<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Gaylord Container Corporation
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(Name of Registrant as Specified in its Charter)
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[X] No fee required.
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<PAGE> 2
GAYLORD LOGO
GAYLORD CONTAINER CORPORATION
PROXY STATEMENT
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
FEBRUARY 4, 1998
You are cordially invited to attend the 1998 annual meeting of stockholders
("Annual Meeting") of Gaylord Container Corporation ("Company") which will be
held on Wednesday, February 4, 1998 at 10:00 a.m. Chicago time at 520 Lake Cook
Road, Deerfield, Illinois 60015, for the following purposes:
1. To elect nine directors of the Company to serve for terms commencing
with the Annual Meeting;
2. To approve an amendment to the Gaylord Container Corporation Shareholder
Value 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 8, 1997
as the record date for determining the stockholders entitled to notice of, and
to vote at, the Annual 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, during the 10-day period immediately prior to the Annual
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 Annual
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. Your proxy is revocable at any time before it is voted. If you are
present at the meeting you may withdraw your proxy and vote in person, if you so
desire.
David F. Tanaka
Secretary
Deerfield, Illinois
December 22, 1997
YOU ARE URGED TO MARK, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY. THE PROXY IS REVOCABLE
AT ANY TIME BEFORE IT IS VOTED.
<PAGE> 3
GAYLORD CONTAINER CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 4, 1998
TIME AND LOCATION OF ANNUAL MEETING
The 1998 annual meeting of stockholders (the "Annual Meeting") of Gaylord
Container Corporation, a Delaware corporation (the "Company"), will be held at
10:00 a.m. Chicago time on Wednesday, February 4, 1998 at 520 Lake Cook Road,
Deerfield, Illinois 60015.
PURPOSE AND SOLICITATION OF PROXIES
This proxy statement (the "Proxy Statement") and the enclosed proxy card
are being mailed on or about December 22, 1997 to the holders of Class A Common
Stock ("Common Stock") of the Company in connection with the solicitation of
proxies on behalf of the Board of Directors of the Company (the "Board of
Directors" or "Board") for use at the Annual Meeting and at any adjournment or
adjournments thereof. The purpose of this solicitation is for election of
directors to serve on the Board, approval of an amendment to an existing
long-term incentive plan and ratification of the appointment of the Company's
independent auditors.
RECORD DATE; VOTING AND REVOCATION OF PROXIES
Only stockholders of record as of the close of business on December 8, 1997
(the "Record Date") will be entitled to notice of, and to vote at, the Annual
Meeting. At the Annual Meeting, the Company's stockholders will be asked to vote
on proposals (i) to elect the nominees identified herein (the "Director
Nominees") as directors; (ii) to approve an amendment to the Gaylord Container
Corporation Shareholder Value Plan ("the Shareholder Value Plan"); and (iii) to
ratify the appointment of Deloitte & Touche LLP as the Company's independent
auditors. The details of each of these proposals are described below.
Proxies properly executed and returned in a timely manner will be voted at
the Annual Meeting in accordance with the directions noted thereon. If no
direction is indicated, proxies will be voted in favor of each of the proposals
outlined below and at the discretion of the proxyholders on all other business
as may properly be brought before the Annual Meeting or any adjournment or
adjournments thereof. Any stockholder submitting a proxy has the power to revoke
it at any time before it is voted either in person at the Annual Meeting, by
written notice to the Company's Secretary delivered before the Annual Meeting or
by delivery to the Company's Secretary before the Annual Meeting of a properly
executed 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").
OUTSTANDING SHARES AND VOTING RIGHTS
Only the Company's Common Stock outstanding represented in person or by
proxy may vote at the Annual Meeting. Each holder of Common Stock is entitled to
one vote per share.
Mid-America Group, Ltd. ("MAG") beneficially owns less than 9 percent and
the Company's executive officers and directors, as a group, including the shares
owned by MAG, beneficially own or control less than 14% percent of the Common
Stock.
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In connection with the Company's financial restructuring completed in
November 1992, the Company issued warrants to obtain Common Stock ("Warrants")
and simultaneously issued the shares of Common Stock obtainable upon the
exercise of all such warrants to a warrant trustee ("Warrant Trustee") which
holds such shares ("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. In connection with this proxy
solicitation, 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 Common Stock.
As of the Record Date, there were outstanding 53,031,091 shares of Common
Stock, including 1,931,971 shares of Trust Stock held by the Warrant Trustee,
and 1,931,971 Warrants to obtain shares of Common Stock. For detailed
information with respect to the beneficial ownership of the Common Stock and the
Warrants, see "Information With Respect To Certain Stockholders" below.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board is currently composed of 11 directors, all of whom, with the
exception of Charles S. Johnson, have served as directors since the 1997 Annual
Meeting of Stockholders. Mr. Johnson was elected to the Board in August 1997.
