjournment or adjournments
thereof, at the discretion of the proxy holders. Any stockholder submitting
a proxy has the power to revoke it at any time before it is voted, either in
person at the meeting, by written notice to the Secretary of the Company or
by delivery of a later-dated proxy.
Pursuant to Delaware law, abstentions are treated as present and
entitled to vote and thus have the effect of a vote against a matter. Shares
registered in the names of brokers or other "street name" nominees for which
proxies are voted on some but not all matters will be considered to be voted
only as to those matters actually voted, and will not be considered for any
purpose as to the matters with respect to which a beneficial holder has not
provided voting instructions (commonly referred to as "broker non-votes").
The Company's principal executive offices are located at 500 Lake Cook
Road, Suite 400, Deerfield, Illinois 60015 (telephone 708-405-5500). It is
expected that proxy materials will be mailed to stockholders on or about
December 28, 1994.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on December 16,
1994 are entitled to vote at the annual meeting of stockholders. The Company
has two classes of common stock, Class A Common Stock ("Class A Common") and
Class B Common Stock ("Class B Common") (together, "Common Stock"), and two
classes of directors, Class A Directors and Class B Directors. The Company's
three Class A Directors, Frank E. Babb, Norman H. Brown Jr. and Harve
A. Ferrill, have served as directors since November 2, 1992 and do not stand
for annual re-election. Under the Company's Restated Certificate of
Incorporation, they or their duly appointed replacements will serve as
Class A Directors until the earlier of July 31, 1996 or such time as the
Company has no Warrants outstanding (as defined in the Company's Restated
Certificate of Incorporation). The Company's eight Class B Directors are
elected by holders of Class A Common and holders of Class B Common, voting
together as a single class, with such holders entitled to one vote per share
and 10 votes per share, respectively.
Except as otherwise required by the Company's Restated Certificate of
Incorporation or by applicable law, holders of Class A Common and Class B
Common vote together as a single class on all matters and are entitled to one
vote per share and 10 votes per share, respectively. Accordingly,
Proposals 2 and 3 herein require the affirmative vote of a majority of the
combined voting power of the Company's Common Stock represented at the annual
meeting.
In connection with the Company's financial restructuring completed in
November 1992, the Company issued warrants to obtain Class A Common and
simultaneously issued the shares of Class A Common obtainable upon the
exercise of all such warrants to a warrant trustee (the "Warrant Trustee")
which holds such shares (the "Trust Stock") in trust for the benefit of the
holders of the warrants, pending any exercise, or for the benefit of the
Company, pending any redemption or exchange of the warrants.
<PAGE>
The Warrant Trustee will vote, and has appointed the Secretary of the
Company as its proxy to vote, all shares of Trust Stock then held by the
Warrant Trustee in proportion to all other votes by holders of the Company's
Common Stock (accounting for the disparate voting power between the two
classes of Common Stock, if applicable) except upon any vote of the Company's
stockholders required by law or the Company's Restated Certificate of
Incorporation in connection with a change of control (as defined in the trust
agreement) and except in connection with the election of Class A Directors by
the holders of Class A Common required in the event of the death, resignation
or removal of all of such directors or pursuant to Section 223(d) of the
General Corporation Law of the State of Delaware. With respect to such
exceptions, each record holder of warrants will be permitted to instruct the
Warrant Trustee to vote the shares of Trust Stock underlying such warrants
and the Warrant Trustee will vote the shares of Trust Stock then held by the
Warrant Trustee in accordance with, and only in accordance with, such
instructions which are reasonably satisfactory to the Warrant Trustee.
Mid-America Group, Ltd. ("MAG") beneficially owns more than 81 percent,
and the Company's executive officers and directors, as a group, beneficially
own or control more than 92 percent, of the outstanding Class B Common, which
ownership gives MAG sufficient voting power acting alone to elect all Class
B directors, to approve Proposals 2 and 3 herein and to approve or disapprove
any other business that may properly be presented at the meeting on which the
Class A Common and Class B Common vote together as a single class. As of
December 16, 1994, there were outstanding 48,510,364 shares of Class A
Common, including 31,845,533 shares of Trust Stock held by the Warrant
Trustee, 31,845,533 warrants to obtain Class A Common and 5,266,273 shares of
Class B Common.
PROPOSAL 1
ELECTION OF DIRECTORS
Eight Class B Directors are to be elected at the meeting. Each Class B
Director is to be elected to hold office until the 1996 Annual Meeting of
Stockholders or until his successor is elected and qualified. All of the
nominees are serving as directors of the Company as of this date and were
recommended to the Board of Directors by the Nominating Committee.
Unless otherwise instructed, signed proxies that are returned will be
voted for election of all nominees, provided that if any of such nominees
should be unable or should fail to act as such by virtue of an unexpected
occurrence, the proxies will be voted for such other person or persons as
will be determined by the holders of the proxies in their discretion.
NOMINEES FOR ELECTION AT THE 1995 ANNUAL MEETING
Nominees for Class B Director
JOHN E. GOODENOW. Mr. Goodenow has served as a director of the Company
since November 1992. Mr. Goodenow has served as President and Chief
Executive Officer of Goodenow Bancorporation since 1979. Mr. Goodenow also
serves as a director of Bank Midwest (Okoboji, Iowa), Bank Midwest
(Minnesota, Iowa), and Jackson Bancorporation (Fairmont, Minnesota), each a
private banking corporation. Member, Compensation and Stock Option
Committee. Age 59.
DAVID B. HAWKINS. Mr. Hawkins has served as a director of the Company
since November 1986. He served as President or Executive Vice President and
a director of MAG, a real estate investment company, from 1977 to 1993 and
since then as Vice Chairman and a director of MAG. Member, Nominating
Committee. Age 60.
JOHN HAWKINSON. Mr. Hawkinson has served as a director of the Company
since February 1987. He also served as a director of Kansas City Southern
Industries, Inc., a diversified railroad holding company from 1967 to 1993.
He is the former Chairman and President and a former director of Kemper
Financial Services, Inc. and the former President and a former director of
Kemper Group Funds. He served as a director of Ryder System, Inc., a truck
leasing and services company, from 1978 to 1988 and of ALC Communications,
Inc., a long-distance telephone carrier, from 1986 to 1988. Chairman, Audit
Committee; member, Compensation and Stock Option Committee. Age 82.
<PAGE>
WARREN J. HAYFORD. Mr. Hayford served as President, Chief Operating
Officer and a director of the Company from its organization in 1986 through
August 1988 and served as Vice Chairman and a director from that time until
his retirement as Vice Chairman effective December 31, 1992. He continues to
serve as a director. Mr. Hayford has served as Chairman and director of
Brockway Standard Holdings Corporation, a privately held manufacturer of
metal containers, since its formation in 1989. From 1982 through 1984, he
was President and a director of GenCorp Inc. (formerly General Tire Corp.),
a diversified manufacturer, and from 1979 to 1982, served as President and a
director of Navistar International Corporation, ("Navistar"), a manufacturer
of trucks. Prior thereto, Mr. Hayford served as Executive Vice President and
a director of The Continental Group, Inc., a diversified manufacturing and
services company. Mr. Hayford serves as a director of System Software
Associates, Inc., a developer and marketer of business application software
packages, and formerly served as a director of Brockway Incorporated, a
glass, plastic and metal container manufacturer. Chairman, Nominating
Committee. Age 65.
RICHARD S. LEVITT. Mr. Levitt has served as a director of the Company
since October 1987. He is currently Chairman of Nellis Corporation, a
private capital management company. He served from 1983 to 1987 as Vice
Chairman and Chief Operating Officer of the Specialized Financial Group of
Norwest Corporation, a bank holding company. From 1979 to 1983, Mr. Levitt
served as Chairman of the Board, President and Chief Executive Officer of
Norwest Financial Services, Inc., a financial services company (formerly Dial
Corporation), which became a wholly owned subsidiary of Norwest Corporation
on August 31, 1982. Mr. Levitt is a director of Norwest Corporation, Norwest
Bank Iowa, N.A., Meredith Corporation, a communications company and the
Northwest Area Foundation, a charitable foundation. Chairman, Compensation
and Stock Option Committee; member, Audit Committee. Age 64.
