<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
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
IVEX PACKAGING CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
IVEX PACKAGING CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
IVEX LOGO
IVEX PACKAGING CORPORATION
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
March 30, 1998
Dear Stockholders:
It is a pleasure to invite you to attend the 1998 Annual Meeting of
Stockholders of Ivex Packaging Corporation to be held at the Deer Path Inn, 255
East Illinois Road, Lake Forest, Illinois 60045, on Friday, May 15, 1998, at
9:00 a.m. (Chicago time).
Each item of business described in the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement will be discussed during the meeting
and stockholders will have an opportunity to ask questions.
IT IS IMPORTANT THAT YOU VOTE YOUR SHARES WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. We urge you to carefully review the Proxy Statement and to complete
the enclosed proxy card. Please sign, date and return your proxy card in the
envelope provided as soon as possible. If you do attend the meeting, your proxy
can be revoked at your request in the event you wish to vote in person.
I look forward to seeing you at the meeting.
Sincerely,
George V. Bayly
Chairman of the Board of Directors,
President and Chief Executive Officer
<PAGE> 3
IVEX LOGO
IVEX PACKAGING CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Ivex Packaging Corporation (the "Company") will hold its 1998 Annual
Meeting of Stockholders (the "Annual Meeting") on Friday, May 15, 1998 at 9:00
a.m. (Chicago time) at the Deer Path Inn, 255 East Illinois Road, Illinois
60045, for the following purposes:
1. To elect two directors to serve until the 2001 Annual Meeting of
Stockholders.
2. To ratify the appointment of Price Waterhouse LLP as the Company's
independent public accountants.
3. To act upon any other matters that may properly come before the meeting.
The Board of Directors has fixed March 17, 1998 as the record date for the
determination of the stockholders entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or postponement of the Annual Meeting.
At the Annual Meeting, each share of Common Stock, par value $.01 per
share, of the Company represented at the Annual Meeting will be entitled to one
vote on each matter properly brought before the Annual Meeting.
By Order of the Board of Directors,
G. Douglas Patterson
Secretary
March 30, 1998
YOUR VOTE IS IMPORTANT
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENCLOSED
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY
VOTE IN PERSON EVEN IF YOU HAVE RETURNED A PROXY.
<PAGE> 4
IVEX LOGO
IVEX PACKAGING CORPORATION
PROXY STATEMENT
GENERAL
The accompanying proxy is solicited by the Board of Directors of Ivex
Packaging Corporation (the "Company" or "Ivex") for use at the 1998 Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be held on
Friday, May 15, 1998 at 9:00 a.m. (Chicago time) at the Deer Path Inn, 255 East
Illinois Road, Lake Forest, Illinois 60045, and at any adjournments or
postponements thereof. This Proxy Statement and accompanying proxy card will be
mailed beginning on or about March 30, 1998 to give the holders of the Company's
Common Stock, par value $.01 per share ("Common Stock"), of record on March 17,
1998 (the "Record Date") an opportunity to vote at the Annual Meeting. Ivex
Packaging Corporation's 1998 Annual Report to Stockholders which includes its
Annual Report on Form 10-K for the year ended December 31, 1997 accompanies this
Proxy Statement.
Each share of Common Stock represented at the Annual Meeting is entitled to
one vote on each matter properly brought before the Annual Meeting. The
Company's Amended and Restated By-Laws (the "By-Laws") require that the holders
of a majority of the total number of shares entitled to vote be present in
person or by proxy in order for the presence of a quorum for the transaction of
business at the Annual Meeting.
In voting, please specify your choices by marking the appropriate spaces on
the enclosed proxy card, signing and dating the card and returning it in the
accompanying envelope. If no directions are given and the signed card is
returned, then the proxy holders will vote the shares FOR the election of all
listed nominees, FOR the proposal set forth in Item 2 in the Notice of Meeting,
in accordance with the directors' recommendations on the other subjects listed
on the proxy card and at their discretion on any other matters that may properly
come before the meeting and any adjournments or postponements thereof.
Abstentions may be specified on all proposals other than the election of
directors. Pursuant to Delaware law, abstentions are treated as present for
purposes of determining the presence or absence of a quorum, thus, will have the
effect of a vote against a proposal that requires the vote of a majority of the
votes cast by the holders of Common Stock present in person or by proxy and
entitled to vote thereon. In situations where brokers are prohibited from
exercising discretionary authority for beneficial owners who have not returned
proxies to the brokers (so-called "broker non-votes"), the affected shares will
be counted for purposes of determining the presence or absence of a quorum for
the transaction of business at the Annual Meeting but will not be included in
the vote totals and, therefore, will have no effect on the outcome of the votes.
REVOCABILITY OF PROXIES
Any stockholder giving a proxy has the power to revoke it at any time
before the proxy is voted. Proxies may be revoked by filing with the Secretary
of the Company written notice of revocation bearing a later date than the proxy,
by duly executing a subsequently dated proxy relating to the same shares of
Common Stock and delivering it to the Secretary of the Company or by attending
the Annual Meeting and voting in person. Attendance at the Annual Meeting will
not in and of itself constitute revocation of a proxy. Any subsequently dated
proxy or written notice revoking a proxy should be sent to the Secretary of Ivex
Packaging Corporation, at its executive offices at 100 Tri-State Drive, Suite
200, Lincolnshire, Illinois 60069.
1
<PAGE> 5
SHARES OUTSTANDING
Only holders of record of Common Stock at the close of business on the
Record Date are entitled to vote at the Annual Meeting. As of the Record Date,
the Company had outstanding 20,426,666 shares of Common Stock. Each share of
Common Stock is entitled to one vote.
SOLICITATION
The Company will bear the entire cost of the solicitation of proxies,
including preparation, assembly and mailing of this Proxy Statement, the proxy
and any additional materials furnished to stockholders. Proxies may be solicited
by directors, officers and a small number of regular employees of the Company
personally or by mail, telephone or telegraph, but such persons will not be
specially compensated for such service. Copies of solicitation material will be
furnished to brokerage houses, fiduciaries and custodians that hold shares of
Common Stock of record for beneficial owners for forwarding to such beneficial
owners. The Company has also engaged Innisfree M&A Incorporated to assist in the
solicitation of proxies. This firm will be paid a fee of approximately $5,000
and will be reimbursed for expenses incurred in connection with such engagement.
The Company may also reimburse persons representing beneficial owners for their
costs of forwarding the solicitation material to such owners.
Your vote is important. Please return your marked proxy card promptly so
your shares can be represented, even if you plan to attend the Annual Meeting in
person. Highlights of the Annual Meeting and the voting results will be included
in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
NOMINATION AND ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") provides that the Board of Directors will consist of not less
than three nor more than fifteen members, the exact number to be determined in
accordance with the By-Laws.
The Certificate provides for the Board of Directors to be divided into
three classes, each class to serve for staggered three-year terms, with each
class consisting, as nearly as possible, of one-third of the directors.
The Board of Directors of the Company currently consists of six persons,
divided into three classes with two directors designated in each of Class I,
Class II and Class III. At the Annual Meeting, stockholders will elect two
directors for Class I.
The Board of Directors' Class I nominees are Glenn R. August and Frank V.
Tannura. At the 1998 Annual Meeting, each Class I director will be elected for a
three-year term and will hold office until the 2001 Annual Meeting of
Stockholders. In each case, the elected director will continue in office until
such director's successor is elected and has been qualified, or until such
director's earlier death, resignation or removal.
The Class I nominees were designated for election, pursuant to the By-Laws,
by the Board of Directors of the Company.