Two of the Company's former directors, John Hawkinson and Richard S. Levitt,
will retire before and not stand for re-election at the Annual Meeting.
Beginning with the Annual Meeting, nine members will serve on the Board.
If elected at the Annual Meeting, each of the nine directors will hold
office until the next annual meeting of stockholders, and until a successor
shall have been duly elected and qualified. All of the Director Nominees were
recommended to the Board of Directors by the Nominating and Organizational
Planning Committee. Unless otherwise instructed, signed proxies that are
returned will be voted for election of all of the Director 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 at their
discretion.
DIRECTOR NOMINEES FOR ELECTION AT THE 1998 ANNUAL MEETING
Director Nominees
MARY SUE COLEMAN. Ms. Coleman has served as a director of the Company since
August 1996. Since 1995 she has served as President and Professor of
Biochemistry and Biological Sciences at the University of Iowa. She served from
1993 to 1995 as Provost and Vice President for Academic Affairs and Professor of
Biochemistry at the University of New Mexico and from 1992 to 1993 as Vice
Chancellor for Graduate Studies and Research at the University of North Carolina
at Chapel Hill. She serves on the board of directors of Meredith Corporation, a
publishing and television broadcasting company, Norwest Bank Iowa, N.A. and on
the Board of Trustees of Grinnell (Iowa) College. Member, Audit Committee and
Nominating and Organizational Planning Committee. Age 54.
HARVE A. FERRILL. Mr. Ferrill has served as a director of the Company since
November 1992. He has served as Chief Executive Officer of Advance Ross
Corporation ("Advance Ross"), a wholly owned subsidiary of CUC International,
Inc., a membership services company, since 1996. He previously served as
Chairman or President and Chief Executive Officer of Advance Ross since 1990.
Advance Ross' 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 1991 and as President of Ferrill-Plauche Co.,
Inc., a private investment company, since 1982. Member, Audit Committee and
Compensation and Stock Option Committee. Age 64.
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JOHN E. GOODENOW. Mr. Goodenow has served as a director of the Company
since November 1992. He is Chairman of the Board of Goodenow Bancorporation
where he served from 1979 to 1995 as President, Chief Executive Officer and a
director. Mr. Goodenow also serves as a director of Bank Midwest (Okoboji,
Iowa), Bank Midwest (Fairmont, Minnesota), each a private banking corporation.
Member, Audit Committee and Compensation and Stock Option Committee. Age 62.
DAVID B. HAWKINS. Mr. Hawkins has served as a director of the Company since
November 1986. He currently serves as President of Coldwell Banker/Mid-America
Group Realtors and Vice Chairman and a director of MAG, a real estate investment
company. He served as President or Executive Vice President and a director of
MAG from 1977 to 1993. Member, Nominating and Organizational Planning Committee.
Age 63.
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, Chief Executive Officer and a
director of BWAY Corporation (formerly Brockway, Inc.), a manufacturer of metal
containers, since its formation in 1989. Mr. Hayford served from 1989 to 1996 as
a director of System Software Associates, Inc., a developer and marketer of
business application software packages. Chairman, Nominating and Organizational
Planning Committee. Age 68.
CHARLES S. JOHNSON. Mr. Johnson has served as a director of the Company
since August 1997. He is Chairman, President and Chief Executive Officer of
Pioneer Hi-Bred International, Inc., an agricultural biotech company, where he
has held increasingly responsible positions since 1965. He serves on the board
of directors of the National Association of Manufacturers, the Progressive
Policy Institute, the National Policy Association, the Principal Financial Group
and NationsBank, N.A. He also serves as Chairman of Grand Valley (Iowa) College
and the Des Moines Chamber of Commerce. Age 59.
RALPH L. MacDONALD JR. Mr. MacDonald has served as a director of the
Company since May 1994. Mr. MacDonald is a principal of Amelia Investment Corp.,
a private investment company. Prior thereto, he was a principal of Island
Capital Corporation ("Island Capital"), a private investment company. He was
formerly Managing Director -- Corporate Finance and a 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 concern. Member,
Compensation and Stock Option Committee and Audit Committee. Age 55.
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 formerly served
on the Board of Directors of Stone Container Corporation, a manufacturer of
packaging products. He formerly served on the Board of Directors and the
Executive Committee of the American Forest & Paper Association. Age 67.
