<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
SCOTT PAPER COMPANY
------------------------------------------------------------------------
(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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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:
Notes:
<PAGE>
[LOGO OF SCOTT PAPER APPEARS HERE]
SCOTT PAPER COMPANY SCOTT PLAZA,
PHILADELPHIA PA 19113
March 10, 1995
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, APRIL 18, 1995
----------------
The Annual Meeting of Shareholders of Scott Paper Company, a Pennsylvania
corporation, will be held at 10:00 A.M. on Tuesday, April 18, 1995, at The
Radisson Hotel-Philadelphia Airport, 500 Stevens Drive, Philadelphia,
Pennsylvania, for the following purposes:
1. To elect nine Directors.
2. To act on a proposal to approve the Non-Employee Directors'
Compensation Plan.
3. To act on a proposal to approve a performance goal applicable to
restricted stock grants under the 1994 Long-Term Incentive Plan.
4. To act on a proposal to approve the appointment of auditors.
5. To transact such other business as may properly come before the
meeting.
Only holders of Common Shares of record at the close of business on February
17, 1995 will be entitled to vote at the meeting. In the absence of a quorum,
the meeting will be adjourned until a time announced at the meeting at which
adjourned meeting the shareholders in attendance, although less than a quorum,
shall nevertheless constitute a quorum to elect Directors and, if the meeting
has been adjourned for at least fifteen days, to act on all other matters
included in this notice.
Please sign, date and return, in the envelope provided, the enclosed proxy
which is being solicited on behalf of the Company's Board of Directors. The
proxy shows the form in which your Common Shares are registered. Your signature
should be in the same form.
If you need directions to the meeting, please call the undersigned at 610-
522-6770.
John P. Murtagh
Secretary
<PAGE>
SCOTT PAPER COMPANY
March 10, 1995
PROXY STATEMENT
PURPOSES OF THE MEETING
This Proxy Statement is being mailed on or about March 10, 1995, and is
furnished for the solicitation of proxies for use at the Annual Meeting of
Shareholders of Scott Paper Company to be held on April 18, 1995, and at any
adjournments thereof. Action will be taken at the meeting upon the election of
Directors, a proposal to approve the Non-Employee Directors' Compensation Plan,
a proposal to approve a performance goal applicable to restricted stock grants
under the 1994 Long-Term Incentive Plan and a proposal to approve the
appointment of auditors.
VOTING AT THE MEETING
Only the holders of Common Shares ("shares") of record at the close of
business on February 17, 1995, are entitled to vote at the Meeting. As of that
time there were 76,086,131 shares outstanding and entitled to be voted at the
Meeting. Each holder of shares entitled to vote has the right to one vote for
each share standing in his or her name on the books of the Company. However, in
the election of Directors, voting may be cumulative so that each share has as
many votes as there are Directors to be elected, and those votes may be
distributed among the nominees in any way the shareholder desires. To vote
cumulatively, the shareholder must write the words "cumulate for" followed by
the name of the nominee or nominees selected on the line provided under Item 1
of the proxy.
The shares represented by each properly executed proxy will be voted in the
manner specified by the shareholder. If instructions to the contrary are not
given, the shares will be voted in the election of Directors as specified
below, for approval of the proposals relating to the Non-Employee Directors'
Compensation Plan and a performance goal applicable to restricted stock grants
under the 1994 Long-Term Incentive Plan, and for approval of the appointment of
auditors. The proxies being solicited may be voted cumulatively and the vote
distributed among all or less than all of the nominees for election as
Directors, if the proxy holders, in the exercise of their discretion, deem it
desirable. Execution of the accompanying proxy will not affect a shareholder's
right to attend the meeting and vote in person. Any shareholder giving a proxy
has the right to revoke it by giving written notice of revocation to the
Secretary of the Company at any time before the proxy is voted.
CONFIDENTIAL VOTING POLICY
It is the policy of the Company that each shareholder's proxy relating to
this Meeting is to be confidential, if the shareholder so requests on the
proxy.
If the shareholder requests confidentiality, the proxy will not, prior to the
tabulation of the final vote at the Meeting, be available for examination by,
nor will the vote of the shareholder be disclosed to, any person (other than
the independent tabulator and judge of election) except (i) where disclosure is
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necessary to meet applicable legal requirements or (ii) in the event of a
contested proxy solicitation. Subject to the foregoing, in cases where the
shareholder requesting confidentiality is also a Director or employee of the
Company (including through shares held in employee benefit plans), any
requested and granted confidentiality would be maintained permanently. The
Company has retained an independent tabulator and judge of election to receive,
inspect, tabulate and certify proxy votes. The independent tabulator and judge
may inform the Company at any time of vote tallies and whether a particular
shareholder has voted.
In accordance with this policy, a space is provided on the proxy for the
shareholder to elect to have the proxy treated confidentially. If the
shareholder makes this election, the proxy may still be used to communicate
directly with the Company by writing comments on it, but any comment will be
transcribed separately and given to the Company. Except for a Director or
employee, the name of the shareholder making a comment will be disclosed.
OWNERSHIP OF SHARES
According to a Schedule 13G filed by FMR Corp. on behalf of itself and other
persons, FMR Corp. and such persons beneficially owned a combined total of
3,836,196 shares, or approximately 5.1% of those outstanding, on December 31,
1994. Fidelity Management & Research Company ("Fidelity"), and the funds for
which Fidelity serves as investment adviser, had sole dispositive power with
respect to 3,225,054 shares, and the funds' boards of trustees had sole voting
power with respect to these shares. Fidelity Management Trust Company had sole
dispositive power with respect to 574,442 shares and sole voting power with
respect to 293,242 of these shares. Edward C. Johnson 3d and FMR Corp., of
which Fidelity and Fidelity Management Trust Company are wholly-owned
subsidiaries, had the same dispositive power and voting power as these
subsidiaries. FMR Corp., Fidelity and Fidelity Management Trust Company are
located at 82 Devonshire Street, Boston, Massachusetts 02109. In addition,
Fidelity International Limited, which is located at Pembroke Hall, 42 Crowlane,
Hamilton, Bermuda, had sole dispositive power and sole voting power with
respect to 36,700 shares.
BOARD OF DIRECTORS
The Board of Directors currently consists of ten members, each of whom is
required to be a shareholder of the Company. Each non-employee Director serves
on one of the Board's two standing committees (the Audit and the Compensation
Committees). The overall attendance at the 12 Board and 18 committee meetings
during 1994 was 91%.
No Director who is an employee receives any additional compensation for
service on the Board or its committees. In July 1994, the Board discontinued
all prior forms of compensation for non-employee Directors and approved, as the
only form of compensation for regular service as a Director, the payment to
each Director at the rate of 1000 shares of the Company per year. Until a
formal plan has been approved by the shareholders, the Board required that each
monthly installment of these shares would be credited to each such Director's
unfunded deferred shares account under the Directors' Deferred Compensation
Plan (described below) beginning in July. The proposed Non-Employee Directors'
Compensation Plan is described beginning on page 21 and will, if approved at
the Meeting, provide for all compensation for regular service as a Director
beginning in April 1995. The Directors are also reimbursed for their reasonable
actual expenses in traveling to and from Board and committee meetings.
The prior forms of compensation for each Director consisted of an annual
retainer of $20,000, a fee of $1,000 for each Board and committee meeting
attended, a travel expense allowance, a grant of options
2
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for 1000 shares per year, a benefit upon retirement subject to certain
conditions under the Directors' Retirement Benefit Plan (described below), and
an additional annual retainer of $2,500 for the chairperson of each committee.
Under the Directors' Deferred Compensation Plan, each non-employee Director
has been required since July 1994 to defer the receipt of his or her monthly
installment of shares (either 83 or 84 shares per month) in an unfunded
deferred shares account until the termination of his or her service as a
Director. Previously, each such Director could elect to defer the receipt of
all or part of his or her retainer and meeting fees until such termination in
the form of an unfunded deferred cash account, an unfunded deferred shares
account or a combination of both. On a regular periodic basis, interest at a
market rate or dividends are credited to these accounts. The number of shares
in unfunded deferred shares accounts are reported in footnote 4 to the
"Ownership of Shares" table on page 7. All payments from these accounts are
made in cash. The Company's stock option plans previously provided for an
automatic annual grant to each non-employee Director of a nonqualified option
to purchase 1000 shares, and the 1989 Stock Option and Restricted Stock Plan
included stock appreciation rights in connection with these grants. In July
1994, the Board of Directors discontinued future automatic grants to non-
employee Directors and in September 1994, the then current non-employee
Directors surrendered all existing stock appreciation rights. Under the
Directors' Retirement Benefit Plan, each non-employee Director with at least
five years of service is entitled to an annual benefit, payable monthly, equal
to his or her annual retainer at the time of retirement (or $20,000 per year
for those active Directors who had qualified as of July 1994), to be paid over
a period equal to the shorter of fifteen years or his or her years of
qualifying service. If the Director dies before these payments have been
completed, the remaining benefits will be paid to his or her designated
beneficiary. In July 1994 all further accruals of benefits under this plan were
terminated.
The Audit Committee consists of Chairman John F. Fort, III, William A.
Andres, Claudine B. Malone and Paula Stern. It met four times during 1994 in
the discharge of its responsibilities to review and examine: the audit plan,
practices and procedures of the Company's independent accountants and internal
audit staff; the scope of their audit activities; the Company's accounting
policies, practices and controls; the Company's policies and practices in
reporting to shareholders and the public; the Company's compliance with
policies and programs; any relevant litigation, environmental, health and
safety matters; and the performance audits of major capital projects,
acquisitions and divestitures. As part of its activities, the committee meets
with representatives of the Company's management, internal audit staff and
independent accountants and meets privately with the independent accountants
and internal auditors. The committee makes a recommendation each year to the
full Board concerning the choice of the Company's independent accountants.
The Compensation Committee is composed of Chairman Gary L. Roubos, Jack J.
Crocker, Peter Harf, Richard K. Lochridge and Bruce K. MacLaury. This committee
examines and reviews the Company's policies and practices regarding
compensation, development, performance evaluation and succession for Company
personnel; reviews the qualifications of officers who report directly to the
Chairman and Chief Executive Officer and approves their compensation (including
incentive compensation); administers the Company stock option plans; reviews
the Company's pension plans, their performance and funding status, and their
investment and actuarial policies; reviews and removes investment managers,
trustees and a voting fiduciary; and reviews the Board's structure,
composition, policies and practices, including recommending candidates for
election as Directors and considering candidates suggested by shareholders. See
"Shareholder Proposals and Nominations" on page 27. This committee met 6 times
during 1994.
3
<PAGE>
ELECTION OF DIRECTORS
Nine Directors are to be elected, each to hold office until the next
succeeding Annual Meeting of Shareholders and until his or her successor has
been duly elected and qualified. Of the twelve Directors elected at the 1994
Annual Meeting of Shareholders, six are not standing for election to the Board
of Directors this year; they are Mr. W. H. Gray, III, who resigned in June
1994; Mr. J. R. Leaman, Jr., who resigned in October 1994; Mr. J. J. Crocker
who, having reached age 70, will be retiring at the end of the current term in
accordance with the provisions of the Company's bylaws; and Ms. C. B. Malone,
Dr. P. Stern and Mr. B. K. MacLaury, all of whom are not standing for re-
election. Standing for election for the first time this year are Mme. G. E.
Beaux, Mr. M. C. Davis and Mr. H. G. Kristol.
All nominees have consented to be named and to serve if elected. The Company
does not presently know of anything that would preclude any nominee from
serving if elected. If any nominee for any reason should become unable or
unwilling to stand for election as a Director, either the shares represented
by all proxies authorizing votes for that nominee will be voted for the
election of such other person as the Board may recommend, or the number of
Directors to be elected at the meeting will be reduced accordingly. Each
nominee will be elected if he or she receives the affirmative vote of a
plurality of the votes cast by holders of shares at the Meeting. Abstentions
and broker non-votes will not be counted as votes cast.
The following information is submitted concerning the nominees for election
to the Board.
[PHOTO OF WILLIAM A. ANDRES, 68, Former Chairman and Chief Executive
WILLIAM A. Officer of Dayton Hudson Corporation, a non-food retailing
ANDRES company, having served as its Chairman of the Board from 1976
APPEARS HERE] until 1984.
Director of Hannaford Bros. Co. (food retailer);
International Multifoods, Inc.; Jostens, Inc. (education,
business and athletic products); and Lowe's Companies, Inc.
(building materials).
(Company Director since 1984 and member of the Audit
Committee.)
