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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 Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
FIBERMARK, INC.
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(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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FIBERMARK, INC.
Formerly
SPECIALTY PAPERBOARD, INC.
P.O. Box 498 - Brattleboro, Vermont 05302
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1997
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TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of
FiberMark, Inc., a Delaware corporation ("the Company"), formerly known as
Specialty Paperboard, Inc., will be held on Thursday, May 15, 1997, at 2:00 p.m.
at the Four Points Hotel - Leominster, 99 Erdman Way, Leominster, Massachusetts,
for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the selection of KPMG Peat Marwick L.L.P. as independent
auditors of the Company for its fiscal year ending December 31, 1997.
3. To approve the 1997 Stock Option Plan for employees of the Company.
4. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has established the close of business on March 17,
1997, as the record date for the determination of stockholders entitled to
notice of and to vote at this Annual Meeting and at any adjournment or
postponement thereof.
By Order of the Board of Directors
Paul S. Street
Secretary and General Counsel
Brattleboro, Vermont
March 31, 1997
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND
THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK, OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
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FIBERMARK, INC.
P.O. Box 498 - Brattleboro, Vermont 05302
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PROXY STATEMENT
MAY 15, 1997
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TABLE OF CONTENTS
INFORMATION CONCERNING COMPANY DEVELOPMENT.....................................1
INFORMATION CONCERNING SOLICITATION AND VOTING.................................1
PROPOSAL 1 - ELECTION OF DIRECTORS.............................................3
PROPOSAL 2 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS.................6
PROPOSAL 3 - APPROVAL OF THE 1997 STOCK OPTION PLAN............................7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................12
EXECUTIVE COMPENSATION AND OTHER INFORMATION..................................15
CERTAIN TRANSACTIONS..........................................................22
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934..........23
OTHER MATTERS.................................................................23
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INFORMATION CONCERNING COMPANY DEVELOPMENT
On March 27, 1997, Specialty Paperboard, Inc. changed its name to
FiberMark, Inc. (the "Company"). The Company believes that this name change
better reflects the operations of the Company which have expanded beyond the
production of press board to the production of a wide variety of fiber-based
products including printed circuit boards, pressure sensitive tape, imitation
leather labels for clothing, filter paper, book covers, and battery separator
materials.
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
FiberMark, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on May 15, 1997, at 2:00 p.m. (the "Annual
Meeting"), or at any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Stockholders.
The Annual Meeting will be held at the Four Points Hotel-Leominster, 99 Erdman
Way, Leominster, Massachusetts. The Company intends to mail this proxy
statement and accompanying proxy card on or about April 9, 1997, to all
stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing, and mailing of this proxy statement, the proxy,
and any additional information to be furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries, and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram, or
personal solicitation by directors, executive officers, or other regular
employees of the Company. No additional compensation will be paid to directors,
executive officers, or other regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on March
17, 1997, will be entitled to notice of and to vote at the Annual Meeting. At
the close of business on March 17, 1997, the Company had outstanding and
entitled to vote 4,043,092 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions, and broker non-votes in respect of each proposal to be voted upon
at the meeting. Abstentions will be counted towards the tabulation of votes
cast on proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether a matter has been approved.
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REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, P.O. Box
498, Brattleboro, Vermont 05302, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
Under Section 5(b) of the bylaws of the Company, proposals by stockholders
of the Company must be given in writing to the Secretary of the Company in a
timely manner. A timely manner is identified as being delivered to or mailed
and received at the principal executive offices of the Company not less than one
hundred twenty (120) calendar days in advance of the date the Company's proxy
statement is released to stockholders in connection with the previous year's
annual meeting of stockholders. No timely proposals were received.
STOCKHOLDER NOMINATION OF DIRECTORS
Under Section 5(c) of the bylaws of the Company, nominations for election
to the Board of Directors by stockholders of the Company must be made in
accordance with the requirements of the bylaws. No timely nominations were
received.
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PROPOSAL 1
ELECTION OF DIRECTORS
There are eight nominees for the Board of Directors' positions presently
authorized in the Company's Bylaws. Each director to be elected will hold
office until the next annual meeting of stockholders and until his successor is
elected and has qualified, or until such director's earlier death, resignation,
or removal. Each nominee listed below is currently a director of the Company.
Mr. Stephens, who has served as a director of the Company since February 1991,
is not standing for re-election. The terms "Board of Directors" or "Board" may
be used interchangeably throughout and refer to the Board of Directors of the
Company.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the eight nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as the Board may propose. Each person nominated for election
has agreed to serve if elected and management has no reason to believe that any
nominee will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
ALEX KWADER, age 54, has been the President and Chief Executive Officer of the
Company since August 1991 and a director since November 1991. He served as
Senior Vice President of the Company from March 1990 to August 1991 and as Vice
President from the Company's inception in June 1989 until March 1990. From 1970
until June 1989, Mr. Kwader was employed by Boise Cascade Corporation, a
diversified paper products corporation, in various managerial positions. During
this time, Mr. Kwader was General Manager of the Pressboard Products Division
from 1986 until June 1989. From 1980 to 1985, he served as General Manager of
the Latex Fiber Products Division of Boise Cascade Corporation. Mr. Kwader
holds a B.S. in Mechanical Engineering from the University of Massachusetts and
a M.S. from Carnegie Mellon University and attended the Harvard Business School
Executive Program.
K. PETER NORRIE, age 58, has served as Chairman of the Board of Directors of the
Company since June 1989 and as Chief Executive Officer from the Company's
inception in June 1989 to November 1990. He is also a member of the
Compensation Committee of the Board of Directors. From 1976 until June 1989,
Mr. Norrie was Senior Vice President and General Manager of Boise Cascade
Corporation's Paper Group. From 1964 to 1976, he was employed by Boise Cascade
Corporation in various management positions, including Vice President and
General Sales Manager of the White Paper Division of the Paper Group.
Mr. Norrie received a B.S. in Civil Engineering from Gonzaga University and an
M.B.A. from Harvard University.
GEORGE E. MCCOWN, age 61, has been a director of the Company since its inception
in June 1989. Mr. McCown was co-founder and has been a Managing General Partner
of MDC Management Company, the general partner of McCown De Leeuw & Co., since
1984. Mr. McCown received a B.S. in Mechanical Engineering from Stanford
University and an M.B.A. from Harvard University. He currently serves as a
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director of three other publicly held companies: BMC West Corporation, a
building materials retailer, Nimbus CD International, Inc., a CD audio and
CD-ROM manufacturer, and Vans, Inc., a casual shoe manufacturer. Mr. McCown
also serves as a director of several other McCown De Leeuw & Co. portfolio
companies.