THOMAS H. STONER. Mr. Stoner has served as a director of the Company since
February 1993. He serves as Chairman of the Executive Committee of American
Radio Systems and served from 1965 to 1993 as Chairman and Chief Executive
Officer of Stoner Broadcasting Systems, Inc., a private broadcast communications
company that merged with American Radio Systems in 1993. Since 1994, he has been
Chairman of Chesapeake Bay Foundation, a charitable foundation, after having
served on its Board of Trustees since 1989. From 1965 to 1991 he served as
Chairman of Stoner McCray Systems, Inc., a privately owned real estate
development company, and from 1985 to 1989 he served as director of Annapolis
Banking and Trust Company, an affiliate of Mercantile Bankshares Corporation, a
publicly traded banking company. Member, Nominating and Organizational Planning
Committee. Age 62.
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REQUIRED VOTE
Election of each Director Nominee requires the affirmative vote by the
holders of a majority of the outstanding shares of Common Stock present (whether
by person or proxy) and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH DIRECTOR NOMINEE.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held five meetings during fiscal 1997 and the
various committees of the Board held a total of nine meetings. During fiscal
1997, each Board member attended at least 75 percent of the meetings of the
Board and meetings of the committees of which he or she is a member.
Directors who are not current employees of the Company (the "Outside
Directors") are entitled to an annual fee of $26,000 plus an attendance fee of
$1,000 for each meeting of the Board or committee. Each Outside Director also
received on May 7, 1997 a one time grant of 1,000 "phantom" stock units of the
Company valued at $5.88 per unit, which vest only on retirement, death,
disability or a change in control of the Company. When vesting occurs, the
Outside Director will receive the cash value of the stock units at the then-
current market price. In addition, an Outside Director is entitled to an annual
fee of $5,000 for each committee chaired. During fiscal 1997, no director fees
were paid to Mr. Pomerantz. All directors are reimbursed for expenses incurred
as a director.
Beginning in fiscal 1996, Outside Directors may elect to defer all (but not
less than all) fees payable for service on the Board until they cease to be
directors or file a written revocation of their election. At the election of the
Outside Director, deferred fees accrue (i) interest at 300 basis points over the
six month U.S. Treasury bill rate in effect at the beginning of each fiscal year
("Option A"); or (ii) gain or loss as if deferred fees were used to acquire
Common Stock at a 15 percent discount from the closing price at the beginning of
each fiscal year ("Option B"). Messrs. Goodenow, MacDonald, and Stoner have
elected to defer fees, all under Option B.
The Board, pursuant to its powers, has designated certain committees of the
Board, including a Compensation and Stock Option Committee ("Compensation
Committee"), an Audit Committee ("Audit Committee") and a Nominating and
Organizational Planning Committee ("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 ("1987 Plan"), the 1989 Long-Term
Incentive Plan ("1989 Plan"), and the 1997 Long-Term Equity Incentive Plan
("1997 Plan"). The Compensation Committee met five times in fiscal 1997.
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 1997.
The Nominating Committee's responsibilities include recommending candidates
for election to the Board or to fill vacancies on the Board, reviewing the
performance of Board members and establishing and reviewing a plan of succession
for the Company's Chief Executive Officer, in the event of death, disability,
retirement or other termination of employment. The Nominating Committee met
twice in fiscal 1997. 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
days 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
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recommendation by a stockholder does not guarantee that the Nominating Committee
will propose any such nominee to the Board.
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE
SHAREHOLDER VALUE PLAN
GENERAL
The Compensation Committee and the Board have approved and recommend that
stockholders approve an amendment to the Shareholder Value Plan which would (i)
extend the Shareholder Value Plan from the original expiration date of December
31, 1997 to December 31, 2000; and (ii) reduce the participants in the
Shareholder Value Plan from all four of the Company's executive officers to
solely the Chief Executive Officer.
The Shareholder Value Plan was approved by the Company's stockholders at
the 1994 Annual Meeting of Stockholders as a means to directly tie the long-term
incentive compensation of the Company's executive officers to the creation of
shareholder value. As approved, the Shareholder Value Plan became effective for
five years beginning on January 1, 1993 and covered the Company's Chief
Executive Officer, Mr. Pomerantz; President, Dale E. Stahl; Executive Vice
President, Daniel P. Casey; and Senior Vice President, Lawrence G. Rogna.
Following a review of the Company's long-term incentive compensation plans, the
Compensation Committee and the Board decided that it was appropriate for the
Company to extend the Shareholder Value Plan for the term of Mr. Pomerantz's
latest employment agreement (see "Employment Agreements") to cover Mr. Pomerantz
alone. The material features of the Shareholder Value Plan, as amended, are set
forth below.