[PHOTO OF GILBERTE E. BEAUX, 65, Chairman since 1982 and Chief
GILBERTE E. Executive Officer since 1988 of Basic Petroleum International
BEAUX Ltd., a Bahamian petroleum exploration and production
APPEARS HERE] company, Chairman and Chief Executive Officer of Efficacite
Finance Conseil, a French financial investment firm which she
founded in 1991, and Chairman and Chief Executive Officer
since 1968 of Fipp S.A., a French financial investment firm.
Director and Vice Chairman of General Oriental Investments
Limited; Director of Fiat France (automobiles); and Imetal
S.A. (building materials and industrial minerals).
(Mme. Beaux is standing for election as a Director of the
Company for the first time.)
4
<PAGE>
[PHOTO OF MARK C. DAVIS, 35, a Managing Director of the Investment
MARK C. DAVIS Banking Department of Salomon Brothers Inc, a financial
APPEARS HERE] services firm, since 1993. Formerly a Director in the same
department from 1990 to 1992 and a Vice President from 1989
to 1990.
Director of Valassis Communications, Inc. (printing and
promotional materials).
(Mr. Davis is standing for election as a Director of the
Company for the first time.)
[PHOTO OF ALBERT J. DUNLAP, 57, Chairman of the Board and Chief
ALBERT J. Executive Officer of the Company since April 19, 1994.
DUNLAP Formerly, Managing Director and Chief Executive Officer of
APPEARS HERE] Consolidated Press Holdings Limited (Australian media,
chemicals and agricultural operations) from 1991 to 1993,
Chairman and Chief Executive Officer of Gyrestar, Inc.
(investment company) for a portion of 1991, Chairman and
Chief Executive Officer of Anglo Group plc (U.K. investment
company) from 1989 to 1990, and Chairman and Chief
Executive Officer of GOSL Acquisition Corp. (timber, oil
and gas operations) from 1986 to 1989.
Director of General Oriental Investments Limited.
(Company Director since April 19, 1994.)
[PHOTO OF JOHN F. FORT, III, 53, Former Chairman, President and
JOHN F. Chief Executive Officer of Tyco International, Inc., a
FORT, III diversified manufacturing company, having served as its
APPEARS HERE] Chairman from 1983 to 1993, its President from 1982 to 1989
and its Chief Executive Officer from 1982 to 1992.
Director of Tyco International, Inc. and Dover
Corporation (diversified manufacturing).
(Company Director since 1993 and Chairman of the Audit
Committee.)
[PHOTO OF PETER HARF, 48, Chairman and Chief Executive Officer
PETER HARF since 1988 of Joh. A. Benckiser GmbH, an international
APPEARS HERE] consumer products company.
Director of Joh. A. Benckiser GmbH.
(Company Director since 1990 and member of the
Compensation Committee.)
5
<PAGE>
[PHOTO OF HOWARD G. KRISTOL, 57, Partner since 1976 of Reboul,
HOWARD G. MacMurray, Hewitt, Maynard & Kristol, a New York-based law
KRISTOL firm.
APPEARS HERE] Director of Valassis Communications, Inc. (printing and
promotional materials).
(Mr. Kristol is standing for election as a Director of
the Company for the first time.)
[PHOTO OF RICHARD K. LOCHRIDGE, 51, President and Chief Executive
RICHARD K. Officer of Lochridge & Company, Incorporated, a management
LOCHRIDGE consulting company which he founded in 1986.
APPEARS HERE] Director of Dynatech Corporation (communication
equipment) and Hannaford Bros. Co. (food retailer).
(Company Director since 1986 and member of the
Compensation Committee.)
[PHOTO OF GARY L. ROUBOS, 58, Chairman since 1989 of Dover
GARY L. ROUBOS Corporation (diversified manufacturing), having served as
APPEARS HERE] Chief Executive Officer from 1981 to 1994.
Director of Bell & Howell Holdings Company (information
management products and services); Dovatron International,
Inc. (electronics manufacturing); Dover Corporation;
Omnicom Group, Inc. (advertising); and The Treasurers Fund
(financial services).
(Company Director since 1987 and Chairman of the
Compensation Committee.)
6
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OWNERSHIP OF SHARES
The following table contains information as of January 13, 1995 relating to
the ownership of shares by (i) each Director and nominee for election to the
Board of Directors and each person named in the summary compensation table on
page 12, and (ii) all Directors, nominees and executive officers (including
all persons named in the summary compensation table, whether or not they are
still executive officers of the Company) as a group. None of these individuals
owns shares of any class of equity securities of the Company other than Common
Shares. Information as to the number of shares owned and the nature of
ownership has been provided by these individuals and is not within the direct
knowledge of the Company.
<TABLE>
<CAPTION>
NAME OF SHARES
INDIVIDUAL OWNED(/1/)(/2/)
---------- ---------------
<S> <C>
Basil L.
Anderson 185,376(/3/)(/7/)
William A.
Andres 8,000(/4/)
Gilberte E.
Beaux 0
Jack J. Crocker 6,400(/4/)(/5/)
Mark C. Davis 0
Albert J. Dunlap 891,633(/1/)(/3/)(/7/)
Paolo Forlin 212,174(/6/)(/7/)
John F. Fort,
III 9,101(/4/)
Peter Harf 7,321(/4/)
Russell A. Kersh 210,027(/3/)(/7/)
</TABLE>
<TABLE>
<CAPTION>
NAME OF SHARES
INDIVIDUAL OWNED(/1/)(/2/)
---------- ---------------
<S> <C>
Howard G.
Kristol 0
J. Richard
Leaman, Jr. 152,175(/3/)(/6/)
Philip E.
Lippincott 234,989(/3/)(/6/)(/8/)
Richard K.
Lochridge 6,400(/4/)
Bruce K.
MacLaury 1,200(/4/)
Claudine B.
Malone 7,107(/4/)(/6/)
John P. Murtagh 203,145(/3/)(/7/)
Gary L. Roubos 7,000(/4/)
Paula Stern 6,500(/4/)
P. Newton White 312,785(/3/)(/6/)(/7/)
</TABLE>
<TABLE>
<S> <C> <C> <C>
All Directors, nominees and executive officers as a group (22 persons) 2,781,038(/3/)(/6/)(/7/)
</TABLE>
- --------
(/1/)Nature of ownership consists of sole voting power and sole investment
power unless otherwise indicated. There were 75,677,322 shares outstanding
on January 13, 1995, of which Mr. Dunlap owned 1.2% and all Directors,
nominees and executive officers as a group owned 3.6%.
(/2/)The numbers shown include shares which the individual or members of the
group have the right to acquire upon exercise of stock options under the
Company's stock option plans, as follows: Mr. Anderson, 147,000 shares; Mr.
Dunlap, 750,000 shares; Mr. Forlin, 136,000 shares; Mr. Kersh, 170,000
shares; Mr. Leaman, 140,000 shares; Mr. Lippincott, 210,000 shares; Mr.
Murtagh, 170,000 shares; Mr. White 240,000 shares; each current non-
employee Director, 6,000 shares, except Dr. Harf, 4,000 shares, Mr. Fort,
2,000 shares, and Mr. MacLaury, 1,000 shares; and all Directors, nominees
and executive officers as a group, 2,270,000 shares. Of these, the
following numbers of shares may be acquired within sixty days: Mr.
Anderson, 43,250 shares; Mr. Dunlap, no shares; Mr. Forlin, 27,000 shares;
Mr. Kersh, no shares; Mr. Leaman, 140,000 shares; Mr. Lippincott, 210,000
shares; Mr. Murtagh, no shares; Mr. White, 80,000 shares; each current non-
employee Director, 4,500 shares, except Dr. Harf, 2,500 shares, Mr. Fort,
500 shares, and Mr. MacLaury, no shares; and all Directors, nominees and
executive officers as a group, 577,250 shares.
(/3/)The numbers shown include shares held for the account of the individual
or members of the group under the Salaried Investment Plan, as follows: Mr.
Anderson, 2,350 shares; Mr. Dunlap, 217 shares; Mr. Kersh, 27 shares; Mr.
Leaman, 49 shares; Mr. Lippincott, 3,747 shares; Mr. Murtagh, 1,656 shares;
Mr. White, 1,283 shares; and all Directors, nominees and executive officers
as a group, 9,378 shares.
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The Directors, nominees and executive officers have sole voting power with
respect to shares held for their account in the plan, but their power to
obtain and dispose of such shares is limited by the terms of the plan.
(/4/)The numbers shown exclude the unfunded deferred shares accounts of each
non-employee Director under the Company's Directors' Deferred Compensation
Plan as of December 31, 1994: Mr. Andres, 1,243 shares; Mr. Crocker, 11,364
shares; Mr. Fort, 1,731 shares; Dr. Harf, 499 shares; Mr. Lochridge, 6,102
shares; Mr. MacLaury, 499 shares; Ms. Malone, 499 shares; Mr. Roubos, 499
shares; Dr. Stern, 1,781 shares; and all non-employee Directors as a group,
24,217 shares.
(/5/)Four hundred of these shares are held by Mr. Crocker and his wife as co-
trustees of a revocable trust for members of their family.
(/6/)The numbers shown include the following shares owned jointly with others:
Mr. Forlin, 46,174 shares; Mr. Leaman, 126 shares; Mr. Lippincott, 237
shares; Ms. Malone, 297 shares; Mr. White, 2 shares; and executive officers
not named in this table, 1,348 shares.
(/7/)The numbers shown include restricted shares held as shown on page 13. All
Directors, nominees and executive officers as a group held 240,289
restricted shares.
(/8/)Does not include 400 shares owned by Mr. Lippincott's wife.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
Near the beginning of each year, the Committee assesses the performance of
the Company's Chief Executive Officer and each of the executives who report
directly to the Chief Executive Officer. The Committee takes into
consideration performance relative to their individual responsibilities, as
well as the financial performance of the Company relative to its goals and to
the financial performance of other companies. The Chief Executive Officer
makes recommendations to the Committee regarding the performance of these
executives. The Committee meets without the Chief Executive Officer being
present when assessing his performance.
Based on its assessment, the Committee authorizes the amounts, if any, of
base salary increases for the current year and annual incentive bonuses for
the prior year for these officers. In addition, the Committee reviews the
annual base salary increase program proposed by the Company for its other
salaried employees, authorizes the total amount of annual incentive bonuses
proposed by the Company, and makes all individual grants of stock options and
restricted stock.
On April 19, 1994, the Company entered into an Employment Agreement with Mr.
Dunlap upon his election as Chairman of the Board and Chief Executive Officer.
This agreement, certain provisions of which were approved by the shareholders
on June 3, 1994, is described under "Agreements with Executives" on page 16.
Mr. Dunlap's compensation is governed by this agreement, as well as by the
Committee determinations described herein.
In making its executive compensation determinations, the Committee considers
the competitiveness of both the entire executive compensation package and each
of its individual components. In addition, the Committee is mindful of the
Company's belief that the total compensation programs of its executives should
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<PAGE>
be essentially the same as those of its other salaried employees, except that
(i) executives should have a greater portion of their compensation at risk
than other employees, (ii) executive compensation should be tied directly to
the performance of the business, as well as to performance of individual
responsibilities, and (iii) executives should have a large stake in the risks
and rewards of ownership of the Company.
The Committee has considered the probable effects of Section 162(m) of the
Internal Revenue Code (the "Code"), which was added by the Omnibus Budget
Reconciliation Act of 1993. This section disallows a publicly held company's
tax deductions for employee remuneration exceeding $1,000,000 per year for
certain executives, but contains an exception for qualified "performance-based
compensation." The Committee has been advised that, based on proposed
regulations (i) income received upon the exercise of stock options granted
under its stock option plans will constitute qualified "performance-based
compensation"; (ii) income received upon the vesting of restricted shares
which are not performance related will not qualify as "performance-based
compensation"; (iii) in most cases income received upon the vesting of certain
performance related restricted shares granted under the 1994 Long-Term
Incentive Plan will qualify as "performance-based compensation" (see "Approval
of Performance Goal Applicable to Restricted Stock Grants" on page 22); (iv)
annual incentive bonuses, as presently constituted, will not qualify as
"performance-based compensation"; and (v) base salary will not qualify as
"performance-based compensation."
Following is a discussion of the compensation actions taken by the Committee
for 1994. This discussion focuses separately on base salary, annual incentive
bonuses, stock options and restricted stock. For each of these components of
compensation, the discussion outlines guiding principles used by the Committee
and describes actions taken.
BASE SALARY
Guiding Principles
Under Mr. Dunlap's employment agreement, his annual base salary has been set
at $1,000,000 and may be increased by the Compensation Committee for any year
after 1994, but may not be decreased after any such increase. Base salaries
for other executives and all other salaried employees are paid within broad
salary ranges established for each pay level which are determined through
annual competitive salary surveys. The Company positions the salary ranges in
relation to those companies with sales volumes comparable to the Company's.