BRIAN C. KERESTER, age 38, has been a director of the Company since May 1996 and
serves as a member of the Compensation Committee. Mr. Kerester is the Chief
Financial Officer of Distribution Dynamics, Inc. ("DDI") a privately held
company controlled by McCown DeLeeuw & Co. DDI is a distribution company of "C"
class components, including fasteners and electronic components, to Original
Equipment Manufacturers. Prior to joining DDI on October 1, 1996, Mr. Kerester
had been an operating affiliate and a Partner with McCown DeLeeuw & Co. Prior
to joining MDC, Mr. Kerester worked with The First Boston Corporation in the
Venture Capital Group from 1984 through 1986, and Bankers Trust Company in the
World Corporate Department from 1981 to 1984. He holds a B.S. in Economics from
The Wharton School, University of Pennsylvania and an M.B.A. from Columbia
Business School.
GLENN S. MCKENZIE, age 44, has been a director of the Company since January
1994. Since October 1991, Mr. McKenzie has been President of Alpha Investments,
Inc., a management consulting firm. Mr. McKenzie holds a B.A. in Economics and
an M.B.A. from the University of North Carolina. Mr. McKenzie currently serves
as a director of two other publicly held companies, Nimbus CD International,
Inc, and DEC International.
JON H. MILLER, age 59, has been a director of the Company since its inception in
June 1989. He is also a member of the Compensation Committee of the Board of
Directors. Mr. Miller was President and Chief Operating Officer of Boise
Cascade Corporation from 1978 until his retirement in 1990. In addition to
serving on the Board of the Company, he is a director of Idaho Power Company.
Mr. Miller received a B.A. in Economics and an M.B.A. from Stanford University.
FRED P. THOMPSON, JR., age 69, has been a director of the Company since April
1993. He serves as a member of the Audit Committee of the Board of Directors.
Mr. Thompson is the President and Chief Executive Officer of Executive
Management, Inc., a management services firm. He is also President and Chief
Executive Officer of Peregrine Industries, Inc., a cabinet manufacturer and the
Chairman of Powder River, Inc., a livestock enclosure manufacturer. Mr.
Thompson previously served as Chairman and Chief Executive Officer of
Nelson-Ball Paper Products, Inc., a paper products manufacturer, prior to the
acquisition of its assets by the Newark Group, Inc. Mr. Thompson received a
B.S. from the University of Oregon and attended the Harvard Business School
Advanced Management Program.
JOHN D. WEIL, age 49, has been a director of the Company since May 1996 and
serves as a member of the Audit Committee. Mr. Weil has over 25 years of
experience in national manufacturing and service organizations. Mr. Weil
currently serves as Chairman of the Board of Directors of DEC International,
Inc., a manufacturer of custom paper products and as a director of Tiara
Motorcoach Corporation. These companies are McCown & DeLeeuw & Co. portfolio
companies. Additionally, Mr. Weil serves as a director of Sage Enterprises,
Inc., a food service distributor. In 1995, Mr. Weil joined the venture banking
firm of McCown DeLeeuw & Co. as an operating affiliate to assist in portfolio
management. From 1982 to 1994, he served as President and Chief Executive
Officer and as a director of American Envelope Company. Mr. Weil received a
B.S. in Economics from the University of Illinois and an M.B.A. from
Northwestern University.
There are no family relationships among any of the directors or executive
officers of the Company.
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BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1996, the Board of Directors held
five meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee reviews the results and scope of the annual audit and
other services provided by the auditors, discusses the financial statements, and
recommends to the Board the independent auditors to be retained. It also
receives and considers the accountants' comments as to controls and adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee is composed of three directors:
Messrs. Thompson, Stephens, and Weil. The Audit Committee met once during
1996.
The Compensation Committee makes recommendations concerning executive
salaries, incentive compensation, and benefit plans, awards stock options to
employees under the Company's stock option plans, and otherwise determines
compensation levels and performs such other functions regarding compensation as
the Board may delegate. The Compensation Committee is composed of three
directors: Messrs. Miller, Norrie, and Kerester. The Compensation Committee met
five times during 1996. See "Compensation Committee Interlocks and Insider
Participation" for a discussion of Mr. Norrie's employment arrangement with the
Company.
During the fiscal year ended December 31, 1996, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he served during the period for which he was a director or committee
member, respectively, with the exception of Mr. Thompson, who was unable to
attend two Board of Directors meetings.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
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PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
On March 28, 1996, the Audit Committee of the Board of Directors accepted
the resignation of Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as the
Company's independent auditors and approved the appointment of KPMG Peat Marwick
L.L.P. ("KPMG") to audit the Company's financial statements for the fiscal year
ending December 31, 1996, in place of Coopers & Lybrand. The decision to accept
Coopers & Lybrand's resignation and to change independent auditors was
authorized by the Company's Board of Directors and approved by the Company's
stockholders.
The Board of Directors has selected KPMG Peat Marwick L.L.P. ("KPMG") as
the Company's independent auditors for the fiscal year ending December 31, 1997,
and has further directed that management submit the selection of independent
auditors for ratification by the stockholders at the Annual Meeting. KPMG has
audited the Company's financial statements since May 1996. Representatives of
KPMG are expected to be present at the Annual Meeting and will have an
opportunity to make a statement if they so desire and be available to respond to
appropriate questions.
Stockholder ratification of the selection of KPMG as the Company's
independent auditors is not required by the Company's Bylaws or otherwise.
However, the Board is submitting the selection of KPMG to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail
to ratify the selection, the Audit Committee and the Board will reconsider
whether or not to retain that firm. Even if the selection is ratified, the
Audit Committee and the Board in their discretion may direct the appointment of
a different independent auditing firm at any time during the year if they
determine that such a change would be in the best interests of the Company and
its stockholders.
The affirmative vote of the holders of a majority of the shares represented
and entitled to vote at the meeting will be required to ratify the selection of
KPMG.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
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PROPOSAL 3
APPROVAL OF THE 1997 STOCK OPTION PLAN
On February 20, 1997, the Board of Directors adopted the Company's 1997
Stock Option Plan (the "1997 Plan"), authorizing 400,000 shares of the Company's
Common Stock for issuance thereunder.
Stockholders are requested in this Proposal 3 to approve the 1997 Plan.
The affirmative vote of the holders of a majority of the shares represented and
entitled to vote at the meeting will be required to approve the 1997 Plan. No
options have been granted under the 1997 Plan.
