<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CARAUSTAR INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[CARAUSTAR LETTERHEAD]
March 10, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Caraustar Industries, Inc. The meeting will be held on Wednesday, April 16,
1997, at 10:00 A.M. at the Caraustar corporate headquarters, located at 3100
Washington Street, Austell, Georgia.
The primary business of the meeting will be the election of directors, the
ratification of the selection of independent public accountants and, if
presented, consideration of a shareholder proposal concerning the elimination of
staggered terms for directors, as more fully explained in the enclosed proxy
statement.
During the meeting, we will also report to you on the condition and performance
of Caraustar and its subsidiaries, including developments during the past fiscal
year. You will have an opportunity to question management on matters that affect
the interest of all shareholders. Immediately following the meeting, we will
provide a brief tour of one of our Austell mills for anyone who wants to
participate.
We hope to see you on April 16, 1997. Whether you plan to attend or not, please
complete, sign, date and return the enclosed proxy card as soon as possible in
the postage-paid envelope provided. Your vote is important. We appreciate your
continued interest and support of Caraustar.
Sincerely yours,
CARAUSTAR INDUSTRIES, INC.
<TABLE>
<S> <C>
/s/ Russell M. Robinson, II /s/ Thomas V. Brown
- -------------------------- --------------------------------------
Russell M. Robinson, II Thomas V. Brown
Chairman of the Board President and Chief Executive Officer
</TABLE>
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, APRIL 16, 1997
The Annual Meeting of Shareholders of Caraustar Industries, Inc. ("Caraustar")
will be held on Wednesday, April 16, 1997, at 10:00 A.M., at the Caraustar
corporate headquarters, located at 3100 Washington Street, Austell, Georgia for
the following purposes:
1. To elect three Class II directors to serve until the 2000 Annual Meeting
of Shareholders.
2. To consider and act on a proposal to ratify the selection of Arthur
Andersen LLP as independent public accountants to audit the books of the
Company and its subsidiaries for the year ending December 31, 1997.
3. To consider and act on, if presented, a shareholder proposal concerning
the elimination of staggered terms for directors.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on February 21, 1997, as
the record date for determination of shareholders entitled to notice of and to
vote at the meeting and any adjournments thereof.
By Order of the Board of Directors
/s/ Marinan R. Mays
-------------------
Marinan R. Mays
Corporate Secretary and Manager,
Administrative Services
March 10, 1997
PLEASE COMPLETE AND RETURN THE ENCLOSED APPOINTMENT OF PROXY. IF YOU ATTEND THE
MEETING IN PERSON, YOU MAY WITHDRAW YOUR APPOINTMENT OF PROXY AND VOTE YOUR OWN
SHARES.
<PAGE> 4
CARAUSTAR INDUSTRIES, INC.
3100 WASHINGTON STREET
AUSTELL, GEORGIA 30001
---------------------
PROXY STATEMENT
---------------------
The following statement, first mailed on or about March 10, 1997, is
furnished in connection with the solicitation by the Board of Directors (the
"Board") of Caraustar Industries, Inc. (the "Company") of proxy appointment
forms to be used at the Annual Meeting of Shareholders of the Company to be held
on April 16, 1997, at 10:00 A.M., at the Caraustar corporate headquarters,
located at 3100 Washington Street, Austell, Georgia and at any adjournment or
adjournments thereof.
Please complete, date and sign the accompanying proxy appointment form and
return it to ensure that your shares are voted at the meeting. You may revoke
the appointment of proxy at any time before it is exercised by submitting to the
Secretary of the Company written notice of revocation, a properly executed
appointment of proxy of a later date, or by attending the meeting and electing
to vote in person. All shares represented by valid proxy appointment forms
received pursuant to this solicitation, and not revoked before they are
exercised, will be voted in the manner specified therein. If no specification is
made, the proxies will vote in favor of the election to the Board of Directors
of the three Class II director nominees named in this Proxy Statement and a
proposal to ratify action taken by the Board of Directors in selecting Arthur
Andersen LLP as independent public accountants to audit the books of the Company
and its subsidiaries for the year ending December 31, 1997, and against a
shareholder proposal concerning the elimination of staggered terms for
directors.
The Company will bear the entire cost of preparing this Proxy Statement and
of soliciting the enclosed proxy appointment forms. In addition to the
solicitation of the proxies by mail, the Company will request banks, brokers and
other record holders to send proxy appointment forms and proxy material to the
beneficial owners of the stock and secure their voting instructions, if
necessary. The Company will reimburse them for their reasonable expenses in so
doing. If necessary, the Company may use several of its regular employees, who
will not be specially compensated, to solicit proxy appointment forms from
shareholders, either personally or by telephone, telegram or special letter. The
Company has retained Corporate Investor Communications, Inc. to assist in the
solicitation at an estimated cost of $12,000.
February 21, 1997 has been fixed as the record date for determination of
shareholders entitled to notice of and to vote at such Annual Meeting and,
accordingly, only record holders of the Company's Common Shares, $.10 par value
(the "Common Shares") at the close of business on February 21, 1997, will be
entitled to notice of and to vote at the meeting.
The number of outstanding Common Shares entitled to vote as of the record
date was 24,703,415. Each Common Share is entitled to one vote. In accordance
with North Carolina law and the Company's bylaws, a majority of the outstanding
Common Shares represented in person or by proxy will constitute a quorum for the
election of directors, the ratification of the selection of accountants and
consideration of the shareholder proposal. Abstentions and broker non-votes will
be counted for purposes of determining the presence or absence of a quorum. With
regard to the election of directors, votes may either be cast in favor of or
withheld, and directors will be elected by a plurality of the votes cast. Votes
that are withheld will be excluded entirely from the vote and will have no
effect on the outcome of the election. The selection of auditors and the
shareholder proposal will be approved if the number of votes cast for the
proposal exceeds the number of votes cast against the proposal. Thus,
abstentions and broker non-votes will have no effect on the outcome of the vote
on the proposals.