In connection with the Company's initial public offering of Common Stock
which was consummated during October 1997 (the "1997 Common Stock Offering"),
certain executive officers of the Company who own shares of the Company's Common
Stock and Acadia Partners, L.P. ("Acadia") which owns shares of the Company's
Common Stock, entered into a Voting Agreement (the "Voting Agreement") pursuant
to which they agreed to vote all of their outstanding shares of Common Stock,
for so long as they own such shares, for the director nominees proposed by the
Board of Directors of the Company. Pursuant to this Voting Agreement, such
executive officers and Acadia have agreed to vote all of their shares of Common
Stock to elect Messrs. August and Tannura as Directors of the Company. See
"Principal Stockholders" and "Certain Relationships and Related Transactions."
Each of the Class I nominees has consented to serve as a director if elected.
2
<PAGE> 6
The By-Laws of the Company provide that directors will be elected at the
Annual Meeting by a plurality of the votes cast at the meeting by the holders of
the shares represented in person or by proxy and entitled to vote thereon. With
regard to the election of directors, votes may be cast for or withheld for each
nominee. Votes that are withheld will have no effect on the outcome of the
election because directors will be elected by a plurality of the votes cast.
Stockholders eligible to vote at the Annual Meeting do not have cumulative
voting rights with respect to the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE TWO NAMED
NOMINEES
AS A DIRECTOR OF THE COMPANY.
INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the name and age of, and the recent business
experience and certain other information with respect to the Class I nominees as
well as the other directors in Class II and Class III whose terms continue after
the Annual Meeting:
<TABLE>
<CAPTION>
TERM TO
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT AGE EXPIRE
---- ---------------------------------- --- -------
<S> <C> <C> <C>
NOMINEES
CLASS I
Glenn R. August...................... Mr. August has served as a Director of the 36 2001
Company since March 1993. Mr. August has served
as a Managing Director of Oak Hill Partners,
Inc. (the investment advisor to Acadia Partners,
L.P.) and its predecessor since 1987. Since
August 1996, Mr. August has served as President
of Oak Hill Advisors, Inc., the exclusive
advisor to the Oak Hill Securities Fund, L.P.
Frank V. Tannura..................... Mr. Tannura has served as a Director of the 41 2001
Company since August 1995 and Vice President and
Chief Financial Officer of the Company since
October 1989.
CONTINUING DIRECTORS
CLASS II
R. James Comeaux..................... Mr. Comeaux has served as a Director of the 60 1999
Company since December 1, 1997. Mr. Comeaux has
served as President of Petrochemical Management
Inc. since 1993 and as President and Chief
Executive Officer of Arcadian Corporation from
1989 to 1993. Mr. Comeaux is also a director of
Energy BioSystems Corporation.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
TERM TO
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT AGE EXPIRE
---- ---------------------------------- --- -------
<S> <C> <C> <C>
William J. White..................... Mr. White has served as a Director of the 59 1999
Company since December 1, 1997. Mr. White has
been a professor at Northwestern University
since January 1998 and served as Chairman of the
Board of Bell & Howell Company from February
1993 to December 1997 and of Bell & Howell
Operating Company from February 1990 to December
1997. He served as Chief Executive Officer of
Bell & Howell Company from February 1993 to
December 1997 and of Bell & Howell Operating
Company from February 1990 to December 1997. He
is also a director of Bell & Howell Company,
Readers Digest Association, Inc. and the Chicago
Stock Exchange.
CLASS III
George V. Bayly...................... Mr. Bayly has served as Chairman of the Board, 55 2000
Director, President and Chief Executive Officer
of the Company since January 1991.
Anthony P. Scotto.................... Mr. Scotto has served as a Director of the 50 2000
Company since August 1995. Mr. Scotto has been a
Managing Director of Oak Hill Partners, Inc.
(the investment advisor to Acadia) and its
predecessor since March 1988. Mr. Scotto is also
a director of Holophane Corporation and
Specialty Foods Corporation.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS
During the portion of the 1997 calendar year occurring after the 1997
Common Stock Offering, the Company's Board of Directors held two meetings. Each
member of the Board of Directors was present for all of the meetings of the
Board of Directors (held during the period for which he was a director) and all
of the meetings held by all committees of the Board of Directors on which he
served (during the period that he served).
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors maintains an Audit Committee and a
Compensation Committee. These committees were organized in December 1997
following the Company's 1997 Common Stock Offering. The members of such
committees are directors who are neither officers nor employees of the Company.
During the portion of the 1997 calendar year occurring after the 1997 Common
Stock Offering, the Audit Committee held one meeting and the Compensation
Committee did not meet. Because of the size of the Company's Board of Directors
and the existence of the Voting Agreement pursuant to which Acadia and the
Company's executive officers have agreed to vote for the Board's nominees, the
Board of Directors has not established a nominating committee.
Audit Committee. The Audit Committee of the Board of Directors of the
Company currently consists of Messrs. Comeaux (Chairman) and White, each of whom
is a non-employee director. This committee is directed to review the scope, cost
and results of the independent audit of the Company's books and records, the
results of the annual audit with management and the adequacy of the Company's
accounting, financial and operating controls; to recommend annually to the Board
of Directors the selection of the independent auditors; to consider proposals
made by the Company's independent auditors for consulting work; and to report to
the Board of Directors, when so requested, on any accounting or financial
matters.
4
<PAGE> 8
Compensation Committee. The Compensation Committee of the Board of
Directors of the Company currently consists of Messrs. White (Chairman) and
Scotto, each of whom is a "non-employee director" of the Company as such term is
defined in Rule 16b-3 adopted under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). In addition, each is an "outside director" as such
term is defined in Section 162(m) of the Code. The principal responsibilities of
the Compensation Committee are to (a) to review and approve the compensation,
including salary, bonus, stock options or other appropriate incentive plans, and
perquisites, if any, of the President and Chief Executive Officer and the other
executive officers of the Company, including the named executive officers; (b)
to monitor the Company's management resources, organizational structure,
succession planning and the selection process and performance of key executives;
(c) to administer and implement the Company's stock option or other stock-based
and equity-based benefit plans, including the Ivex Packaging Corporation 1997
Long-Term Stock Incentive Plan (collectively, the "Plans"), including the review
and approval of all grants thereunder; (d) to fulfill the purposes of the Plans
including, without limitation, through the grants of options and other benefits
under the Plans; (e) to recommend to the Board of Directors any revisions or
additions to the Plans; and (f) to review and report to the Board of Directors,
when so requested, on any management resources, compensation, succession
planning or other similar matters.
DIRECTORS' COMPENSATION FOR 1997
No retainer or other compensation was paid to any director during 1997 for
their service as a director, however, beginning in 1998, an annual retainer of
$25,000 per year will be payable to Messrs. Comeaux and White and no retainer or
other compensation will be paid to employees of the Company or to
representatives of Acadia for their service as a director.
In addition, during 1997, Messrs. White and Comeaux each received options
to purchase 2,000 shares of the Company's Common Stock at an exercise price of
$16.00 per share, and it is expected that in the future such non-employee
directors will participate in a Non-Employee Director Stock Option Plan (the
"Director Plan") to be adopted by the Company, which is expected to provide for
grants of nonqualified stock options to certain non-employee directors to
purchase shares of Common Stock at an exercise price equal to the fair market
value of Common Stock on the date of grant. It is expected that under the
Director Plan, each grant will vest as to 33-1/3% of the shares on the first
three anniversary dates of the grant. Under the Director Plan, shares of Common
Stock will be reserved for grant.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors of the
Company has selected Price Waterhouse LLP to audit the consolidated financial
statements of the Company and its subsidiaries for the fiscal year ending
December 31, 1998. Price Waterhouse LLP has served in this capacity since
December 1989. Representatives of Price Waterhouse LLP are expected to be
present at the Annual Meeting and will be available to respond to appropriate
questions of stockholders and to make a statement if they desire.
The affirmative vote of a majority of the votes cast on this proposal will
constitute ratification of the appointment of Price Waterhouse LLP to serve in
this capacity.