The essential features of the 1997 Plan are outlined below:
GENERAL
The 1997 Plan provides for the grant of incentive stock options and
non-statutory stock options. Incentive stock options granted under the 1997
Plan are intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). See
"Federal Income Tax Information" for a discussion of the tax treatment of
incentive stock options.
PURPOSE
The 1997 Plan was adopted to provide a means by which the employees
(including officers) of the Company and its affiliates (collectively
"employees") could be given an opportunity to purchase stock in the Company, to
assist in retaining the services of employees holding key positions, to secure
and retain the services of persons capable of filling such positions and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
ADMINISTRATION
The 1997 Plan is administered by the Board of Directors of the Company.
The Board is authorized to delegate administration of the 1997 Plan to a
committee composed of not fewer than two members of the Board. The Board has
delegated administration of the 1997 Plan to the Compensation Committee of the
Board, subject to certain limitations. The Compensation Committee has the power
to construe and interpret the 1997 Plan and, subject to the provisions of the
1997 Plan, to determine the persons to whom and the dates on which options will
be granted, the number of shares to be subject to each option, the time or times
during the term of each option within which all or a portion of such option may
be exercised, the exercise price, the type of consideration and other terms of
the option.
ELIGIBILITY
Incentive and nonincentive stock options may be granted under the 1997 Plan
to the employees (including officers) of the Company and its affiliates.
No incentive stock option may be granted under the 1997 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market
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value of the stock subject to the incentive stock option on the date of grant,
and the term of the incentive stock option does not exceed five years from the
date of grant. For incentive stock options, the aggregate fair market value,
determined at the time of grant, of the shares of Common Stock with respect to
which such options are exercisable for the first time by an optionee during any
calendar year (under all such plans of the Company and its affiliates) may not
exceed $100,000.
No person shall be eligible to be granted options covering more than
100,000 shares of the Company's Common Stock in any one-year period. However,
the Compensation Committee may determine in some future circumstances that it
would be in the best interests of the Company and its stockholders to grant
options to purchase such number of shares to a single employee.
STOCK SUBJECT TO THE 1997 PLAN
If options granted under the 1997 Plan expire or otherwise terminate
without being exercised, the Common Stock not purchased pursuant to such options
again becomes available for issuance under the 1997 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the 1997 Plan. Individual option grants may be more restrictive as to any or
all of the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of incentive stock options
under the 1997 Plan may not be less than the fair market value of the Common
Stock (defined as the closing sale price of the Company's Common Stock on the
Stock Exchange or automated quotation system on the date of grant) subject to
the option on the date of the option grant, and in some case (see "Eligibility"
above), may not be less than 110% of such fair market value. At March 19, 1997,
the closing price of the Company's Common Stock was $24.125 per share.
The exercise price of options granted under the 1997 Plan must be paid
either: (i) in cash at the time the option is exercised; (ii) as directed by a
program developed under Regulation t and managed by the Federal Reserve Board;
(iii) by delivery of already-owned shares of Common Stock that have been held
for the period required to avoid a change to the earnings of the Company; (iv)
payment by a combination of payment methods as stated; or (v) in any other form
of legal consideration acceptable to the Board any shares shall be valued at
their fair market value on the date of exercise.
OPTION EXERCISE. Options granted under the 1997 Plan may become exercisable
in cumulative increments ("vest") as determined by the Compensation Committee.
Although no vesting schedule is required under the 1997 Plan, the Company
expects that options granted under the 1997 Plan will generally become
exercisable at the rate of 20% per year on each anniversary of the grant date.
The Compensation Committee has the power to accelerate the time during which an
option may be exercised. An optionee may satisfy any federal, state or local
tax withholding obligation relating to the exercise of such option by a cash
payment upon exercise, by authorizing the Company to withhold a portion of the
stock otherwise issuable to the optionee, by delivering already-owned stock of
the Company or by a combination of these means.
TERM. The maximum term of options under the 1997 Plan is ten years for
incentive stock options from the grant date, except that in certain cases (see
"Eligibility" above) the maximum term is five years. Options under the 1997
Plan terminate three months after the optionee ceases to be employed by the
Company
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or any affiliate of the Company, unless (a) the termination of employment is due
to such person's permanent and total disability (as defined in the Code), in
which case the option shall terminate on the earlier of the termination date
referred to above or twelve (12) months following termination of employment;
(b) the optionee dies while employed by the Company or any affiliate of the
Company (in this case the option shall terminate on the earlier of the
termination date set forth above or eighteen (18) months after optionee's death)
by the person or persons to whom the rights to such option pass by will or by
the laws of descent, and distribution; or (c) the option by its terms
specifically provides otherwise. Individual options by their terms may provide
for exercise within a longer or shorter period of time following termination of
employment. The option term may also be extended in the event that exercise of
the option within these periods is prohibited for specified reasons. There is
no term for nonincentive stock options.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1997 Plan or subject to
any option granted under the 1997 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1997 Plan and any and
all Options granted thereunder shall be immediately exercisable and shares shall
remain exercisable and may be exercised at any time during the remainder of the
term.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1997 Plan provides that in the event of a dissolution or liquidation
of the Company, specified type of merger or other corporate reorganization, to
the extent permitted by law, the options shall be immediately exercisable and
may be exercised at any time during the remainder of the term.
DURATION, AMENDMENT AND TERMINATION
The Compensation Committee may suspend or terminate the 1997 Plan without
stockholder approval or ratification at any time or from time to time.
The Compensation Committee may also amend the 1997 Plan at any time or from
time to time. However, no amendment will be effective unless approved by the
stockholders of the Company within 12 months before or after its adoption by the
Board if the amendment would: (a) modify the requirements as to eligibility for
participation (to the extent such modification requires stockholder approval in
order for the 1997 Plan to satisfy Section 422 of the Code, if applicable, or
Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); (b) increase the number of shares reserved for issuance
upon exercise of options; or (c) change any other provision of the 1997 Plan in
any other way if such modification requires stockholder approval in order to
comply with Section 162(m) of the Code or Rule 16b-3 or satisfy the requirements
of Section 422 of the Code.
RESTRICTIONS ON TRANSFER
Under the 1997 Plan, an option may not be transferred by the optionee
otherwise than by will or by the laws of descent and distribution. During the
lifetime of an optionee, an option granted under the 1997 Plan may be exercised
only by the optionee. The person to whom the option is granted may, by
delivering written notice to the Company, in form satisfactory to the Company,
designate a third party who, in the event of the death of the optionee, shall
thereafter be entitled to exercise the option.