<PAGE> 5
SHARE OWNERSHIP
As of March 3, 1997, the only class of voting securities the Company had
issued and outstanding was its Common Shares. On that date there were 24,727,415
Common Shares outstanding. The following table sets forth the names of, and the
numbers and percentages of Common Shares beneficially owned as of March 3, 1997
by, (a) each person known to the Company to own beneficially 5% or more of the
Company's outstanding Common Shares; (b) each director and nominee; (c) each
executive officer of the Company identified below in the Summary Compensation
Table; and (d) all executive officers and directors of the Company as a group. A
"beneficial owner" of Common Shares is a person who has either the voting or
investment power, or both, alone or shared with others, over such Common Shares.
Each of the individuals listed below possesses sole voting and investment power
with respect to the shares listed opposite his or her name, unless noted
otherwise.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------
NAME AND ADDRESS+ OF BENEFICIAL OWNER NUMBER(1) PERCENT
- ------------------------------------- ----------- ---------
<S> <C> <C>
Maxine Francis Forrest(2)................................... 1,894,825 7.7%
P.O. Box 115
Austell, Georgia 30001
Mary Elizabeth Puette Francis............................... 1,341,025 5.4%
P.O. Box 115
Austell, Georgia 30001
Thomas V. Brown(3).......................................... 210,724 *
Bob M. Prillaman(4)......................................... 166,555 *
Jimmy A. Russell............................................ 119,526 *
Russell M. Robinson, II(5).................................. 113,075 *
H. Lee Thrash, III(6)....................................... 109,177 *
Ralph M. Holt, Jr........................................... 94,025 *
Gary M. Cran................................................ 85,105 *
James L. Walden............................................. 49,875 *
James E. Rogers............................................. 4,253 *
James H. Hance, Jr.(7)...................................... 4,253 *
John D. Munford............................................. 3,638 *
Directors and Executive Officers as a group (14 persons).... 2,882,218 11.6%
</TABLE>
- ---------------
+ Addresses are furnished only for each person known to the Company to own
beneficially 5% or more of the Company's outstanding Common Shares.
(1) Includes the following shares subject to stock options or stock purchase
rights exercisable within 60 days after March 3, 1997: Mr.
Prillaman -- 7,875; Mr. Brown -- 129,474; Mr. Thrash -- 6,125; Mr.
Russell -- 6,375; Mr. Cran -- 22,362; Mr. Walden -- 19,875; Ms.
Forrest -- 2,000; Mr. Robinson -- 2,000; Mr. Holt -- 2,000; Mr.
Rogers -- 2,000; Mr. Hance -- 2,000; Mr. Munford -- 2,000; Directors and
Executive Officers as a group -- 208,461.
(2) Includes 71,279 shares registered in the name of Mrs. Forrest's husband,
over which Mrs. Forrest disclaims beneficial ownership, 142,438 shares held
by Mrs. Forrest in trust for herself under an agreement with her mother,
916,162 shares held by Mrs. Forrest as trustee or custodian for certain
family members and 360,000 shares held by The Edward C. Giles Foundation,
over which Mrs. Forrest has shared voting and investment power.
(3) Includes 21,200 shares registered in the name of Mr. Brown's wife.
(4) Includes 6,300 shares owned by his daughter, over which Mr. Prillaman
disclaims beneficial ownership.
(5) Includes 53,290 shares registered in the name of Mr. Robinson's wife.
(6) Includes 4,434 shares held by Mr. Thrash as custodian for his children and
148 shares held in his wife's Individual Retirement Account.
(7) Includes 2,000 shares held in a family partnership, over which Mr. Hance has
shared voting and investment power.
* Denotes ownership of less than 1% of the Company's Common Shares.
2
<PAGE> 6
SHAREHOLDER RETURN
Performance Graph. The following graph compares the cumulative total
shareholder return on the Company's Common Shares for the years 1992 through
1996 with (a) the cumulative total return of the S&P 400 Index and (b) the
cumulative total return of the S&P Paper & Forest Products Index. All cumulative
returns assume the investment of $100.00 in each of the Company's Common Shares,
the S&P 400 Index and the S&P Paper & Forest Products Index on September 30,
1992 and assume the reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG CARAUSTAR INDUSTRIES, INC., S&P 400 INDEX &
S&P PAPER & FOREST PRODUCTS INDEX FOR THE YEARS 1992 THROUGH 1996
<TABLE>
<CAPTION>
MEASUREMENT PERIOD CARAUSTAR S&P 400 S&P PAPER &
(FISCAL YEAR COVERED) FOREST
PRODUCTS
INDEX
<S> <C> <C> <C>
SEPTEMBER 30, 1992 100.00 100.00 100.00
DECEMBER 31, 1992 125.04 103.99 107.88
DECEMBER 31, 1993 114.53 110.70 115.85
DECEMBER 31, 1994 155.16 112.20 117.74
DECEMBER 31, 1995 142.62 147.79 126.43
DECEMBER 31, 1996 241.39 178.28 136.47
</TABLE>
ELECTION OF DIRECTORS
The Board of Directors currently consists of 9 members and is divided into
3 classes (I, II and III). Each newly elected class of directors will serve
terms of three years. The term of office for incumbent Class II directors will
expire at the 1997 Annual Meeting. The incumbent Class II directors are Bob M.
Prillaman, Russell M. Robinson, II and H. Lee Thrash, III.
It is intended that the persons named in the accompanying proxy appointment
form will vote only for the three nominees for Class II director, except to the
extent authority to so vote is withheld with respect to one or more nominees.
Although the Board does not expect that any of the nominees named will be
unavailable for election, in the event of a vacancy in the slate of nominees
occasioned by death or any other unexpected occurrence, it is intended that the
Common Shares represented by the accompanying proxy appointment form will be
voted for the election of a substitute nominee selected by the persons named in
the proxy appointment form.