The Board of Directors is submitting the approval of Price Waterhouse LLP
to stockholders as a matter of good corporate practice, although it is not
required to do so. Should the stockholders fail to provide such ratification,
the Board of Directors will reconsider its approval of Price Waterhouse LLP as
the Company's independent public accountants for the year ended December 31,
1998. Even if the selection is ratified, the Board of Directors, in its
discretion, may direct the appointment of a new independent accounting firm at
any time during the fiscal year if the Board of Directors feels that such a
change would be in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2
TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS.
5
<PAGE> 9
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of December 31, 1997, by (i) each person known
by the Company to be the beneficial owner of more than 5% of the Common Stock,
(ii) each of the directors of the Company, (iii) each of the named executive
officers of the Company, and (iv) all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF THE COMPANY'S PERCENTAGE
OF BENEFICIAL OWNER COMMON STOCK(1) OF CLASS
- ------------------- ---------------- ----------
<S> <C> <C>
Acadia Partners, L.P.(2).................................... 7,903,595 37.2%
Fidelity Management & Research Co. ......................... 1,394,900 6.6%
Alliance Capital Management L.P.(3)......................... 1,240,400 5.8%
J. & W. Seligman & Co., Inc. ............................... 1,108,160 5.2%
George V. Bayly............................................. 1,149,430(6) 5.4%
Frank V. Tannura............................................ 486,366(6) 2.3%
Eugene M. Whitacre.......................................... 329,143(6) 1.5%
Thomas S. Ellsworth......................................... 321,919(6) 1.5%
G. Douglas Patterson........................................ 174,288(6) *
Glenn R. August(4)(5)....................................... -0- *
Anthony P. Scotto(5)........................................ -0- *
R. James Comeaux............................................ 3,000 *
William J. White............................................ 1,000 *
All directors and officers as a group....................... 2,871,656(7) 13.5%
</TABLE>
- -------------------------
* Represents less than 1% of such Common Stock.
(1) To the knowledge of the Company, each stockholder has sole voting and
investment power as to the shares shown unless otherwise noted, although
certain executive officers of the Company and Acadia are parties to the
Voting Agreement. See "Certain Relationships and Related Transactions."
(2) Includes shares held by Acadia and shares held by Acadia Electra Partners,
L.P. ("Electra"), an affiliate of Acadia. Acadia is the general partner of
Electra. The general partner of Acadia is Acadia FW Partners, L.P. ("Acadia
FW"), the managing general partner of which is Acadia MGP, Inc. ("Acadia
MGP"), a corporation controlled by J. Taylor Crandall. As such, Acadia FW,
Acadia MGP and Mr. Crandall may be deemed to beneficially own the shares of
the Company's common stock held by Acadia and Electra. The address of
Acadia, Electra, Acadia FW and Acadia MGP is 2600 Texas Commerce Tower, 201
Main Street, Fort Worth, Texas 76102. The address of Mr. Crandall is 3100
Texas Commerce Tower, 201 Main Street, Fort Worth, Texas 76102.
(3) The shares shown as beneficially owned by Alliance Capital Management L.P.
are based upon a Schedule 13G filed by the Alliance Capital Management L.P.,
Alpha Assurances Vie Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA
Assurances Vie Mutuelle, AXA Courtage Assurance Mutuelle, AXA-UAP and
Equitable Companies Inc. on February 13, 1998.
(4) Mr. August is an officer and director of Acadia MGP (see footnote 2 above).
(5) The address of such individuals is c/o Oak Hill Partners, Inc., 65 East 55th
Street, New York, New York 10022-3219.
(6) Represents shares of outstanding Common Stock in the amounts of 825,074,
356,782, 237,907, 235,011 and 132,636 that are owned by Messrs. Bayly,
Tannura, Whitacre, Ellsworth and Patterson, respectively, and vested and
earned options that are currently exercisable in the amounts of 324,356,
129,584, 91,236, 86,908 and 41,652 that are owned by Messrs. Bayly, Tannura,
Whitacre, Ellsworth and Patterson, respectively.
(7) All directors and officers as a group hold shares of outstanding Common
Stock in the aggregate amount of 2,089,733 and vested and earned options
that are currently exercisable for 781,923 shares of Common Stock.
6
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid by the Company to the Company's chief executive officer and each of the
four most highly compensated officers of the Company whose aggregate cash
compensation exceeds $100,000, in each case for all services rendered during the
fiscal years 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION(4)
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ---------- -------
NUMBER OF
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION SARS PAYOUTS COMPENSATION
YEAR ($)(1) ($)(2) ($)(3) (#)(5) ($)(6) ($)(7)
---- ------ ------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
George V. Bayly................ 1997 457,667 700,000 206,930 123,575 -- 13,239,290
President and Chief 1996 420,000 600,000 -- 103,729 765,938 314,721
Executive Officer 1995 400,000 400,000 -- 79,399 237,500 14,938
Frank V. Tannura............... 1997 263,200 300,000 70,857 34,335 -- 5,266,519
Vice President and 1996 249,100 290,000 -- 48,410 282,188 40,368
Chief Financial Officer 1995 211,667 235,000 -- 32,040 87,500 28,885
Eugene M. Whitacre............. 1997 247,500 60,000 -- 34,335 -- 3,657,577
Vice President and 1996 236,250 230,000 -- 34,593 201,563 7,500
General Manager 1995 225,000 168,750 -- 21,777 62,500 13,741
Thomas S. Ellsworth............ 1997 250,000 50,000 -- 17,500 -- 3,653,047
Vice President and 1996 250,000 100,000 -- 34,593 -- 25,813
General Manager 1995 229,000 168,750 -- 21,777 -- 16,185
G. Douglas Patterson........... 1997 193,600 100,000 -- 10,000 -- 1,762,988
Vice President and 1996 180,400 140,000 -- 13,817 129,000 23,296
General Counsel 1995 164,000 105,600 -- 11,564 40,000 11,997
</TABLE>
- -------------------------
(1) Includes amounts deferred pursuant to the Company's Retirement Plan and
Trust and under the Company's Executive Deferred Compensation Plan.
(2) Includes (i) annual bonus awards for services rendered in 1997, 1996 and
1995 that were paid under the Company's Executive Incentive Bonus Plan and
(ii) special one-time bonuses of $250,000, $150,000 and $50,000 which were
paid to Messrs. Bayly, Tannura and Patterson, respectively, in 1997 in
connection with the Company's completion of the 1997 Common Stock Offering.
The Executive Incentive Compensation Plan provides the executive officers of
the Company with annual awards for outstanding individual performance
contributing to the present and future success of the Company. Prior to the
formation of the Corporation's Compensation Committee, this Plan was
administered by the President in consultation with the Board of Directors
and, beginning in 1998, will be administered by the Board's Compensation
Committee. Awards are based upon the Company's achievement of, among other
things, certain predetermined financial objectives such as minimum EBITDA
and earnings per share targets as well as the attainment of key individual
strategic and operational goals. Under the provisions of the Plan,
participants have target incentive compensation of 40% to 50% of that year's
base salary, although the actual incentive compensation paid in any given
year may be significantly less than or greater than the target level based
upon the extent of the Company's under-achievement or over-achievement of
such predetermined financial objectives.
(3) The 1997 Other Annual Compensation column includes payments made to Messrs.
Bayly and Tannura to reimburse them (on an after tax basis) for initiation
fees and dues associated with certain country club memberships.
(4) The column designated by the Commission pursuant to the applicable
regulations for the reporting of "Restricted Stock Awards" has been deleted
because no restricted stock of the Company was awarded to any of the named
executive officers in any of the reported calendar years. See "Executive
Compensation and Other Information -- Summary Compensation Table" (footnote
5) for a description of the restricted shares of Common Stock received by
the named executive officers in exchange for their stock options exercisable
for common stock of IPC, Inc.
7
<PAGE> 11
Based on the December 31, 1997 closing market price of $24.00 per share, the
value of each named executive officer's shares of restricted common stock of
the Company held as of December 31, 1997 and the number of such shares as of
such date (including the 1993 Plan Shares described in footnote 5 below)
would be as follows: Mr. Bayly's 824,973 shares -- $19,799,352; Mr.