RALPH L. MacDONALD JR. Mr. MacDonald has served as a director of the
Company since May 1994, when he was appointed to replace Vernon E. Faulconer,
who resigned in February 1994 for personal reasons. Mr. MacDonald is a
principal of Island Capital Corporation ("Island Capital"), a private
investment company. He was formerly Managing Director and member of the
Management Committee of Bankers Trust Company and its parent, Bankers Trust
New York Corporation, which he joined in 1964 and served in various
capacities until his resignation in March 1992 to co-found Island Capital.
Mr. MacDonald also serves as a director of Hercules, Inc., a specialty
chemical and aerospace concern, and United Meridian Corporation, an oil and
gas company. Member, Compensation and Stock Option Committee. Age 52.
MARVIN A. POMERANTZ. Mr. Pomerantz has served as Chairman, Chief
Executive Officer and a director of the Company since its organization in
1986. Since 1980, Mr. Pomerantz has served as Chairman or President and a
director of MAG. From 1980 to 1982, he served as President of the
Diversified Group, and later as Executive Vice President of Navistar.
Mr. Pomerantz formerly served as President of the Board of Regents for the
state universities in Iowa and on the board of directors of Stone Container
Corporation, a manufacturer of packaging products. He currently serves on
the Board of Directors and the Executive Committee of the American Forest &
Paper Association. Age 64.
THOMAS H. STONER. Mr. Stoner has served as a director of the Company
since February 1993. He served from 1965 to 1993 as Chairman and Chief
Executive Officer of Stoner Broadcasting Systems, Inc., a privately owned
broadcast communications company ("SBI"), and now serves as Chairman of the
Executive Committee of American Radio Systems, Inc., into which SBI merged in
1993. Since January 1994 he has been Chairman of the Chesapeake Bay
Foundation, a charitable foundation, after having served on the Board of
Trustees since 1989. From 1965 to 1991 he served as Chairman of the Stoner
McCray System, Inc., a privately owned real estate development company, and
from 1985 to 1989 he served as a director of Annapolis Banking & Trust
Company, an affiliate of Mercantile Bankshares Corporation, a publicly traded
banking company. Member, Nominating Committee. Age 59.
The Board of Directors recommends a vote FOR each Class B Director
nominee.
<PAGE>
CONTINUING DIRECTORS WHOSE TERMS ARE NOT EXPIRING
Class A Directors
FRANK E. BABB. Mr. Babb has served as a director of the Company since
November 1992. He has been Chairman of Automated Computer Business Systems,
Inc., a private electronic marketing company, since 1993, and of The Shoals
Company, a family asset management firm, since 1991. Since 1991 Mr. Babb has
served as counsel to McDermott, Will & Emery, a national law firm. He served
as a member of the Management Committee and from 1978 through 1984 as
Chairman of the Finance Committee of McDermott, Will & Emery, where he was a
partner until 1990. Mr. Babb is a director of International Research and
Development Corporation, a toxicology testing and cosmetics company, and
TerraTek, Inc., a geo-science company. Member, Nominating Committee.
Age 62.
NORMAN H. BROWN JR. Mr. Brown has served as a director of the Company
since November 1992. He has been a Managing Director of Donaldson, Lufkin &
Jenrette Securities Corporation, an investment banking and brokerage firm,
since June 1985. He was a Senior Vice President of Oppenheimer & Co., an
investment banking firm, from 1983 to 1985 and was a Senior Vice President at
E.F. Hutton, an investment banking firm, from 1979 to 1983. Member, Audit
Committee. Age 47.
HARVE A. FERRILL. Mr. Ferrill has served as a director of the Company
since November 1992. He has served as Chairman and Chief Executive Officer
of Advance Ross Corporation since October 1992 and had been President and
Chief Executive Officer since November 1990. Advance Ross Corporation's
primary business is Europe Tax-Free Shopping AB, the world's largest refunder
of value-added taxes. Advance Ross also operates PPC Industries, which
designs, manufacturers and installs electrostatic precipitators for
industrial pollution control applications. He has served as Chairman of the
board of directors of GeoWaste Incorporated, a publicly traded waste
management company, since August 1991. Mr. Ferrill has also served as
President of Ferrill-Plauche Co., Inc., a private investment company, since
November 1982. He served from 1984 through 1989 as Chairman of the board of
directors and Chief Executive Officer of Efficient Health Systems, Inc., a
private health care cost containment company. He served from 1983 through
1989 as a director of Laidlaw Industries, Inc., a waste management company.
Member, Audit Committee. Age 61.
MEETINGS AND COMMITTEES OF THE BOARD
The Company's Board of Directors (the "Board") held four meetings
during fiscal 1994 and the various committees of the Board held a total of
four meetings. During fiscal 1994, each Board member attended 100 percent of
the meetings of the Board and 100 percent of the meetings of the committees
of which he is a member.
Directors who are not current employees of the Company (the "Outside
Directors") receive an annual fee of $18,000 ($26,000, effective January
1995) plus an attendance fee of $1,000 for each meeting of the Board. In
addition, each Outside Director is paid an annual fee of $3,500 ($5,000,
effective January 1995) for each committee chaired, plus a fee of $1,000 per
committee meeting attended. During fiscal 1994, no director fees were paid
to Mr. Pomerantz. All directors are reimbursed for expenses incurred as a
director.
The Board, pursuant to its powers, has designated certain committees of
the Board, including a Compensation and Stock Option Committee (the
"Compensation Committee"), an Audit Committee and a Nominating Committee, the
functions of which are described below.
The Compensation Committee is responsible for establishing and
maintaining employee benefit programs, plans and trusts, including incentive
compensation programs, and the administration and grant of stock-based awards
under the Company's 1987 Key Employee Stock Option Plan (the "1987 Plan") and
1989 Plan. The Compensation Committee met twice in fiscal 1994.
The Audit Committee's functions include making recommendations to the
Board on the selection of the Company's independent auditors, reviewing the
scope of the independent auditors' examination and meeting with the
independent auditors, internal auditors, the Board and certain officers and
employees of the Company to review the adequacy of internal controls. The
Audit Committee held two meetings in fiscal 1994.
<PAGE>
The Nominating Committee's responsibilities include recommending
candidates for election to the Board or to fill vacancies and reviewing the
performance of Board members. The Nominating Committee, established in
May 1994, met for the first time in November 1994. The Nominating Committee
will consider a director nominee recommended by a stockholder, if written
notice of such recommendation is delivered by registered mail to the
Secretary of the Company not less than 90 nor more than 120 days before a
meeting of stockholders at which directors are to be elected. A
recommendation must be accompanied by a comprehensive written resume of the
recommended nominee's business experience and background and a consent in
writing signed by the recommended nominee that he or she is desirous of being
considered as a nominee, and if nominated and elected, he or she will serve
as a director. Such a recommendation by a stockholder does not guarantee
that the Nominating Committee will propose any such nominee to the Board.
PROPOSAL 2
INCREASE IN THE NUMBER OF SHARES OF CLASS A
COMMON AVAILABLE UNDER THE 1989 PLAN
General
The Board has approved and recommends that the stockholders approve an
increase in the number of shares of Class A Common authorized to be issued
under the 1989 Plan from 1,679,833 to 2,279,833. The additional
600,000 shares would be used for grants of incentive options under
Section 422 of the Internal Revenue Code, nonqualified stock options,
restricted stock or stock-based awards as provided by the 1989 Plan. The
1989 Plan is currently qualified pursuant to Rule 16b-3 under the Securities
Exchange Act of 1934, and stockholder approval of the increase in the number
of shares authorized to be issued under the 1989 Plan is being sought in
order for the 1989 Plan, as amended, to remain qualified under such
Rule 16b-3. The following summary of the material provisions of the
1989 Plan is qualified by reference to the full text of the 1989 Plan, a copy
of which may be obtained at no charge upon written request to the Secretary
of the Company.
Term
The 1989 Plan commenced on January 1, 1989 and will terminate on
December 31, 1998 unless sooner terminated by the Board. Termination of the
1989 Plan will not affect grants made prior to termination, but no grants
will be made after termination.
Administration
The 1989 Plan is administered by a committee appointed by the Board
(the "Committee") composed of three or more persons not eligible to receive
awards under the 1989 Plan. The 1989 Plan is currently being administered by
the Compensation Committee.