During 1996 the Board of Directors held 7 meetings and on 3 occasions acted
by unanimous written consent.
The Board of Directors maintains an Audit Committee, on which Mrs. Forrest
and Messrs. Hance, Holt (chairman) and Rogers serve. The Audit Committee reviews
the results and scope of each audit, the service
3
<PAGE> 7
provided by the Company's independent accountants and related-party
transactions. The Audit Committee met 3 times in 1996.
The Board of Directors also has a Compensation and Employee Benefits
Committee, on which Messrs. Munford and Rogers (Chairman) currently serve, and
on which Mr. Robinson served during 1996. The Compensation and Employee Benefits
Committee establishes and reviews the compensation criteria and policies of the
Company and administers the Company's 1993 Key Employees' Share Ownership Plan
and Incentive Bonus Plan. The Compensation and Employee Benefits Committee met 2
times in 1996.
Each director who is not an employee or former employee of the Company is
being paid (in quarterly installments) an annual retainer fee of $15,000 for
serving as a director. A non-executive Chairman of the Board is paid an annual
retainer fee of $50,000. The chairmen of the Audit Committee, Compensation and
Employee Benefits Committee and Executive Committee also receive an annual
retainer fee of $3,000. Additionally, all directors who are not employees of the
Company are paid a fee of $1,500 per meeting for attending meetings of the Board
of Directors, $500 for participation in a telephonic Board meeting, $750 per
committee meeting attended and $250 per committee meeting by telephone
conference. All directors are reimbursed for ordinary and necessary
out-of-pocket expenses incurred in attending meetings of the Board of Directors.
The Board of Directors makes nominations for director candidates as
permitted by the Company's Bylaws. Section 3 of Article III of the Company's
Bylaws prescribes the procedure a shareholder must follow to make nominations
for director candidates. Shareholder nominations for director will be considered
at an annual meeting or any other meeting at which an election is to be held if
the shareholder delivers to the Secretary of the Company, not later than the
close of business on the fifth business day following the date on which notice
is first given to shareholders of the meeting at which such election is to be
held, a notice setting forth the information specified in Section 3 of Article
III of the Company's Bylaws. Any shareholder desiring a copy of the Company's
Bylaws will be furnished one without charge upon written request to the
Secretary.
Each director and nominee's name, age, current principal occupation (which
has continued for at least five years unless otherwise indicated) and the name
and principal business of the corporation in which that occupation is carried
on, the year each incumbent was first elected to the Board, all positions and
offices presently held with the Company and directorships in other publicly held
companies are set forth below. None of the following nominees or directors is
related (as first cousin or closer) by blood, marriage or adoption to any other
nominee, director or person who may be deemed to be an executive officer of the
Company.
CLASS I DIRECTORS
(Incumbents to Serve Until 1999 Annual Meeting)
THOMAS V. BROWN (56), PRESIDENT AND CHIEF EXECUTIVE OFFICER, CARAUSTAR
INDUSTRIES, INC. Mr. Brown has served as President of the Company since January
1991 and as its Chief Executive Officer since October 1991. He has served as a
director since April 1991. Prior to joining the Company, Mr. Brown served as the
Vice President and General Manager, Industrial Packaging Division, of Jefferson
Smurfit Corporation, a recycled paperboard manufacturer, from October 1986
through December 1990.
MAXINE FRANCIS FORREST (46). Mrs. Forrest has served on the Board of
Trustees of Brevard College since 1988, and as Vice Chairman since 1990, and on
the Board of Trustees of the Cleveland County Community Foundation, a charitable
organization, since 1989, and as Vice Chairman during 1993 and as Chairman since
1994. Mrs. Forrest also serves as President of the Edward C. Giles Foundation, a
charitable organization that makes educational scholarship grants exclusively
for the benefit of the children and descendants of the Company's employees. Mrs.
Forrest has served as a director of the Company since April 1990. Mrs. Forrest
also is the granddaughter of the late Mr. Ross Puette, the Company's founder.
RALPH M. HOLT, JR. (65), CHAIRMAN AND CHIEF EXECUTIVE OFFICER, HOLT HOSIERY
MILLS, Burlington, North Carolina, a hosiery manufacturer. Mr. Holt has been a
director of the Company since April 1986, and has been the Chairman and Chief
Executive Officer of Holt Hosiery Mills since 1967.
4
<PAGE> 8
CLASS II DIRECTORS
(Nominees for election to serve until 2000 Annual Meeting)
BOB M. PRILLAMAN (64), SENIOR VICE PRESIDENT, CARAUSTAR INDUSTRIES, INC.
Mr. Prillaman has served as Senior Vice President of the Company and as a
director since 1980. Mr. Prillaman has been employed by the Company or its
predecessors since 1969.
RUSSELL M. ROBINSON, II (64), ATTORNEY AT LAW, ROBINSON, BRADSHAW & HINSON,
P.A., Charlotte, North Carolina, a law firm. Mr. Robinson has been engaged in
the private practice of law since 1956 and is a shareholder, officer and
director of Robinson, Bradshaw & Hinson, P.A. Mr. Robinson has been a director
of the Company since December 1992, and has served as Chairman of the Board of
Directors of the Company since April 1995. Mr. Robinson also serves as a
director of Cadmus Communications Corporation and Duke Power Company.
H. LEE THRASH, III (46), VICE PRESIDENT, PLANNING AND DEVELOPMENT, AND
CHIEF FINANCIAL OFFICER, CARAUSTAR INDUSTRIES, INC. Mr. Thrash has been employed
by the Company since 1983 and has served as Vice President and Chief Financial
Officer of the Company since 1986 and as a director since 1987.
CLASS III DIRECTORS
(Incumbents to serve until 1998 Annual Meeting)
JAMES H. HANCE, JR. (52), VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER,
NATIONSBANK CORPORATION, Charlotte, North Carolina, a bank holding company. Mr.