Tannura's 356,681 shares -- $8,560,344; Mr. Whitacre's 237,906 shares --
$5,709,744; Mr. Ellsworth's 235,010 shares -- $5,640,240 and Mr. Patterson's
132,635 shares -- $3,183,240. All of such shares of the Company's Common
Stock are vested and the Company has no present intentions to pay dividends
on such shares.
(5) The options reported for 1995 and 1996 in this column were originally
granted under IPC's Stock Option and Purchase Agreement, dated as of January
1, 1993, as amended and restated as of January 1, 1996 (the "1993 Stock
Option Plan"), pursuant to which options exercisable into an aggregate of
24,178 shares of IPC's common stock were originally granted to certain
executive officers (including the named executive officers), 16,321 of such
options were earned and vested (the "IPC Options") and 7,857 of such options
were not earned and were canceled.
In connection with the Company's 1997 Common Stock Offering, the executive
officers participating under the 1993 Stock Option Plan, including the named
executive officers, exchanged all of the IPC Options for (i) 2,114,133
shares of the Company's Common Stock (the "1993 Plan Shares") and (ii)
options exercisable for 817,067 shares of the Company's Common Stock (the
"1993 Plan Options") at an exercise price equal to $16.00 per share (the
initial offering price of the Common Stock in the 1997 Common Stock
Offering). Consequently, the options reported for 1995, 1996 and 1997 in
this column reflect each named executive officer's portion of the 1993 Plan
Options allocable to 1995, 1996 and 1997 (the 1997 reported amounts also
include 93,500, 30,000, 30,000, 17,500 and 10,000 of options granted to
Messrs. Bayly, Tannura, Whitacre, Ellsworth and Patterson, respectively,
under the 1997 Ivex Packaging Corporation Long-Term Stock Incentive Plan).
In addition, in connection with this exchange, Messrs. Bayly, Tannura,
Whitacre, Ellsworth and Patterson received 805,663, 324,095, 224,872,
224,872 and 107,773, respectively, shares of the 1993 Plan Shares, and based
on the December 31, 1997 closing market price of $24.00 per share, the value
as of December 31, 1997 of these shares received in this exchange would be
as follows: $19,335,912; $7,778,280; $5,396,928; $5,396,928; and $2,586,552,
respectively. See "Principal Stockholders."
(6) The amounts in this column represent the amounts paid to the named executive
officers during the years ended December 31, 1995 and 1996 under IPC's
Special Incentive Plan, dated as of January 1, 1993. Pursuant to such plan,
upon the occurrence of certain "Payment Events" (therein defined), IPC was
obligated to pay to certain executive officers an aggregate cash award up to
a maximum amount of $2.25 million. During 1995 and 1996, IPC paid to certain
executive officers (including the named executive officers) $550,000 and
$1.7 million, respectively, under such plan. The 1995 and the 1996 payments
under such plan were made by IPC notwithstanding the fact that there was not
a Payment Event during 1995 or 1996, this condition having been waived by
IPC. The IPC Special Incentive Plan was terminated in 1996 after the final
payments thereunder were made.
(7) The 1997 All Other Compensation column includes (i) the Company's
contributions (excluding employee earnings reduction contributions) under
the Company's Retirement Plan and Trust and under the Company's Executive
Deferred Compensation Plan during fiscal 1997 as follows: $67,133 to Mr.
Bayly; $28,663 to Mr. Tannura; $22,844 to Mr. Whitacre; $16,811 to Mr.
Ellsworth; and $19,180 to Mr. Patterson; (ii) insurance premiums with
respect to the Company's Executive Disability Income Coverage paid by the
Company during 1997 as follows: $7,221 for Mr. Bayly; $2,323 for Mr.
Tannura; $3,582 for Mr. Ellsworth; and $2,809 for Mr. Patterson; (iii) the
Company's payment during 1997 of $150,000 of nonqualified retirement
benefits to Mr. Bayly pursuant to the terms of his Amended and Restated
Employment Agreement, dated as of May 30, 1996; (iv) the following amounts
of taxable compensation which were realized by the named executive officers
as a result of their receipt of their portion of the 1993 Plan Shares: Mr.
Bayly -- $12,890,608; Mr. Tannura -- $5,185,520; Mr. Whitacre -- $3,597,952;
Mr. Ellsworth -- $3,597,952; and Mr. Patterson -- $1,724,368; and (v) the
Company's payment to the named executive officers of the following amounts
to enable them to make (on an after tax basis) the 1997 interest payments on
their respective promissory notes payable to the Company: Mr. Bayly --
$124,328; Mr. Tannura -- $50,014; Mr. Whitacre -- $36,781; Mr. Ellsworth --
$34,702; and Mr. Patterson -- $16,631. See "Certain Relationships and
Related Transactions."
8
<PAGE> 12
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATE OF
SECURITIES OPTIONS/SARS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED (#)(1) FISCAL YEAR(2) ($/SH) DATE 5% ($) 10% ($)
---- -------------- -------------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
George V. Bayly............ 123,575 24.0 16.00 9/30/07 1,243,450 3,151,148
President and Chief
Executive Officer
Frank V. Tannura........... 34,335 6.7 16.00 9/30/07 345,490 875,538
Vice President
Eugene M. Whitacre......... 34,335 6.7 16.00 9/30/07 345,490 875,538
Vice President
Thomas S. Ellsworth........ 17,500 3.4 16.00 9/30/07 176,090 446,248
Vice President
G. Douglas Patterson....... 10,000 1.9 16.00 9/30/07 100,623 254,999
Vice President
</TABLE>
- -------------------------
(1) The options specified in this column reflect each named executive officer's
portion of the Company's non-qualified stock options issued under the Ivex
Packaging Corporation 1997 Long-Term Stock Incentive Plan (the "1997 Plan
Options") and their portion of the 1993 Plan Options allocable to 1997. The
1993 Plan Options are fully vested and the 1997 Plan Options vest 33 1/3%
over the first three years of the ten-year option term. The 1993 Plan
Options and the 1997 Plan Options were granted at the initial public
offering price of $16.00 per share in connection with the Company's 1997
Common Stock Offering.
(2) Reflects the percentage of all options granted to all employees during the
calendar year ended on December 31, 1997.
(3) The potential realized dollar values shown above represent the potential
gains based upon annual compound price appreciation of 5% and 10% from the
date of grant through the full option term. The dollar amounts under these
columns are the result of calculations at the 5% and 10% rates established
by the Commission and therefore are not intended to forecast possible future
appreciation, if any, of the stock price of the Company.
9
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED ON VALUE AT FY-END AT FY-END
EXERCISE REALIZED EXERCISABLE(1)/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE(2) UNEXERCISABLE(3)
---- ----------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
George V. Bayly....................... -- -- 324,356/93,500 $2,594,848/748,000
President and Chief Executive
Officer
Frank V. Tannura...................... -- -- 129,548/30,000 1,036,384/240,000
Vice President
Eugene M. Whitacre.................... -- -- 91,236/30,000 729,888/240,000
Vice President
Thomas S. Ellsworth................... -- -- 86,908/17,500 695,264/140,000
Vice President
G. Douglas Patterson.................. -- -- 41,652/10,000 333,216/ 80,000
Vice President
</TABLE>
- -------------------------
(1) The 1993 Plan Options specified in this column were received by the named
executive officers on September 30, 1997 in connection with the Company's
1997 Common Stock Offering in exchange for each such named executive
officer's portion of the IPC Options which were originally granted under
IPC's 1993 Stock Option Agreement. See "Executive Compensation and Other
Information -- Summary Compensation Table" (footnote no. 5). These options
are fully vested. These options were granted at the initial public offering
price of $16.00 per share in connection with the Company's 1997 Common Stock
Offering.