The Company believes that it competes for executives in a multi-industry
market and, in particular, those portions of the market which include paper
companies and consumer packaged goods companies. As a result, the Company used
a multi-industry survey of over 150 companies with sales exceeding $1 billion
as the primary reference for setting its base salary ranges. The Company
compares the multi-industry survey group data with surveys of paper companies
and consumer packaged goods companies to ascertain whether there are
significant variations which could suggest a need to adjust the Company's
salary ranges to be more reflective of consumer packaged goods and paper
companies.
Actions for 1994
Due to its significant restructuring during 1994, the Company did not apply
these principles but instituted a broad-based freeze on salary increases. Base
salary increases were implemented in early 1995.
9
<PAGE>
ANNUAL INCENTIVE BONUS
Guiding Principles
The Company believes that its annual incentive plans focus the attention of
employees on improving business results and serve to align the interests of
employees with those of the Company's shareholders. In early 1994, the
Committee approved performance goals based on year-to-year improvement of a
financial measure which focused on the extent to which net operating profit
after tax exceeds, or falls short of, the total cost of the Company's or
business unit's capital. Separate performance measures were maintained for the
Company as a whole and for each of its nine major operating units. The bonuses
of the executives who report directly to the Chief Executive Officer and all
corporate staff employees were based on total Company results. Bonuses for all
other employees were based on their respective business unit results.
For 1994 the size of the bonus opportunity was determined by using a total
pay version (base salary plus annual bonus) of the same multi-industry survey
used to determine base salary ranges. At the nominal target performance by the
Company, the plan was designed to produce bonus levels that, in combination
with midpoint base salaries, would result in total pay for employees generally
between the 60th and 70th percentiles in the survey. The Committee approved a
formula tying proposed bonus levels to varying levels of Company or business
unit results. Each employee's bonus opportunity was based on his or her bonus
points, which in turn are based on his or her likely impact on the business,
multiplied by the dollars per point determined by the formula. The Committee
had full discretion with respect to the amount of each bonus for 1994 paid to
the Chief Executive Officer and the executives who report directly to him, and
with respect to the total amount of incentive awards.
For 1995 the Company has revised its incentive plan design, including its
performance goals.
Actions for 1994
At its January 1995 meeting, the Committee approved 1994 bonuses consistent
with the formula it had approved for 1994. The Chief Executive Officer
recommended and the Committee approved awards for the executives who report
directly to the Chief Executive Officer based on the formula described above.
In the exercise of its discretion, the Committee determined not to grant
bonuses to the executives named in the summary compensation table who are not
continuing employees of the Company. In addition, in the exercise of its
discretion, the Committee elected to grant Mr. Dunlap a $2,500,000 bonus for
1994 based on its subjective evaluation of his success in developing and
implementing a plan to improve the Company's performance.
STOCK OPTIONS
Guiding Principles
The Company views stock options as a competitively appropriate component of
total compensation which provides long-term incentive and firmly links the
interests of executives with those of the Company's shareholders. The Company
believes that those employees in positions requiring them to take actions with
long-term implications are the most appropriate candidates for stock option
grants. Grants are based on this factor, as well as each employee's level in
the Company and his or her performance.
Actions for 1994
Based on the Company's historical practice of making annual grants, stock
options were granted to executive officers and other key employees in February
1994 based on the principles described above. Upon execution of Mr. Dunlap's
employment agreement in April 1994, the Company granted him options to purchase
750,000 shares which vest at the rate of 20% per year over a five-year period
(see
10
<PAGE>
"Agreements with Executives" on page 16). In addition, upon the Company's
hiring of Messrs. Kersh and Murtagh, the Committee granted them the options
shown under "Stock Options" on page 14.
In September 1994, the Committee departed from its past practice of annual
grants by making significant grants to executive officers and other key
employees. These grants were intended to be in lieu of annual option grants
over a multi-year period, and vest at the rate of 20% per year for five years.
The purpose of grants of this magnitude and with this vesting schedule is to
strengthen the linkage between the grantees' interests and those of the
Company's shareholders and to give the grantees a significant incentive to
remain employed by the Company.
RESTRICTED STOCK
Guiding Principles; Actions for 1994
In the past, the Committee occasionally made limited grants of restricted
shares to individual employees to recognize their contribution to the business
and to clearly signal the Company's interest in retaining them as employees.
These grants vested if the grantee remained in the Company's employ for a
specified period of time.
In September 1994, the Committee made grants of performance-based restricted
shares to 22 senior executives of the Company, including Mr. Dunlap and those
other persons named in the summary compensation table on page 12 who are
continuing employees of the Company. The Board of Directors is seeking
shareholder approval of the performance goal applicable to these grants, which
are described in more detail under "Approval of Performance Goal Applicable to
Restricted Stock Grants" on page 22. The purpose of these grants is to
strengthen the linkage between the grantee's interests and those of the
Company's shareholders and to give the grantees a significant incentive to
remain employed by the Company.
OTHER COMPONENTS OF COMPENSATION
Deferral of Bonuses and Salary
Company executives and key employees have an opportunity, under unfunded
plans which are not qualified under the Code, to defer receipt of all or a
portion of their annual bonuses and to defer part of their base salaries until
termination or retirement.
Benefit Plans
The pension and welfare benefits provided to executives are equivalent to
those provided to all other salaried employees, except as described under
"Agreements with Executives" on page 16.
Financial Counselling
During 1994, the Company paid for personal financial counselling for
approximately forty senior executives. This program has been terminated and
replaced by a tax counselling service. As required by the Code, a portion of
the amount paid is reported as taxable income for the executive.
Other Benefits
Other than as described above and in "Agreements with Executives," the
Company generally does not provide non-business related personal benefits to
its executives.
Compensation Committee
G. L. Roubos, Chairman R. K. Lochridge
J. J. Crocker B. K. MacLaury
P. Harf
11
<PAGE>
EXECUTIVE COMPENSATION FOR THE LAST THREE FISCAL YEARS
The following table shows the compensation paid by the Company and its
subsidiaries for services in all capacities during each of the past three years
to (i) the Company's current Chief Executive Officer and its former Chief
Executive Officer, and (ii) the six persons who were executive officers at any
time during the year whose 1994 salary and annual bonus were highest.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------------- -------------------
RESTRICTED OPTIONS
NAME AND OTHER ANNUAL STOCK (NUMBER ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(/4/) COMPENSATION AWARDS(/9/) OF SHARES) COMPENSATION(/1//0/)
------------------ ---- -------- ---------- ------------ ----------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Albert J. Dunlap (/1/).. 1994 $705,753 $2,500,000 $369,768 (/5/) $3,181,250 750,000 $801,290(/1//1/)
Chairman of the Board 1993 -- -- -- -- -- --
and
Chief Executive Officer 1992 -- -- -- -- -- --
Philip E. Lippincott 0 0 0 510,425(/1//2/)
(/1/).................. 1994 185,107 0
Former Chairman of the 1993 617,918 0 0 0 40,000 7,044
Board and Chief 1992 554,055 341,741 0 0 50,000 6,505
Executive Officer
Basil L. Anderson....... 1994 199,452 222,300 0 1,352,500 107,500 8,126
Vice President, 1993 196,844 0 0 57,844 4,500 5,756
Treasurer
and Chief Financial 1992 188,559 108,254 0 0 6,000 5,134
Officer
Paolo Forlin............ 1994 314,378 249,206 0 1,244,100 118,000 0
Senior Vice President-- 1993 223,763 0 0 0 18,000 0
European Consumer 1992 219,296 160,000 0 0 0 0
Business
Russell A. Kersh (/2/).. 1994 166,849 323,000 75,597 (/6/) 1,881,750 170,000 160,766(/1//3/)
Senior Vice President-- 1993 -- -- -- -- -- --
Finance and 1992 -- -- -- -- -- --
Administration
J. Richard Leaman, Jr. 45,046 (/7/) 0 25,000 625,194(/1//4/)
(/3/).................. 1994 448,767 0
Vice Chairman, and 1993 441,076 0 11,312 (/7/) 0 25,000 24,303
President
of S.D. Warren Company 1992 414,247 281,381 10,815 (/7/) 0 25,000 21,847
John P. Murtagh(/2/).... 1994 112,767 253,000 13,093(/6/) 1,566,774 170,000 50,000(/1//3/)
Senior Vice President, 1993 -- -- -- -- -- --
General Counsel and 1992 -- -- -- -- -- --
Secretary
P. Newton White......... 1994 299,178 323,000 (23,141)(/8/) 2,304,300 170,000 21,669
Senior Vice President-- 1993 291,507 0 (42,360)(/8/) 192,813 18,000 16,394
Worldwide
Away-from-Home Business 1992 258,904 170,056 81,836 (/8/) 0 18,000 15,940
</TABLE>
- --------
(/1/)On April 19, 1994, Mr. Lippincott resigned as Chairman and Chief Executive
Officer and Mr. Dunlap was elected to these positions.
(/2/)Mr. Kersh's employment with the Company commenced on June 13, 1994 and Mr.
Murtagh's employment with the Company commenced on June 9, 1994.
(/3/)Mr. Leaman resigned as Vice Chairman and as a Director on October 7, 1994.
The Company sold its wholly-owned subsidiary, S.D. Warren Company, on
December 20, 1994.
(/4/)The bonus shown for each year is the bonus earned in that year and paid in
the first quarter of the following year.
12
<PAGE>
(/5/)This amount includes the following amounts paid pursuant to Mr. Dunlap's
employment agreement: (i) $30,077 for membership-related fees and (ii)
reimbursements totalling $327,608 for tax liabilities relating to various
items included in Other Annual Compensation and All Other Compensation.
(/6/)These amounts consist of reimbursement for tax liabilities relating to
relocation to Philadelphia, Pennsylvania.
(/7/)These amounts consist of reimbursements for the increase in Mr. Leaman's
state personal income tax liability resulting from his employment in
Massachusetts as President of S.D. Warren Company. See "Agreements with
Executives" on page 16.
(/8/)These amounts consist of tax payments in the amounts shown made pursuant
to the Company's policy of offsetting higher personal income taxes
occasioned by an employee's service outside his home country.
(/9/)The number and value (based on $69.125, the closing price of the
Company's shares on December 30, 1994) of the aggregate restricted stock
holdings at the end of the Company's 1994 fiscal year were as follows for
each named executive officer who held restricted shares at that time:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER RESTRICTED SHARES HELD VALUE
----------------- ---------------------- ----------
<S> <C> <C>
Albert J. Dunlap 50,000 $3,456,250
Basil L. Anderson 24,500 1,693,563
Paolo Forlin 30,000 2,073,750
Russell A. Kersh 30,000 2,073,750
John P. Murtagh 24,789 1,713,540
P. Newton White 45,000 3,110,625
</TABLE>
Outstanding grants to Messrs. Anderson, Forlin and White under the 1989
Stock Option and Restricted Stock Plan, totalling 6,500, 15,000 and
15,000, respectively, are scheduled to vest not less than three years
after their respective grant dates, and vesting is accelerated on a change
of control. All other grants to the named executive officers were made
under the 1994 Long-Term Incentive Plan, the relevant provisions of which
are described under "Approval of Performance Goal Applicable to Restricted
Stock Grants" on page 22. Dividends on restricted shares are paid to the
grantee.
(/1//0/)The amounts shown for 1994 under All Other Compensation consist of
matching employer contributions under the Salaried Investment Plan, plus
(i) matching Company contributions for deferrals of base salary under the
Deferred Compensation Plan in the amount of $14,115 for Mr. Dunlap, $3,989
for Mr. Anderson, $3,222 for Mr. Kersh, $8,975 for Mr. Leaman and $5,984
for Mr. White, and (ii) payments made upon withdrawal of vacation banked
in prior years in the amount of $51,781 for Mr. Leaman and $11,507 for Mr.
White.
(/1//1/)This amount includes the following amounts paid pursuant to Mr.
Dunlap's employment agreement: (i) a special bonus on hiring of $333,333,
(ii) $329,425 in excess of the amounts payable under the Company's
standard relocation policy for new hires relating to Mr. Dunlap's move to
Philadelphia, Pennsylvania, including temporary living costs during the
remainder of 1994 (see "Agreements with Executives" on page 16), (iii)
payment of legal fees of $111,442 in connection with the negotiation of
the employment agreement, and (iv) $8,665 paid by the Company for welfare
benefits provided under the Flexible Benefit Plan.
13
<PAGE>
(/1//2/)This amount includes $443,153 in payments made to Mr. Lippincott after
termination of his active employment, pursuant to the Company's agreement
with him which is described under "Agreements with Executives" on page 16,
and $60,890 of pay in lieu of vacation.