Hance has served as Vice Chairman and Chief Financial Officer of NationsBank
Corporation since October 1993, and as Chief Financial Officer since August
1988. Prior to joining NationsBank Corporation (formerly NCNB Corporation) in
March 1987, Mr. Hance, a certified public accountant, spent 17 years with the
public accounting firm of Price Waterhouse in Philadelphia and Charlotte. Mr.
Hance is also a director of Family Dollar Stores, Inc., Lance, Inc. and Summit
Properties, Inc. Mr. Hance has been a director of the Company since November
1995.
JOHN D. MUNFORD (69), VICE CHAIRMAN (RETIRED), UNION CAMP CORPORATION,
Franklin, Virginia, a paper and forest products company. Mr. Munford served as
Executive Vice President of the fine papers group of Union Camp Corporation from
1984 until April 1991 and thereafter as Vice Chairman of the board of directors
of Union Camp Corporation until August 1993. During his 42 years of employment
with Union Camp Corporation, Mr. Munford held management positions in both sales
and operations. Mr. Munford has been a director of the Company since November
1994. Mr. Munford also serves as a director of Cadmus Communications
Corporation, Pulaski Furniture Corporation and Universal Corporation.
JAMES E. ROGERS (51), PRESIDENT, SCI INVESTORS INC., Richmond, Virginia, a
private equity investment firm. Mr. Rogers has been President of SCI Investors
Inc. since April 1993. From 1993 to 1996, Mr. Rogers also served as Chairman of
Custom Papers Group, Inc., a paper manufacturing company. From 1991 to 1993, Mr.
Rogers served as President and Chief Executive Officer of Specialty Coatings
International, Inc., a manufacturer of specialty paper and film products. Prior
to that time, Mr. Rogers was Senior Vice President, Group Executive of James
River Corporation, a paper and packaging manufacturer. Mr. Rogers has been a
director of the Company since November 1993. Mr. Rogers also serves as a
director of Wellman, Inc. and Owens & Minor, Inc.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Shares and other equity securities of the Company. Executive
officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on review of the copies of such
reports furnished to
5
<PAGE> 9
the Company during the year ended December 31, 1996, all Section 16(a) filing
requirements applicable to its executive officers and directors and any greater
than 10% beneficial owners (the Company is aware of none) were complied with.
EXECUTIVE COMPENSATION
Compensation Committee Report. The Company's Compensation and Employee
Benefits Committee (the "Compensation Committee") considers and makes
recommendations to the Board of Directors with respect to the compensation of
the chief executive officer and management incentive plans, sets and adjusts
salaries for the Company's other officers, and administers the Company's stock
option and incentive bonus plans. Set forth below is the Compensation
Committee's report on its actions and policies with regard to the compensation
of Thomas V. Brown, the Company's Chief Executive Officer, and the Company's
executive officers generally.
COMPENSATION POLICIES
The Compensation Committee's policies with regard to senior officer
compensation are (1) to pay appropriate base salaries based on reviews of base
salaries paid to executives in comparable companies and evaluations of
individual responsibilities and performance, (2) to provide long-term incentives
and encourage investment in the Company's shares by granting stock options and
other stock-based awards, and (3) to tie compensation to Company performance
through an annual incentive bonus plan. The Compensation Committee regularly
reviews compensation paid to executives in other comparable companies and uses
surveys produced by Hewitt and the Paper Industry Compensation Association as
its principal resources in this regard.
BASE SALARY
Base salary forms the competitive foundation of the officer compensation
program. Executive officer salaries are administered by the Compensation
Committee to ensure they remain competitive with practices of companies of
comparable revenues and similar industries. As stated above, the Company
periodically engages compensation consultants and surveys industry data for this
purpose. Based on its review of the survey data, the Compensation Committee
approved certain base salary increases for 1996 for the Company's senior
officers and recommended an increase, which the Board approved, in Mr. Brown's
base salary from $420,000 to $445,000.
LONG TERM INCENTIVES
The Compensation Committee believes that share ownership by executives is
important to align the interests and outlook of executives with those of the
shareholders. The Company's 1993 Key Employees' Share Ownership Plan, which
provides for grants of stock options and stock purchase rights, provides that,
in making grants of options and rights, the Compensation Committee should give
particular consideration to employees who have taken advantage of opportunities
to increase their share ownership. During 1996, the Compensation Committee
granted to employees stock options, stock purchase rights and accompanying bonus
share rights with respect to an aggregate of 154,360 shares, taking into account
each employee's functions, responsibilities and ability to contribute to Company
performance. Mr. Brown also participated in the Company's 1993 Key Employees'
Share Ownership Plan, on the same basis as that of all other participating
executives, with the amount of stock options granted to him being substantially
the same, in proportion to his base salary, as the amounts granted to other
senior executives.
INCENTIVE BONUS PLAN
The Company maintains an Incentive Bonus Plan pursuant to which
participants receive annual bonuses based on Company performance. Approximately
53 executives participated in this plan in 1996. Each year the Compensation
Committee establishes a formula pursuant to which the amount of the bonuses for
that year is to be determined, based on some measure or measures of Company
performance. For 1996, bonuses under the
6
<PAGE> 10
plan were determined based on the amount by which 1996 net income from
continuing operations exceeded 1995 income from continuing operations. Under the
1996 formula, increases in net income from continuing operations of 5%-15% over
1995 levels would yield participant bonuses of 5%-18% of base salary; for
increases in net income of 16%-25%, bonuses would range from 23%-39% of base
salary; and for increases in net income of over 25%, bonuses would be 50% of
base salary and higher, depending upon the exact amount of the increase in net
income from continuing operations, but in no event would exceed 100% of base
salary. Net income from continuing operations for 1996 was approximately $57.9
million, an increase of 35% over 1995, and application of the 1996 bonus formula
yielded participant bonuses of approximately 72% of base salary. Mr. Brown also
participated in the Company's Incentive Bonus Plan, receiving an annual bonus
under the Incentive Bonus Plan that was, as a percentage of his base salary, the
same (approximately 72%) as that of all other participating employees. Thus, Mr.