TERMS OF THE SHAREHOLDER VALUE PLAN, AS AMENDED
Eligibility. The Company's Chief Executive Officer, Mr. Pomerantz, is
eligible to participate in the Shareholder Value Plan. Mr. Pomerantz is not
eligible for awards under the Company's Management Incentive Plan for the term
of the Shareholder Value Plan.
Term. The Shareholder Value Plan will be in effect until December 31, 2000.
All deferred awards not paid by the end of calendar 2000 will be forfeited;
provided that awards earned in calendar 2000 may be payable during calendar
2001.
Determination of Award. At the end of each calendar year, Mr. Pomerantz
will be entitled to receive in cash 1.0 percent of the increase in Shareholder
Value (as defined), if any, created during that calendar year. Upon appropriate
certification by the Compensation Committee that an award has 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.
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, currently $8.84, (provided that such share 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.
Acquisition of the Company. In the event of an acquisition of the Company
prior to December 31, 2000, 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.
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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, Mr. Hayford, or their respective spouses or
heirs).
Termination of Employment. If the Company terminates the employment of Mr.
Pomerantz or he resigns for Good Reason (see "Employment Agreements") 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 calendar year in which the termination occurs and the following calendar
year.
If the Company terminates Mr. Pomerantz' employment for serious misconduct
or if Mr. Pomerantz resigns for other than Good Reason, he shall receive no
earned award for the calendar year in which such termination occurred or any
subsequent calendar year.
If Mr. Pomerantz ceases to be a Company employee because of his death or
total and permanent disability before the end of a calendar year, (i) he shall
be entitled to an award for such calendar year and the Year End Share Value 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) he shall be entitled to no earned award
for any subsequent calendar year.
Amendments to Shareholder Value Plan. 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.
NEW PLAN BENEFITS
Benefits under the original Shareholder Value Plan, for calendar 1997,
cannot be determined until January 15, 1998. No amounts were payable to any
executive officer under the original Shareholder Value Plan for the calendar
year ended December 31, 1996. Benefits under the Shareholder Value Plan, as
amended, for the calendar year 1998 cannot be determined until January 15, 1999.
STOCKHOLDER APPROVAL
The amendment to the Shareholder Value Plan is being submitted for approval
of stockholders so that any amounts paid thereunder will be fully deductible by
the Company for federal income tax purposes without regard to the limitation
imposed by Section 162(m) of the Internal Revenue Code of 1986, as amended.
Approval in accordance with such section requires that a majority of the votes
cast by the holders of the shares of Common Stock present and voting at the
meeting be votes for approval. If the requisite stockholder approval is not
received, the Company will not implement the amendment to the Shareholder Value
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
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. Deloitte & Touche LLP served as the Company's auditors for the 1997
fiscal year. Representatives of Deloitte & Touche LLP will be present at the
1998 Annual Meeting; 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 ratify the selection of Deloitte & Touche LLP as
the Company's independent auditors for the 1998 fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3.
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INFORMATION WITH RESPECT TO CERTAIN STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock and Warrants to obtain Common
Stock as of December 8, 1997 by (i) each holder known by the Company to own
beneficially more than 5 percent of the outstanding Common Stock, (ii) each
director and executive officer of the Company and (iii) all officers and
directors of the Company as a group. The numbers and percentages of Common Stock
include Trust Stock held by the Warrant Trustee. 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
COMMON STOCK COMMON STOCK
------------------------ --------------------------
NUMBER PERCENT OF NUMBER PERCENT OF
OF SHARES OUTSTANDING* OF WARRANTS OUTSTANDING*
--------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Schneider Capital Management, L.P.(1)............ 5,290,500 9.9 0 --
460 E. Swedesford Rd., Suite 1080
Wayne, PA 19087
Marvin A. Pomerantz and MAG(2)................... 4,504,942 8.4 0 --
4700 Westown Parkway
West Des Moines, IA 50625
M. D. Sass Associates, Inc. and.................. 3,076,113 5.7 0 --
M. D. Sass Investors Services, Inc.(3)
1185 Avenue of the Americas
New York, N.Y. 10036
Warren J. Hayford(4)............................. 1,847,068 3.5 0 --
Mary Sue Coleman................................. 1,000 -- 0 --
Harve A. Ferrill................................. 10,000 -- 0 --
John E. Goodenow(5).............................. 44,000 -- 0 --
David B. Hawkins(6).............................. 26,200 -- 0 --
John Hawkinson(6)(7)(8).......................... 68,102 -- 0 --
Charles S. Johnson............................... 0 -- 0 --
Richard S. Levitt(6)(8)(9)....................... 74,200 -- 0 --
Ralph L. MacDonald Jr. .......................... 20,000 -- 0 --
Thomas H. Stoner................................. 12,000 -- 0 --
Dale E. Stahl.................................... 266,648 -- 0 --
Daniel P. Casey(10).............................. 148,110 -- 0 --
Lawrence G. Rogna(11)............................ 98,300 -- 0 --
All officers and directors as a group (22
persons)(12)................................... 7,426,316 13.9% 0 --
</TABLE>
- ---------------
* Percentages less than 1 percent have been omitted.