(/1//3/)These amounts include, (i) for Mr. Kersh, a special bonus on hiring of
$75,000 and $78,314 paid in excess of amounts payable under the Company's
standard relocation policy for new hires relating to his move to
Philadelphia, Pennsylvania, and (ii) for Mr. Murtagh, a special bonus on
hiring of $50,000.
(/1//4/)This amount includes a $500,000 incentive award (see "Agreements with
Executives" on page 16) and $60,411 of pay in lieu of vacation.
STOCK OPTIONS
The following table provides information on stock options granted in 1994 to
the persons named in the summary compensation table on page 12. No stock
appreciation rights were granted in 1994. The columns relating to potential
realizable value show the gain each person would receive if he exercised all of
these options on their expiration date, and if the price of the Company's
shares were to increase by 0%, 5% and 10% annually to that date. The row
entitled "All Shareholders" shows the gain all shareholders as a group would
receive, based on increases in price of 0%, 5% and 10% over a ten year period
from $54.42, the weighted average exercise price for all options granted in
1994, based on the number of shares outstanding on December 31, 1994,
75,595,272 shares. Regardless of the hypothetical rates of appreciation in the
price of the Company's shares, the ultimate value of these options will depend
on the actual value of the Company's shares in the future, and that value will
depend in part on the efforts of the Company's executives to foster the future
success of the Company.
OPTION GRANTS IN FISCAL 1994
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
INDIVIDUAL GRANTS STOCK PRICE APPRECIATION FOR OPTION TERM
------------------------------------------------ ------------------------------------------
NUMBER OF % OF
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION 0% 5% 10%
NAME GRANTED(/1/) IN FISCAL 1994 ($/SHARE) DATE APPRECIATION APPRECIATION APPRECIATION
---- ------------ -------------- --------- ---------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Albert J. Dunlap........ 750,000 20.3% $38.00 4/19/04 $ 0 $ 17,925,000 $ 45,420,000
Philip E. Lippincott.... 0 -- -- -- -- -- --
Basil L. Anderson....... 7,500 0.2% 45.00 2/15/04 0 212,250 537,900
100,000 2.7% 63.75 9/16/04 0 4,009,000 10,160,000
Paolo Forlin............ 18,000 0.5% 45.00 2/15/04 0 509,400 1,290,960
100,000 2.7% 63.75 9/16/04 0 4,009,000 10,160,000
Russell A. Kersh........ 20,000 0.5% 49.88 6/13/04 0 627,300 1,589,700
150,000 4.1% 63.75 9/16/04 0 6,013,500 15,240,000
J. Richard Leaman, Jr. . 25,000 0.7% 45.00 2/15/04 0 707,500 1,793,000
John P. Murtagh......... 20,000 0.5% 49.88 6/13/04 0 627,300 1,589,700
150,000 4.1% 63.75 9/16/04 0 6,013,500 15,240,000
P. Newton White......... 20,000 0.5% 45.00 2/15/04 0 566,000 1,434,400
150,000 4.1% 63.75 9/16/04 0 6,013,500 15,240,000
All Shareholders........ -- -- -- -- 0 $2,586,870,000 $6,556,378,000
</TABLE>
14
<PAGE>
- --------
(/1/)All options granted on February 15, 1994 and the options granted to
Messrs. Kersh and Murtagh on June 13, 1994 become 50% exercisable one year
after grant and become fully exercisable two years after grant. All options
granted to Mr. Dunlap and all options granted on September 16, 1994 become
exercisable at the rate of 20% per year on each anniversary of the grant
date (see "Agreements with Executives" on page 16). Exercisability of these
options is accelerated on a change in control of the Company.
The following table provides information on stock option exercises during
1994 by each person named in the summary compensation table on page 12, and
provides information on the number and value (based on $69.125, the closing
price of the Company's shares on December 30, 1994) of stock options, both
exercisable and unexercisable, held by each such person at the end of the
Company's 1994 fiscal year.
AGGREGATED OPTION EXERCISES IN FISCAL 1994 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL-YEAR END FISCAL-YEAR END
NUMBER OF
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Albert J. Dunlap........ 0 $ 0 0/750,000 $0/$23,343,750
Philip E. Lippincott.... 25,000 485,938 230,000/ 20,000 6,563,850/ 611,250
Basil L. Anderson....... 4,800 85,200 34,250/109,750 924,891/ 787,203
Paolo Forlin............ 0 0 34,000/127,000 941,439/ 1,246,813
Russell A. Kersh........ 0 0 0/170,000 0/ 1,186,139
J. Richard Leaman, Jr. . 46,000 1,208,688 127,500/ 0 3,245,781/ 0
John P. Murtagh......... 0 0 0/170,000 0/ 1,186,139
P. Newton White......... 0 0 59,000/179,000 1,523,063/ 1,563,813
</TABLE>
RETIREMENT BENEFITS
All of the persons named in the summary compensation table on page 12, except
Messrs. Dunlap and Forlin, are eligible to participate in the Retirement Plan
for Salaried Employees (the "Salaried Retirement Plan") and the Supplemental
Executive Retirement Plan (the "Supplemental Plan"). The following table shows
the annual single life annuity retirement benefit that a member of the Salaried
Retirement Plan and the Supplemental Plan would receive if he or she had
retired effective January 1, 1995 at the normal retirement age of 65. The
amounts shown reflect the indicated assumptions as to compensation and years of
employment, but do not reflect the deduction, applicable to years of employment
after 1978, of an amount not in excess of one-half of the employee's annual
Social Security benefit. Retirees with a vested benefit under the Supplemental
Plan may elect to receive the value of their benefit under that plan in a lump
sum soon after retirement.
15
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS
AVERAGE YEARS OF EMPLOYMENT(/2/)
FINAL --------------------------------------------------------------
COMPENSATION(/1/) 10 15 20 25 30 35 40
----------------- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000.............. $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $105,000 $120,000
300,000.............. 45,000 67,500 90,000 112,500 135,000 157,500 180,000
400,000.............. 60,000 90,000 120,000 150,000 180,000 210,000 240,000
500,000.............. 75,000 112,500 150,000 187,500 225,000 262,500 300,000
600,000.............. 90,000 135,000 180,000 225,000 270,000 315,000 360,000
700,000.............. 105,000 157,500 210,000 262,500 315,000 367,500 420,000
800,000.............. 120,000 180,000 240,000 300,000 360,000 420,000 480,000
</TABLE>
- --------
(/1/)"Average final compensation" under the Salaried Retirement Plan and the
Supplemental Plan is the average of the employee's annual compensation in
the four calendar years (whether or not consecutive), out of the last ten
years of his or her employment, in which his or her annual compensation was
highest. "Annual compensation" includes salary and bonuses paid in such
year. The 1994 annual compensation of each person named in the summary
compensation table who is eligible to participate in the Salaried Retirement
Plan was the same as the salary shown in the summary compensation table, but
was $633,260 for Mr. Lippincott.
(/2/)At the end of 1994, the persons named in the summary compensation table
who are eligible to participate in the Salaried Retirement Plan had the
following full years of credited employment under that plan: Mr. Lippincott,
35; Mr. Anderson, 19; Mr. Kersh, 0; Mr. Leaman, 34; Mr. Murtagh, 0; and Mr.
White, 27.
The Salaried Retirement Plan has been amended to cease accrual of credited
employment after December 31, 1994. Beginning in 1995, the Company will make
additional contributions to the Salaried Investment Plan to provide retirement
benefits to salaried employees. Mr. Dunlap is not eligible for participation in
the Salaried Plan or the Supplemental Plan pursuant to his employment agreement
with the Company (see "Agreements with Executives" below).
AGREEMENTS WITH EXECUTIVES
Albert J. Dunlap
On April 19, 1994, the Company entered into an employment agreement with Mr.
Dunlap and on June 3, 1994, the shareholders approved the portions of the
agreement containing Mr. Dunlap's performance-based incentive package. The
Company agreed to employ Mr. Dunlap as Chairman of the Board and Chief
Executive Officer, and Mr. Dunlap agreed to serve in such capacities, for an
initial period of five years ending April 18, 1999, and for successive one-year
renewal periods unless six months advance notice of termination is given by
either party. The agreement provides for a base salary at an annual rate of
$1,000,000. The Compensation Committee of the Board of Directors (the
"Committee") may increase Mr. Dunlap's base salary for any year after 1994, but
may not reduce it after any such increase. Under the agreement, the Company
paid Mr. Dunlap a special bonus on hiring of $333,333 and granted him the stock
options listed under "Option Grants in Fiscal 1994" on page 14, and Mr. Dunlap
invested $1,000,000 in the Company by purchasing 26,316 shares from the Company
at a price of $38.00 per share.
16
<PAGE>
The agreement provides that Mr. Dunlap will receive, in lieu of participation
in any annual incentive plan of the Company, an annual incentive bonus for each
Company fiscal year after 1994 if he is employed during the entire fiscal year.
The amount of the bonus will equal 1.25% of the Company's net income for the
year in excess of 10% of the average of the Company's shareholders' equity at
the beginning and end of the year. The bonus is payable in cash in the first
quarter of the following year. Under the agreement, Mr. Dunlap is entitled to a
termination bonus for any fiscal year after 1995 in which his employment
terminates, if the termination is due to death or disability, if it is by the
Company other than for "cause," or if it is by Mr. Dunlap for "good reason"
(including a change in control of the Company). No termination bonus is payable
if the termination is by the Company for "cause" or by Mr. Dunlap other than
for "good reason." The amount of the termination bonus would be determined by
the Committee, but could not be less than the annual incentive bonus payable
for the prior year, prorated for the number of days employed during the year of
termination. The bonus would be payable in cash within 60 days after
termination.
Under the agreement, Mr. Dunlap is eligible to participate immediately in the
benefit plans available generally to employees or other senior executives of
the Company. However, he is not eligible to participate in any other annual
incentive plan, the Salaried Retirement Plan or the Termination Pay Plan for
Salaried Employees.
Under the agreement, the Company purchased Mr. Dunlap's house in Florida at
its cost to him, $3,268,000, in order to facilitate his relocation to
Philadelphia, and agreed to pay his relocation expenses, including temporary
living costs for six months after the date of the agreement. The Company sold
the house soon after purchasing it. In January 1995, the Committee extended the
provision of the agreement on temporary living costs for an additional six
months. Under the agreement, the Company also purchased Mr. Dunlap's car at its
cost to him, $86,963. Mr. Dunlap is entitled to reimbursement from the Company
on a grossed up basis for taxes paid by him in relation to these amounts.
The Company may terminate Mr. Dunlap's employment under the agreement at any
time, or due to his disability, or for "cause." "Cause" means (i) Mr. Dunlap's
willful failure substantially to perform his duties under the agreement, except
if such failure results from disability, or (ii) his conviction for a felony
(or a plea of guilty or nolo contendere thereto). Mr. Dunlap may terminate his
employment under the agreement at any time with the Company's consent. In
addition, he may terminate his employment for "good reason" by notifying the
Company within 90 days after any of the following events occurring without his
consent, unless remedied by the Company within 30 days after receiving such
notice: (i) any change in Mr. Dunlap's title as Chairman of the Board and Chief
Executive Officer or his removal from, or the failure to re-elect him to, such
positions; (ii) any assignment of duties materially inconsistent with his
positions or any material limitation of his powers as contemplated by the
agreement; (iii) any requirement that Mr. Dunlap be based without his consent
anywhere other than at the Company's principal executive office; (iv) any
reduction in Mr. Dunlap's base salary; (v) any failure to continue in effect
any fringe benefit plan in effect at the date of the agreement or to provide
Mr. Dunlap equivalent benefits; (vi) the failure of the Company to maintain his
status as a Director while he serves as Chief Executive Officer; (vii) a
"change in control" of the Company; or (viii) any other material breach of the
agreement by the Company. A "change in control" means the occurrence of any one
of the following events:
(i) any "person" as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, as amended, becomes a "beneficial
owner," as such term is used in Rule 13d-3 promulgated under that Act, of
20% or more of the voting stock of the Company;
17
<PAGE>
(ii) the majority of the Board of Directors consists of individuals other
than Incumbent Directors, which term means the members of the Board on the
date of the agreement, provided that any person becoming a Director
subsequent to such date whose election or nomination for election was
supported by two-thirds of the Directors who then comprised the Incumbent
Directors is considered to be an Incumbent Director;
(iii) the Company, without Mr. Dunlap's consent, adopts any plan of
liquidation providing for the distribution of all or substantially all of
its assets; or
(iv) all or substantially all of the assets or business of the Company
are disposed of pursuant to a merger, consolidation or other transaction
(unless the persons who were shareholders of the Company immediately prior
to such merger, consolidation or other transaction beneficially own,
directly or indirectly, in substantially the same proportion as they owned
the voting stock of the Company, all of the voting stock or other ownership
interests of the entity or entities, if any, that succeed to the business
of the Company).