Brown's 1996 bonus compensation was dependent upon Company performance to the
extent that his bonus awarded under the Incentive Bonus Plan was based on the
increase in the Company's net income from continuing operations.
Under the formula established for the 1997 Incentive Bonus Plan, the
bonuses paid to participants are also based on increases in the Company's net
income from continuing operations. The 1997 formula provides that participants
will not receive any bonus unless the Company achieves an increase in net income
from continuing operations. If the Company's 1997 net income improves over 1996,
then a bonus pool will be distributed to plan participants based on the extent
to which 1997 net income exceeds the 1996 performance level. In no event may the
bonus payable under the 1997 formula exceed 100% of a participant's salary.
CORPORATE TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code prohibits publicly held
corporations from deducting as an expense for tax purposes the amount by which
compensation paid to any of the Company's chief executive officer or four other
most highly compensated executive officers exceeds $1,000,000, unless such
compensation qualifies as "performance-based." Although the current cash
compensation levels of the Company's executives generally remain well below the
$1,000,000 limit, and the remaining compensation payable under the Company's
1993 Key Employees' Share Ownership Plan to such executive officers consists of
incentive stock options under Section 422 of the Internal Revenue Code, for
which the Company generally is not entitled a deduction, the Compensation
Committee intends to structure any stock option component of the Company's
future compensation plans to qualify as "performance-based" compensation that is
exempt from the Section 162(m) deduction limitations.
COMPENSATION COMMITTEE:
JAMES E. ROGERS, CHAIRMAN
JOHN D. MUNFORD
RUSSELL M. ROBINSON, II
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, no member of the Compensation and
Employee Benefits Committee was an employee or officer of the Company. Mr.
Russell M. Robinson, II, who is the Chairman of the Board of Directors and was a
member of the Compensation and Employee Benefits Committee during 1996, is
President, a director and a shareholder of the firm of Robinson, Bradshaw &
Hinson, P.A., which was retained to perform legal services for the Company and
its subsidiaries during the last fiscal year. It is anticipated that the firm
will continue to provide legal services to the Company and its subsidiaries
during the current fiscal year. In light of certain amendments to the Section 16
rules under the Securities Exchange Act of 1934 and the expiration of certain
transition rules under Section 162(m) of the Internal Revenue Code, Mr. Robinson
recently resigned from the Compensation and Employee Benefits Committee to
ensure that the Compensation Committee will be composed solely of "non-employee
directors" for purposes of the Section 16 rules and "outside directors" for
purposes of Section 162(m).
7
<PAGE> 11
Summary Compensation Table. The following table sets forth information
concerning the compensation for the years ended December 31, 1994, 1995 and 1996
for those persons who were, at December 31, 1996, the chief executive officer of
the Company and the Company's four other most highly compensated executive
officers (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
---------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#) ($)
------------------ ---- -------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas V. Brown,....................... 1996 $440,833 $320,045 -- --(3) 8,000(6) $1,560(9)
President and Chief 1995 $420,000 $106,940(2) -- $13,038(4) 8,000(7) $1,026(9)
Executive Officer 1994 $397,000 $103,974(2) -- $15,582(5) 8,000(8) $1,026(9)
James L. Walden,....................... 1996 $285,007 $206,915 -- --(10) 4,500(11) --
Vice President 1995 $270,400 $ 55,973 -- -- 4,500(12) --
1994 $261,621 $ 68,519 -- -- 4,500(8) --
Bob M. Prillaman,...................... 1996 $250,771 $182,060 -- --(10) 4,500(11) --
Senior Vice President 1995 $237,492 $ 49,161 -- -- 4,500(12) --
1994 $229,781 $ 60,180 -- -- 4,500(8) --
Gary M. Cran,.......................... 1996 $262,917 $190,878(2) -- $28,619(13) 4,500(11) --
Vice President 1995 $248,989 $ 51,540(2) -- $ 7,722(14) 4,500(12) --
1994 $224,992 $ 58,925(2) -- $ 8,831(15) 4,500(8) --
Jimmy A. Russell....................... 1996 $223,486 $162,251 -- --(16) 4,000(11) --
Vice President 1995 $208,619 $ 43,184 -- -- 4,000(12) --
1994 $187,575 $ 49,126 -- -- 3,500(8) --
</TABLE>
- ---------------
(1) All restricted stock awards shown are awards of restricted bonus shares
under the Company's Incentive Bonus Plan (the "Incentive Bonus Plan").
Under the Incentive Bonus Plan, except as described below, 30% of each
executive officer's bonus is paid in bonus shares, valued at the current
market price of the Company's common shares, and the recipient also
receives one restricted bonus share for each two bonus shares received.
Additionally, the payment of such bonus shares results in the cancellation
of a like number of stock purchase rights held by such officer under the
1993 Key Employees' Share Ownership Plan (the "1993 Share Plan"). Thus, an
award under the Incentive Bonus Plan of bonus shares and restricted bonus
shares, with the resulting cancellation of a like number of stock purchase
rights, has the same effect as the officer's using a cash bonus to exercise
stock purchase rights under the 1993 Share Plan. If for any reason an
officer does not hold stock purchase rights at the time his bonus is paid,
his entire bonus is paid in cash. Although the restricted bonus shares are
fully vested and pay dividends at the normal rate upon issuance, they are
subject to certain forfeiture and transfer restrictions under the terms of
the 1993 Share Plan and Incentive Bonus Plan.