(2) The 1997 Plan Options specified in this column were granted under the Ivex
Packaging Corporation 1997 Long-Term Stock Incentive Plan. These options
vest 33 1/3% per year during the first three years of the ten year option
term. These options were granted at the initial public offering price of
$16.00 per share in connection with the Company's 1997 Common Stock
Offering.
(3) The value of the unexercised options is based upon the difference between
the closing price of $24.00 per share of Common Stock on the New York Stock
Exchange on December 31, 1997 (the last trading day in 1997) and the option
exercise price.
CERTAIN EMPLOYMENT ARRANGEMENTS
Mr. Bayly has an amended and restated employment agreement with the
Company, pursuant to which (i) the Company agrees to employ Mr. Bayly through
December 31, 2000 (provided that beginning on January 1, 1998, the term thereof
is automatically extended for one additional day for each day which has then
elapsed since December 31, 1997 unless on or after December 31, 1997 either the
Company's Board of Directors or Mr. Bayly gives notice that the automatic
extension shall cease) as Chairman, President and Chief Executive Officer and to
cause Mr. Bayly's election as a director of IPC, (ii) Mr. Bayly receives a base
salary of $491,000 during 1997, $515,550 during 1998, $541,327 during 1999 and
$568,393 during 2000 (subject to increase at the discretion of the Board of
Directors), (iii) Mr. Bayly is entitled to an aggregate of $150,000 per year for
life insurance, disability insurance and nonqualified retirement benefits, (iv)
Mr. Bayly is eligible for an annual performance bonus based upon the achievement
of predetermined financial objectives, and (v) Mr. Bayly will receive certain
severance benefits if his employment is terminated without cause or if Mr. Bayly
terminates the agreement for good reason (including the giving of notice by the
Board of Directors of the Company to stop the automatic extension of the term
thereof and a termination by Mr. Bayly for any reason during the period of three
months which begins six months after a change of control (as therein defined)).
These severance benefits include the payment of a lump sum equal to four times
the sum of (x) the
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<PAGE> 14
annual salary then in effect and (y) the target amount of the annual performance
bonus for the year in which the termination occurs, plus the continuation of all
benefits and supplemental benefits for four years after the date of termination.
The agreement restricts Mr. Bayly from competing with the Company during his
employment and, in certain circumstances, for an additional one-year period
after the termination of Mr. Bayly's employment. In addition, the Company has
agreed to gross-up payments to Mr. Bayly for certain taxes, interest and
penalties that may be imposed by certain sections of the Code.
Mr. Tannura has an amended employment agreement with the Company, pursuant
to which (i) the Company agrees to employ Mr. Tannura through May 31, 1999
(provided that beginning on June 1, 1996, the term thereof is automatically
extended for one additional day for each day which has then elapsed since May
31, 1996 unless either the Board of Directors of the Company or Mr. Tannura
gives notice that the automatic extension shall cease) as Vice President and
Chief Financial Officer, (ii) Mr. Tannura is entitled to receive a base salary
of $235,000 per year (subject to increase at the discretion of the Board of
Directors), (iii) Mr. Tannura is eligible to receive an annual performance bonus
based upon the achievement of predetermined financial objectives, and (iv) Mr.
Tannura will receive certain severance benefits if his employment is terminated
without cause or if Mr. Tannura terminates the agreement for good reason
(including the giving of notice by the Board of Directors of the Company to stop
the automatic extension of the term thereof) in an amount equal to (i) at Mr.
Tannura's option, either (A) his annual salary for the remaining term thereof or
(B) the present value (based upon a 10% interest rate) of the aggregate unpaid
annual salary for the full term thereof, plus (ii) at Mr. Tannura's option,
either (C) an annual bonus for each year remaining in the term in an amount
equal to the target amount of his performance bonus for the year in which his
termination of employment occurs, or (D) the present value of three times the
target amount of his performance bonus for the year in which the termination of
his employment occurs plus (iii) a pro rata portion of his performance bonus for
the year in which his employment is terminated, plus (iv) unpaid benefits
accrued up to the date of termination, plus (v) the continuation of all benefits
for the full term.
The Company has entered into severance agreements with the other named
executive officers, pursuant to which such officers receive a severance payment
equal to one year's salary if their employment is terminated other than for
death, disability or cause.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until December 1, 1997, the Company's Board of Directors did not have a
compensation committee (or other board committee performing equivalent
functions). The members of the Board of Directors of the Company, in
consultation with Mr. Bayly, the President of the Company, performed the
functions normally performed by a compensation committee and participated in
deliberations concerning executive officer compensation. No executive officer of
the Company served as a member of the compensation committee (or other board
committee performing equivalent functions) or as a member of the Board of
another entity, one of whose executive officers served on the Board of Directors
of the Company. On December 1, 1997, the Board of Directors formed the
Compensation Committee and elected Messrs. William J. White (chairman) and
Anthony P. Scotto as its members.
IVEX PACKAGING CORPORATION 1997 LONG-TERM STOCK INCENTIVE PLAN
In connection with the 1997 Common Stock Offering, Ivex adopted the Ivex
Packaging Corporation 1997 Long-Term Stock Incentive Plan (the "1997 Stock
Incentive Plan" or the "LTIP"). The following is a summary of the material
features of the plan.
Purpose. The purpose of the plan is to promote the interests of the Company
and its stockholders by (i) attracting and retaining exceptional officers,
employee-directors and other key employees of the Company; (ii) motivating such
individuals by means of performance-related incentives to achieve longer-range
performance goals; and (iii) enabling such individuals to participate in the
long-term growth and financial success of the Company.
Administration. The plan will be administered by the Compensation Committee
of the Board (the "Committee" or the "Corporation Committee").
11
<PAGE> 15
Number of Shares Authorized Under the Plan. The plan authorizes the grant
of awards to participants with respect to a maximum of 2,000,000 shares of the
Company's Common Stock ("Shares"), which awards may be made in the form of (i)
nonqualified stock options; (ii) stock options intended to qualify as incentive
stock options under Section 422 of the Code; (iii) stock appreciation rights;
(iv) restricted stock and/or restricted stock units; (v) performance awards and
(vi) other stock-based awards; provided that the maximum number of Shares with
respect to which stock options and stock appreciation rights may be granted to
any participant in the plan in any calendar year may not exceed 200,000. If,
after the effective date of the plan, any Shares covered by an award granted
under the plan, or to which such an award relates, are forfeited, or if an award
has expired, terminated or been canceled for any reason whatsoever (other than
by reason of exercise or vesting) and in either such case a participant has
received no benefits of ownership with respect to the forfeited Shares or the
Shares to which such expired, terminated or canceled award relates (other than
voting rights and dividends that were forfeited in connection with such
forfeiture, expiration, termination or cancellation), then the Shares covered by
such award shall again be, or shall become, Shares with respect to which awards
may be granted under the plan.
Terms and Conditions of Awards Under the Plan. Non-qualified and incentive
stock options granted under the plan shall be subject to such terms, including
exercise price and conditions and timing of exercise, as may be determined by
the Committee and specified in the applicable award agreement or thereafter;
provided that stock options that are intended to qualify as incentive stock
options will be subject to terms and conditions that comply with such rules as
may be prescribed by Section 422 of the Code. Payment in respect of the exercise
of an option granted under the plan may be made in cash, or its equivalent, or,
if and to the extent permitted by the Committee, by exchanging Shares owned by
the optionee (which are not the subject of any pledge or other security interest
and which have been owned by such optionee for at least six months), or by a
combination of the foregoing, provided that the combined value of all cash and
cash equivalents and the fair market value of such Shares so tendered to the
Company as of the date of such tender is at least equal to the aggregate
exercise price of the option.
Stock appreciation rights granted under the plan shall be subject to such
terms, including grant price and the conditions and limitations applicable to
exercise thereof, as may be determined by the Committee and specified in the
applicable award agreement or thereafter; provided that stock appreciation
rights may not be exercisable earlier than six months after the date of grant.