The agreement, as amended subsequent to April 1994, provides that, if the
Company terminates Mr. Dunlap's employment other than for "cause" and not due
to his disability, or if he terminates his employment for "good reason," (i) he
will receive as liquidated damages a lump sum payment in an amount equal to the
base salary that would have been payable through the period ending April 18,
1999 or any then applicable renewal period, (ii) he will receive the
termination bonus described above for any year after 1995 in which the
termination occurs, (iii) all of his unvested options will vest immediately and
he will be entitled to exercise such options within three years after the date
of termination, and (iv) he will be entitled to continue participating in the
employee benefit plans in which he had been entitled to participate before
termination, for three years after termination, or to receive substantially
equivalent benefits. The Company and Mr. Dunlap have also amended the agreement
to provide for immediate vesting of all options on a change of control of the
Company.
The agreement provides that, if the Company terminates Mr. Dunlap's
employment for "cause" or if he terminates his employment with the consent of
the Company, all obligations (other than accrued obligations) of the Company
will cease, except that he will be able to exercise the options which are
exercisable on the date of termination within 60 days, if the termination is
for "cause," and within one year, if it is with the consent of the Company. The
agreement provides that, if Mr. Dunlap's employment is terminated due to his
death or disability, he will receive the termination bonus described above for
any year after 1995 in which the termination occurs. If his employment is
terminated due to death, his estate or legal representative will be entitled to
exercise within one year the options which are then exercisable or which would
have become exercisable within one year after his death. If his employment is
terminated due to disability, he will be entitled to exercise within three
years all options which are then exercisable or which would have become
exercisable within one year after the date of termination.
Philip E. Lippincott
In January 1994, the Company entered into an agreement with Mr. Lippincott
with respect to his resignation as Chairman of the Board, Chief Executive
Officer and a Director of the Company. Under the agreement, Mr. Lippincott
agreed to be available to provide consulting services at the Company's request
and Mr. Lippincott is entitled to (i) base salary at the annual rate of
$635,000 until his retirement, (ii)
18
<PAGE>
reimbursement for any expenses incurred in working for the Company, subject to
certain limits, (iii) a supplemental retirement benefit outside the Salaried
Retirement Plan sufficient to eliminate the normal actuarial reduction for
retirements before age 62, (iv) financial counselling services during the
remainder of his life, and (v) the same group insurance benefits that are
available to other salaried employees and retirees. The agreement also provides
that his Performance Plan bonus, if any, for 1994 will be based solely on the
period before his resignation date and that, if Mr. Lippincott elects to retire
November 30, 1995, the Company will make a payment to him so that its cost will
be equivalent to the cost it would have incurred if he had retired March 31,
1996.
J. Richard Leaman, Jr.
In September 1994, the Company and Mr. Leaman entered into an agreement under
which it has paid him an incentive award of $500,000 in connection with the
Company's successful sale of S.D. Warren Company ("Warren"). While this
agreement superseded the April 1991 agreement between the Company and Mr.
Leaman relating to his appointment as President of Warren, it continued the
provisions of the earlier agreement under which Mr. Leaman (i) was provided an
apartment in Boston and reimbursed for Massachusetts income tax liability
arising from his work in Boston, and (ii) is entitled to payments outside the
Salaried Retirement Plan sufficient to eliminate the normal actuarial reduction
for retirements before age 62.
Other Executives
The Company has entered into agreements with each of Messrs. Anderson, Kersh,
Murtagh and White providing that if such person's employment is terminated upon
or after a change in control (defined generally in the same manner as in the
Company's employment agreement with Mr. Dunlap), or is terminated in any event
without cause, (i) he will receive an amount equal to three times his then-
current annual salary, (ii) he will receive an amount equal to his bonus, if
any, for the prior year, prorated for the portion of the then-current year
during which he is employed, (iii) all of his unvested options will vest
immediately, and (iv) he will be entitled to continue participating in the
Company's employee benefit plans for three years after termination, or to
receive substantially equivalent benefits.
Other Benefits
If any corporate officer dies while still employed but prior to the
attainment of age 55 and completion of 15 years of service when his or her
surviving spouse or, if the officer is unmarried, his or her surviving
dependent or dependents, would otherwise become entitled to an early retirement
death benefit under the Salaried Retirement Plan, the Company will make
payments outside the Salaried Retirement Plan as an operating expense to the
officer's spouse or dependents in an amount equal to 20% of the officer's
annual rate of base salary at the time of death until the earlier of the
spouse's or dependent's death or the expiration of 20 years. These payments
will be reduced by the amount of any pre-retirement survivor annuity payable
under the Salaried Retirement Plan and the Supplemental Plan.
19
<PAGE>
COMPARATIVE SHAREHOLDER RETURN
The following graph compares the cumulative total return on the Company's
shares over the past five calendar years with the cumulative total return on
shares of companies in the Standard & Poor's 500 Index and the Standard &
Poor's Paper and Forest Products Index. Cumulative total return is measured
assuming an initial investment of $100 and the reinvestment of dividends.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CALENDAR YEAR ENDED SCOTT S&P 500 S&P P/F
- ------------------- -------- ------- --------
<S> <C> <C> <C>
1989 $ 100 $100 $ 100
1990 $ 80.21 $ 96.9 $ 90.34
1991 $ 75.35 $126.42 $ 114.59
1992 $ 78.83 $136.05 $ 131.02
1993 $ 92.69 $149.76 $ 144.4
1994 $ 158.1 $151.74 $ 150.46
</TABLE>
CERTAIN TRANSACTIONS
Mark C. Davis is a Managing Director of the Investment Banking Department of
Salomon Brothers Inc. Salomon Brothers Inc has served as one of the Company's
principal investment bankers for more than a decade. Since the beginning of
1994, Salomon Brothers Inc has provided investment banking services to Scott in
connection with certain divestitures and other transactions, and Salomon
Brothers Inc has been engaged to provide investment banking services to the
Company in connection with certain pending transactions.
Howard G. Kristol is a partner in the law firm of Reboul, MacMurray, Hewitt,
Maynard & Kristol, which provided legal services to the Company in 1994 and may
provide such services to the Company in the future.
20
<PAGE>
APPROVAL OF THE NON-EMPLOYEE DIRECTORS' COMPENSATION PLAN
ITEM 2 ON THE PROXY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
On February 21, 1995, the Board of Directors and its Compensation Committee
adopted the Scott Paper Company Non-Employee Directors' Compensation Plan (the
"Plan"), subject to approval by the Company's shareholders at the Meeting. The
complete text of the Plan is set forth in Exhibit A.
It is the intention of the Board of Directors that, if the Plan is approved
at the Meeting, the only compensation of non-employee Directors for their
regular service as such will be through grants under the Plan. See "Board of
Directors" on page 2.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the shares present or
represented and entitled to vote at the Meeting is required to approve adoption
of the Plan. Since abstentions are counted as shares present or represented,
they will have the legal effect of "no" votes. However, broker non-votes will
not have any effect.
DESCRIPTION OF THE PLAN
All statements herein describing the Plan are qualified by reference to
Exhibit A.
Purpose
The purpose of the Plan is to promote the interests of the Company and its
shareholders by attracting and retaining non-employee Directors capable of
furthering the future success of the Company and by aligning their economic
interests more closely with those of the Company's shareholders.
Effective Date and Term
If approved by the shareholders at the Meeting, the Plan would become
effective when approved. The term during which grants may be made would expire
on December 31, 2010.
Automatic Grants of Shares
Each person who (i) is elected as a Director on or after the effective date
of the Plan, (ii) has agreed in writing to serve as a Director until the
expiration of his or her term of office, and (iii) is not then, and has not
been for a period of six months prior thereto, an employee of the Company or
any subsidiary of the Company would be granted shares as compensation for all
regular services to be performed as a Director from the date of election to the
expiration of his or her term of office. The number of shares to be granted to
each such Director elected at an annual meeting of the Company's shareholders
would be 1,000. The number of shares to be granted to each such Director
elected at any other time would be 1,000, prorated for the number of days left
until the next scheduled annual meeting of the Company's shareholders. The
number of shares for which certificates would be delivered to each such
Director would be automatically reduced by 28% to provide for the estimated
Federal income tax payment obligations of the Director, or by such higher
percentage as may be required by law to be withheld, with the Company remitting
to the appropriate tax authorities the fair market value of the shares for
which certificates are not so delivered. None of the shares granted under the
Plan will be subject to forfeiture upon the termination of a Director's service
prior to completion of his or her term.
Adjustments
The number and kind of shares which would be automatically granted to each
non-employee Director would be subject to automatic adjustment for any changes
in the number or kind of outstanding shares
21
<PAGE>
resulting from a merger, recapitalization, stock exchange, stock split, stock
dividend, other extraordinary dividend or distribution, corporate division or
other change in the Company's corporate or capital structure.
Amendment of the Plan
The Board of Directors would be permitted to amend, suspend or discontinue
the Plan, but shareholder approval of such action would be required if
necessary in order to ensure compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended.
PLAN BENEFITS
If the Plan is approved by the shareholders at the Meeting, the annual
benefit receivable by each non-employee Director would be 1,000 shares. The
last sale price of the Company's shares, as reported in The Wall Street
Journal, New York Stock Exchange Composite Transactions, for February 24, 1995
was $78.875. At that price, the value of the 1995 grant to each non-employee
Director elected at the Meeting would be $78,875 and the value of the 1995
grants to all eight of the non-employee Director nominees (assuming they are
elected at the Meeting), would be $631,000.
APPROVAL OF PERFORMANCE GOAL APPLICABLE TO RESTRICTED STOCK GRANTS
ITEM 3 ON THE PROXY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
At the Annual Meeting of Shareholders held on June 3, 1994, the Company's
shareholders approved the 1994 Long-Term Incentive Plan (the "Plan"), which
provided for grants of stock options, restricted shares and performance shares.
On July 19, 1994, the Board of Directors amended the Plan to delete the
provisions relating to performance shares.
On September 16, 1994, subject to the approval of the Company's shareholders,
the Compensation Committee awarded restricted shares under the Plan with a
significant performance goal to 22 senior executives of the Company, including
those officers named in the summary compensation table on page 12 who are
continuing as employees of the Company. The Company is seeking shareholder
approval of the performance goal which is applicable to these awards and which
may be applicable to future awards of restricted shares under the Plan. If the
Company's shareholders do not approve the performance goal at the Meeting, all
awards which have been made with that performance goal will be rescinded.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Meeting is required to approve the performance goal.
Since abstentions are counted as shares present or represented, they will have
the legal effect of "no" votes. However, broker non-votes will not have any
effect.
DESCRIPTION OF THE PERFORMANCE GOAL
The performance goal is attained for a given measuring period if the
annualized cumulative increase in the fair market value of a Company share
during 15 out of the 20 consecutive trading days ending on the last day of the
measuring period, over such fair market value at the beginning of the measuring
period, exceeds the annualized cumulative increase in the Standard & Poor's 500
Index for the same measuring
22
<PAGE>
period by at least one percentage point. The Plan defines "fair market value"
as the mean between the highest and lowest sale prices of a share on the date
of reference, as reported in The Wall Street Journal, New York Stock Exchange
Composite Transactions.
DESCRIPTION OF THE GRANTS
Each grantee was awarded a specified number of restricted shares (see "Plan
Benefits" below), but the restricted shares are not considered "granted" until
the grantee purchases "qualifying shares" of the Company. The number of
restricted shares granted equals three times the number of qualifying shares
purchased. Company shares are "qualifying shares" only if their acquisition
increases the grantee's actual ownership of Company shares, as certified
periodically by the grantee, and only if they are not purchased through a
Company program. For example, shares received on the exercise of options or the
lapse of restrictions on previously granted restricted shares, as well as
shares purchased periodically through the Salaried Investment Plan, are not
considered qualifying shares.
Only shares purchased between June 4, 1994 and September 25, 1998 constitute
qualifying shares. If a grantee failed to purchase at least 500 shares by
December 15, 1994 (or within the first 60 days thereafter that the grantee was
not prohibited from purchasing qualifying shares under the Company's insider
trading policy), the entire award would have lapsed. If a grantee fails to
purchase at least 500 additional shares in any subsequent period ending on a
September 25, the portion of the award which had not already been granted would
then lapse. As indicated in "Plan Benefits" below, substantially all of the
restricted shares covered by the Committee's September 16, 1994 action have
been granted due to the grantees' purchases of qualifying shares.
The restricted shares granted on each grant date vest at the rate of 20% on
the initial vesting date shown in the following schedule and on each of the
next four anniversaries of the initial vesting date shown if the Company has
then attained the performance goal. The performance goal is calculated
separately for each 20% portion. The measuring period for each of the five 20%
portions of a restricted share grant starts on the date shown.