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FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1997 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for more than two years from the date on which the option is granted and
more than one year from the date on which the shares are transferred to the
optionee under exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss upon the disqualifying disposition will
be a capital gain or loss which will be long-term or short-term depending on
whether the stock was held for more than one year. Capital gains currently are
generally subject to lower tax rates than ordinary income. The maximum capital
gains rate for federal income tax purposes is currently 28% while the maximum
ordinary income rate is effectively 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will be generally entitled (subject to
the requirement of reasonableness, the application of Section 162(m) of the Code
and perhaps, in the future, the satisfaction of a withholding obligation) to a
corresponding business expense deduction in the tax year in which the
disqualifying disposition occurs.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add
Section 162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with proposed Treasury regulations issued under Code Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period; (ii) the per-employee limitation is approved by the
stockholders; (iii) the option is granted by a compensation committee comprised
solely of "outside directors;" and (iv) either the exercise price of the option
is not less than the fair market value of the stock on the date of grant, or the
option is granted (or exercisable) only upon the achievement (as certified by
the Compensation Committee) of an objective performance goal established by the
Compensation Committee while the outcome is substantially uncertain.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
10
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 1997, by: (i) each director;
(ii) each of the executive officers named in the Summary Compensation Table
employed by the Company in that capacity on March 31, 1997; (iii) all executive
officers and directors of the Company as a group; and (iv) all those known by
the Company to be beneficial owners of more than 5% of its Common Stock.
BENEFICIAL OWNERSHIP(1)
-------------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL(2)
------------- -------------
Kirkpatrick, Pettis, Smith,
Polian, Inc.(3) .......................... 627,375 15.5%
10250 Regency Circle
Omaha, NE 68114
Heartland Advisors, Inc.(3) ................ 484,600 11.9
790 North Milwaukee Street
Milwaukee, WI 53202
Dalton, Greiner, Hartman Maher & Co.(3) .... 282,900 7.0
630 Fifth Avenue, Ste. 3425
New York, NY 10111
McCown De Leeuw & Co.(4) ................... 206,152 5.1
3000 Sand Hill Road, Bldg. 3, Ste. 290
Menlo Park, CA 94025
Alex Kwader, President, CEO and
Director(5) .............................. 69,478 1.7
K. Peter Norrie, Chairman of the
Board of Directors (6) ................. 26,858 *
George E. McCown, Director(7) .............. 273,197 6.8
Brian C. Kerester, Director(8) ............. 11,460 *
Glenn S. McKenzie, Director(9) ............. 13,500 *
Jon H. Miller, Director(10) ................ 10,500 *
Fred P. Thompson, Jr., Director(11) ........ 11,000 *
John D. Weil, Director(12) ................. 9,500 *
Bruce P. Moore, Vice President and
CFO(13) .................................. 67,450 1.7
Stephen A. Steidle, Vice President and
General Sales Manager(14) .............. 31,004 *
------
All executive officers and directors as a
group (11 persons) ..................... 523,947 13.0
__________________
* Represents holdings of less than 1%.
1 This table is based upon information supplied by executive officers,
directors, and principal stockholders and Schedules 13D and 13G, if any,
filed with the Commission. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, each of
the stockholders named in this table has sole voting and investment power
with respect to the shares indicated as beneficially owned.
2 Applicable percentages of ownership are based on 4,043,092 outstanding
shares of the Company's Common Stock on March 17, 1997, as adjusted as
required by rules promulgated by the Commission.
3 Assumes the number of shares owned as of December 1, 1996.
11
<PAGE>
4 Includes 180,360 shares held by McCown De Leeuw & Co. and 25,792 shares
held by MDC/JAFCO Ventures, an investment partnership affiliated with
McCown De Leeuw & Co.
5 Mr. Kwader has vested options of 56,265 shares under the 1992 Stock Option
Plan. Under the 1994 Stock Option Plan he has options for 62,500 shares,
of which 9,067 are vested.
6 Mr. Norrie has options for 5,000 shares granted under the 1994 Directors
Stock Option Plan (options vest at a rate of 1,000 shares per year), of
which 3,000 are vested. Under the 1996 Amendment to the 1994 Director
Stock Option Plan (options vest over ten (10) years with accelerated
vesting if stock reaches a certain market price over a period of time), he
has options for 10,000 shares, of which 7,500 are vested.
7 Mr. McCown has options for 5,000 shares under the 1994 Directors Stock
Option Plan (options vest at a rate of 1,000 shares per year), of which
3,000 are vested. Under the 1996 Amendment to the 1994 Director Stock
Option Plan (options vest over ten (10) years with accelerated vesting if
stock reaches a certain market price over a period of time), he has options
for 10,000 shares, of which 7,500 are vested. Includes 180,360 shares held
by McCown De Leeuw & Co. and 25,792 shares held by MDC/JAFCO Ventures, an
investment partnership affiliated with McCown De Leeuw & Co. Mr. McCown, a
director of SPI, may be deemed to own beneficially all of the shares held
by McCown De Leeuw & Co. and MDC/JAFCO Ventures because of his position as
General Partner of MDC Management Company, the general partner of McCown
De Leeuw & Co. and MDC/JAFCO Ventures.
8 Mr. Kerester holds sole investment and voting power over 1,000 shares and
shares investment and voting power over 1,960 shares. Mr. Kerester has
options for 5,000 shares under the 1994 Directors Stock Option Plan
(options vest at a rate of 1,000 shares per year), of which 1,000 are
vested. Under the 1996 Amendment to the 1994 Director Stock Option Plan
(options vest over ten (10) years with accelerated vesting if stock reaches
a certain market price over a period of time), he has options for 10,000
shares, of which 7,500 are vested.
9 Mr. McKenzie has options for 5,000 shares under the 1994 Directors Stock
Option Plan (options vest at a rate of 1,000 shares per year), of which
3,000 are vested. Under the 1996 Amendment to the 1994 Director Stock
Option Plan (options vest over ten (10) years with accelerated vesting if
stock reaches a certain market price over a period of time), he has options
for 10,000 shares, of which 7,500 are vested.
10 Mr. Miller has options for 5,000 shares under the 1994 Directors Stock
Option Plan (options vest at a rate of 1,000 shares per year), of which
3,000 are vested. Under the 1996 Amendment to the 1994 Director Stock
Option Plan (options vest over ten (10) years with accelerated vesting if
stock reaches a certain market price over a period of time), he has options
for 10,000 shares, of which 7,500 are vested.