Subject to the terms of the 1989 Plan, the Committee has authority to
(i) select employees to participate in the 1989 Plan, (ii) determine the form
of grants, and the conditions and restrictions, if any, subject to which
grants will be made and become payable under the 1989 Plan, (iii) construe
and interpret the 1989 Plan and (iv) adopt, amend or rescind such rules and
regulations, and make such other determinations for carrying out the
1989 Plan, as the Committee deems necessary or appropriate.
Eligibility
Officers and key employees of the Company and its subsidiaries selected
by the Committee may participate in the 1989 Plan. During the term of the
Company's Shareholder Value Plan the Company's executive officers are not
eligible to participate in the 1989 Plan or the 1987 Plan. Selection for
participation with respect to one form of award under the 1989 Plan does not
automatically result in selection for participation with respect to other
forms of awards under the 1989 Plan unless such result is specified by the
Committee or by the terms of the 1989 Plan. As of December 16, 1994,
approximately 250 employees were participants or eligible to participate in
the 1989 Plan.
<PAGE>
Securities Subject to the 1989 Plan
Upon approval of Proposal 2, the 1989 Plan will permit awards relating
to up to 2,279,833 shares of Class A Common. The shares to be delivered
under the 1989 Plan may consist, in whole or in part, of authorized but
unissued Class A Common or treasury Class A Common not reserved for any other
purpose. If any grant made pursuant to the 1989 Plan terminates, expires or
lapses for any reason, any shares of Class A Common subject to such grant
shall again be made available for grant unless, in the case of stock options
granted under the 1989 Plan, related stock appreciation rights are exercised.
In the event of any changes in the Class A Common, such as stock splits or
other similar events described in the 1989 Plan, the Committee may make
appropriate adjustments in the number of shares subject to grants theretofore
made to participants, in the exercise price per share of stock options
theretofore granted to participants and in the number and kinds of shares
which may be distributed under the 1989 Plan. Based on the closing price of
$7.88 per share for the Company's Class A Common on December 16, 1994, the
aggregate market value of 2,279,833 shares of Class A Common is approximately
$18 million.
Effect of Termination of Employment or Change in Control on Grants
The rights of participants with respect to grants under the 1989 Plan
following termination of employment for any reason or a change in control of
the Company (as defined in the 1989 Plan) shall be in accordance with the
terms of the 1989 Plan and rules established by the Committee.
Stock Options
The 1989 Plan authorizes grants of stock options to participants from
time to time as determined by the Committee. The Committee shall specify
whether or not any option is intended to be an incentive stock option
described in Section 422 of the Internal Revenue Code. Options that are not
incentive stock options are referred to as nonqualified stock options. All
stock options shall have an exercise price that is not less than the fair
market value of the Class A Common at the time the option is granted, and
none may be exercised more than 10 years and one day from the date of grant.
The Committee may establish dates on which installment portions of any option
may be exercised during its terms, and may accelerate the time at which
installment portions of an outstanding option may be exercised.
Payment for shares received upon exercise of a stock option may be made
in cash, in shares of Class A Common, in a combination of cash and shares, by
delivery of the optionee's promissory note or in such other manner as
determined by the Committee.
Stock Appreciation Rights
The 1989 Plan authorizes the Committee to affix stock appreciation
rights ("SARs") to stock options either at the time the option is granted or
at any date (prior to the option expiration ) thereafter. SARs give an
option holder the right to surrender all or a portion of the option and
receive from the Company a payment, in shares of Class A Common Stock, cash
or a combination thereof, equal to the difference between the option exercise
price and the fair market value at the time of surrender. SARs are
exercisable only to the extent that the related options are exercisable. The
exercise of any option will result in an immediate forfeiture of its related
SAR, and the exercise of an SAR will cause an immediate forfeiture of its
related option. No SARs have been granted.
Stock Indemnification Rights
The 1989 Plan authorizes the Committee to grant stock indemnification
rights ("SIRs") to optionees who are officers of the Company and subject to
Section 16(b) of the Exchange Act. Section 16(b) has the effect of making it
impractical for an officer, among others, to sell any Class A Common within
six months before or after the grant of an option. (For purposes of this
discussion of SIRs, the Section 16(b) six-month period is referred to as the
"Holding Period."). An SIR, if awarded, shall provide that if at the end of
the Holding Period the shares acquired in the exercise are sold, the Company
shall pay the optionee in cash an amount equal to the amount, if any, by
which the fair market value of Class A Common on the date of exercise exceeds
the greater of (i) the net sale price received by the optionee or (ii) the
purchase price paid for the shares on the date the option was exercised.
The Committee has full discretion in awarding SIRs and in imposing such
other terms and conditions on them as the Committee deems appropriate, except
that an SIR and an SAR shall not be awarded with respect to the same option.
SIRs may be granted at the same time options are awarded or at a later date.
No SIRs have been granted.
<PAGE>
Restricted Stock
Shares of restricted Class A Common may be awarded to participants from
time to time as determined by the Committee under the 1989 Plan. The
Committee will determine the restrictions on such shares, the duration of
such restrictions and any circumstance under which restricted shares will be
forfeited. Participants will be required to deposit the shares with the
Company during the period of any restriction thereon and, except as otherwise
provided by the Committee, during any such period of restriction participants
shall have all of the rights of a holder of Class A Common, including but not
limited to the rights to receive dividends and to vote.
Performance Awards
The 1989 Plan permits grants of performance awards to participants from
time to time as determined by the Committee. Performance awards may include
fixed dollar amount target grants, performance units and performance shares.
The value of a performance unit granted under the 1989 Plan shall be
determined by the Committee at the time of grant, while the value of a
performance share shall be equal to the market value of a share of Class A
Common.
The Committee will establish the time periods over which performances
will be measured (the "performance cycle") and the performance goals for each
performance cycle. The value of a performance award or the portion of a
performance award that is actually earned by participants, or both, shall be
determined by the Committee based upon the extent to which the performance
goals are attained. Performance goals may include financial or operating
measures of the Company (such as return on equity, return on assets or return
on investment) or of a specific division or operating unit and may be based
on performance relative to a peer group as determined by the Committee.
Payment of earned performance awards may be made to participants in cash,
shares of Class A Common or a combination thereof, as determined by the
Committee. No performance awards have been granted.
Federal Income Tax Consequences
The following discussion is intended only as a brief summary of the
federal income tax rules relevant to stock options, SARs, SIRs, restricted
stock and performance awards. The rules are highly technical and subject to
change. The following discussion is limited to the federal income tax rules
relevant to the Company and to individuals who are citizens or residents of
the United States. The discussion does not address the state, local or
foreign income tax rules relevant to stock options, SARs, SIRs, restricted
stock and performance awards.
Incentive Stock Options. An optionee will not recognize taxable income
upon the grant or exercise of an incentive stock option. However, the excess
of the fair market value of the share of the Class A Common on the date of
exercise over the option exercise price of the option may be included in
alternative minimum taxable income which may subject the optionee to the
alternative minimum tax. An optionee may be required to pay an alternative
minimum tax even though the optionee receives no cash upon the exercise of
the incentive stock option with which to pay such tax.
If an optionee holds the Class A Common acquired upon exercise of the
incentive stock option for at least two years from the date of grant and at
least one year following exercise (the "Statutory Holding Periods"), the
optionee's gain, if any, upon a subsequent disposition of such Class A Common
is taxed as long-term capital gain. The net capital gain of an individual
taxpayer is subject to a maximum tax rate of 28 percent.
If an optionee disposes of Class A Common acquired pursuant to the
exercise of an incentive stock option before satisfying the Statutory Holding
Periods (a "Disqualifying Disposition"), the optionee may recognize both
compensation income and capital gain in the year of disposition. The amount
of the compensation income generally equals the excess of (1) the lesser of
the amount realized on disposition or the fair market value of the Class A
Common on the exercise date over (2) the exercise price. The balance of the
gain realized on such a disposition, if any, is long-term or short-term
capital gain depending on whether the Class A Common has been held for more
than one year following exercise of the incentive stock option.
<PAGE>
Special rules apply for determining an optionee's tax basis in and
holding period for Class A Common acquired upon the exercise of an incentive
stock option if the optionee pays the exercise price of the incentive stock
option in whole or in part with previously owned shares of Class A Common.