<TABLE>
<CAPTION>
THE START OF THE
FOR GRANTS BETWEEN MEASURING PERIOD IS THE INITIAL VESTING DATE IS
------------------ ------------------- ---------------------------
<S> <C> <C>
9/16/94 and 12/15/94(/1/).... 7/1/94 6/30/95
12/16/94 and 9/25/95......... 7/1/95 6/30/96
9/26/95 and 9/25/96.......... 7/1/96 6/30/97
9/26/96 and 9/25/97.......... 7/1/97 6/30/98
9/26/97 and 9/25/98.......... 7/1/98 6/30/99
</TABLE>
- --------
(/1/)Or within the first 60 days thereafter that the grantee was not prohibited
from purchasing qualifying shares under the Company's insider trading
policy.
Each measuring period ends on the later of the date the applicable 20%
portion of the grant is scheduled to vest or the first date thereafter that the
performance goal is met, but ends in no event later than the September 15
occurring in the seventh calendar year following the grant date. If the Company
fails to meet the performance goal by such September 15, the restricted shares
to which such measuring period applies will be forfeited. If a grantee ceases
to be actively employed by the Company or disposes of any qualifying shares,
the grantee will forfeit any then-unvested restricted shares.
Notwithstanding the foregoing, if a change of control of the Company occurs,
all restricted shares granted will vest on the later of the date of the change
of control or six months and one day after the grant date. As defined in the
Plan, "change of control" means the first to occur of the following events:
23
<PAGE>
(a) Any person within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, other than the Company or any entity
controlled by the Company (including an employee plan established primarily
for the benefit of Company employees or employees of any entity controlled
by the Company), acquires beneficial ownership of, or, acting alone or in
concert with others, acquires voting power over voting shares of the
Company that would entitle the holders thereof to cast at least 20% of the
votes that all shareholders would be entitled to cast in an election of
Directors; or
(b) At any time within any period of two consecutive years, persons who
(i) at the beginning of the period constitute the Board of Directors or
(ii) become Directors after the beginning of the period and whose election
or nomination for election by the shareholders of the Company was approved
by a vote of at least two-thirds of the persons who were Directors at the
beginning of the period, cease for any reason to constitute at least a
majority of the Board of Directors; provided that any person who ceases to
be a Director by reason of death or disability shall be excluded from the
numerator and the denominator in all such calculations.
Each grantee is entitled to vote and receive dividends on the restricted
shares granted to him.
DESCRIPTION OF APPLICABLE PLAN PROVISIONS
Eligibility; Term
All of the approximately 2,800 salaried employees of the Company and its
consolidated U.S. subsidiaries, and all key employees of the Company's other
subsidiaries, totalling approximately 80 persons, are eligible for grants of
restricted shares under the Plan. The term during which restricted shares may
be awarded expires on April 25, 1999.
Shares Subject to the Plan; Adjustments
The maximum number of shares which may be issued upon the grant of restricted
shares under the Plan is 50,000 to any one person and 400,000 in the aggregate.
The number and kind of shares which may be issued and with respect to which
grants may be made, both in the aggregate and to any one person, as well as the
number of shares subject to each outstanding grant, is subject to adjustment
for any changes in the number or kind of outstanding shares resulting from a
merger, recapitalization, stock exchange, stock split, stock dividend, other
extraordinary dividend or distribution, corporate division or other change in
the Company's corporate or capital structure.
Administration
The Plan is administered by a committee (the "Committee") consisting of not
less than three non-employee Directors, all of whom must be members of the
Compensation Committee. Each member of the Committee must at all times be a
"disinterested person" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 ("Rule 16b-3"), as then applicable to the Company. Subject
to the terms and conditions of the Plan, the Committee has sole discretion and
authority to grant restricted shares to determine the terms and conditions of
these grants, to interpret the Plan and to establish rules for its
administration.
Amendment of the Plan
The Board of Directors may amend, suspend or discontinue the Plan, but may
not, without the affirmative vote of the holders of a majority of shares
present or represented and entitled to vote at a
24
<PAGE>
shareholder meeting, increase the limits described above in "Shares Subject to
the Plan; Adjustments," extend the term of the Plan, materially increase
benefits or modify the Plan's eligibility requirements in a manner which would
require shareholder approval under Rule 16b-3, or cause the Plan not to meet
the requirements of Rule 16b-3 in any other respect.
PLAN BENEFITS
The following table shows the number of restricted shares awarded on
September 16, 1994 to each person named in the summary compensation table on
page 12 and to the members of the groups shown. Except where noted, the same
number of restricted shares have been granted due to the grantee's purchase of
qualifying shares. The Company cannot determine the dollar value of the shares
which would be earned if the applicable Company performance goals are met,
because it cannot predict the future price of its shares.
<TABLE>
<CAPTION>
RESTRICTED SHARES
NAME AND PRINCIPAL POSITION; GROUP AWARDED
- ---------------------------------- -----------------
<S> <C>
Albert J. Dunlap............................................. 50,000
Chairman of the Board
and Chief Executive Officer
Philip E. Lippincott......................................... 0
Former Chairman of the
Board and Chief Executive Officer
Basil L. Anderson............................................ 18,000
Vice President, Treasurer
and Chief Financial Officer
Paolo Forlin................................................. 15,000
Senior Vice President--
European Consumer Business
Russell A. Kersh............................................. 30,000
Senior Vice President--
Finance and Administration
J. Richard Leaman, Jr. ...................................... 0
Vice Chairman, and President
of S.D. Warren Company
John P. Murtagh.............................................. 30,000(/1/)
Senior Vice President, General
Counsel and Secretary
P. Newton White.............................................. 30,000
Senior Vice President--Worldwide
Away-from-Home Business
All current executive officers as a group (7 persons)........ 194,000
All current non-employee Directors as a group (8 persons).... 0
All current employees, other than executive officers, as a
group (15 persons).......................................... 137,500(/1/)
</TABLE>
- --------
(/1/)The number of restricted shares considered "granted" by virtue of purchases
of qualifying shares before December 15, 1994 (or within the first 60 days
thereafter that the grantee was not prohibited from purchasing qualifying
shares under the Company's insider trading policy) was 24,789 for Mr.
Murtagh and 119,500 for all current employees, other than executive
officers, as a group.
25
<PAGE>
As of July 1, 1994, the fair market value (as defined in the Plan) of a
Company share was $52.31 and the Standard & Poor's 500 Index was 446.20. As of
February 24, 1995, the fair market value of a Company share was $78.56 and the
Standard & Poor's 500 Index was 488.26.
APPROVAL OF APPOINTMENT OF AUDITORS
ITEM 4 ON THE PROXY
The Board of Directors has appointed Coopers & Lybrand L.L.P. ("Coopers &
Lybrand"), independent accountants, to be the Company's auditors for the year
1995. Although not required to do so, the Board has determined that it would be
desirable to request approval of this appointment by the shareholders of the
Company. If approval is not received, the Board will reconsider the
appointment. Representatives of Coopers & Lybrand are expected to be present at
the meeting to make a statement if they desire to do so and to respond to
appropriate questions.
On August 31, 1994, the Company engaged Coopers & Lybrand as the principal
accountants to audit the Company's financial statements, effective September 1,
1994, replacing Price Waterhouse LLP ("Price Waterhouse"). The action was
approved by the Audit Committee of the Company's Board of Directors. Price
Waterhouse's report on the Company's financial statements for fiscal years 1992
and 1993 did not contain any adverse opinion, disclaimer of opinion or
qualification or modification as to uncertainty, audit scope or accounting
principles. During fiscal years 1992 and 1993 and the interim period subsequent
to fiscal year 1993, there were no disagreements between the Company and Price
Waterhouse on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of Price Waterhouse, would have caused Price Waterhouse to
make a reference to the subject matter of the disagreements in connection with
its report. During fiscal years 1992 and 1993 and the interim period subsequent
to fiscal year 1993, Price Waterhouse did not advise the Company that (1) the
internal controls necessary for the Company to develop reliable financial
statements do not exist, or (2) information has come to Price Waterhouse's
attention that has led it to no longer be able to rely on management's
representations or that has made it unwilling to be associated with the
financial statements prepared by management, or (3) there was a need to expand
significantly the scope of its audit, or that information has come to Price
Waterhouse's attention during such period that, if further investigated, may
(i) materially impact the fairness or reliability of either a previously issued
audit report or the underlying financial statements, or the financial
statements issued or to be issued covering the fiscal periods subsequent to
fiscal year 1993 (including information that may prevent it from rendering an
unqualified audit report on those financial statements), or (ii) cause Price
Waterhouse to be unwilling to rely on management's representations or be
associated with the Company's financial statements, or (4) information has come
to Price Waterhouse's attention that Price Waterhouse has concluded materially
impacts the fairness or reliability of either a previously issued audit report
or the underlying financial statements, or the financial statements issued or
to be issued covering the fiscal periods subsequent to fiscal year 1993
(including information that, unless resolved to Price Waterhouse's
satisfaction, would prevent it from rendering an unqualified audit report on
those financial statements). During fiscal years 1992 and 1993 and the interim
period subsequent to fiscal year 1993, neither the Company nor anyone on its
behalf consulted Coopers & Lybrand regarding either the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's financial
statements, and neither a written report nor oral advice was provided to the
Company by Coopers & Lybrand.
26
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other matters to be presented for action at the Meeting. However, if any
further business should properly come before the meeting, the persons named as
proxies in the accompanying form will vote on that business in accordance with
their best judgment.
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors. The
cost of soliciting proxies will be paid by the Company. Following the original
mailing of the proxies, several Company employees may solicit proxies
personally, or by mail, telephone or telecopy. In addition, the Company has
retained D. F. King & Co. to aid in the solicitation of proxies from brokers
and nominees for a fee of $12,500. The Company will reimburse banks, brokerage
firms, voting trustees and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy material to beneficial
owners of shares.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Proposals which shareholders intend to present at the next Annual Meeting of
Shareholders must be received by the Secretary of the Company at its executive
offices (Scott Plaza, Philadelphia, PA 19113) no later than November 10, 1995.
A nomination for election of a Director may be made by any shareholder only
if written notice of the shareholder's intent to nominate a Director is given
by the shareholder not less than (1) 60 days prior to the Annual Meeting of
Shareholders or (2) seven days following the day notice of any other meeting at
which Directors will be elected is mailed to the shareholders. The process to
be followed and the requirements for the shareholder's notice are stated in the
Company's bylaws, a copy of which may be obtained from the Secretary.
ADDITIONAL INFORMATION
WHEN IT BECOMES AVAILABLE, THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY
PERSON FROM WHOM A PROXY IS SOLICITED BY THE BOARD OF DIRECTORS, UPON WRITTEN
REQUEST, A COPY OF THE COMPANY'S 1994 ANNUAL REPORT ON FORM 10-K, INCLUDING ITS
FINANCIAL STATEMENTS AND SCHEDULES (AS WELL AS EXHIBITS, IF SPECIFICALLY
REQUESTED), REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 13A-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
WRITTEN REQUESTS SHOULD BE DIRECTED TO MICHAEL D. MASSETH, DIRECTOR--INVESTOR
RELATIONS, AT THE COMPANY'S EXECUTIVE OFFICES.
27
<PAGE>
EXHIBIT A
SCOTT PAPER COMPANY
NON-EMPLOYEE DIRECTORS'
COMPENSATION PLAN
1. PURPOSE
The purpose of the Scott Paper Company Non-Employee Directors' Compensation
Plan (the "Plan") is to promote the interests of Scott Paper Company (the
"Company") and its shareholders by attracting and retaining non-employee
Directors capable of furthering the future success of the Company and by
aligning their economic interests more closely with those of the Company's
shareholders.
2. DEFINITIONS
"Board of Directors" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder. References to any provision of the Code or rule or
regulation thereunder shall be deemed to include any amended or successor
provision, rule or regulation.
"Director" means a member of the Board of Directors.
"Grantee" means any person who has been granted Shares under Section 4.
"Rule 16b-3" means Rule 16b-3 under the Securities Exchange Act of 1934, as
amended.
"Share" means a common share of the Company and such other securities as may
be substituted for a Share or such other securities pursuant to the adjustment
provisions of Section 5.
3. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective only if it is approved by the affirmative
vote of the holders of a majority of the Shares present or represented and
entitled to vote at the annual meeting of the Company's shareholders to be
held on April 18, 1995 or at any adjournment thereof and, if so approved,
shall be effective from the date approved.
The term during which Shares shall be granted under the Plan shall expire on
December 31, 2010.