11 Mr. Thompson has options for 5,000 shares under the 1994 Directors Stock
Option Plan (options vest at a rate of 1,000 shares per year), of which
3,000 are vested. Under the 1996 Amendment to the 1994 Director Stock
Option Plan (options vest over ten (10) years with accelerated vesting if
stock reaches a certain market price over a period of time) he has options
for 10,000 shares, of which 7,500 are vested.
12 Mr. Weil has options for 5,000 shares under the 1994 Directors Stock Option
Plan (options vest at a rate of 1,000 shares per year), of which 1,000 are
vested. Under the 1996 Amendment to the 1994 Director Stock Option Plan
(options vest over ten (10) years with accelerated vesting if stock reaches
a certain market price over a period of time), he has options for 10,000
shares, of which 7,500 are vested.
12
<PAGE>
13 Mr. Moore has vested options for 28,133 shares as of 2/1/97 under the 1992
Stock Option Plan. Under the 1994 Stock Option Plan, he has options for
28,500 shares, of which 4,400 are vested.
14 Mr. Steidle has vested options for 20,095 shares as of 2/1/97 under the
1992 Stock Option Plan. Under the 1994 Stock Option Plan, he has options
for 14,000 shares, of which 2,767 are vested.
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION OF DIRECTORS
On August 8, 1996, the Compensation Committee approved changes to the
compensation plan for the Board of Directors. The Company has a policy of
paying the Chairman of the Board of Directors and directors who are not
full-time employees of the Company a quarterly fee of $2,500 for services to
the Board, this fee was increased from $2,000 as of August 1996. In addition,
each director receives a fee for each meeting he attends. This fee was
increased to $1,500 from $1,000. If a director participates in a Board meeting
which is held telephonically, then he receives a fee of $500. A director
receives a fee of $1,000 for each committee meeting of the Board of Directors
he attends. If a director participates in the committee meeting,
telephonically, then the director receives a fee of $500 and if the committee
meeting is held in conjunction with a Board meeting, the fee paid to the
director is $750. This fee was increased from $500.
In 1996, Mr. Norrie received an aggregate of $70,979 in compensation from
the Company. Mr. Norrie's compensation includes a fee of $19,500 for his
services as Chairman of the Board, $50,004 for his annual compensation and
$1,475 for the pension he receives as an employee of the Company. In the fiscal
year ended December 31, 1996, the total compensation paid to non-employee
directors (excluding the $70,979 in fees paid to Mr. Norrie) was $101,750. All
of the non-employee directors are reimbursed for their travel expenses for each
Board and committee meeting attended.
Directors of the Company who are not full-time employees of the Company
("Non-Employee Directors") are also eligible to receive stock options under the
1994 Directors Stock Option Plan (the "Directors Plan"). Pursuant to the
Directors Plan, automatic stock option grants were made to seven directors of
the Company on May 16, 1994. The options granted were for 5,000 shares for
each Non-Employee Director at the then current market value of $9.00 per share.
Each person who is, after May 16, 1994, elected for the first time to be a
Non-Employee Director shall, upon the date of such director's initial election,
be granted an option to purchase 5,000 shares. On May 9, 1996, under the
Director's Plan, each of the new directors received 5,000 shares, at the then
current market value of $14.12 per share. Also on May 9, 1996 the eight
directors received options for 10,000 shares. The options under the Director's
Plan vest and become exercisable on the earlier of the date eight years from
their grant date, but are subject to accelerated vesting when the fair market
value of the Company's Common Stock reaches the following fair market values;
50% of the options vest at the fair market value of $18.00, 25% of the options
vest at the fair market value of $22.00, and the remaining 25% of the options
vest at the fair market value of $26.00. Options granted under the Directors
Plan are exercisable for a period of 10 years from the grant date. Each director
is eligible for these options, provided that the recipient is still serving as a
director of the Company. As of March 31, 1997, no options had been exercised
and 75% of the options under the May 9, 1996 Grant from the Directors Plan are
vested.
SUMMARY OF COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended December 31, 1994,
1995, and 1996 compensation awarded or paid to, or earned by the Company's Chief
Executive Officer and its other executive officers who earned over $100,000 (the
"Named Executive Officers"):
14
<PAGE>
SUMMARY COMPENSATION TABLE
- - -------------------------------------------------------------------------------
Long Term
Compensation
Annual Compensation Awards
----------------------------- ------------ All Other
Name and Principal Salary Bonus Options Compensation(2)
Position Year ($) ($) (#) ($)
- - ------------------------ ---- ------- ------- -------- ---------------
Alex Kwader, 1996 292,504 210,000 41,000(1) 19,371
President and 1995 268,758 169,966 12,000(1) 9,603
Chief Executive Officer 1994 243,756 126,454 9,500(1) 7,934
Bruce P. Moore, 1996 146,256 105,000 18,000(1) 15,821
Vice President and 1995 134,386 84,990 6,000(1) 7,498
Chief Financial Officer 1994 119,679 63,227 4,500(1) 6,117
Stephen Steidle, 1996 115,012 82,606 7,500(1) 13,749
Vice President and 1995 106,771 66,780 3,500(1) 6,984
General Sales Manager 1994 100,737 51,270 3,000(1) 5,142
- - -----------------------------------------
(1) The awards consist of two stock option grants during 1996 under the 1994
Stock Option Plan. The 1996 stock option grants were made in August
("August 1996 grant) and December 1996 ("December 1996 grant"). The Named
Executive Officers received the following options under the two grants:
Mr. Kwader received 16,000 and 25,000 options, Mr. Moore received 8,000 and
10,000 options, and Mr. Steidle received 4,500 and 3,000 options,
respectively. The options granted under the August 1996 grant vest in
installments of 20% upon the one-year anniversary of the grant date and
1.66% at the end of each month thereafter, unless accelerated by the
Compensation Committee of the Board of Directors. The options granted
under the December 1996 grant vest in installments of 20% upon the
one-year anniversary of the grant date and 20% upon each anniversary of the
grant date thereafter.
(2) Consists of the Company's matching and discretionary payments under its
Savings and Supplemental Retirement Plan ("401(k) Plan"). The matching
payments under its 401(k) Plan to Messrs. Kwader, Moore, and Steidle in
1996 were 4,500 each. Discretionary Company payments under the 401(k) Plan
to Messrs. Kwader, Moore, and Steidle in 1996 were $5,103, $2,998, and
$2,484, respectively. The value of other perquisites the Executive
Officers received, such as country club dues, automobile allowance, and
life insurance premiums, totaled $24,856.