(2) Pursuant to the Incentive Bonus Plan, 30% of this amount was paid to the
Named Officer in bonus shares rather than cash, and a like number of stock
purchase rights were cancelled. The Named Officer also received, without
consideration, one restricted bonus share (the value of which is reflected
in the Restricted Stock Awards column) for each two bonus shares awarded.
(3) As of December 31, 1996, Mr. Brown held a total of 12,615 restricted common
shares valued at $419,449.
(4) Amount represents the fair market value on the date of issuance of 596
restricted bonus shares. See footnotes 1 and 2.
(5) Amount represents the fair market value on the date of issuance of 794
restricted bonus shares. See footnotes 1 and 2.
(6) Amount represents a grant of incentive options under the 1993 Plan. All
such stock options are currently unvested, but will vest over three years
beginning on February 2, 1998 in annual increments of 18.25%, 38.775% and
42.975%.
8
<PAGE> 12
(7) Amount represents a grant of incentive options under the 1993 Share Plan.
Such stock options are currently approximately 25% vested, and will
continue vesting at the approximate rate of 25% per year on June 6 of each
year through 1999.
(8) Amount represents a grant of incentive stock options under the 1993 Share
Plan. Such stock options are currently 50% vested, and will continue
vesting at the rate of 25% per year on May 16 of each year through 1998.
(9) Amount represents the portion of term life insurance premiums paid by the
Company on terms not otherwise available to all salaried employees.
(10) As of December 31, 1996, this Named Officer held a total of 7,500
restricted common shares valued at $249,375.
(11) Amount represents a grant of incentive options under the 1993 Share Plan.
Such stock options are currently 25% vested, and will continue vesting at
the rate of 25% per year on February 2 of each year through 2000.
(12) Amount represents a grant of incentive stock options under the 1993 Share
Plan. Such stock options are currently 25% vested, and will continue
vesting at the rate of 25% per year on June 6 of each year through 1999.
(13) Amount represents the fair market value on the date of issuance of 950
restricted bonus shares. See footnotes 1 and 2. As of December 31, 1996,
Mr. Cran held a total of 1,721 restricted common shares valued at $57,223.
(14) Amount represents the fair market value on the date of issuance of 353
restricted bonus shares. See footnotes 1 and 2.
(15) Amount represents the fair market value on the date of issuance of 450
restricted bonus shares. See footnotes 1 and 2.
(16) As of December 31, 1996, Mr. Russell held a total of 5,850 restricted
common shares valued at $194,513.
Option Grants Table. The following table sets forth certain information
concerning grants of stock options to the Named Officers during the year ended
December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES OR BASE FOR OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION ----------------------
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas V. Brown....................... 8,000(1) 5.63% $19.50 2004 $74,480 $178,400
James L. Walden....................... 4,500(2) 3.17% $19.50 2004 $41,895 $100,350
Bob M. Prillaman...................... 4,500(2) 3.17% $19.50 2004 $41,895 $100,350
Gary M. Cran.......................... 4,500(2) 3.17% $19.50 2004 $41,895 $100,350
Jimmy A. Russell...................... 4,000(2) 2.82% $19.50 2004 $37,240 $ 89,200
</TABLE>
- ---------------
(1) This amount represents the number of shares of common stock underlying
grants of incentive stock options under the 1993 Share Plan. All of these
options are currently unvested, but will vest over three years beginning on
February 2, 1998 in annual increments of 18.25%, 38.775% and 42.975%.
(2) These amounts represent the number of shares of common stock underlying
grants of incentive stock options under the 1993 Share Plan. These options
are currently 25% vested, and will continue vesting at the rate of 25% per
year on February 2 of each year through 2000.
9
<PAGE> 13
Option Exercises and Year-End Value Table. The following table sets forth
certain information concerning the exercise of stock options by the Named
Officers during 1996 and unexercised options held as of December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES ACQUIRED VALUE AT FY-END (#) FY-END ($)(1)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas V. Brown................. 2,200 $67,200 131,678 20,026 $3,668,463 $298,851
4,192 $ 0
2,096 $50,413
Bob M. Prillaman................ -- -- 6,750 11,250 $ 116,720 $167,907
James L. Walden................. -- -- 14,750 19,250 $ 240,719 $291,906
Gary M. Cran.................... 706 $ 0 79,087 11,250 $1,989,121 $167,907
353 $ 7,722
Jimmy A. Russell................ -- -- 25,375 9,625 $ 630,469 $142,531
</TABLE>
- ---------------
(1) The fair market value used for computations in this column was $33.25, which
was the closing market price of the Company's Common Shares on December 31,
1996.
Retirement Plans. Substantially all of the Company's employees participate
in a non-contributory defined benefit pension plan. The pension plan provides
for retirement, disability and death benefits. Employees who retire at the
normal retirement age of 65 and receive their benefits as a single life annuity
are entitled to annual pension benefits equal to 1.35% of their average annual
compensation multiplied by the number of years of credited service (not greater
than 33 years), less .65% of final average annual compensation (up to the
taxable wage base as established by the Social Security Administration) for each
year of credited service at normal retirement date (not greater than 33 years).
Average annual compensation is the highest average compensation received by an
employee for any consecutive five-year period during the last 10 consecutive
plan years of an employee's participation in the plan. Average annual
compensation is defined as an employee's gross wages, excluding fringe benefits
and deferred compensation (salary and bonus columns of the Summary Compensation
Table less any deferred compensation included in the salary column), and final
average compensation is defined as average annual compensation up to the taxable
wage base as determined by the Social Security Administration.
The Company also maintains a Supplemental Executive Retirement Plan
("SERP"), which supplements the Company's pension plan benefits by providing to
certain highly compensated employees the additional retirement benefits to which
they otherwise would be entitled under the Company's pension plan in the absence
of certain limitations imposed by the Internal Revenue Code. The additional
benefits payable under the SERP will be based on the same formula as the pension
plan, but without regard to the taxable wage base established by the Social
Security Administration or the 33-year maximum limit on credited years of
service.