(1) The shares shown as beneficially owned by Schneider Capital Management,
L.P. ("Schneider Capital") are based upon a Schedule 13 G filed by
Schneider Capital on December 10, 1997. Schneider Capital has sole power to
vote or direct the vote of 1,303,300 shares and sole power to dispose or
direct the disposition of 5,290,500 shares.
(2) 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 15,000 shares held in his own name. Mr. Pomerantz disclaims beneficial
ownership of shares held by MAG and attributable to his wife and the
trusts.
(3) The shares shown as beneficially owned by M. D. Sass Associates, Inc. and
M. D. Sass Investors Services, Inc. (collectively, "M. D. Sass") are based
upon a Schedule 13 G filed by M. D. Sass on February 3, 1997. M. D. Sass
has sole power to vote or direct the vote of 3,076,113 shares and sole
power to dispose or direct the disposition of 3,076,113 shares.
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(4) The shares shown as beneficially owned by Mr. Hayford include 514,060
shares owned directly by trusts for the benefit of his children and
grandchildren, 218,496 owned directly by his wife and 50,000 owned by a
charitable family foundation. Mr. Hayford disclaims beneficial ownership of
shares held by the trusts, his wife and the foundation.
(5) The shares shown as beneficially owned by Mr. Goodenow include 1,000 owned
directly by his wife and 20,000 owned directly by Goodenow Bancorporation,
a family owned corporation. Mr. Goodenow disclaims beneficial ownership of
such shares.
(6) Messrs. Hawkins, Hawkinson and Levitt own options to purchase 24,200, 5,300
and 24,200 shares, respectively, of the Company's Common Stock, which
options were granted pursuant to the Company's Outside Director Stock
Option Plan. Although none of such options have been exercised, the shares
shown as beneficially owned by each of them include 100 percent of such
options, all of which are currently exercisable.
(7) The shares shown as beneficially owned by Mr. Hawkinson include 6,615 owned
directly by his wife. Mr. Hawkinson disclaims beneficial ownership of such
shares.
(8) Messrs. Hawkinson and Levitt will retire from the Board prior to and not
stand for reelection at the Annual Meeting.
(9) The shares shown as beneficially owned by Mr. Levitt include 50,000 owned
by a trust for the benefit of his wife. Mr. Levitt disclaims beneficial
ownership of such shares.
(10) The shares shown as beneficially owned by Mr. Casey include 12,360 owned
directly by his wife and 28,500 owned directly by his children. Mr. Casey
disclaims beneficial ownership of such shares.
(11) The shares shown as beneficially owned by Mr. Rogna include 2,800 owned
directly by his wife. Mr. Rogna disclaims beneficial ownership of such
shares.
(12) The number and percentage of shares of Common Stock owned by the persons
named in the table and all officers and directors as a group include the
513,128 shares that such persons and group may obtain upon the exercise
stock options exercisable currently or within 60 days of December 8, 1997.
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, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
RESTRICTED
OTHER ANNUAL STOCK LTIP ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS/ OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) SARS(#) ($)(1) ($)(2)(3)(4)
------------------ ------ ------- ------- ------------ ---------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marvin A. Pomerantz..... 1997 712,500 0 0 0 0 0 53,500
(Chairman and Chief 1996 600,000 0 0 0 0 0 202,600
Executive Officer) 1995 600,000 0 0 0 0 2,236,400 4,500
Dale E. Stahl........... 1997 389,400 0 0 0 0 0 40,100
(President and Chief 1996 368,100 208,000 0 0 0 0 115,700
Operating Officer) 1995 346,900 375,000 0 0 0 894,500 4,500
Daniel P. Casey......... 1997 360,600 0 0 0 0 0 38,400
(Executive Vice 1996 344,400 208,000 0 0 0 0 112,400
President) 1995 326,900 353,000 0 0 0 894,500 4,500
Lawrence G. Rogna....... 1997 241,900 0 0 0 0 0 74,400
(Senior Vice President) 1996 230,900 125,000 0 0 0 0 114,000
1995 218,900 185,000 0 0 0 447,300 4,500
</TABLE>
- ---------------
(1) Amounts shown are awards payable under the Company's Shareholder Value Plan,
a calendar year plan, in which only the named executive officers were
eligible to participate. Payment of a portion of such awards is contingent
upon the price of the Company's Common Stock remaining at certain levels.