STOCK OPTION GRANTS IN THE LAST FISCAL YEAR
During 1996, the Board of Directors combined incentive stock options under
the 1992 Stock Option Plan (the "1992 Plan") and the 1994 Stock Option Plan
(the "1994 Plan") to grant two stock option grants to its executive officers
and key employees. On August 10, 1996, the Board granted 60,000 options from
the 1994 Plan to make the August grant (the "August 1996 grant"). In
recognition of the Company's successful acquisitions and expansion, the Board
combined the remaining 24,918 options remaining in the 1992 Plan and the
balance of 79,150 options available under the 1994 Plan, to grant 104,068
shares to the Company's executive officers and key employees under the 1996
Amendment Grant from the 1994 Plan (the "December 1996 grant"). There are no
remaining options currently available under either the 1992 or 1994 Plan. In
general, the options vest 20% on the one-year anniversary of the grant date and
1.66% at the end of each month, with the exception of the December 1996 grant,
which vests 20% upon the one-year anniversary of the grant date and 20% upon
each anniversary of the grant date thereafter. No options of either grant have
been exercised. The 1994 Plan is administered by the Compensation Committee.
The Compensation Committee has the authority to determine to whom options shall
be granted, the number of shares subject to each option, whether the options
will be incentive or nonstatutory, when the options may be
15
<PAGE>
exercised, and the exercise price. The 1994 Plan expires on February 27, 2004.
The following table contains information concerning the stock options granted to
the Named Executive Officers under the 1994 Plan during the last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------
Individual Grants Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term(4)
- - ---------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options Granted
Underlying Options to Employees Exercise Price Expiration
Name Granted (#)(1) in Fiscal Year(2) ($/Sh)3 Date 5%($) 10% ($)
- - ---- ------------------ ------------------ -------------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Alex Kwader
August 16,000 9.75 13.50 8/10/06 135,840 344,320
December 25,000 15.24 20.25 12/13/06 318,500 806,750
------ -----
Total 41,000 24.99
Bruce P. Moore
August 8,000 4.88 13.50 8/10/06 67,920 172,160
December 10,000 6.10 20.25 12/13/06 127,400 322,700
------ -----
Total 18,000 10.98
Stephen Steidle
August 4,500 2.74 13.50 8/10/06 38,205 96,840
December 3,000 1.83 20.25 12/13/06 38,220 96,810
------ -----
Total 7,500 4.57
</TABLE>
1 Includes the two stock option grants during 1996 under the 1994 Stock
Option Plan. The stock options were made in August and December 1996. Mr.
Kwader received 16,000 and 25,000 options, Mr. Moore received 8,000 and
10,000 options, and Mr. Steidle received 4,500 and 3,000 shares,
respectively. To the extent that the aggregate Fair Market Value
(determined at the time of grant) of stock with respect to which Incentive
Stock Options granted after 1996 are exercisable for the first time by any
Optionee during any calendar year under all plans of the Company and its
Affiliates exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which
they were granted) shall be treated as Nonstatutory Stock Options. The
August 1996 grant options vest in installments of 20% upon the one-year
anniversary of the grant date and 1.66% at the end of each month
thereafter, unless accelerated by the Compensation Committee of the Board
of Directors. The December 1996 grant options vest 20% upon the one-year
anniversary of the grant date and 20% upon each anniversary of the grant
date thereafter. In the event of a merger or change of control, as defined
in the 1994 Plan, if the surviving company shall refuse to assume the
options or substitute similar options for those outstanding options under
the 1994 Plan, the options shall become immediately exercisable and shall
terminate if not exercised prior to such event. Options expire 90 days
after an optionee's employment with the Company is terminated for any
reason, unless the termination is by reason of the optionee's death,
disability, or retirement. The options expire 10 years from the grant
date. As of December 31, 1996, none of the options granted to the Named
Executive Officers in the last fiscal year had vested.
2 During the 1996 fiscal year, a total of 164,068 shares were granted to
executive officers and key employees. Additionally, there were 90,000
shares granted to Non-employee Directors in 1996.
3 Represents the closing market price of the Company's Common Stock on the
day immediately preceding the grant date.
4 The potential realizable value is based on the term of the option at its
time of grant (10 years). It is calculated by assuming that the stock
price on the date of grant, which for 1996 was $13.50 in August and $20.25
in December,
16
<PAGE>
appreciates at the indicated annual rate, compounded annually for the
entire term of the option, and that the option is exercised and sold on the
last day of its term for the appreciated stock price. No gain to the
optionee is possible unless the stock price increased over the option term,
which will benefit all stockholders. For example, a stockholder who
purchased one share of stock on December 31, 1996, at $20.00, and held the
stock for 10 years and sold it on December 31, 2006, while the stock
appreciated at 5% and 10% would have profits of $12.58 and $31.87,
respectively on his $20.00 investment.
AGGREGATED STOCK OPTIONS
The following table shows, as of December 31, 1996, information regarding
unexercised stock options held by the Named Executive Officers. No stock
options were exercised by the Named Executive Officers during the year.
Aggregated Options in Last Fiscal Year and Fiscal Year-End Option Values
- - -------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1996(1) December 31, 1996(1, 2)
Name Exercisable Unexercisable Exercisable Unexercisable
- - ----- ----------- ------------- ----------- -------------
Alex Kwader 64,257 54,508 $920,241 $226,484
Bruce P. Moore 32,008 24,625 458,857 111,888
Stephen Steidle 22,537 11,558 324,834 66,216
- - -------------------------------
1 The table includes options granted under the 1992 Amended and Restated
Stock Option Plan and the 1994 Stock Option Plan as of December 31, 1996,
and valued at the closing market price of the stock on December 31, 1996.
2 Value in this table is the aggregate amount by which the market price per
share of $20.00 at December 31, 1996, exceeded the following exercise
prices of $5.00, $9.50, $11.75, $13.50, and $20.25.
SEVERANCE AGREEMENTS
The Board has approved severance arrangements with certain executive
officers, pursuant to which such persons will receive their base salary for a
specified period in the event of termination by the Company without cause.
Pursuant to such arrangements and based on current annual salaries,
Messrs. Kwader and Moore would be entitled to severance payments of
approximately $201,923 and $86,538, respectively.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION(1)
The Board of Directors established the Compensation Committee of the Board
of Directors (the "Committee") in May 1992 and granted it authority to (i) set
compensation levels for executive officers and directors, and (ii) administer
the Company's stock option or other compensation plans. To assist the Committee
in the performance of its duties, it collects on an informal basis information
regarding executive compensation levels at similar sized companies within the
paper products industry. The Committee also obtains reports from consultants
surveying the compensation of executive officers employed in the paper industry
in similarly sized companies. In 1996, the Company engaged Compensation
Resource Group (CRG) to study and evaluate the Company's compensation policies
and programs, and to compare the compensation paid by the Company with that paid
by other similarly size companies to executive officers and key employees.