Stock appreciation rights may be granted in tandem with another award, in
addition to another award, or freestanding and unrelated to another award. A
stock appreciation right shall entitle the participant to receive an amount
equal to the excess of the fair market value of a Share on the date of exercise
of the stock appreciation right over the grant price thereof. The Committee
shall determine whether a stock appreciation right shall be settled in cash,
Shares or a combination of cash and Shares.
Restricted stock and restricted stock units granted under the plan shall be
subject to such terms and conditions including, without limitation, the duration
of the period during which, and the conditions under which, the restricted stock
and restricted stock units may be forfeited to the Company, as may be determined
by the Committee in its sole discretion. Each restricted stock unit shall have a
value equal to the fair market value of a Share. Restricted stock units shall be
paid in cash, Shares, other securities or other property, as determined in the
sole discretion of the Committee, upon the lapse of the restrictions applicable
thereto, or otherwise in accordance with the applicable award agreement.
Dividends paid on any Shares of restricted stock may be paid directly to the
participant, or may be reinvested in additional Shares of restricted stock or in
additional restricted stock units, as determined by the Committee in its sole
discretion.
Performance awards granted under the plan shall consist of a right which is
(i) denominated in cash or Shares, (ii) valued, as determined by the Committee,
in accordance with the achievement of such performance goals during such
performance periods as the Committee shall establish, and (iii) payable at such
time and in such form as the Committee shall determine. Subject to the terms of
the plan and any applicable award agreement, the Committee shall determine the
performance goals to be achieved during any performance period, the length of
any performance period, the amount of any performance award and the amount and
kind of any payment or transfer to be made pursuant to any performance award.
Performance
12
<PAGE> 16
awards may be paid in a lump sum or in installments following the close of the
performance period or, in accordance with procedures established by the
Committee, on a deferred basis.
In addition to the foregoing types of awards, the Committee shall have
authority to grant to participants an "other stock-based award," which shall
consist of any right which is (i) not a stock option, stock appreciation right,
restricted stock or restricted unit award or performance award and (ii) an award
of Shares or an award denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as deemed by the Committee to
be consistent with the purposes of the plan; provided that any such rights must
comply, to the extent deemed desirable by the Committee, with Rule 16b-3 and
applicable law. Subject to the terms of the plan and any applicable award
agreement, the Committee shall determine the terms and conditions of any such
other stock-based award, including the price, if any, at which securities may be
purchased pursuant to any other stock-based award granted under this plan.
In addition, in the sole and complete discretion of the Committee, an
award, whether made as an other stock-based award or as any other type of award
issuable under the plan, may provide the participant with dividends or dividend
equivalents, payable in cash, Shares, other securities or other property on a
current or deferred basis.
Amendment to Plan. The Board may amend, alter, suspend, discontinue, or
terminate the plan or any portion thereof at any time; provided that no such
amendment, alteration, suspension, discontinuation or termination shall be made
without stockholder approval if such approval is necessary to comply with any
tax or regulatory requirement, including for these purposes any approval
requirement which is a prerequisite for exemptive relief from Section 16(b) of
the Exchange Act. Notwithstanding anything to the contrary herein, the Committee
may amend the plan in such manner as may be necessary so as to have the plan
conform with local rules and regulations in any jurisdiction outside the United
States.
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION FOR FISCAL YEAR 1997
INTRODUCTION AND BACKGROUND
The following report is provided in accordance with the rules of the
Securities and Exchange Commission and covers compensation policies applicable
to the Company's executive officers, including the named executive officers,
during 1997. The report has been approved by the members of the Compensation
Committee.
Until December 1, 1997, the Board of Directors of the Company performed the
duties of the Compensation Committee. On December 1, 1997, the Board of
Directors of the Company formed the Compensation Committee and Messrs. White
(Chairman) and Scotto, each of whom is an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
were elected as members of the Compensation Committee.
The Compensation Committee did not hold any meetings during December 1997,
however, on January 28, 1998, the Compensation Committee held its first meeting.
In connection with such meeting, the Company's Chief Executive Officer submitted
bonus recommendations to the Committee with respect to the executive officers.
Following a review of such recommendations, the Committee approved 1997 cash
bonuses for the executive officers.
COMPENSATION PHILOSOPHY
The Company's executive compensation program has been designed to attract,
motivate, reward and retain the Company's executive officers by providing them
with a competitive total compensation opportunity based upon performance, team
work and the creation of stockholder value.
13
<PAGE> 17
The key elements of the Company's executive officer compensation program
are designed to:
- Create a direct link between executive officer compensation and the
Company's financial and stock performance.
- Provide a competitive base salary with an annual cash bonus opportunity
directly linked to the Company's annual financial performance (the
annual cash bonus awards vary significantly in correlation with the
Company's financial performance and compensate the executive officers
with superior cash compensation for superior financial results and below
median level cash compensation for below average financial results).
Cash bonus awards, at target levels of performance, are designed to be
competitive with those companies which the Company believes are most
likely to compete with the Company for the services of its executive
officers.
- Create a meaningful long-term stock option incentive directly linked to
the Company's long term growth, financial success and stockholder return.
PROGRAM COMPONENTS
From time to time during the past several years, the Board of Directors has
contracted with independent compensation consulting firms to review the
Company's executive officer compensation philosophy and programs. As part of
such reviews, such consultants have presented to the Company from time to time
and have periodically updated information on the base salaries, cash bonuses and
equity-based compensation programs of senior executives at various companies
identified by the Company.
Over the past several years, the Board of Directors has designed the
Company's executive officer compensation to include three basic components: base
salary, annual cash bonuses and stock option grants.
The Board has established executive officer salaries to be competitive with
the salary levels for the executives at other companies identified by the
Company, and has desired to provide an opportunity for total cash compensation
(base salary plus annual cash bonus) to significantly exceed such levels upon
the Company's achievement of certain predetermined, budgeted financial
objectives such as minimum EBITDA and earnings per share targets. In this way,
the Board of Directors sought to have a significant portion of each executive's
annual cash compensation at risk.
In addition, under the 1993 Stock Option Plan, which was approved by the
Company's stockholders prior to the 1997 Common Stock Offering, the Board of
Directors established a performance-based stock option plan for the Company's
executive officers pursuant to which a meaningful number of stock options were
granted during 1993, 1994, 1995 and 1996 with the specific intent to directly
align each executive's long-term financial interests with the financial
interests of the Company's stockholders. In addition, the Company recently
adopted the 1997 Stock Incentive Plan for future stock option grants in order to
continue to motivate the Company's executive officers through the issuance of
performance-based stock options. To date, the stock options granted have
exercise prices equal to the fair market value of the underlying shares on the
date of grant so that compensation is earned only through long-term appreciation
in the fair market value of the underlying shares. Generally, the Company
expects to grant stock options on an annual basis (if warranted by the Company's
growth and profitability) and individual grants are expected to be based on,
among other things, the executive officer's responsibilities, individual
performance and potential to contribute to the Company. To encourage an
executive officer's long-term performance, stock options generally will vest
over three years and terminate ten years after the date of grant. The
opportunity to own stock is considered an important component in an executive
officer's compensation package. See "Executive Compensation and Other
Information -- Ivex Packaging Corporation 1997 Long-Term Stock Incentive Plan."
The Compensation Committee intends to continue the basic compensation
philosophy established by the Board of Directors by placing a significant
portion of each year's cash compensation at risk and by using stock option
grants as the primary element of long-term incentive compensation.
The following is a discussion of elements of the Company's 1997 executive
officer compensation program, along with a description of the decisions and
actions taken by the Committee with regard to 1997
14
<PAGE> 18
compensation. Also included is a specific discussion of the decisions regarding
Mr. Bayly's 1997 compensation for performing the duties of Chairman, President
and Chief Executive Officer. The tables and accompanying narrative and footnotes
included in "Executive Compensation and Other Information" which precede this
Committee report reflect the decisions covered by the discussions below.