See
8
<PAGE> 11
"Compensation Committee Report on Executive Compensation." Awards for
calendar 1997, if any, cannot be calculated as of the date of this proxy
statement.
(2) Includes for each of 1995, 1996 and 1997 employer contributions to the
Company's 401(k) Plan on behalf of Messrs. Pomerantz, Stahl, Casey and
Rogna, respectively, of $4,500.
(3) Includes for 1995, 1996 and 1997 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 $0, $198,100 and
$49,000; $0, $111,200 and $35,600; $0, $107,900 and $33,900; and $0, $53,700
and $16,900, respectively. Beginning in 1995, calculation of the payment was
made on a calendar rather than fiscal year basis. Amounts paid for calendar
1995 are included in fiscal 1996 compensation.
(4) Includes for 1996 and 1997 principal and interest on a relocation loan to
Mr. Rogna which was forgiven of $55,800 and $53,000, respectively.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options or SARs were granted to the named executive officers in
fiscal 1997 under any stock option plan sponsored by the Company.
The following table shows information concerning the exercise of options by
the named executive officers in fiscal 1997 and the value of options held by the
named executive officers at the end of fiscal 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FY-END(#) AT FY-END($)
--------------------- --------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED($) UNEXERCISABLE(1) UNEXERCISABLE(2)
---- --------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Marvin A. Pomerantz...... 0 0 0/0 0/0
Dale E. Stahl............ 0 0 177,148/0 884,700/0
Daniel P. Casey.......... 0 0 80,000/0 419,400/0
Lawrence G. Rogna........ 0 0 50,000/0 257,200/0
</TABLE>
- ---------------
(1) Options only are included. No SAR grants have been made.
(2) The closing price of the Common Stock on September 30, 1997 was $8.50.
EXECUTIVE OFFICERS
MARVIN A. POMERANTZ. See Director Nominees for Election at the 1998 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. He is currently serving as a director of
AMCOL International Corporation, a diversified specialty mineral, chemical and
environmental company. Age 50.
DANIEL P. CASEY. Mr. Casey has served as Executive Vice President and Chief
Financial Officer 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 55.
9
<PAGE> 12
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 51.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Pomerantz
effective as of June 1, 1997. The employment agreement is for a term ending on
December 31, 2000 and provides for an annual base salary of no less than
$750,000, participation in the Shareholder Value Plan (if approved at the Annual
Meeting) and participation in all salaried employee benefit plans and programs
of the Company. Under the terms of his employment agreement, Mr. Pomerantz will
be eligible to receive stock option or restricted stock grants beginning January
1, 1998, but not to participate in the Company's Management Incentive Plan. The
employment agreement provides Mr. Pomerantz with supplemental annual retirement
income payments commencing on 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.
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 12
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 December 31, 2001.
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 $400,000 effective January
1998, Mr. Casey, under which he is serving as Executive Vice President at an
annual salary of $365,000 effective January 1998 and Mr. Rogna, under which he
is serving as Senior Vice President at an annual salary of $242,000 effective
January 1998.
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 12 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 24
months following such termination; provided, however, that the final 12 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 until December 31, 1997 and in the Company's salaried
employee benefit and incentive plans.
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 24 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
10
<PAGE> 13
50 percent, 50 percent and 40 percent, respectively, of base salary. In
connection with the agreements, the Company also provides reimbursement of any
excise tax imposed on severance payments.
Each of Messrs. Stahl, Casey and Rogna is a participant in the Supplemental
Executive Retirement Plan ("SERP") that was established in 1995. Pursuant to the
SERP, each such executive will receive supplemental annual retirement payments
commencing the later of age 55 or the date of retirement equal to up to 60
percent of his average base salary and bonus, excluding awards under the
Shareholder Value Plan, for the four highest of the seven years prior to
retirement, less primary Social Security benefits and any amounts payable under
the Company's pension plan. Such payments range from 35 percent (at age 55) to
60 percent (at age 65) of the executive's average base salary and bonus.
CERTAIN TRANSACTIONS
MAG and certain of its subsidiaries provided office space and professional,
administrative, aviation and clerical services to the Company during fiscal 1997
at a cost of approximately $178,000. 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 such services to the Company in the future.
The Company has entered into agreements with certain of its stockholders
which provide such stockholders with the right in certain circumstances to
require the Company to register, at the Company's expense, the shares of Common
Stock owned by them under the Securities Act of 1933, as amended.