Under these rules, the optionee does not recognize any income or loss from
the delivery of shares of Class A Common (other than shares previously
acquired through the exercise of an incentive stock option and not held for
the Statutory Holding Periods) in payment of the exercise price. The
optionee's tax basis in and holding period for the newly acquired shares of
Class A Common are determined as follows: as to a number of newly acquired
shares equal to the previously owned shares delivered, the optionee's basis
in and holding period (for capital gain, but not Disqualifying Disposition,
purposes) for the previously owned shares carry over to the newly acquired
shares on a share-for-share basis; as to each remaining newly acquired share,
the optionee's basis is zero (or, if part of the exercise price is paid in
cash, the amount of such cash divided by the number of such remaining newly
acquired shares) and the optionee's holding period begins on the date after
such share is transferred. Under proposed regulations, any Disqualifying
Disposition is deemed made from shares with the lowest basis first.
If an optionee pays the exercise price of an incentive stock option in
whole or in part with previously owned shares that were acquired upon the
exercise of an incentive stock option and that have not been held for the
Statutory Holding Periods, the optionee recognizes compensation income (but
not capital gain) under the rules applicable to Disqualifying Dispositions.
The optionee may increase his or her basis in the shares received in an
amount equal to the compensation income he or she recognizes.
The Company is not entitled to any deduction with respect to the grant
or exercise of an incentive stock option or the subsequent disposition by the
optionee of the shares acquired if the optionee satisfies the Statutory
Holding Periods. If these holding periods are not satisfied, the Company is
entitled to a deduction in the year the optionee disposes of the Class A
Common in an amount equal to the optionee's compensation income.
Nonqualified Stock Options. An optionee does not recognize taxable
income upon the grant of a nonqualified stock option. At the time of
exercise, however, the optionee generally recognizes compensation income
equal to the difference between the exercise price and the fair market value
of the shares of Class A Common on the date of exercise. This income is
subject to income and employment tax withholding. The Company is entitled to
an income tax deduction corresponding to the compensation income recognized
by the optionee.
When an optionee disposes of shares of Class A Common received upon the
exercise of a nonqualified stock option, the optionee recognizes capital gain
or loss equal to the difference between the sales proceeds received and the
optionee's basis in the shares sold. The optionee's capital gain is
long-term or short-term, depending upon whether the shares sold were held for
more than one year. The Company does not receive a deduction for any capital
gain recognized by the optionee.
If an optionee pays the exercise price of a nonqualfied stock option
entirely in cash, the optionee's tax basis in the shares of Class A Common
received equals the shares' fair market value on the exercise date, and the
optionee's holding period begins on the day after the exercise date. If,
however, an optionee pays the exercise price of a nonqualified stock option
in whole or in part with previously owned shares of Class A Common, then the
optionee's tax basis in and holding period for the newly acquired shares are
determined as follows: as to a number of newly acquired shares equal to the
number of previously owned shares delivered, the optionee's basis in and
holding period for the previously owned shares carry over to the newly
acquired shares on a share-for-shares basis; as to each remaining newly
acquired share, the optionee's basis equals the share's value on the exercise
date, and the optionee's holding period begins on the day after the exercise
date.
In the case of an optionee subject to six-month short-swing profit
liability under Section 16(b) of the Exchange Act (typically, executive
officers, directors and major stockholders of the Company), the optionee's
compensation income equals the excess of the fair market value of the shares
acquired over the option exercise price. However, such excess is determined
by using the fair market value on the later of the date of exercise or the
date six months after the date of grant unless such optionee elects to be
taxed based on the fair market value of the shares on the date of exercise by
filing an election with the IRS within 30 days after the exercise date.
<PAGE>
Stock Appreciation Rights. A participant who is granted an SAR
recognizes no income upon the grant of the SAR. At the time of exercise,
however, the participant recognizes compensation income equal to the sum of
any cash received and the fair market value of any shares of Class A Common
received. This income is subject to income and employment tax withholding.
The Company is entitled to an income tax deduction corresponding to the
compensation income recognized by the participant.
Stock Indemnification Rights. A participant who is granted an SIR
recognizes no income upon the grant of the SIR. At the time of exercise,
however, the participant recognizes compensation income equal to any cash
received in respect of the SIR. This income is subject to income and
employment tax withholding. The Company is entitled to an income tax
deduction corresponding to the compensation income recognized by the
participant.
Restricted Stock. A participant who is granted restricted stock may
make a Section 83 election to have the grant taxed as compensation income at
the date of receipt, with the result that any future appreciation (or
depreciation) in the value of the shares of Class A Common granted will be
taxed as capital gain (or loss) upon a subsequent sale of the shares.
However, if a participant makes a Section 83(b) election and later forfeits
the shares of Class A Common subject to the election, he or she does not
receive a deduction as a result of such forfeiture.
If a participant does not make a Section 83(b) election with respect to
restricted shares, he or she recognizes compensation income on the date the
restrictions lapse equal to the fair market value of the shares on that date,
and his or her holding period begins on the day after that date. Upon a
later sale or exchange of the shares, the participant recognizes capital gain
or loss (long-term or short-term depending upon whether he has held the
shares for more than one year) equal to the difference between the proceeds
received and the value of the shares on the date the restrictions lapsed.
Any dividends a participant receives with respect to shares which are subject
to restrictions and with respect to which no Section 83(b) election has been
made are treated as additional compensation income.
Any compensation income a participant recognizes from a grant of
restricted stock is subject to income and employment tax withholding. The
Company is entitled to an income tax deduction for any compensation income
taxed to the participant.
Performance Awards. The grant of a performance award does not generate
taxable income to the participant or an income tax deduction to the Company.
Any cash and the fair market value of any shares of Class A Common received
as payment in respect of a performance award constitute compensation income
to the participant. The participant's income is subject to income and
employment tax withholding. The Company is entitled to an income tax
deduction corresponding to the compensation income recognized by the
participant.
Payment of Withholding Taxes. The Company has the power to withhold,
or to require a participant to remit to the Company, an amount sufficient to
satisfy any Federal, state, local or foreign withholding tax requirements on
any grant or exercise made pursuant to the 1989 Plan. However, to the extent
permissible under applicable tax, securities and other laws, the Committee
may, in its sole discretion, permit the participant to satisfy a tax
withholding requirement by delivering to the Company shares of Class A Common
previously owned by the participant, or by directing the Company to apply
shares of Class A Common to which the participant it entitled as a result of
the exercise of any option or the lapse of a period of restriction, to
satisfy such requirement.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 3
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP has been selected by the Board of Directors, upon
the recommendation of the Audit Committee, to act as the Company's
independent auditors in fiscal 1995. Representatives of Deloitte & Touche LLP
will be present at the 1995 Annual Meeting of Stockholders; they will have
the opportunity to make a statement, if they desire to do so; and they will
be available to respond to appropriate questions. Stockholders are being
asked to approve the selection of Deloitte & Touche LLP as the Company's
independent auditors.
The Board of Directors recommends a vote FOR this proposal.
<PAGE>
OTHER BUSINESS
The Board does not intend to present, and does not have any reason to
believe that others will present, any item of business at the annual meeting
other than those specifically set forth in the notice of the meeting. If
other matters are presented for a vote, however, the proxies will be voted
for such matters in accordance with the judgment of the persons acting under
the proxies.
<PAGE>
INFORMATION WITH RESPECT TO CERTAIN STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of each class of the Company's Common Stock and warrants
to obtain Class A Common as of December 16, 1994 by (i) each stockholder
known by the Company to own beneficially more than 5 percent of such
outstanding class of Common Stock (ii) each director, named executive officer
(as defined below) and nominee of the Company and (iii) all officers and
directors of the Company as a group. The numbers and percentages of Class A
Common include Trust Stock held by the Warrant Trustee but do not include the
outstanding Class B Common which is convertible into Class A Common. To the
knowledge of the Company, each stockholder has sole voting and investment
power as to the shares owned unless otherwise noted. The address of all
directors and executive officers is the address of the Company.