4. GRANTS OF SHARES
Each person who (i) is elected as a Director on or after the effective date
of the Plan, (ii) has agreed in writing to serve as a Director until the
expiration of his or her term of office, and (iii) is not then, and has not
been for a period of six months prior thereto, an employee of the Company or
any subsidiary of the Company shall be granted, without any further action or
authorization, Shares as his or her only compensation for regular services to
be performed as a Director from the date of election to the expiration of his
or her term of office. The number of Shares to be granted to each such
Director elected at an annual meeting of the Company's shareholders shall be
1,000. The number of Shares to be granted to each such Director elected at any
other time shall be 1,000 multiplied by a fraction, the numerator of which
A-1
<PAGE>
shall be the number of days after the date of such election to and including
the date of the next scheduled annual meeting of the Company's shareholders and
the denominator of which shall be 365. None of the Shares granted under this
Plan shall be subject to forfeiture upon the termination of a Director's
service prior to completion of his or her term.
The number of Shares for which certificates shall be delivered to each
Grantee shall be automatically reduced by 28% to provide for the estimated
Federal income tax payment obligations of the Grantee, or by such other higher
percentage as may be required by law to be withheld, with the Company remitting
to the appropriate tax authorities the fair market value of the Shares for
which certificates are not so delivered.
The Shares granted under the Plan may be treasury shares or newly-issued
shares. The obligation of the Company to deliver Shares shall be subject to all
applicable laws, rules and regulations, and to such approvals by governmental
agencies as may be deemed necessary or appropriate by the Company, including,
among others, such steps as counsel for the Company shall deem necessary or
appropriate to comply with requirements of relevant securities laws. This
obligation shall also be subject to the condition that any Shares reserved for
issuance under the Plan shall have been duly listed on any national securities
exchange which then constitutes the principal trading market for the Shares.
5. ADJUSTMENTS
The number and kind of Shares which shall be automatically granted to each
Grantee under Section 4 of the Plan shall be automatically adjusted to prevent
dilution or enlargement of the rights of Grantees in the event of any changes
in the number or kind of outstanding Shares resulting from a merger,
recapitalization, stock exchange, stock split, stock dividend, other
extraordinary dividend or distribution, corporate division or other change in
the Company's corporate or capital structure.
6. AMENDMENT, SUSPENSION AND DISCONTINUANCE
The Board of Directors may at any time amend, suspend or discontinue the
Plan, provided that, if shareholder approval of such action is necessary in
order to ensure compliance with Rule 16b-3, such action shall be subject to
approval by the holders of the Shares by the vote and in the manner required by
Rule 16b-3. In no event may the Board of Directors amend any provision of the
Plan that constitutes a "plan provision" referred to in Rule 16b-3(c)(2)(ii)(B)
more frequently than once every six months (other than to comport with changes
in the Code).
7. COMPLIANCE WITH RULE 16B-3
The Company intends that the Plan and all transactions hereunder meet all of
the requirements of Rule 16b-3, and that any Grantee shall not, as a result of
any grant hereunder, lose his or her status as a "disinterested person" as
defined in Rule 16b-3. Accordingly, if any provision of the Plan does not meet
a requirement of Rule 16b-3 as then applicable to any such transaction, or
would cause a Grantee not to be a "disinterested person," such provision shall
be construed or deemed amended to the extent necessary to meet such requirement
and to preserve such status.
8. GOVERNING LAW
The Plan shall be applied and construed in accordance with and governed by
the law of the Commonwealth of Pennsylvania and applicable Federal law.
A-2
<PAGE>
APPENDIX
FORM OF RESTRICTED STOCK AGREEMENT
AGREEMENT, made as of , by and between Scott Paper Company, a
Pennsylvania corporation (the "Company") and ("Grantee");
WHEREAS, Scott Paper Company maintains the 1994 Long-Term Incentive Plan
("Plan") under which the Compensation Committee of the Company's Board of
Directors ("Committee") may, among other things, award the Company's Common
Shares (the "Shares") to such employees of the Company and its United States
Subsidiaries as the Committee may determine, subject to such terms, conditions,
or restrictions as it may deem appropriate; and
WHEREAS, pursuant to the Plan, the Committee has awarded to the Grantee a
restricted stock award subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. AWARD OF SHARES
In accordance with the provisions of the Plan, the Committee has awarded to
the Grantee on the date first set forth herein ("Initial Date") the right to
receive Shares ("Restricted Shares") subject to the terms, conditions, and
restrictions set forth herein and in the Plan. Capitalized terms not otherwise
defined herein shall be as defined in the Plan.
2. AWARD RESTRICTION
(a) Ownership of the Restricted Shares shall not vest in the Grantee, and
such Restricted Shares shall be subject to forfeiture, until the conditions of
each of Sections 2(b) and 2(c) are fully satisfied. (The lapse of all of the
restrictions hereunder with respect to the Grantee's rights in the Restricted
Shares shall be hereafter referred to as "Vesting"; the period between the date
("Grant Date") upon which the Restricted Shares are awarded to the Grantee
pursuant to Section 2(b) and the date of Vesting hereafter is referred to as
the "Restricted Period"; and the date of Vesting shall be hereafter referred to
as the "Vesting Date.")
(b) In order to be entitled to an award of Restricted Shares, the Grantee
must purchase Shares ("Qualifying Shares") in a Qualifying Transaction. For
these purposes, a Qualifying Transaction shall mean the acquisition of Shares
in which such Grantee owns the legal and beneficial interest by any means other
than through a Company program, including without limitation (x) Shares
received from the Company pursuant to a base salary or incentive award deferral
program, the exercise of stock options, Vesting in a Restricted Stock award or
the reallocation of Shares to the Grantee with respect to such an award or (y)
Shares purchased on behalf of the Grantee's account in the Company's 401(k),
savings or other qualified profit sharing plan; provided, further, that to be
treated as a Qualifying Share, an acquisition must increase the Grantee's
actual ownership of Shares by not less than the number of Shares acquired in
the Qualifying Transaction.
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(i) Subject to the provisions hereof, the Grantee shall be awarded three
(3) Restricted Shares for each one (1) Qualifying Share acquired in a
Qualifying Transaction occurring on or after June 4, 1994 and before
September 25, 1998; provided, however, that the maximum number of
Restricted Shares which may be awarded to the Grantee hereunder shall not
exceed the number set forth in Paragraph 1.
(ii) The Grantee may purchase all or any portion of the aggregate number
of Qualifying Shares required to obtain the maximum number of Restricted
Shares which may be awarded hereunder at any time on or after June 4, 1994
and before September 25, 1998; provided, however, to the extent that the
Grantee has not previously purchased such maximum number of Qualifying
Shares, the Grantee must purchase not less than five hundred (500)
Qualifying Shares on or before December 15, 1994 or, if applicable, within
the first 60 day period thereafter that the Grantee may purchase Qualifying
Shares without causing a violation of Federal or State securities laws due
to his or her status as an "insider" and an additional five hundred (500)
Qualifying Shares during the twelve month period ending on or before each
subsequent September 25 thereafter to and including September 25, 1998. In
the event a minimum purchase is not made during any twelve month period,
the Grantee will forfeit his or her right to purchase Qualifying Shares
during any subsequent 12 month period. Vesting in Restricted Shares with
respect to which Qualifying Shares were purchased during the 12 month
period(s) prior to the period in which the failure to purchase 500
Qualifying Shares occurs shall continue in accordance with the terms of
this Agreement, however, Shares purchased during such period shall not be
considered Qualifying Shares for purposes of this Agreement.
(iii) On or before December 15, 1994 and thereafter on or before each
date which is the earlier of (w) each following September 25 or the (x) the
date upon which one hundred percent (100%) of the Grantee's Restricted
Shares shall have Vested, the Grantee shall submit to the Committee a
certified statement, executed by the Grantee, which (y) sets forth, in
detail, the facts concerning the acquisition of the Qualifying Shares, and
(z) affirms that the Grantee has not sold, transferred or otherwise
disposed of Qualifying Shares previously acquired by the Grantee and that
the aggregate number ("Grantee Share Ownership Amount") of Shares owned by
the Grantee (other than those described in this Section 2(b)(x) and (y))
since the Initial Date is not less than the sum of (u) the number of Shares
owned on the Initial Date (other than those described in this Section
2(b)(x) and (y)) and (v) the total number of Qualifying Shares acquired by
the Grantee on or following the Initial Date. For these purposes, the
pledge of, or the granting of a security interest in, Qualifying Shares in
connection with a loan obtained by the Grantee to acquire, carry or hold
such shares shall not be treated as a sale, transfer or disposition.
(iv) Within five (5) days following a Qualifying Transaction, the Grantee
shall notify the Committee in writing of such acquisition, including the
number of Qualifying Shares so acquired, and shall certify that the
acquisition is a Qualifying Transaction and the Grantee's Share Ownership
Amount, determined as of the date of such Qualifying Transaction, satisfies
the requirements of Section 2(b)(iii)(z). Upon receipt of such certificate,
the Committee shall, as soon as practicable, award the appropriate number
of Restricted Shares to the Grantee. For purposes of this Agreement, the
Grant Date with respect to each Restricted Share shall be the date upon
which the Grantee engaged in a Qualifying Transaction which resulted in the
award of such Restricted Share.
(c) Twenty percent (20%) of the Restricted Shares awarded on each Grant Date
shall become vested in the Grantee on the June 30 shown as the "initial vesting
date" in Section 2(d) and on each of the first, second, third and fourth
anniversaries thereof, subject to the terms hereof, including but not limited
to the attainment of the Performance Goal described in Section 2(d), as the
Performance Goal is applied to each twenty percent (20%).
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(d) Subject to the provisions of Sections 2(c), 2(d)(i) and Paragraph 4 an
award of Restricted Shares made pursuant to Section 2(b) shall not vest in the
Grantee unless the Company shall have equalled or exceeded the Performance
Goal; provided, however, that if and to the extent that any Restricted Shares
have not vested on or before the September 15 occurring in the seventh calendar
year following the Grant Date because of the failure to satisfy the Performance
Goal with respect to such Restricted Shares, the Grantee shall forfeit all of
his or her rights to such Restricted Shares. For purposes of Grants awarded on
or prior to December 15, 1994 or, if applicable, within the first 60 day period
thereafter that the Grantee may purchase Qualifying Shares without causing a
violation of Federal or State securities laws due to his or her status as an
"insider," the Performance Goal shall mean that (x) the cumulative increase,
calculated on an annualized basis, in the Fair Market Value of the Shares
during fifteen (15) out of the twenty (20) consecutive trading days ("Test
Days") (on which the New York Stock Exchange is open) immediately preceding and
including each June 30 (beginning on June 30, 1995, the initial vesting date
for such Grants) over the Fair Market Value of the Company's Shares on July 1,
1994 (each such period hereinafter is referred to as the "Measuring Period")
exceeds (y) the cumulative increase calculated on an annualized basis in the
Standard and Poor's 500 Index ("S&P Index") for the same Measuring Period, by
not less than one (1) percentage point. For purposes of Grants awarded after
December 15, 1994, the Measuring Period shall commence on the applicable July
1st in accordance with the following schedule:
<TABLE>
<CAPTION>
DATES GRANT OF COMMENCEMENT INITIAL
RESTRICTED SHARES AWARDED OF MEASURING PERIOD VESTING DATE
------------------------- ------------------- -------------
<S> <C> <C>
December 16, 1994 - September 25, 1995........ July 1, 1995 June 30, 1996
September 26, 1995 - September 25, 1996....... July 1, 1996 June 30, 1997
September 26, 1996 - September 25, 1997....... July 1, 1997 June 30, 1998
September 26, 1997 - September 25, 1998....... July 1, 1998 June 30, 1999
</TABLE>
The Performance Goal shall be calculated in accordance with the same
methodology set forth in this Section 2(d)(x) and (y) above.
(i) The Committee shall compare the increase (calculated on an annualized
basis) in the Fair Market Value of a Share during such Measuring Period
with the increase (calculated on annualized basis) in the S&P Index for
such Measuring Period for each Test Day occurring at the end of such
Measuring Period. In the event that, with respect to not less than fifteen
(15) of the twenty (20) Test Days the annualized increase in the Fair
Market Value of the Shares exceeds the annualized increase in the S&P Index
by not less than one (1) percentage point, the Company shall be deemed to
have achieved the Performance Goal for such Measuring Period. In the event
the Performance Goal is not achieved in any initial Measuring Period and
the Performance Goal is achieved at any time during a subsequent Measuring
Period (i.e., Test Days are any (20) consecutive trading days during the
subsequent Measuring Period, not just the 20 days ending on June 30), the
Grantee shall vest in all Restricted Shares for which he or she has
satisfied the requirements of Section 2(b) with respect to any earlier
Measuring Period in which the Performance Goal was not achieved with
Vesting to occur on the date the Performance Goal is achieved. For the then
current Measuring Period, the Test Days will be those days immediately
preceding and including the June 30th, which shall be considered the
Initial Vesting Date for that period.