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 to salaried employees 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 YEARS OF SERVICE(2)
AVERAGE ----------------------------------------------------------------
EARNINGS(1) 15 20 25 30 35
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000(3)(4).......................... $ 16,750 $ 23,250 $ 29,750 $ 35,000 $ 40,500
150,000................................ 25,125 34,875 44,625 52,500 60,750
200,000................................ 33,500 46,500 59,500 70,000 81,000
250,000................................ 41,875 58,125 74,375 87,500 101,250
300,000................................ 50,250 69,750 89,250 105,000 121,500
350,000................................ 58,625 81,375 104,125 122,500 141,750
400,000................................ 67,000 93,000 119,000 140,000 162,000
450,000................................ 75,375 104,625 133,875 157,500 182,250
500,000................................ 83,750 116,250 148,750 175,000 202,500
550,000................................ 92,125 127,875 163,625 192,500 222,750
600,000................................ 100,500 139,500 178,500 210,000 243,000
650,000................................ 108,875 151,125 193,375 227,500 263,250
700,000................................ 117,250 162,750 208,250 245,000 283,500
750,000................................ 125,625 174,375 223,125 262,500 303,750
</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
11
<PAGE> 14
compensation or deferred compensation. The amounts reflected in the above
pension table do not reflect the Social Security offset in accordance with
the Pension Plan benefit formula.
(2) As of September 30, 1997, the named executive officers had been credited
with the following years of service: Mr. Pomerantz, 9 years; Mr. Stahl, 9
years; Mr. Casey, 10 years; and Mr. Rogna, 8 years. The basic benefit
payable under the Pension Plan is computed on a straight life annuity basis.
(3) For the 1997 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.
(4) In addition to amounts payable under the Pension Plan, Messrs. Pomerantz,
Stahl, Casey and Rogna will receive supplemental retirement income. See
"Employment Agreements." Based on current and historical compensation, the
maximum annual supplemental retirement income payable to Messrs. Pomerantz,
Stahl, Casey and Rogna will be approximately $725,000, $330,000, $309,000
and $180,000, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During fiscal 1997, the members of the Company's Compensation Committee
were Messrs. Ferrill, Goodenow, Hawkinson, Levitt and MacDonald. No officers or
former 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 Company
operating and financial 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 that enable executives to achieve
rewards based on increased shareholder value to reinforce the link
between executive and shareholder interests.
12
<PAGE> 15
Competitive Executive Compensation, Base Salary and Annual Incentive
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 and 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 the Dow Jones paper products peer group, and surveys by consulting
firms.
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 were increased in
fiscal 1997 to reflect their individual contributions and provide salaries in
line with competitive practices.
The Management Incentive Plan is 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 1998 based on the
Company's earnings before interest, income taxes, depreciation and amortization.
Messrs. Stahl, Casey and Rogna received no payouts under this plan for fiscal
1997. 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. Based on the results achieved in fiscal 1997, the
Company made no contributions to this plan. The Company's executive officers
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: the 1989 Plan and the 1997 Plan.
Both Plans also permit 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 to date.
The Shareholder Value Plan, as approved by the Company's stockholders on
February 2, 1994 ("Shareholder Value Plan"), 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 expire on
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. None of Messrs. Pomerantz, Stahl, Casey or Rogna received
an award under this Plan based on Year End Share Value for calendar 1996, the
last year for which awards were determinable.
As discussed below under "Chief Executive Officer Compensation", during
fiscal 1997 the Compensation Committee, over the course of several meetings,
considered alternatives for the extension of Mr. Pomerantz's employment
agreement which expires December 31, 1997 and alternatives for extension of the
Shareholder Value Plan for all participants upon expiration on December 31,
1997. In extending Mr. Pomerantz's employment agreement to December 31, 2000,
the Compensation Committee recommended that, subject to shareholder approval,
the Shareholder Value Plan be amended to run through December 31, 2000 for Mr.
Pomerantz alone. This recommendation was approved by the Board in May 1997 and
is contained in Proposal 2 herein.
13
<PAGE> 16
The Shareholder Value Plan will not be extended beyond December 31, 1997
for Messrs. Stahl, Casey or Rogna. The Compensation Committee determined that
extending the Shareholder Value Plan for these participants is not the most
practical alternative, and in order to provide an equitable replacement has
authorized a one time grant of stock options in amounts which are directly
equivalent to each individual's degree of participation in the Shareholder Value
Plan. These grants, effective January 15, 1998, will have an exercise price
equal to the highest Year End Share Value attained during the period of the
Shareholder Value Plan (but in no event less than $8.85 per share). The amount
of these grants are 213,400, 213,400 and 106,700 shares respectively for Messrs.
Stahl, Casey and Rogna.