10
<PAGE> 14
The following table shows the estimated annual benefits payable upon
retirement to employees participating in the Company's non-contributory defined
benefit pension plan, as supplemented by the SERP, at specified compensation
levels and years of service:
COMBINED RETIREMENT PLANS ESTIMATED ANNUAL BENEFITS
<TABLE>
<CAPTION>
CREDITED YEARS OF SERVICE
AVERAGE ANNUAL -----------------------------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35 40 45
- -------------- ------- ------- -------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$150,000 $18,345 $27,518 $ 36,690 $ 45,863 $ 55,036 $ 64,208 $ 73,381 $ 82,554
200,000 25,095 37,643 50,190 62,738 75,286 87,833 100,381 112,929
250,000 31,845 47,768 63,690 79,613 95,536 111,458 127,381 143,304
300,000 38,595 57,893 77,190 96,488 115,786 135,083 154,381 173,679
350,000 45,345 68,018 90,690 113,363 136,036 158,708 181,381 204,054
400,000 52,095 78,143 104,190 130,238 156,286 182,333 208,381 234,429
450,000 58,845 88,268 117,690 147,113 176,536 205,958 235,381 264,804
500,000 65,595 98,393 131,190 163,988 196,786 229,583 262,381 295,179
</TABLE>
At December 31, 1996, the estimated credited years of service and average
annual compensation under the retirement plans for each of the Named Officers
were as follows: Thomas V. Brown, 34 years and $455,776 (credited years of
service include term of service with former employer in accordance with Mr.
Brown's employment agreement); James L. Walden, 4 years and $299,325; Bob M.
Prillaman, 28 years and $150,000 (Mr. Prillaman participates only in the pension
plan); Gary M. Cran, 10 years and $150,000 (Mr. Cran participates only in the
pension plan); and Jimmy A. Russell, 21 years and $206,995.
Employment Agreements. The Company entered into an employment agreement,
effective January 1, 1991, with Thomas V. Brown. Pursuant to the employment
agreement, the annual base salary of Mr. Brown was established for the first
year of employment at $350,000. Future increases in such base salary are
determined by the Compensation and Employee Benefits Committee. Pursuant to the
employment agreement, the Company granted to Mr. Brown options to purchase
120,000 shares of Common Stock at $4.00 per share, which expire January 1, 2001,
and which were subject to vesting at a rate of 20% per year over a five-year
period. As of December 31, 1996, options for the 120,000 shares were fully
vested. Pursuant to the employment agreement, the Company has provided Mr. Brown
with $1,000,000 in term life insurance, the initiation fee and monthly dues for
a local country club, an annual $5,000 allowance for financial planning and tax
preparation services and travel and accident insurance in the amount of
$1,000,000.
Under Mr. Brown's employment agreement, the Company has agreed to pay Mr.
Brown an excess benefit to the extent that the pension benefit Mr. Brown would
have received under his former employer's benefit plan (assuming Mr. Brown's
term of service with his prior employer continued uninterrupted until his
termination of service with the Company) exceeds his benefit from the Company.
Under this alternate calculation, this benefit is equal to approximately 1.5% of
Mr. Brown's annual average compensation (less certain adjustments).
Mr. Brown's employment agreement runs for an indefinite term, but may be
terminated by the Company or Mr. Brown with or without cause upon 60 days' prior
notice. Certain terms of the agreement (i) providing for one year's severance
pay to Mr. Brown in the event of his termination by the Company without cause
and (ii) prohibiting Mr. Brown from competing with the Company for one year
following his voluntary termination of employment with the Company expired on
January 1, 1996.
The Company entered into an employment agreement with James L. Walden on
January 25, 1993 to establish Mr. Walden's compensation during the first year of
his employment. Under the employment agreement, Mr. Walden's base salary for his
first year of employment was set at $250,000, with future increases to be
determined by the Compensation and Employee Benefits Committee. The agreement
also provided Mr. Walden with a guaranteed minimum bonus of 10% of his base
salary for the first year and provided that Mr. Walden was eligible for
immediate participation in the 1993 Key Employees' Share Ownership Plan and the
Company's Incentive Bonus Plan. Pursuant to the employment agreement, the
11
<PAGE> 15
Company granted Mr. Walden options to purchase 20,000 shares of Common Stock at
$17.75, the fair market value of such shares on the date of grant. These options
expire on February 5, 2003 and are subject to vesting at a rate of 20% per year
over a five-year period. Any unvested options terminate upon the termination of
Mr. Walden's employment for any reason other than death or disability. Options
for 16,000 of these shares were vested as of February 5, 1997. Under the
agreement, the Company also has provided Mr. Walden with term life insurance in
an amount equal two times his annual base salary, travel and accident insurance
in the amount of $500,000, an annual $5,000 allowance for financial planning and
tax preparation services and an allowance for local country club dues of up to
$3,000 per year.
The Company has agreed to pay Mr. Gary Cran an excess benefit to the extent
that the pension benefit Mr. Cran would have received under his former
employer's benefit plan (assuming Mr. Cran's term of service with his prior
employer continued uninterrupted until his termination of service with the
Company) exceeds his benefit from the Company. Under this alternate calculation,
this benefit is equal to approximately 1.5% of Mr. Cran's annual average
compensation (less certain adjustments).
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board, upon the recommendation of the Audit Committee, has approved the
selection of the firm of Arthur Andersen LLP as independent public accountants
to examine the books of the Company and its subsidiaries for the current year,
to report on the consolidated statement of financial position and related
statement of earnings of the Company and its subsidiaries, and to perform such
other appropriate accounting services as may be required by the Board. The Board
recommends that the shareholders vote in favor of ratifying and approving the
selection of Arthur Andersen LLP for the purposes set forth above. The Company
has been advised by Arthur Andersen LLP that the firm did not have any direct
financial interest or any material indirect financial interest in the Company
and its subsidiaries during the Company's most recent fiscal year.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they so desire, and
they are expected to be available to respond to appropriate questions.