17
<PAGE>
Compensation for all of the Company's employees, including executive
officers, is based on the individual employee's experience and responsibilities
and the economic success of the Company. The components of executive
compensation are as follows:
BASE SALARY. The Committee annually reviews the salaries of the executive
officers. The general philosophy followed by the Committee in setting base
salaries is to be competitive in the Company's industry. In 1996, the Committee
received a report from CRG that summarized the compensation paid to executive
officers as disclosed in proxy statements of other similarly sized companies in
the paper industry and general industry to evaluate the compensation paid to
senior management. Some of these companies are in the group utilized for
performance comparison (see "Performance Measurement Comparison"). The
Committee supplemented the report information with the independent knowledge of
its members regarding salaries paid by other companies with similar sales that
are both publicly and privately held. Utilizing this information, salaries for
executive officers are set by the Committee. The Company targets, and believes
it establishes, base salaries in the middle one-third range of such similar
companies.
BONUS COMPENSATION. To provide incentive to the executive officers to
achieve certain performance goals, the Committee administers a bonus program.
In 1994, the Committee adopted the Executive Bonus Plan, which provides for
bonus payments of a percentage of base salary based upon achievement by the
Company of certain levels of earnings per share. The Executive Bonus Plan
utilizes a sliding scale so that the percentage of base salary paid as bonus
compensation increases as the earnings per share of the Company increase. The
Executive Bonus Plan is designed to directly align the interests of the
executive officers and the stockholders. The Executive Bonus Plan is subject
to annual review.
STOCK OPTIONS. The Committee uses stock option grants to executive
officers and other key employees to provide such individuals with incentives to
remain in the employ of the Company and to work to maximize the value of the
Company's stock. Stock option grants are viewed by the Committee as long-term
compensation intended to directly align the executive's interest with the
interests of the stockholders. Since stock options are also used by other
competitors, the Committee believes that the granting of stock options is
necessary to make the Company's compensation package competitive. The Committee
grants options with vesting over a five (5) year period to encourage executives
to remain in the employ of the Company.
In February 1994, the Board of Directors adopted the 1994 Stock Option Plan
(the "1994 Plan"), which was approved at the annual meeting of the
stockholders. Under the 1994 Plan, an aggregate of 200,000 shares are reserved
for issuance to key employees and executive officers of the Company. The
amount of shares reserved under the 1994 Plan (together with shares granted
under the 1992 Plan) was established based on a review by the Committee of
industry averages with respect to the percentage of outstanding shares reserved
for stock option plans for executive officers and other persons.
During 1996, the Committee granted options to purchase shares to executive
officers and key managers in August and December. On August 10, 1996, the
Committee granted options to purchase an aggregate of 60,000 shares. The August
1996 grant options vest in installments of 20% annually on the anniversary of
the grant date and 1.66% each month thereafter. The Committee's decision to
grant options for 60,000 shares was based on a review of levels of executive
stock ownership in the paper industry and in consideration of the need to
minimize dilution of the stockholder's interest.
In recognition of the Company's recent acquisitions and employees' expanded
responsibilities, on December 13, 1996, the Committee decided to grant options
to purchase an aggregate of 104,068 shares to the executive officers and other
key employees. The December 1996 grant options vest in installments of 20% on
the one-year anniversary of the grant date and 20% upon each anniversary of the
grant date thereafter.
18
<PAGE>
The Named Executive Officers received the following options under the August and
December grants: Mr. Kwader received 16,000 and 25,000 options, Mr. Moore
received 8,000 and 10,000 options, and Mr. Steidle received 4,500 and 3,000
options, respectively. The 1994 Plan currently has no outstanding options.
OTHER BENEFIT PROGRAMS. As a result of the December 1996 grant of stock
options under the 1994 Plan, there are no available options remaining under the
1994 Plan. The Committee proposed to the Board and the Board agreed to a new
stock option plan, the 1997 Plan, set forth in Proposal No. 3 of this proxy.
The Committee's proposal for the 1997 Plan stock option plan was based on the
employees' increased responsibilities within the expanded operations of the
Company. The executive officers also participate in other employee benefit
programs including health insurance, group life insurance, and a savings and
supplemental retirement plan (the "401(k) Plan") on the same basis as other
employees of the Company.
LIMITATION ON DEDUCTIBILITY OF COMPENSATION PAID. Under Section 162(m) of
the Internal Revenue Code, compensation paid to certain executives in excess of
$1,000,000 is not deductible. The Committee believes that at the present time,
it is quite unlikely that the compensation paid to executive officers in a
taxable year would exceed $1,000,000. The Committee has accordingly not
established a policy for determining which forms of incentive compensation shall
be designed to qualify as "performance based compensation."
RELATIONSHIP OF PERFORMANCE UNDER COMPENSATION PLANS. The Executive Bonus
Plan, which bases bonuses on earnings per share, is directly tied to the
financial performance of the Company. The Executive Bonus Plan is aligned with
the stockholders' interest in the Company's performance by providing for
payments only if the Company achieves certain levels of earnings per share. The
greater the earnings per share, the greater the award, up to a maximum award
level.
The Company's stock option plans are designed to align and focus the
executive officers' interest in the long-term growth of the value of the
Company.
CHIEF EXECUTIVE OFFICER'S 1996 COMPENSATION. The Committee's philosophy as
to the annual compensation of Mr. Kwader, the Chief Executive Officer (the
"CEO"), is to establish a base salary in the middle third of the range of
salaries paid to CEO's of companies in the paper industry with similar sales
volumes. Additional annual incentive compensation is based on the success of
the Company through the Executive Bonus Plan. The CEO's annual compensation
will fluctuate, based on the performance of the Company.
Based on the Committee's review of salary ranges, Mr. Kwader's base salary,
effective as of April 1, 1996, was increased from $280,000 to $300,000. In
addition, Mr. Kwader received $210,000 in incentive compensation in 1996, in
accordance with the scale set forth in the Executive Bonus Plan, as a result of
the Company achieving certain earnings per share.