(ii) In the event that on any June 30, the Shares are no longer listed on
the New York Stock Exchange or the S&P Index no longer is readily
available, the Committee shall select a readily available and appropriate
stock index to utilize in calculating the Performance Goal.
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(e) Subject to the provisions of Section 5(a), upon the Vesting of the
Restricted Shares, the Grantee shall own the Restricted Shares free and clear
of all restrictions imposed by this Agreement, and the Grantee shall be free to
hold or dispose of such shares at will. The Qualifying Shares shall at all
times be owned by the Grantee free and clear of any restrictions or conditions
related to this Agreement, or the Restricted Shares awarded hereunder, and the
Grantee shall be free to sell, assign, transfer, pledge or otherwise dispose of
the Qualifying Shares, although such transaction may adversely affect his or
her rights hereunder.
(f) During the Restricted Period, the Restricted Shares may not be
transferred or encumbered by the Grantee by means of sale, assignment,
mortgage, transfer, exchange, pledge, or otherwise. The levy of any execution,
attachment, or similar process upon the Shares shall be null and void.
3. STOCK CERTIFICATES
(a) Restricted Shares shall be evidenced by one or more stock certificates
registered in the name of the Grantee or a nominee or nominees therefor. Prior
to Vesting, the Company shall prepare and issue a certificate for the
Restricted Shares (the "Share Certificate"), which shall be registered in the
name of the Grantee and which shall bear the following restrictive legend, in
addition to such other legends (if any) as the Company may deem necessary or
desirable under any applicable law:
"RESTRICTED SHARES"
The shares represented by this certificate are subject to
the restrictions and other conditions contained in the Scott
Paper Company 1994 Long Term Incentive Plan and the Restricted
Stock Agreement dated September 16, 1994 between Scott Paper
Company and the person named on this certificate, including
restrictions on the sale, encumbrance or transfer of the
shares represented by this certificate.
(b) The Grantee shall execute and deliver to the Director, Corporate
Compensation & Benefits (the "Escrow Agent") a stock power designating the
Company as the transferee of an unspecified number of Shares, which stock power
may be completed by the Escrow Agent as specified herein. The Grantee and the
Company each waive the requirement that the signature of the Grantee on the
stock power be guaranteed. Upon receipt of a copy of this Agreement and the
stock power, each signed by the Grantee, the Escrow Agent shall promptly notify
the proper officers of the Company who shall cause the Share Certificate to be
deposited with the Escrow Agent, to be held in accordance with the terms of
this Agreement.
(c) Upon Vesting, the Company shall cause to be delivered to the Grantee (i)
a certificate for the Shares which have vested free and clear of restrictive
legends and (ii) any stock powers signed hereunder by the Grantee remaining in
its possession. In the event that the Grantee dies after Vesting and before
delivery of the certificate, such certificate shall be delivered to, and
registered in the name of, the Grantee's beneficiary or estate, as the case may
be. In lieu of any fractional share, the Company shall pay to the Grantee, the
Grantee's beneficiary or estate, as the case may be, in cash, an amount equal
to the Fair Market Value of such fractional share on the date of delivery of
such certificate.
(d) Except as otherwise provided in Section 2 and this Section 3, during the
Restricted Period and after the certificates for the Restricted Shares have
been issued, the Grantee shall be entitled to all rights
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of a stockholder of the Company, including the right to vote and the right to
receive dividends, with respect to the Restricted Shares subject to this
Agreement. Subject to applicable withholding requirements, dividends on the
Restricted Shares shall be paid to the Grantee when earned.
(e) The Escrow Agent is hereby authorized by the Grantee to utilize the stock
power delivered by the Grantee to transfer all forfeited Shares to the Company.
4. CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT
(a) In the event that a Change of Control shall occur during the Restricted
Period any Restricted Shares awarded more than six (6) months prior to the date
of such Change of Control shall automatically Vest and any Restricted Shares
awarded not earlier than six (6) months prior to such Change of Control shall
Vest upon the lapse of six months and one day following the Grant Date with
respect to such Restricted Shares.
(b) Except as otherwise provided in subparagraph (a) of this paragraph 4, in
the event of the termination of the Grantee's active employment with the
Company (whether voluntarily or involuntarily through death, retirement,
disability, or otherwise) prior to the end of the Restricted Period, all of the
Grantee's rights in and to the Restricted Shares then credited to such
Grantee's account shall be forfeited as of the date of termination. Any
reference herein to active employment with the Company shall be deemed to
include employment with any subsidiary.
(c) The Grantee shall be the only person who may effectuate a Qualifying
Transaction, and the Grantee must effectuate the same while he or she is still
employed by the Company.
5. WITHHOLDING TAXES
(a) In connection with the delivery of any stock certificates, or the making
of any payment in accordance with the provisions of this Agreement, the Company
shall withhold Shares or cash amounts (for fractional Shares) equal to the
taxes then required by applicable federal, state and local law to be so
withheld (taking into account any election made by the Grantee in accordance
with Section 5(b)).
(b) In the event that the Grantee shall elect to recognize income with
respect to Restricted Shares in accordance with Section 83(b) of the Internal
Revenue Code of 1986, as amended, the Grantee (i) shall furnish the Committee
with a copy of such election within ten days of its filing; and (ii) shall pay
to the Company the taxes which the Company is required to withhold as a result
of such election, in the amount and on such terms and conditions as the
Committee may determine.
6. ADMINISTRATION
In addition to the administrative authority set forth in the Plan itself, the
Committee shall have full authority and sole discretion (subject only to the
express provisions of the Plan) to decide all matters relating to the
administration and interpretation of this Agreement. All such Committee
determinations shall be final, conclusive, and binding upon the Company, the
Grantee, the Grantee's Estate and any and all other interested parties. The
Grantee hereby acknowledges receipt of the Company's Prospectus which includes
the text of the Plan.
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7. NO RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Plan or this Agreement shall confer on the Grantee any right
to continue as an employee of the Company or in any way affect the Company's or
any subsidiary's right to terminate the Grantee's employment at any time.
8. NON-COMPETITION
In consideration of the award of shares under the Plan, Grantee agrees as
follows:
(a) During Grantee's employment by the Company and for a period of 24
months following the termination of such employment for any reason, Grantee
will not, without the written consent of the Company, either as principal,
agent, consultant, employee, director, or otherwise, engage in any
competitive work or other competitive activity. For purposes of this
Agreement, "competitive work or other competitive activity" means engaging
in the manufacture, development, advertising, promotion, or sale of any
product which is the same or similar to or competitive with any products of
the Company with respect to which Grantee's work has been directly
concerned at any time during the 24 months preceding the termination of
Grantee's employment or with respect to which during the same time period
Grantee acquired knowledge of trade secrets or other confidential
information. For purposes of this Agreement, the definition of the term
"Confidential Information" contained in the Employee's Agreement signed by
the Grantee is incorporated by reference. Grantee will consult with the
Company when considering entering into any activity which might violate
this paragraph. Grantee will refrain from the activity described in the
paragraph within such geographic area as is necessary to protect the
interests of the Company.
(b) Should the Company determine it is necessary to enforce restrictions
on Grantee's activities following the termination of Grantee's employment
by the Company, the Company may, in its sole discretion, elect to proceed
under one or more of this Agreement, the Employee's Agreement signed by the
Grantee, or any other agreement between the Company and Grantee containing
such restrictions. To the extent the Company elects not to proceed under
the Employee's Agreement, Grantee hereby surrenders Grantee's rights under
the Employee's Agreement and will not seek performance by the Company under
the Employee's Agreement.
(c) In the event a court of competent jurisdiction finds that the
provisions of this paragraph are too burdensome on the Grantee as to length
of time or geographic location, the provisions of this paragraph shall not
be stricken from the Agreement but rather shall be modified to conform to
the findings of the court.
9. NOTICE
Any notice to the Company hereunder shall be in writing addressed to:
Director, Corporate Compensation & Benefits
Scott Paper Company
Scott Plaza
Philadelphia, Pennsylvania 19113
Any notice to the Grantee hereunder shall be in writing addressed to:
-------------------------
Scott Paper Company
Scott Plaza
Philadelphia, Pennsylvania 19113
or such other address as the Grantee shall notify the Company in
writing.
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10. ENTIRE AGREEMENT; CONFLICT WITH PLAN
(a) This Agreement contains the entire understanding of the parties and shall
not be modified or amended except in writing and duly signed by each of the
parties hereto. No waiver by either party of any default under this Agreement
shall be deemed a waiver of any later default thereof.
(b) The Restricted Shares awarded hereunder are awarded pursuant and subject
to the Plan. This Agreement is intended to supplement and carry out the terms
of the Plan. It is subject to all terms and provisions of the Plan and, in the
event of a direct conflict, the Plan shall prevail.
11. SHAREHOLDER APPROVAL; COMPENSATION LIMITATION
The Grantee agrees that if, in the opinion of the Company's counsel, the
applicable provisions of Section 162(m) of the Code and Prop. Treas. Reg.
(S)1.162-27 (or any applicable final regulation) shall require the approval of
the Company's shareholders for all or any portion of this Agreement, this
Agreement shall terminate, and any Restricted Shares awarded hereunder shall be
forfeited, unless the Company's shareholders shall timely approve such matters
as counsel shall determine are required under the Code and Regulations. The
Company hereby agrees that, if such shareholder approval is deemed to be
necessary, it shall seek such approval at the Company's next annual meeting of
its shareholders. The Grantee further agrees that the Compensation Committee
shall have the authority to defer Vesting in any Restricted Shares awarded
hereunder to the extent that the Compensation Committee in its sole discretion
determines that Vesting in Restricted Shares would cause the maximum deductible
compensation limitation set forth in Section 162(m) of the Code to be exceeded.
The Compensation Committee shall designate March 31 of the next calendar year
as the deferred Vesting date. The Grantee shall only vest in the Restricted
Shares, as to which Vesting is deferred, if he or she is still in the employ of
the Company on the applicable March 31.
12. FORCE AND EFFECT
The various provisions of this Agreement are severable in their entirety. Any
determination of invalidity or unenforceability of any one provision shall have
no effect on the continuing force and effect of the remaining provisions.
13. PREVAILING LAWS
This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania applicable to contracts made, and to be enforced, within the
Commonwealth of Pennsylvania.
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14. SUCCESSORS
This Agreement shall be binding upon and inure to the benefits of the
successors, assigns and heirs of the respective parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on ,
, to be effective as of , .
Scott Paper Company
By: _________________________________
Grantee
____________________________________
Name:
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P SCOTT PAPER COMPANY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
R FOR THE ANNUAL MEETING OF SHAREHOLDERS, APRIL 18, 1995
O The undersigned holder of Common Shares of Scott Paper Company hereby
appoints JOHN P. MURTAGH, FRANK W. BUBB and STEPHEN D. FORD, and each or any
X of them, with power of substitution, as proxies to vote, and at their
discretion in the election of Directors to cumulate the vote of, all shares
Y of the undersigned at the Annual Meeting of Shareholders to be held at 10:00
a.m. on April 18, 1995 at The Radisson Hotel--Philadelphia Airport, 500
Stevens Drive, Philadelphia, Pennsylvania and at any adjournment thereof.
ELECTION OF DIRECTORS. Nominees
W.A. Andres, G.E. Beaux, M.C. Davis, A.J. Dunlap, J.F. Fort, III, P.
Harf, H.G. Kristol, R.K. Lochridge, G.L. Roubos
++
++ PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY IN THE ENCLOSED ENVELOPE WHICH
++ REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
++
(CONTINUED, AND TO BE MARKED AND SIGNED, ON THE OTHER SIDE)
---------------------
SEE REVERSE
SIDE
---------------------
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[X] PLEASE MARK YOUR ++++ + 1008
VOTES AS IN THIS + +
EXAMPLE. + +++++
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR ITEMS 1, 2, 3, AND 4.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 and 4.
- --------------------------------------------------------------------------------
1.Election of Directors (see reverse)
FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
- -----------------------------------------------------
2. Approval of Non-Employee Directors' Compensation Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Approval of performance goal applicable to restricted stock grants
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Approval of appointment of auditors
FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
5. In their discretion upon such other matters as may properly come before the
meeting
TREAT AS CONFIDENTIAL IN ACCORDANCE WITH COMPANY POLICY (SEE PAGE 1 OF THE
PROXY STATEMENT) [_]
I PLAN TO ATTEND THE MEETING [_]
SIGNATURE DATE
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NOTE: Please sign exactly as name(s) appears hereon. Joint owners should each
sign. Executors, administrators, trustees, etc., should give full title
as such. If the signer is a corporation, please sign full corporate name
by duly authorized officer.