Approval of the proposal requires the affirmative vote of a majority of the
Common Shares voted on the proposal. Should the shareholders vote negatively,
the Board of Directors will consider a change in auditors for the next year.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFYING THE SELECTION OF
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS TO AUDIT THE BOOKS OF THE
COMPANY AND ITS SUBSIDIARIES FOR THE CURRENT YEAR.
SHAREHOLDER PROPOSAL
The United Paperworkers International Union, 3340 Perimeter Hill Drive,
Nashville, Tennessee 37211, owner of 200 Common Shares of record, has given
notice that it intends to present for action at the Annual Meeting a proposal in
the form of the following resolution:
"BE IT RESOLVED: That the shareholders of Caraustar Industries
('Company') urge that the Board of Directors take the necessary steps to
declassify the Board of Directors for the purpose of director elections.
The Board declassification shall be done in a manner that does not affect
the unexpired terms of directors previously elected."
The proponent has furnished the following statement in support of its
proposal:
"The Board of Directors of the Company is divided into three classes
serving staggered three-year terms. It is our belief that the
classification of the Board of Directors is not in the best interest of the
Company and its shareholders. The elimination of the staggered board would
require each director to stand for election annually. This procedure would
allow shareholders an opportunity to annually register their views on the
performance of the board collectively and each director individually.
12
<PAGE> 16
"Concern that the annual election of all directors would leave the
Company without experienced board members in the event that all incumbents
are voted out is unfounded. If the owners should choose to replace the
entire board, it would be obvious that the incumbent directors'
contributions were not valued.
"A classified board of directors protects the incumbency of the board
and current management which in turn limits accountability to shareholders.
We believe that this protection for incumbents reduces management's
accountability to shareholders and negatively impacts financial
performance.
"We urge your support for this proposal."
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE PROPOSAL
Under the corporate law of North Carolina, the State in which the Company
is incorporated, the change contemplated by the proposal would require the
shareholders to amend the Company's Bylaws to delete the current staggered board
provision that was adopted by the shareholders at a special meeting held August
27, 1992. A vote in favor of the proposal, therefore, would constitute a request
that the Board propose such an amendment for shareholder approval. The Board of
Directors does not believe, however, that such an amendment would be in the best
interests of the Company or its shareholders.
The Board believes that the staggered system of electing directors helps
assure continuity of the Company's business strategies and policies and enables
the Company to plan for a reasonable period into the future. The Board also
believes that the staggered system strikes the right balance between
flexibility, by providing for the annual election of one-third of the directors,
and stability, by ensuring that a majority of the directors at all times will
have had prior experience in the management of the Company's business. In
addition, the staggered system would preclude immediate removal of all incumbent
directors by a person seeking a change in control of the Company and thereby
would permit the Board time to negotiate, consider alternative proposals and act
to protect and maximize shareholder value.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
PROPOSALS FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
Shareholders who intend to present proposals for consideration at next
year's annual meeting are advised that any such proposal must be received by the
Secretary of the Company no later than the close of business on November 10,
1997 if such proposal is to be considered for inclusion in the proxy statement
and proxy appointment form relating to that meeting.
OTHER MATTERS
The Board and officers are not aware of any other matters which may be
presented for action at the meeting, but if other matters do properly come
before the meeting, it is intended that the Common Shares represented by the
accompanying proxy appointment form will be voted by the persons named in the
form in accordance with their best judgment.
13
<PAGE> 17
You are cordially invited to attend this year's meeting. However, whether
you plan to attend the meeting or not, you are respectfully urged to sign and
return the enclosed proxy appointment form, which will, of course, be returned
to you at the meeting if you are present and so request.
/s/ Russell M. Robinson, II
Russell M. Robinson, II
Chairman of the Board
/s/ Thomas V. Brown
Thomas V. Brown
President and Chief Executive Officer
14
<PAGE> 18
CARAUSTAR LOGO
<PAGE> 19
APPENDIX
<TABLE>
<S> <C> <C>
REVOCABLE CARAUSTAR INDUSTRIES, INC.
APPOINTMENT ANNUAL MEETING OF SHAREHOLDERS
OF PROXY TO BE HELD ON APRIL 16, 1997
</TABLE>
THIS APPOINTMENT OF PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Russell M. Robinson, II and
Thomas V. Brown as Proxies with full power of substitution to act and vote for
and on behalf of the undersigned, as designated below, all the common shares of
Caraustar Industries, Inc. (the "Company") held of record by the undersigned on
February 21, 1997, at the annual meeting of shareholders to be held at the
Caraustar corporate headquarters, located at 3100 Washington Street, Austell,
Georgia on April 16, 1997 or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. ELECTION OF THREE CLASS II DIRECTORS
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list below.)
Bob M. Prillaman; Russell M. Robinson, II; H. Lee Thrash, III
2. PROPOSAL TO RATIFY THE BOARD OF DIRECTORS' SELECTION OF ARTHUR ANDERSEN LLP
as the Company's independent public accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposals continued on reverse side. Please sign and date on the reverse side
and return in the enclosed postage-prepaid envelope.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
3. SHAREHOLDER PROPOSAL CONCERNING THE ELIMINATION OF STAGGERED TERMS FOR
DIRECTORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THE PROXIES WILL VOTE FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED HEREIN,
FOR PROPOSAL 2 AND AGAINST PROPOSAL 3 UNLESS THE SHAREHOLDER DIRECTS OTHERWISE,
IN WHICH CASE THE PROXIES WILL VOTE AS DIRECTED.
The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy
Statement dated March 10, 1997, and revokes all Appointments of Proxy heretofore
given by the undersigned.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED: , 1997
--------------------
--------------------------------
Signature
--------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