The Committee's approach to the long-term compensation of the CEO is to
provide for retirement through the 401(k) Plan (the same plan in which all other
employees of the Company participate) and to award stock options. As of
March 31, 1997, Mr. Kwader has vested options to acquire 56,265 shares of the
Company's stock at $5.00 per share, 4,745 shares of the Company's stock at $9.50
per share and 3,513 shares of the Company's stock at $11.75 per share. In
connection with the grants of options made during 1996, under the 1994 Plan, to
executive officers and key employees, and in recognition of his involvement in
the successful merger of the 1996 acquisitions, Mr. Kwader was granted options
to acquire 41,000 shares of stock of the Company. The options vest in
installments of 20% upon the one-year anniversary of the grant date and 1.66% at
the end of each month thereafter. The size of the grant to Mr. Kwader was
based on his role in the recent
19
<PAGE>
acquisitions and his expanded responsibilities during the next year. The
Committee believes that the stock option plans help to direct the focus of Mr.
Kwader towards the long-term performance of the Company.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Jon H. Miller, Chairman
K. Peter Norrie
Brian C. Kerester
- - --------------------------------------
1 The material in this report is not "soliciting material," is not deemed
filed with the SEC, and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after
the date hereof and irrespective of any general incorporation language
contained in such filing.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's Compensation Committee consists of Messrs.
Miller, Norrie, and Kerester. Mr. Norrie served as Chief Executive Officer of
the Company from June 1989 to November 1990. In 1996, Mr. Norrie received an
aggregate of $70,979 for his services as Chairman of the Board and in
compensation and benefits as an employee of the Company. During 1996, Mr.
Kerester was an operating affiliate of McCown DeLeeuw & Co., which provides
management, consulting, and financial services to the Company for an annual
fee. Services rendered by McCown DeLeeuw & Co. include, but are not
necessarily limited to, advice and assistance concerning the operation,
planning, and financing of the Company, including assistance in identifying and
implementing acquisitions. The management fee is paid pursuant to an
agreement. Such fee was $500,000 in 1996. Under the terms of the agreement,
the principals of MDC Management Company, each of whom is also a general
partner of McCown DeLeeuw & Co., are not obligated to devote more than 25% of
their time in any given month to the affairs of the Company.
20
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following chart shows the value of an investment of $100 on March 2,
1993, the date of commencement of trading of the Company's Common Stock, of
(i) the Company's Common Stock, (ii) the NASDAQ Market Index, as calculated by
Media General, as weighted by market capitalization, and (iii) the Media
General Industry Group 381 Index-Paper Products, a published index, as weighted
by market capitalization. All values assume reinvestment of the full amount of
all dividends.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG FIBERMARK, INC.
NASDAQ MARKET INDEX AND MG GROUP INDEX
[GRAPH]
DOLLARS
250
200 202.83
163.22 167.90
150
125.84 146.16 148.15
119.85 117.62
100 100.00 105.26 90.74
58.33 83.33
50
0
3/12/93 12/31/93 12/31/94 12/31/95 12/31/96
FiberMark, Inc.
NASDAQ Market Index
MG Group Index
ASSUMES $100 INVESTED ON MAR. 12, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1996
1 This Section is not "soliciting material," is not deemed "filed" with the
SEC, and is not to be incorporated by reference in any filing of the
Company under the 1933 Act or the 1934 Act whether made before or after the
date hereof and irrespective of any general incorporation language in any
such filing.
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain executive
officers and directors which provide, among other things, that the Company will
indemnify such executive officer or director, under the circumstances and to the
extent provided for therein, for expenses, damages, judgments, fines, and
21
<PAGE>
settlements he may be required to pay in actions or proceedings which he is or
may be made a party by reason of his position as a director, executive officer,
or other agent of the Company, and otherwise to the full extent permitted under
Delaware law and the Company's Bylaws.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, to file with the
SEC initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Executive officers,
directors, and greater than 10% stockholders are required by the SEC regulation
to furnish the Company with copies of all Section 16(a) forms they file.
To the best of the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the fiscal year ended December 31, 1996,
all Section 16(a) filing requirements applicable to its executive officers,
directors, and greater than 10% beneficial owners were complied with as of
December 31, 1996, with the exception of a Form 4 for Mr. Thompson which
inadvertently indicated indirect ownership of all shares rather than both direct
and indirect ownership, which was subsequently corrected, and a Form 5 for each
officer to report the stock option grant made pursuant to the 1994 Stock Option
Plan.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
Paul S. Street
Secretary and General Counsel
Brattleboro, Vermont
March 31, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: MANAGER OF CORPORATE
COMMUNICATIONS, FIBERMARK, INC., P.O. BOX 498, BRATTLEBORO, VERMONT 05302.
22
<PAGE>
FIBERMARK, INC.
FORMERLY KNOWN AS
SPECIALTY PAPERBOARD, INC.
P.O. BOX 498, BRATTLEBORO, VERMONT 05302
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 15, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Alex Kwader, Bruce Moore, and Paul S. Street,
or any of them, attorneys and proxies with full power of substitution in each
of them, in the name, place, and stead of the undersigned to vote as proxy all
the stock of the undersigned in FiberMark, Inc.
Please sign and date on the reverse side and mail promptly. You are encouraged
to specify your choices by marking the appropriate boxes on the reverse side,
but you need not mark any boxes if you wish to vote in accordance with the
Board of Directors' recommendations. If you do not sign and return a proxy or
attend the meeting and vote by ballot, your shares cannot be voted.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE) SEE REVERSE
SIDE
<PAGE>
A /X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
NOMINEES: Alex Kwader
FOR WITHHELD K. Peter Norrie
1. ELECTION OF Brian C. Kerester
DIRECTORS: / / / / George E. McCown
Glenn S. McKenzie
Instructions: To withhold authority to vote for any Jon H. Miller
individual nominee, write that nominee's name in Fred P. Thompson, Jr.
the space provided below: John D. Weil
- - ----------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of KPMG Peat Marwick L.L.P. / / / / / /
as Independent auditors.
3. Approval of the 1997 Stock Option Plan. / / / / / /
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED ACCORDING TO YOUR INSTRUCTIONS. IF YOU SIGN AND
RETURN THE CARD BUT DO NOT VOTE ON ALL THESE MATTERS, THEN PROPOSALS 1, 2
AND 3, IF UNMARKED, WILL RECEIVE FOR VOTES.
PLEASE DATE, SIGN, AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
YES NO
DO YOU PLAN TO ATTEND
THE ANNUAL MEETING? / / / /
SIGNATURE(S) _________________________________ DATE: ______________
SIGNATURE(S) _________________________________ DATE: ______________
NOTE: Please sign exactly as your name appears hereon. When signing as
attorney, executor, administrator, trustee, guardian, partner, etc.,
please indicate your title as such. If shares held by corporation., sign
full corporate name by authorized officer. If shares held in the name of
two or more persons, all should sign.