Messrs. Stahl, Casey and Rogna will be provided future competitive
opportunity for long-term incentives based on share price appreciation through
additional stock grants under the 1989 Plan and the 1997 Plan.
Deductibility of Compensation under Section 162(m) of the Code
Section 162(m) of 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 1997 or 1998. 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
After extensive review of competitive data and all other pertinent factors,
the Compensation Committee recommended and the Board approved a new employment
agreement with Mr. Pomerantz effective June 1, 1997 through December 31, 2000.
In structuring the new agreement, the Compensation Committee placed
continued emphasis on the creation of shareholder value. By providing a program
that consists primarily of base salary and long-term incentive directly tied to
the creation of shareholder value, the Compensation Committee believes it has
created a significant and proper focus. The program utilizes wholly objective
criteria for the long-term variable pay opportunity and Mr. Pomerantz is not
eligible to participate in the Management Incentive Plan.
As discussed previously, the Compensation Committee recommended and the
Board approved, subject to shareholder approval, as contained in Proposal 2 that
the Shareholder Value Plan be amended to expire December 31, 2000 concurrent
with Mr. Pomerantz's new employment agreement.
Extension of the Shareholder Value Plan provides a competitive opportunity
for Mr. Pomerantz in lieu of stock options for the period 1993 through 1998. In
order to provide a competitive opportunity for the remainder of the new
employment agreement, the Compensation Committee has authorized a grant of
300,000 stock options to Mr. Pomerantz effective January 15, 1998. The exercise
price will be the highest Year End Share Value as determined under the
Shareholder Value Plan as of that date (but in no event less than $8.85 per
share).
Mr. Pomerantz's base salary continues at the $750,000 level established
January 1, 1997.
Richard S. Levitt, Chairman
Harve A. Ferrill, member
John E. Goodenow, member
John Hawkinson, member
Ralph L. MacDonald, Jr., member
14
<PAGE> 17
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return of the
Company's Common Stock, the S&P 500 Composite Stock Index ("S&P 500") and an
index of a peer group of paper companies ("Peer Group") for the period of five
years beginning October 1, 1992 and ending September 30, 1997 (assuming that the
value of the investment in the Company's Common Stock and each index was $100 on
October 1, 1992 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 (through the date it was
acquired), P.H.Glatfelter, International Paper, Mead and Westvaco.
FIVE YEAR CUMULATIVE TOTAL STOCKHOLDER RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD GAYLORD
(FISCAL YEAR COVERED) CONTAINER S&P 500 PEER GROUP
<S> <C> <C> <C>
9/93 58.32 113.00 100.50
9/94 226.67 117.17 131.94
9/95 250.00 152.02 159.78
9/96 196.67 182.93 153.60
9/97 226.67 256.92 198.51
</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, 1997, 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 1997
all filing requirements applicable to executive officers and directors were met
except that Mr. Casey was
15
<PAGE> 18
late in filing a Form 5 reporting a gift of Gaylord Common Stock by his wife to
each of his four children. All of the subject Common Stock is still held by his
children.
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 Annual Meeting. If
other matters are presented for a vote, however, the proxies will be voted on
such matters in accordance with the judgment of the persons acting under the
proxies.
PROPOSALS BY STOCKHOLDERS
Any proposals by stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company no later than August 23,
1998.
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
David F. Tanaka
Secretary
16
<PAGE> 19
GAYLORD CONTAINER CORPORATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
[ ]
For Withhold For all
1. Election of Directors: Mary Sue Coleman, all all except
Harve A. Ferrill, John E. Goodenow, / / / / / /
David B. Hawkins, Warren J. Hayford,
Charles S. Johnson, 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:
- --------------------------------------------------------------
2. Approval of an amendment to the Shareholder For Against Abstain
Value Plan / / / / / /
3. Ratify the appointment of Deloitte & Touche LLP For Against Abstain
as the Company's independent auditors. / / / / / /
- --------------------------------------------------
Dated:________________________________, 199_
____________________________________________
(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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
PLEASE SIGN, DATE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE
GAYLORD CONTAINER CORPORATION/PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS FEBRUARY 4, 1998
I/we hereby appoint Marvin A. Pomerantz, Daniel P. Casey and David
F. Tanaka and each of them my true and lawful attorneys and
proxies (with full power of substitution in each) to vote all Common Stock of
Gaylord Container Corporation, standing in my name, at the Annual
Meeting of Stockholders of said corporation to be held at 520 Lake Cook Road,
Deerfield, Illinois 60015, on February 4, 1998 at 10:00 a.m. Chicago time, upon
those matters as described in the Proxy Statement for the Annual Meeting and
such other matters as may properly come before such meeting or any adjournment
or adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
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.