BASE SALARY
During 1997, the base salary levels of Mr. Bayly and Mr. Tannura were
governed by their respective employment agreements and the base salaries of the
other executive officers, including the named executive officers, were
determined by the Board as described above. Salary payments in 1997 were made to
compensate the executive officers for their on-going performance through the
year. The Company's salary ranges and resulting salaries are based on a relative
valuing of the duties and responsibilities of each executive officer position.
Salary increases during 1997 were based upon consideration of each executive
officer's performance and position.
ANNUAL CASH BONUS INCENTIVES
The Executive Incentive Bonus Plan provides the executive officers of the
Company with annual cash bonuses for outstanding individual performance
contributing to the present and future success of the Company. The purpose of
this plan is to link a significant portion of executive pay to both the
Company's financial performance and to the attainment of certain defined key
initiatives. Awards during 1997 were based upon the Company's achievement of,
among other things, certain predetermined financial objectives such as minimum
EBITDA and cash flow targets as well as the attainment of key individual
strategic and operational objectives.
Following a review of recommendations made by the Company's chief executive
officer to the Committee during its January 28, 1998 committee meeting and after
weighing the degree of attainment of the Company's 1997 financial performance
targets as well as the successful completion of the 1997 Common Stock Offering
and the degree of attainment by each of the named executive officers of their
1997 individual objectives, the Committee approved the cash bonuses to each of
the named executive officers for 1997 that are set forth in the "Summary
Compensation Table."
STOCK COMPENSATION
The grant of stock options is designed to align the financial interests of
the executive officers with the financial interests of the Company's
stockholders. Under the 1993 Stock Option Plan, the Company's executive officers
accumulated stock options during 1993, 1994, 1995 and 1996 which, in connection
with the 1997 Common Stock Offering, were converted into a meaningful amount of
the Company's common stock, thereby directly aligning their financial interests
with the financial interests of the Company's stockholders (the named executive
officers received the number of shares of common stock identified in the
footnotes to the "Summary Compensation Table"). See "Principal Stockholders."
The stock options granted to the executive officers under the 1993 Stock Option
Plan and the 1997 Stock Incentive Plan have exercise prices equal to the fair
market value of the underlying common stock on the date of grant so that
compensation will be earned only through long-term appreciation in the fair
market value of the underlying common stock. The individual grants under the
1997 Stock Option Plan were based upon, among other things, each executive
officer's responsibilities, individual performance and potential to contribute
to the Company, and in order to encourage such executive officers' long-term
performance, such stock options will vest over three years and terminate ten
years after the date of grant.
BASIS FOR CHIEF EXECUTIVE OFFICER COMPENSATION
During 1997, Mr. Bayly's base salary was governed by his employment
agreement with the Company and was intended to provide him with a competitive
salary to compensate him for his on-going performance throughout the year. Mr.
Bayly's cash bonus which reflects the Committee's assessment of his contribution
and efforts in 1997, is shown under the "Bonus" caption in the Summary
Compensation Table. In determining
15
<PAGE> 19
the amount of his bonus, the Committee considered, in addition to the Company's
record level of EBITDA during 1997 and his role in establishing the Company's
strategic initiatives and operational plans, his performance in leading the
Company through its successful 1997 Common Stock Offering.
Mr. Bayly received a special one-time bonus in the amount of $250,000 in
connection with the completion of the 1997 Common Stock Offering and $450,000
under the Company's Executive Incentive Bonus Plan. During 1997, Mr. Bayly
received 93,500 stock options under the 1997 Option Plan, with three-year
vesting, which stock options are intended to reward him for the Company's 1997
performance and to incent him to help create additional stockholder value.
COMPENSATION DEDUCTIBILITY POLICY
The Board's policy with respect to the tax deductibility of compensation in
excess of $1 million payable to each of the named executive officers is intended
to comply with the requirements of Section 162(m) of the Code applicable to
qualified performance-based compensation to the extent such compliance is
practicable and in the best interest of the Company and its stockholders;
however, there can be no assurances that executive officer compensation will
comply with these requirements.
William J. White, Chairman
Anthony P. Scotto
Dated: March 30, 1998
16
<PAGE> 20
STOCK PERFORMANCE GRAPH
The following graph compares the performance of the Company's Common Stock
with the performance of the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500 Index") and Dow Jones Containers & Packaging Index (the "Dow Jones
Packaging Index") from the market close on October 1, 1997 (the first trading
day of the Company's common stock) to the market close on December 31, 1997. The
graphs assume that $100 was invested on October 1, 1997 in each of the common
stock, the S&P 500 Index and the Dow Jones Packaging Index, and that all
dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG IVEX PACKAGING CORPORATION,
S&P 500 INDEX AND DOW JONES CONTAINERS & PACKAGING INDEX
FROM OCTOBER 1, 1997 TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
IVEX DOW JONES
MEASUREMENT PERIOD PACKAGING S&P 500 PACKAGING
(FISCAL YEAR COVERED) CORPORATION INDEX INDEX
<S> <C> <C> <C>
OCTOBER 1, 1997 100.00 100.00 100.00
DECEMBER 31, 1997 112.94 101.57 100.07
</TABLE>
17
<PAGE> 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's 1997 Common Stock Offering, Acadia and
certain officers of the Company entered into a Voting Agreement pursuant to
which they agreed to vote all of their outstanding shares of Common Stock, for
so long as they own such shares, for the director nominees proposed according to
the terms thereof. The Voting Agreement obligates the parties thereto to vote
their shares to cause the Board of Directors to consist of six members, two of
whom will be designated by Acadia, two of whom will be designated by Mr. Bayly
(or a successor management employee) and two of whom will be independent
directors mutually acceptable to the parties. Acadia has the right (until
Acadia's ownership of the outstanding Common Stock falls below 20.0%) to
increase the size of the Board to nine members and designate an additional three
directors. During the time that Acadia owns more than 12.5% and less than 20.0%
of the outstanding Common Stock, Acadia will be entitled to designate two
directors (if the Board of Directors has six directors) or three directors (if
the Board of Directors has more than nine directors), and during the time that
Acadia owns more than 5.0% and less than 12.5% of the outstanding Common Stock,
Acadia has the right to designate one director. During the time that Ivex's
management owns 7.5% or more of the outstanding Common Stock, Mr. Bayly (or a
successor management employee) has the right to designate two directors, and
during the time that Ivex's management owns more than 5.0% and less than 7.5%
such management has the right to designate one director. The term of the Voting
Agreement is ten years, subject to earlier termination upon the occurrence of
certain events, including the point at which Acadia's holdings of Common Stock
fall below 5.0% of the outstanding Common Stock of the Company.
In connection with the 1997 Common Stock Offering and pursuant to the 1993
Stock Option Plan, certain executive officers, including the named executive
officers, exchanged all of the IPC Options for (a) 2,114,133 shares of the
Company's Common Stock and (b) vested and earned options exercisable at any time
on or prior to September 30, 2007 into an aggregate of 817,067 shares of the
Company's Common Stock at an exercise price of $16.00 per share, the initial
public offering price per share of Common Stock in the 1997 Common Stock
Offering. See "Executive Compensation -- Summary Compensation Table" (footnote
5) and "Principal Stockholders." These executive officers, including the named
executive officers, have the right to have their shares of Company Common Stock
registered by the Company in the event that Acadia's shares of Common Stock are
registered under the Registration Rights Agreement that the Company entered into
with Acadia and certain related investors concurrently with the 1997 Common
Stock Offering. Currently, the Company is in the process of registering with the
Securities and Exchange Commission on Form S-8 (i) all of the 2,114,133 1993
Plan Shares and all of the 817,067 shares of Common Stock that are issuable upon
exercise of the 1993 Plan Options which the Company's senior management received
in exchange for their IPC Options pursuant to the 1993 Stock Option Plan and
(ii) all of the shares issuable upon the exercise of the options under the Ivex
Packaging Corporation 1997 Long-Term Stock Incentive Plan.