<TABLE>
<CAPTION>
Warrants To Obtain
Class A Common Stock Class B Common Stock Class A Common Stock
----------------------- ----------------------- ------------------------
Percent Percent Number Percent
Number Of Class Number Of Class Of Of Class
Of Shares Outstanding* Of Shares Outstanding* Warrants Outstanding*
---------- ----------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Marvin A. Pomerantz
and MAG(1) 215,000 - 4,279,942 81.3% 0 -
4700 Westown Parkway
West Des Moines, IA 50625
Warren J. Hayford(2) 1,314,550 2.7% 514,518 9.8% 0 -
Frank E. Babb 5,000 - 0 - 3,000 -
Norman H. Brown Jr. 0 - 0 - 10,000 -
Harve A. Ferrill 10,000 - 0 - 0 -
John E. Goodenow(3) 31,000 - 0 - 10,000 -
David B. Hawkins(4) 26,200 - 0 - 0 -
John Hawkinson(4)(5) 54,245 - 0 - 13,857 -
Richard S. Levitt(4)(6) 74,200 - 0 - 0 -
Ralph L. MacDonald Jr. 20,000 - 0 - 0 -
Thomas H. Stoner 0 - 0 - 0 -
Dale E. Stahl 211,648 - 0 - 25,000 -
Daniel P. Casey(7) 113,200 - 59,411 1.1% 15,000 -
Lawrence G. Rogna(8) 77,500 - 0 - 15,800 -
All officers and
directors as a
group (26 persons)(9) 2,618,336 5.4% 4,853,871 92.2% 375,407 1.2%
</TABLE>
* Percentages less than 1 percent have been omitted.
(1) MAG is owned by Mr. Pomerantz, his wife and trusts for the benefit of
their children. Mr. Pomerantz does not own directly any of these
shares except for 5,000 shares of Class A Common held in his own name.
Mr. Pomerantz disclaims beneficial ownership of shares held by MAG and
attributable to his wife and the trusts.
(2) The shares shown as beneficially owned by Mr. Hayford include 64,143
shares of Class A Common and 12,143 shares of Class B Common owned
directly by trusts for the benefit of his grandchildren, 1,853 shares
of Class A Common and 216,643 shares of Class B Common owned directly
by his wife and 50,000 shares of Class A Common owned by a charitable
family foundation. Mr. Hayford disclaims beneficial ownership of
shares held by the trusts, his wife and the foundation.
(3) The shares shown as beneficially owned by Mr. Goodenow include 2,000
shares owned directly by his wife and 24,000 shares owned directly by
Goodenow Bancorporation, a family owned corporation. Mr. Goodenow
disclaims beneficial ownership of such shares.
(4) Messrs. Hawkins, Hawkinson, and Levitt each own options to purchase
24,200 shares of the Company's Class A Common, which options were
granted pursuant to the Company's Outside Director Stock Option Plan
("Director Option Plan"). Although none of such options have been
exercised, the shares of Class A Common shown as beneficially owned by
each of them include 100 percent of such options, all of which are
currently exercisable.
(5) The shares shown as beneficially owned by Mr. Hawkinson include 2,000
shares owned directly by his wife and 758 shares and 3,857 warrants
owned by a trust for the benefit of his wife. Mr. Hawkinson disclaims
beneficial ownership of such shares and warrants.
(6) The shares shown as beneficially owned by Mr. Levitt include 50,000
shares owned by a trust for the benefit of his wife. Mr. Levitt
disclaims beneficial ownership of such shares.
<PAGE>
(7) The shares shown as beneficially owned by Mr. Casey include 9,360 and
6,000 shares of Class A Common owned by his wife and children,
respectively. Mr. Casey disclaims beneficial ownership of such shares.
(8) The warrants shown as benefically owned by Mr. Rogna include 2,800
owned by his wife. Mr. Rogna disclaims beneficial ownership of such
warrants.
(9) The number and percentage of shares of Class A Common owned by the
persons named in the table and all officers and directors as a group
include the 648,059 shares that such persons and group may obtain upon
the exercise of stock options exercisable currently or within 60 days
of December 16, 1994.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information with respect to
compensation of the Company's chief executive officer and the Company's other
executive officers (the "named executive officers") earned for the fiscal
years ended September 30, 1992, 1993 and 1994.
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------
Awards
Annual Compensation --------------------- Payouts
----------------------------- Restricted -------
Other Annual Stock LTIP All Other
Name and Fiscal Salary Bonus Compensation Awards Options/ Payouts Compensation
Principal Position Year ($) ($) ($)(1) ($) SARs(#) ($)(2) ($)(3)(4)(5)
- -------------------- ------ -------- ------ ------------- ---------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marvin A. Pomerantz 1994 600,000 0 - 0 0 682,100 33,500
(Chairman and Chief 1993 570,000 0 60,600 0 0 0 22,800
Executive Officer) 1992 480,000 0 - 0 0 0 9,200
Dale E. Stahl 1994 333,000 87,000 - 0 0 272,800 16,900
(President and Chief 1993 303,400 0 - 0 30,000 0 12,200
Operating Officer) 1992 267,700 0 - 0 30,000 0 495,900
Daniel P. Casey 1994 313,000 82,000 - 0 0 272,800 16,400
(Executive Vice 1993 283,900 0 - 0 30,000 0 11,500
President) 1992 246,000 0 - 0 30,000 0 448,900
Lawrence G. Rogna 1994 211,000 43,000 - 0 0 136,400 9,300
(Senior Vice President) 1993 194,200 0 - 0 15,000 0 8,400
1992 175,100 0 - 0 15,000 0 253,800
</TABLE>
(1) Includes $50,000 country club initiation fee paid in 1993 on behalf of
Mr. Pomerantz.
(2) Amounts shown are awards for calendar 1993 payable in fiscal 1994 under
the Company's Shareholder Value Plan, in which only the named executive
officers are eligible to participate. Payment of a portion of such
awards is contingent upon the price of the Company's Class A Common
remaining at certain levels. See Compensation Committee Report on
Executive Compensation. Awards for calendar 1994 payable in fiscal
1995 are not determinable as of the date of this proxy statement.
(3) Includes for 1993 and 1994 employer contributions to the Company's
401(k) Plan on behalf of Messrs. Pomerantz, Stahl, Casey and Rogna of
$9,200 and $4,500; $9,700 and $4,500; $9,700 and $4,800; and $8,400 and
$5,400, respectively.
(4) Includes for 1993 and 1994 cash payments in lieu of Company
contributions which could not be made because of Internal Revenue Code
limitations to Messrs. Pomerantz, Stahl, Casey and Rogna of $13,600 and
$29,000; $2,500 and $12,400; $1,800 and $11,600; and $0 and $3,900,
respectively.
(5) Includes for 1992 payments made under the Company's Key Performance
Compensation Plan ("KPCP") to Messrs. Pomerantz, Stahl, Casey and Rogna
of $0, $470,000, $425,000 and $240,000, respectively. No further
amounts are payable under the KPCP.
<PAGE>
Option/SAR Grants in Last Fiscal Year
The named executive officers are not be eligible for stock grants
during the term of the Shareholder Value Plan and, therefore, no stock
options or SARs were granted to the named executive officers in fiscal 1994
under any stock option plan sponsored by the Company.
The following table shows information concerning the exercise of
options by the named executive officers in fiscal 1994 and the value of
options held by the named executive officers at the end of fiscal 1994.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Year-End Option/SAR Values
Value
Number of of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARS
FY-End(#) at FY-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized($) Unexercisable(1) Unexercisable(2)
- -------------------- --------------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Marvin A. Pomerantz 0 0 0/0 0/0
Dale E. Stahl 0 0 147,148/30,000 717,214/167,500
Daniel P. Casey 0 0 50,000/30,000 251,875/167,500
Lawrence G. Rogna 0 0 35,000/15,000 173,437/83,750
</TABLE>
(1) Options only are included. No SAR grants have been made.
(2) The closing price of the Company's Class A Common on September 30, 1994
was $8.50.
<PAGE>
EXECUTIVE OFFICERS
MARVIN A. POMERANTZ. See Nominees for Election at the 1995
Annual Meeting.
DALE E. STAHL. Mr. Stahl has served as President and Chief
Operating Officer of the Company since August 1988. From March 1988
through August 1988, Mr. Stahl served as Vice President of the Company.
From 1978 to 1988, he was employed by Union Camp Corporation, an
integrated paper packaging manufacturer, starting in sales and
ultimately being promoted to Vice President-General Manager of the
container division. Age 47.
DANIEL P. CASEY. Mr. Casey has served as Executive Vice
President of the Company since February 1990. From July 1988 through
February 1990, Mr. Casey served as Senior Vice President-Financial and
Legal Affairs of the Company and from January 1988 through June 1988 in
the same position for each of the Company and Mid-America Packaging,
Inc., which merged with the Company in June 1988. From March 1987
through January 1988, Mr. Casey served as Vice President-Financial and
Legal Affairs for each of the Company and Mid-America. Age 52.
LAWRENCE G. ROGNA. Mr. Rogna has served as Senior Vice President
of the Company since February 1990. From December 1988 through
February 1990, Mr. Rogna served as Vice President-Human Resources of
the Company. From 1981 to 1988 he was employed by Rohr Industries,
Inc., a manufacturer of components for aircraft and space vehicles,
where he served as Vice President, Human Resources from 1983 to 1988.
Age 48.
EMPLOYMENT AGREEMENTS
The Company has entered into an Employment Agreement with
Mr. Pomerantz dated as of January 1, 1993. The employment agreement is
for a term of five years, commencing January 1, 1993. The employment
agreement provides for an annual base salary of no less than $600,000,
participation in the Shareholder Value Plan and participation in all
salaried employee benefit plans and programs of the Company. The
employment agreement provides Mr. Pomerantz with supplemental annual
retirement income payments commencing on the later of December 31, 1997
or the date of retirement equal to 50 percent of his average base
salary and bonus for the four highest years of service with the
Company, less primary Social Security benefits and any amounts payable
under the Company's pension plan. Early retirement reductions are
included under the supplemental retirement plan. During the term of
his employment agreement, Mr. Pomerantz will not be eligible for any
stock option or restricted stock grants or to participate in the
Company's Management Incentive Plan.
In the event that Mr. Pomerantz's employment is terminated as a
result of his disability, Mr. Pomerantz will be entitled to receive his
base salary for twelve months after such termination. In the event
that Mr. Pomerantz's employment is terminated as a result of his death,
his estate will be entitled to receive his base salary which is then
accrued and unpaid. In the event that Mr. Pomerantz's employment is
terminated by the Company for any other reason other than Serious
Misconduct (as defined below) or by Mr. Pomerantz for Good Reason (as
defined below), he will be entitled to receive his full compensation
for the balance of the term of the employment agreement. For purposes
of the employment agreement, "Good Reason" means Mr. Pomerantz's
resignation due to substantial diminution of his duties, a reduction of
his perquisites, a change in principal office location or a material
uncured breach by the Company of the employment agreement, and "Serious
Misconduct" means embezzlement or misappropriation of Company funds,
commission of a felony, willful disregard for his duties, violation of
any duty of loyalty, repeated acts causing public disgrace to the
Company, disclosure of the Company's confidential information, or
engaging in competition with the Company at any time before the sixth
anniversary of the commencement of the Employment Agreement.
The Company has entered into an employment letter agreement for
an indefinite term with each of Mr. Stahl, under which he is serving as
President and Chief Operating Officer at an annual salary of $325,000
($335,000 effective January 1995), Mr. Casey, under which he is serving
as Executive Vice President at an annual salary of $305,000 ($315,000
effective January 1995), and Mr. Rogna, under which he is serving as
Senior Vice President at an annual salary of $200,000 ($206,000
effective January 1995).
<PAGE>
If any of Messrs. Stahl, Casey or Rogna becomes disabled and the
Company elects to terminate such executive, such executive will be
entitled to receive his full base salary and benefits for twelve months
following such termination. If the Company otherwise terminates the
employment of any such executive, such executive will be entitled to
his full base salary and benefits for the twenty-four months following
such termination; provided, however, that the final twelve months of
payments will be reduced by the amount, if any, received by such
executive from other employment. Pursuant to the terms of their
employment agreements, each of Messrs. Stahl, Casey and Rogna is
entitled to participate in the Shareholder Value Plan and in the
Company's salaried employee benefit and incentive plans, but is not
eligible for any stock option or restricted stock grants during the
term of the Shareholder Value Plan.
Each of Messrs. Stahl, Casey and Rogna is party to a severance
compensation agreement with the Company. Pursuant to such agreement,
if any such executive is terminated within twenty-four months after a
change in control of the Company, such executive will be entitled to a
severance payment equal to two times the sum of such executive's base
salary plus his target bonus, as such bonus is provided for in the
Company's Management Incentive Plan. Target bonus amounts for
Messrs. Stahl, Casey and Rogna currently are 50 percent, 50 percent and
40 percent, respectively, of base salary.
CERTAIN TRANSACTIONS
MAG and certain of its subsidiaries provided office space and
administrative and clerical services to the Company during fiscal 1994
at a cost of approximately $54,000. Fees for these services are
determined on the basis of costs incurred and the fair market value of
the office space. It is expected that MAG and such subsidiaries will
continue to provide office space and administrative and clerical
services to the Company in the future.
The Company has entered into agreements with certain of its
stockholders and warrant holders which provide such stockholders and
warrant holders with the right in certain circumstances to require the
Company to register, at the Company's expense, the shares of Class A
Common or warrants owned by them under the Securities Act of 1933, as
amended (the "Securities Act").
The Company loaned Mr. Rogna $100,000 in 1990 in connection with
his relocation to the Chicago area. The loan has been extended and a
portion of it repaid. The outstanding balance is $120,619.
The Company has entered into employment agreements with
Messrs. Pomerantz, Stahl, Casey and Rogna. See "Employment
Agreements."
PENSION PLAN
The Gaylord Container Retirement Plan (the "Pension Plan") is a
qualified, non-contributory defined benefit plan which covers
substantially all employees of the Company, including both salaried and
hourly employees. The following table shows estimated annual benefits
payable under the Pension Plan on a straight life annuity basis upon
normal retirement with indicated years of credited service and final
average annual compensation.
<TABLE>
<CAPTION>
Final
Average Years of Service(2)
Average -----------------------------------------------------
Earnings(1) 5 10 15 20 25 30
- ---------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$300,000(3)(4) $9,375 $21,167 $31,992 $40,884 $49,775 $61,084
200,000 9,375 19,375 29,125 38,375 47,625 57,500
175,000 9,375 18,125 27,125 36,625 46,125 55,000
150,000 9,375 16,875 25,125 34,875 44,625 52,500
125,000 7,813 14,063 20,938 29,063 37,188 43,750
100,000 6,250 11,250 16,750 23,250 29,750 35,000
</TABLE>
(1) Compensation covered by the Pension Plan includes all cash
compensation, including amounts received under the Shareholder
Value Plan, but does not include compensation related to stock
options, non-cash compensation or deferred compensation. The
amounts reflected in the above pension table reflect appropriate
deductions for Social Security benefits in accordance with the
Pension Plan benefit formula.
<PAGE>
(2) As of September 30, 1994 the named executive officers had been
credited with the following years of service: Mr. Pomerantz, 6
years; Mr. Stahl, 6 years; Mr. Casey, 7 years; and Mr. Rogna, 5
years. The basic benefit payable under the Pension Plan is
computed on a straight life annuity basis.
(3) For the 1994 Pension Plan year, the amount of compensation in the
calculation of retirement benefits for any participant is limited
to $150,000 subject to future increases based on cost of living
adjustments implemented by the Department of Treasury. The
maximum estimated annual benefits listed in this table do not
include projected cost of living increases. Beginning with the
1994 Pension Plan year, the Company has maintained a supplemental
retirement plan in which Messrs. Stahl, Casey and Rogna
participate and receive credit for cash compensation in excess of
the $150,000 limitation.
(4) In addition to amounts payable under the Pension Plan,
Mr. Pomerantz will receive supplemental retirement income in
accordance with his employment agreement. See "Employment
Agreements." Based on current and historical compensation, the
maximum annual supplemental retirement income payable to
Mr. Pomerantz will be approximately $477,000.
Compensation Committee Participation
The members of the Company's Compensation Committee are
Messrs. Levitt, Goodenow, Hawkinson and MacDonald. No officers of the
Company serve on the Compensation Committee.
Compensation Committee Report on Executive Compensation
This Compensation Committee report shall not be deemed
incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act
of 1933 or under the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
The following has been submitted by the Compensation Committee of
the Board of Directors:
The Compensation Committee of the Board of Directors makes
recommendations to the Board regarding compensation of the Company's
executive officers. The philosophy of the Compensation Committee is to
design an executive compensation program to attract, motivate and
retain the executive talent critical to the Company's achievement of
its objectives to increase shareholder value and maximize returns to
shareholders.
Key to the program are incentives which vary rewards with
individual and Company performance. Two compensation approaches are
used to implement the variable pay initiative -- an annual cash
incentive opportunity focused on operating performance for officers and
key managers, and a long-term incentive based on share price
appreciation through grants of restricted stock, grants of stock
options or payments under the Shareholder Value Plan.