Also, in accordance with the terms of the 1993 Stock Option Plan and
concurrently with the closing of the 1997 Common Stock Offering, the Company
extended loans to certain executive officers (including the named executive
officers) in an amount equal to the aggregate tax liability incurred by each of
them as a result of their receipt of the 1993 Plan Shares in exchange for their
respective IPC Options. Each such loan is evidenced by a non-recourse promissory
note (recourse only to each such officer's 1993 Plan Shares) which bears
interest at the minimum permissible rate per annum allowable under the Internal
Revenue Code without imputation of income, payable in arrears on each December
31, and is payable in full upon the sale of such 1993 Plan Shares or upon the
earlier to occur of (i) September 30, 2007 and (ii) the termination of the
executive officer's employment with the Company for any reason, but in no event
on or before the date such shares of Common Stock are registered pursuant to a
registration statement that has been declared effective. As a consequence of
these loans, as of December 31, 1997, Messrs. Bayly, Tannura, Whitacre,
Ellsworth and Patterson are indebted to the Company in the following respective
amounts: $4,183,002.30, $1,682,701.24, $1,210,710.92, $1,167,535.42 and
$559,557.41 (which amounts will increase as a result of their final tax payments
on or before April 15, 1998). The promissory notes obligate the Company to
gross-up the executive officers' compensation to enable them to make (on an
after-tax basis) the required interest payments on their promissory notes.
18
<PAGE> 22
On or about December 17, 1992, Penobscot-MB Partners (an affiliate of
Acadia) and the Company entered into a consulting agreement. Under this
consulting agreement, the Company agreed to pay Penobscot-MB Partners $400,000
per year and Penobscot-MB Partners agreed to provide to the Company certain
general financial advisory and other consulting services customarily provided by
merchant banks. In addition, the Company agreed to indemnify Penobscot-MB
Partners against certain liabilities in connection with its services to the
Company. Upon consummation of the 1997 Common Stock Offering, the consulting
agreement was terminated and a one-time final termination fee of $500,000 was
paid by the Company to Penobscot-MB Partners.
On or about December 17, 1992, IPC, its subsidiaries and the Company
entered into a tax sharing agreement pursuant to which IPC and its subsidiaries
will pay to the Company their respective shares of the Company's consolidated
tax liability.
Mr. Bayly has an employment agreement with the Company. See "Executive
Compensation and Other Information -- Certain Employment Arrangements."
Mr. Tannura has an employment agreement with the Company. See "Executive
Compensation and Other Information -- Certain Employment Arrangements."
The Company has entered into severance agreements with the other named
executive officers, pursuant to which such officers receive a severance payment
equal to one year's salary if their employment is terminated other than for
death, disability or cause.
Pursuant to a consulting agreement, dated October 29, 1996, Nicolaus Paper
Inc. ("Nicolaus") paid to the Company a performance-based consulting fee in an
annual amount equal to $350,000 for certain services rendered to Nicolaus by the
Company during 1997. Certain executive officers and directors of the Company
together with certain members of management of Oak Hill Partners, Inc. (Acadia's
investment advisor) own all of the outstanding common stock of Nicolaus. During
1997, the Company purchased certain grades of paper from Nicolaus at market
prices for use in IPC's paper converting operations.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the Exchange Act, the Company's directors, certain executive and
other officers, and any person holding more than ten percent of the Company's
Common Stock are required to report their ownership and any changes in that
ownership to the Securities and Exchange Commission (the "SEC") and any exchange
or quotation system on which the Common Stock is listed or quoted. Specific due
dates for these reports have been established and the Company is required to
report in this Proxy Statement any failure by directors, officers and ten
percent holders to file such reports on a timely basis. Based solely on a review
of the copies of reports furnished to the Company as filed with the SEC, the
Company believes that its executive officers and directors have complied with
the filing requirements applicable to them for the year ended December 31, 1997.
REQUIREMENTS AND PROCEDURES FOR SUBMISSION OF PROXY PROPOSALS
AND NOMINATIONS OF DIRECTORS BY STOCKHOLDERS
Nominations for the Board of Directors. The Company expects to hold its
1999 Annual Meeting of Stockholders in May of 1999, although the Company retains
the right to change this date, as it may determine. The By-Laws provide that
written notice of proposed stockholder nominations for the election of directors
at the 1999 Annual Meeting of Stockholders must be received by the Secretary of
the Company not less than sixty days nor more than ninety days prior to the
anniversary of the previous year's annual meeting. Notice to the Company from a
stockholder who proposes to nominate a person for election as a director must
satisfy the requirements of the Securities and Exchange Commission (the "SEC")
and the By-Laws. Stockholders wishing to nominate persons should contact the
Company's Secretary at 100 Tri-State Drive, Suite 200, Lincolnshire, Illinois
60069.
19
<PAGE> 23
Proposals. Any stockholder who intends to present a proposal to be included
in the Company's proxy materials to be considered for action at the 1999 Annual
Meeting of Stockholders must satisfy the requirements of the SEC and By-laws and
the proposal must be received by the Secretary of the Company on or before
December 1, 1998 for review and consideration for inclusion in the Company's
proxy statement and proxy card relating to that meeting.
The Chairman of the Annual Meeting may decline to allow the transaction of
any business or the consideration of any nomination which was not properly
presented in accordance with these requirements. The requirements with respect
to the nomination of director candidates do not affect the deadline for
submitting stockholder proposals for inclusion in the proxy statement, nor do
they apply to questions a stockholder may wish to ask at a meeting.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
for consideration at the Annual Meeting. If other matters are properly brought
before the meeting, however, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
By Order of the Board of Directors,
G. Douglas Patterson
Secretary
20
<PAGE> 24
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
This proxy when executed will be voted in the manner directed herein. If no
direction is made, this proxy will be voted FOR the nominees in proposal 2.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR ALL NOMINEES WITHHELD AUTHORITY TO VOTE FOR AGAINST ABSTAIN
1. Election of Frank V. Tannura 2. Ratification of [ ] [ ] [ ]
Directors [ ] [ ] Glenn R. August appointment of Price
(See reverse) Waterhouse as auditors
for the Corporation for 1998.
For, except vote withheld from the following nominee(s):
Change of Address Check here if your plan [ ]
on Reverse Side to attend the meeting.
- ------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Please date and sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
-------------------------------------------------------------------
1998
-------------------------------------------------------------------
SIGNATURE(S) DATE
</TABLE>
<PAGE> 25
IVEX PACKAGING CORPORATION PROXY
LINCOLNSHIRE, ILLINOIS
- --------------------------------------------------------------------------------
PROXY PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS - MAY 15, 1998
The undersigned hereby appoints Frank V. Tannura or G. Douglas Patterson, or
either of them acting in the absence of the other, with power of substitution,
attorneys and proxies, for and in the name and place of the undersigned, to
vote the number of shares of Common Stock that the undersigned would be
entitled to vote if then personally present at the Annual Meeting of the
Stockholders of Ivex Packaging Corporation, to be held at the Deer Path Inn,
255 East Illinois Road, Lake Forest, Illinois 60045 on Friday, May 15, 1998, at
9:00 a.m., Chicago time, or any adjournments or postponements thereof, upon the
matters set forth in the Notice of Annual Meeting and Proxy Statement (receipt
of which is hereby acknowledged) as designated on the reverse side, and in
their discretion, the proxies are authorized to vote upon such other business
as may come before the meeting.
ADDRESS CHANGE: PLEASE NOTE CHANGE HERE AND MARK ON REVERSE SIDE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
THE PROXY WILL BE VOTED AS SPECIFIED. IF NO CHOICES ARE SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE PROPOSALS.
(Continued and to be signed on reverse side)