General Executive Compensation Program Policies
To achieve its objectives, the Company has developed a series of
executive compensation policies.
- The Company will provide levels of executive compensation
that are competitive with those provided by the relevant
marketplace (as defined below).
- The Company will provide annual cash incentive compensation
for executives that varies in a consistent and predictable
manner with the operating and financial performance of the
Company.
- The Company will provide programs which enable executives
to achieve rewards based on increased shareholder value to
reinforce the link between executive and shareholder
interests.
<PAGE>
Competitive Executive Compensation
The Company seeks to provide levels of executive compensation
that are competitive at expected levels of individual and Company
performance. Competitiveness is defined as in keeping with the
compensation of executives in comparable positions or who have similar
qualifications. The comparison group for those executives is companies
similar to the Company in industry and size.
Competitiveness is measured using data from a number of sources,
including published information, proxies, forest products industry
surveys, which includes data from Dow Jones paper products peer group,
and surveys by consulting firms.
Base Salary
A salary range is established for each salaried position in the
Company, including each executive officer position. The midpoint of
each salary range is based on the average salary of equivalent
positions at the other companies which the Company uses for comparison
purposes. The salary range is from 80 percent to 120 percent of the
midpoint. An individual's base salary is determined by reviewing his
or her sustained performance over time and correspondingly positioning
the executive officer's salary in the salary range for his or her
position. Salaries for the executive officers other than Mr. Pomerantz
were increased in fiscal 1994 to reflect their individual contributions
and provide salaries in line with competitive practices.
Annual Incentive Compensation
The Company maintains a Management Incentive Plan designed to
ensure that incentive compensation varies in a consistent and
predictable manner with the Company's operating and financial
performance. Performance targets and related amounts to be paid to
plan participants if the targets are achieved are determined annually
by the Board. Targets have been established for fiscal 1995 based on
the Company's earnings before interest, income taxes, depreciation and
amortization. Messrs. Stahl, Casey and Rogna received payouts under
this plan for fiscal 1994. Mr. Pomerantz does not participate in the
Management Incentive Plan.
Based on the same goals and targets, the Company also maintains
a Deferred Profit Sharing Plan which provides for contributions to
participants' individual 401(k) accounts. There were no payouts under
this plan for fiscal 1994. The Company's executive officers all
participate in this plan.
Long-Term Incentive
The Company currently maintains two stock-based plans pursuant to
which non-qualified stock options may be granted at no less than the
market price of the Class A Common at the time of the grant: the 1989
Plan and the 1987 Plan. The 1989 Plan also permits the grant of
incentive stock options, stock appreciation rights, stock
indemnification rights, restricted stock and performance awards. Only
non-qualified options and restricted stock have been granted.
Messrs. Pomerantz, Stahl, Casey and Rogna are not eligible to receive
any grants under the 1989 Plan or 1987 Plan during the term of the
Shareholder Value Plan.
The Shareholder Value Plan as approved by the Company's
stockholders on February 2, 1994 directly ties the long-term incentive
compensation of the Company's four executive officers to the creation
of shareholder value.
The Shareholder Value Plan commenced January 1, 1993 and will be
in effect until December 31, 1997. All deferred awards not paid by the
end of the calendar 1997 will be forfeited; provided that awards earned
in calendar 1997 may be payable during calendar 1998.
At the end of each calendar year, Messrs. Pomerantz, Stahl, Casey
and Rogna will be entitled to receive in cash 1.0 percent, 0.4 percent,
0.4 percent and 0.2 percent, respectively, of the increase in
Shareholder Value, if any, created during that calendar year. Upon
appropriate certification by the Compensation Committee that the awards
have been earned, one-half of such award will be immediately payable
and the remaining one-half will be payable in one-twelfth increments at
the conclusion of any month in which the Company's share price on the
last trading day of such month exceeds the Year End Share Value (as
defined) for the calendar year in which such award was earned.
<PAGE>
The increase in "Shareholder Value" for each calendar year is
determined by calculating the excess of (i) the product of (a) the
average closing price of the Company's stock during the last 10 trading
days of such calendar year and the first 10 trading days of the
subsequent calendar year (the "Year End Share Value"), multiplied by
(b) 53,365,378 over (ii) the product of (a) the highest Year End Share
Value for any prior calendar year during which the Shareholder Value
Plan was in effect (provided that such value will not be less than
$3.375), multiplied by (b) 53,365,378. All calculations under the
Shareholder Value Plan will be equitably adjusted by the Board in the
event of any stock split, stock dividend, reverse stock split or other
recapitalization.
In the event of an acquisition of the Company prior to December
31, 1997, the aggregate purchase price of the Company will establish
the final Year End Share Value under the Shareholder Value Plan. Upon
consummation of such acquisition, final payments including all deferred
amounts will be immediately due and payable.
An acquisition of the Company means (i) a sale of substantially
all of the Company's assets to, or a merger with, another person in
exchange for cash and/or other property (other than a person where the
Company's former shareholders own immediately after such transaction
directly or indirectly stock possessing more than 50 percent of such
person's voting power) or (ii) an acquisition of the Company's stock by
a person or group in exchange for cash and/or other property so that
such person or group has acquired stock possessing more than 50 percent
of the Company's voting power (other than a person or group which
includes Mr. Pomerantz, MAG or Mr. Hayford, or their respective spouses
or heirs).
If the Company terminates the employment of Messrs. Stahl, Casey
or Rogna before the end of a calendar year other than because of his
death, total and permanent disability, or serious misconduct, he shall
continue to participate in this plan for the full five-year period. If
the Company terminates the employment of Mr. Pomerantz or if
Mr. Pomerantz resigns for Good Reason (see "Other Business --
Employment Agreements") before the end of the calendar year other than
due to his death, total and permanent disability or serious misconduct,
he shall continue to participate in this plan for the remainder of the
calendar year in which the termination occurs and the following
calendar year.
If the Company terminates a participant's employment for serious
misconduct or if Messrs. Stahl, Casey or Rogna resigns, or if
Mr. Pomerantz resigns for other than Good Reason, such participant
shall receive no earned award for the calendar year in which such
termination occurred or any subsequent calendar year.
If a participant ceases to be a Company employee because of his
death or total and permanent disability before the end of the calendar
year, (i) the participant shall be entitled to an award for such
calendar year and the Year End Share Value for such participant for
such calendar year shall be determined by using the 10 trading days
prior to the termination of the participant's employment (including the
date of termination as the 10th day if it is a trading day) and the 10
trading days after the termination of his employment, and (ii) such
participant shall be entitled to no earned award for any subsequent
calendar year.
The Shareholder Value Plan may be amended or modified by the
Board; provided, however, that any such amendment or modification which
adversely affects a participant must also be approved in writing by
such participant.
Messrs. Pomerantz, Stahl, Casey and Rogna received an award under
this Plan based on the Year End Share Value at the end of the calendar
year 1993 which will be paid during fiscal 1994 based upon the
procedure described above.
Deductibility of Compensation under Section 162(m) of the Internal
Revenue Code
<PAGE>
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") imposes a $1 million deduction limit on compensation paid
to the named executive officers of the Company. Compensation is exempt
from the $1 million deduction limit, however, if the compensation
qualifies for an exception, including an exception for certain
performance-based compensation. Compensation paid under the
Shareholder Value Plan should qualify for the performance-based
compensation exception, and therefore compensation paid pursuant to the
Shareholder Value Plan should not be applied toward the $1 million
deduction limit of Code Section 162(m). The Company anticipates that the
amount of compensation income received by each of the Company's named
executive officers, excluding income received pursuant to the
Shareholder Value Plan, will not exceed $1 million in 1994 or 1995.
Therefore, Code Section 162(m) should not cause the Company to be denied a
deduction for any compensation income paid to the Company's named
executive officers.
Chief Executive Officer Compensation
Commencing in the fall of 1989, the Company's operations were
adversely affected by factors influencing the paper and corrugated
industry generally, and certain segments of the industry in particular.
As adverse conditions continued into fiscal 1991, the Company took
actions to significantly reduce operating expenses and capital
expenditures. These actions included reductions in workforce levels,
reduction in selling and administrative expenses, deferral of
non-essential maintenance expenditures and the postponement of certain
capital expenditures. Effective January 1, 1991, Mr. Pomerantz waived
his contractual right to receive a minimum base salary of $600,000 and
voluntarily reduced his base salary from $600,000 to $480,000 annually.
The Key Performance Compensation Plan, which no longer exists,
was established in 1991 to help ensure the retention of the Company's
key management employees during the financial restructuring.
Mr. Pomerantz determined that he should not participate in this plan
and he received no payment under this plan.
Upon the successful consummation of the financial restructuring,
the Compensation Committee retained the services of Towers Perrin, an
international compensation and benefits consulting firm, to assist in
the design of an equitable and effective overall compensation program
for Mr. Pomerantz. After extensive review of competitive data and
other pertinent factors, the Compensation Committee recommended and the
Board approved a new five-year employment agreement. During the term
of his employment agreement, Mr. Pomerantz is not eligible to
participate in the Management Incentive Plan or to receive any grants
under the 1989 Plan or 1987 Plan.
In structuring this new program, the Compensation Committee
placed significant emphasis on the creation of shareholder value. The
program utilizes wholly objective criteria for the variable pay
opportunity and is devoid of multiple long-term vehicles. By providing
a program that consists primarily of base salary and the Shareholder
Value Plan, (in which Mr. Pomerantz participates as described above)
the Compensation Committee believes it has created an equitable
opportunity for Mr. Pomerantz which is clearly focused on creating
shareholder value. In conjunction with the new program,
Mr. Pomerantz's annual base salary was restored in fiscal 1993 to the
1990 level of $600,000.
The Compensation Committee has reviewed the overall program for
Mr. Pomerantz and believes that it continues to provide the right focus
and incentive on the continued improvement of shareholder value.
Mr. Pomerantz's base salary continues at the $600,000 level established
January 1, 1993.
Richard S. Levitt, Chairman
John E. Goodenow, member
John Hawkinson, member
Ralph L. MacDonald Jr., member
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return
of the Company's Class A Common Stock, the S&P 500 Composite Stock
Index and an index of a peer group of paper companies, for the period
of five years beginning October 1, 1989 and ending September 30, 1994
(assuming that the value of the investment in the Company's Class A
Common Stock and each index was $100 on October 1, 1989 and that all
dividends were reinvested). The peer group index is comprised of nine
medium to large sized companies whose primary business is the
manufacture and sale of paper products. Peer group returns are
weighted each year based on each company's market capitalization at the
beginning of the year. The peer group comprises the common stocks of:
Boise Cascade, Bowater, Champion International, Consolidated Papers,
Federal Paper Board, P.H.Glatfelter, International Paper, Mead, and
Westvaco.
5 YEAR CUMULATIVE TOTAL STOCKHOLDER RETURNS
<TABLE>
<CAPTION>
DOW JONES
PAPER GAYLORD
MEASUREMENT PERIOD S&P 500 PRODUCTS CONTAINER
- --------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
1989 100 100 100
1990 90.76 74.00 28.87
1991 119.04 105.42 25.77
1992 132.20 104.97 30.93
1993 149.39 105.49 18.04
1994 154.89 138.50 70.10
</TABLE>
FINANCIAL STATEMENTS
The Company has enclosed its Annual Report to Stockholders, which
includes its Annual Report on Form 10-K for the year ended
September 30, 1994, with this Proxy Statement.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors to file initial reports of
ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "Commission") and the American Stock Exchange.
Executive officers and directors are required by Commission regulations
to furnish the Company with copies of all section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished
to the Company and written representations from the Company's executive
officers and directors, the Company believes that during fiscal 1994
all filing requirements applicable to executive officers and directors
were met.
PROPOSALS BY STOCKHOLDERS
Any proposals by stockholders intended to be presented at the
1996 Annual Meeting of Stockholders must be received by the Company no
later than August 30, 1995.
You are again urged to attend the annual meeting. Proxies will
be solicited by the Board through the use of the mails. Proxies may
also be solicited by directors, officers and a small number of other
employees of the Company personally or by mail, telephone, telegraph or
otherwise, but such persons will not be separately compensated for such
services. Brokerage firms, banks, fiduciaries, voting trustees or
other nominees will be requested to forward the soliciting materials to
beneficial owners of stock held of record by them. The entire cost of
the Board's solicitation will be borne by the Company.
By Order of the Board of Directors
/s/ David F. Tanaka
----------------------------------
David F. Tanaka
Secretary
<PAGE>
GAYLORD CONTAINER CORPORATION / PROXY
Proxy Solicited by the Board of Directors for Annual Meeting of
Stockholders
February 8, 1995
The undersigned hereby appoints Marvin A. Pomerantz, Daniel P. Casey
and David F. Tanaka and each of them the undersigned's true and lawful
attorneys and proxies (with full power of substitution in each) to vote
all Class A Common Stock of Gaylord Container Corporation, standing in
the undersigned's name, at the Annual Meeting of Stockholders of said
Corporation to be held at 520 Lake Cook Road, Deerfield, Illinois
60015, on February 8, 1995 at 10:00 a.m. Chicago time, upon those
matters as described in the Proxy Statement for the Meeting and such
other matters as may properly come before such meeting or any
adjournment or adjournments thereof.
Continued and to be signed on reverse side
<PAGE>
This proxy when properly executed will be voted in the manner directed
by the undersigned stockholder. If not otherwise specified, this proxy
will be voted FOR proposals 1, 2 and 3.
A vote FOR the following proposals described in the Proxy Statement for
the meeting is recommended.
If any other business is transacted at the Annual Meeting of
Stockholders, this Proxy shall be voted in accordance with the best
judgment of the appointed attorneys and proxies.
<TABLE>
<CAPTION>
1. Election of Class B Directors: John E. Goodenow, David B. Hawkins, John
Hawkinson, Warren J. Hayford, Richard S. Levitt,
Ralph L. MacDonald Jr., Marvin A. Pomerantz,
Thomas H. Stoner
Instruction: To withhold authority to vote for
any individual nominee listed, write that
nominee's name here:
FOR WITHHOLD
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
2. Approval of the Increase in 3. Appointment of
Shares Available under the Deloitte & Touche LLP
1989 Plan. as the Company's
independent auditors.
<S> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
</TABLE>
Dated: , 1995
(Signature of Stockholder)
(Signature of Stockholder)
Please sign your name exactly as it
appears hereon. If acting as attorney,
executor, trustee, or in other
representative capacity, please sign name
and title. If stock is held jointly,
each joint owner should sign.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE
<PAGE>
GAYLORD CONTAINER CORPORATION / PROXY
Proxy Solicited by the Board of Directors for Annual Meeting of
Stockholders
February 8, 1995
The undersigned hereby appoints Marvin A. Pomerantz, Daniel P. Casey
and David F. Tanaka and each of them the undersigned's true and lawful
attorneys and proxies (with full power of substitution in each) to vote
all Class B Common Stock of Gaylord Container Corporation, standing in
the undersigned's name, at the Annual Meeting of Stockholders of said
Corporation to be held at 520 Lake Cook Road, Deerfield, Illinois
60015, on February 8, 1995 at 10:00 a.m. Chicago time, upon those
matters as described in the Proxy Statement for the Meeting and such
other matters as may properly come before such meeting or any
adjournment or adjournments thereof.
Continued and to be signed on reverse side
<PAGE>
This proxy when properly executed will be voted in the manner directed by the
undersigned stockholder. If not otherwise specified, this proxy will be voted
FOR proposals 1, 2 and 3.
A vote FOR the following proposals described in the Proxy Statement for the
meeting is recommended.
If any other business is transacted at the Annual Meeting of Stockholders, this
Proxy shall be voted in accordance with the best judgment of the appointed
attorneys and proxies.
<TABLE>
<CAPTION>
1. Election of Class B Directors: John E. Goodenow, David B. Hawkins, John
Hawkinson, Warren J. Hayford, Richard S. Levitt,
Ralph L. MacDonald Jr., Marvin A. Pomerantz,
Thomas H. Stoner
Instruction: To withhold authority to vote for
any individual nominee listed, write that
nominee's name here:
FOR WITHHOLD
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
2. Approval of the Increase in 3. Appointment of
Shares Available under the Deloitte & Touche LLP
1989 Plan. as the Company's
independent auditors.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Dated: , 1995
(Signature of Stockholder)
(Signature of Stockholder)
Please sign your name exactly as it
appears hereon. If acting as attorney,
executor, trustee, or in other
representative capacity, please sign name
and title. If stock is held jointly,
each joint owner should sign.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE
