JEFFERSON SMURFIT CORPORATION
8182 Maryland Avenue
St. Louis, MO 63105
April 1, 1996
Dear Stockholder:
You are cordially invited to attend our Company's 1996 Annual
Meeting of Stockholders which will be held on Thursday, May 9,
1996, at 1:00 p.m. local time at the Stouffer Renaissance St. Louis
Hotel, 9801 Natural Bridge Road, St. Louis, Missouri 63134. The
formal Notice of Annual Meeting of Stockholders and Proxy Statement
accompanying this letter describe the business to be acted upon at
the meeting.
Your vote is important and your shares should be represented at
the meeting whether or not you are personally able to attend.
Accordingly, you are requested to mark, sign, date and return the
accompanying proxy promptly.
On behalf of the Board of Directors, thank you for your
continued support of Jefferson Smurfit Corporation.
Sincerely,
Michael W.J. Smurfit
Chairman of the Board
<PAGE>
FRONT
This proxy will be voted "FOR" items 1, 2, and 3 if no
instruction to the contrary is indicated. If any other business
is presented at the meeting, this proxy will be voted in
accordance with the recommendation of Management. Please date,
sign and mail this proxy in the enclosed envelope. No postage
is required.
Dated________________________________, 1996
Please sign name or names exactly as
appearing on this proxy. If signing
as a representative,
please include capacity.
<PAGE>
BACK
COMMON STOCKHOLDERS
PROXY JEFFERSON SMURFIT CORPORATION
Annual Meeting May 9, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned stockholder of Jefferson Smurfit Corporation, a
Delaware corporation, appoints JAMES E. TERRILL, JOHN R. FUNKE and
MICHAEL E. TIERNEY, or any of them, with full power to act alone,
the true and lawful attorneys-in-fact of the undersigned, with full
power of substitution and revocation, to vote all shares of stock
of said Corporation which the undersigned is entitled to vote at
the Annual Meeting of its stockholders to be held at the Stouffer
Renaissance St. Louis Hotel, 9801 Natural Bridge Road, St. Louis,
Missouri 63134 , on May 9, 1996 at 1:00 p.m. and at any
adjournment thereof, with all powers the undersigned would possess
if personally present, as follows:
1. Election of Directors:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees
contrary below) listed below.
Alan E. Goldberg, Howard E. Kilroy and James R. Thompson
INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the line below.
2. Ratification of the appointment of Ernst & Young LLP as
independent auditors for the Company for 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Adoption of the Company's Management Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. On any other matter that may be submitted to a vote
of stockholders.
(YOU ARE REQUESTED TO COMPLETE, SIGN AND RETURN THIS PROXY
PROMPTLY)
<PAGE>
JEFFERSON SMURFIT CORPORATION
Notice of Annual Meeting of Stockholders
To Be Held on May 9, 1996
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of
Stockholders of Jefferson Smurfit Corporation, a Delaware
corporation (the "Company"), will be held on Thursday, May 9,
1996, at 1:00 p.m. local time at the Stouffer Renaissance St.
Louis Hotel, 9801 Natural Bridge Road, St. Louis, Missouri
63134 to act upon the following matters which are described
more fully in the accompanying Proxy Statement:
1. The election of three directors for terms of office
expiring at the annual meeting of stockholders in 1999;
2. The ratification of the appointment of Ernst & Young LLP
as independent auditors of the Company for 1996;
3. Adoption of the Company's Management Incentive Plan; and
4. Such other business as may properly come before the
meeting and/or any adjournment thereof.
All stockholders of record at the close of business on
March 11, 1996 are entitled to notice of, and to vote at, the
Annual Meeting and/or any adjournment thereof.
The Board of Directors of the Company has authorized the
solicitation of proxies. Unless otherwise directed, the
proxies will be voted FOR the election of the nominees listed
in the attached Proxy Statement to be members of the Board of
Directors of the Company; FOR the ratification of the
appointment of independent auditors of the Company for 1996;
FOR the adoption of the Company's Management Incentive Plan
and, on any other business that may properly come before the
Annual Meeting, as the named proxies in their best judgment
shall decide.
Any stockholder submitting a proxy may revoke such proxy at
any time prior to its exercise by notifying Michael E.
Tierney, Secretary of the Company, in writing at 8182
Maryland Avenue, St. Louis, Missouri 63105, prior to the
Annual Meeting, and if you attend the Annual Meeting you may
revoke your proxy if previously submitted and vote in person
by notifying the Secretary of the Company at the Annual
Meeting.
By Order Of The Board Of Directors
Michael E. Tierney
Secretary
St. Louis, Missouri
April 1, 1996
<PAGE>
JEFFERSON SMURFIT CORPORATION
Proxy Statement
For 1996 Annual Meeting of Stockholders
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of
Jefferson Smurfit Corporation, a Delaware corporation (the
"Company"), 8182 Maryland Avenue, St. Louis, Missouri 63105,
for use at the 1996 Annual Meeting of Stockholders to be held
on Thursday, May 9, 1996 (the "Annual Meeting"). The Board
of Directors of the Company urges that your proxy be executed
and returned promptly in the enclosed envelope. Any
stockholder submitting a proxy may revoke such proxy at any
time prior to its exercise by notifying Michael E. Tierney,
Secretary of the Company, in writing, prior to the Annual
Meeting. Any stockholder attending the Annual Meeting may
revoke his proxy and vote personally by notifying the
Secretary of the Company at the Annual Meeting. Only
stockholders of record at the close of business on March 11,
1996 will be entitled to notice of, and to vote at, the
Annual Meeting and/or any adjournment thereof. At the close
of business on March 11, 1996, the Company had 110,989,156
outstanding shares of common stock (the "Common Stock").
Each share of Common Stock entitles the holder thereof to one
vote.
If the accompanying proxy card is signed and returned, the
shares represented thereby will be voted in accordance with
the directions on the proxy card. Unless a stockholder
specifies otherwise therein, the proxy will be voted in favor
of the election of the three nominees to the Board of
Directors of the Company named below, in favor of ratifying
the appointment of Ernst & Young LLP as independent auditors
for the Company for 1996 and in favor of adopting the
Company's Management Incentive Plan. The presence in person
or by proxy of a majority of the voting power represented by
outstanding shares of the Common Stock (55,494,579 shares)
will constitute a quorum for the transaction of business at
the Annual Meeting. Directors will be elected by a plurality
of the voting power represented at the meeting and
ratification of the appointment of independent auditors and
the adoption of the Company's Management Incentive Plan will
be determined by the affirmative vote of the majority of the
voting power represented and entitled to vote at the meeting.
In the election of directors, abstentions and broker non-
votes will not affect the outcome except in determining the
presence of a quorum and in the sense that they do not
contribute to reaching the number of votes required for
approval. An instruction to "abstain" from voting on the
proposal to ratify the appointment of independent auditors
and the adoption of the Company's Management Incentive Plan
will be treated as shares present and will have the same
effect as a vote against the proposals. Broker non-votes
will not be considered "entitled to vote" on the proposal to
ratify the appointment of independent auditors and the
proposal relating to the Management Incentive Plan;
therefore, broker non-votes will have no effect on the number
of affirmative votes required to adopt such proposals.
<PAGE>
As noted under the "Principal Stockholders" section herein,
as of the close of business on March 11, 1996, Smurfit
International B.V., an entity organized under the laws of The
Netherlands ("SIBV"), and its subsidiaries was the owner of
approximately 46.5% of the outstanding Common Stock and The
Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II")
and certain related entities (together, the "MSLEF II
Associated Entities") were the owner of approximately 28.7%
of the outstanding Common Stock. SIBV and the MSLEF II
Associated Entities, acting together, by reason of their
ownership of Common Stock, have sufficient votes, without any
additional votes, to elect the three nominees named herein,
to ratify the appointment of independent auditors, to adopt
the Company's Management Incentive Plan and to approve or
defeat any other action or proposal to be taken or made at
the Annual Meeting which requires the approval of a plurality
or a majority of the votes represented by outstanding shares
of the Common Stock. SIBV and the MSLEF II Associated
Entities, which are parties to a Stockholders Agreement dated
May 3, 1994 (the "Stockholders Agreement"), have advised the
Company that they are obligated to vote their respective
shares of Common Stock FOR the three nominees of the Board of
Directors named herein, and that they intend to vote their
respective shares of stock FOR the ratification of the
appointment of independent auditors and FOR the adoption of
the Company's Management Incentive Plan. SIBV is an indirect
wholly-owned subsidiary of Jefferson Smurfit Group plc, a
public corporation organized under the laws of the Republic
of Ireland ("JS Group"), which, through its subsidiaries, is
principally an integrated manufacturer and converter of paper
and board. MSLEF II is a Delaware limited partnership
investment fund formed to make investments in industrial and
other companies. See "Principal Stockholders" and "Certain
Transactions."
This Proxy Statement and the enclosed proxy card are being
mailed to the stockholders of the Company on or about April
1, 1996.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of
eight directors. The directors are classified into three
groups: three directors having terms expiring at the
forthcoming Annual Meeting; two directors having terms
expiring in 1997; and three directors having terms expiring
in 1998.
Set forth below is information concerning the three
nominees for directorships having terms expiring at the
forthcoming 1996 Annual Meeting. Alan E. Goldberg, Howard E.
Kilroy and James R. Thompson are the nominees of the Board of
Directors of the Company to fill these directorships. Such
nominations were made pursuant to the terms of the
Stockholders Agreement. For purposes of the Stockholders
Agreement, Alan E. Goldberg has been designated as a nominee
by MSLEF II, and Howard E. Kilroy and James R. Thompson have
been designated as nominees by SIBV. The Board of Directors
of the Company recommends a vote FOR these three nominees.
If elected, each nominee will serve until the 1999 annual
election of directors or until his successor is duly elected
and qualified, or until his earlier death, resignation or
removal. Alan E. Goldberg, Howard E. Kilroy and James R.
Thompson are presently members of the Board of Directors of
the Company and have been approved unanimously by the Board
of Directors of the Company for re-election. If any of the
nominees are unavailable for election, an event which the
Board of Directors of the Company does not presently
anticipate, the persons named in the enclosed proxy intend to
vote the proxies solicited hereby FOR the election of such
other nominee or nominees, if any, as they may select. Also
set forth below is information concerning directors whose
terms are not expiring this year.
<PAGE>
Nominees for Directors to be Elected at the 1996 Annual Meeting
Name and Year
First Elected
Director Principal Occupation and Other Information
Alan E. Goldberg Mr. Goldberg, 41, joined Morgan Stanley &
1989 Co. Incorporated ("MS&Co.") in 1979 and
has been a member of MS&Co.'s Merchant
Banking Division since its formation in
1985 and a Managing Director of MS&Co.
since 1988. Mr. Goldberg is a Director
and a Vice Chairman of Morgan Stanley
Capital Partners III, Inc. ("MSCP III,
Inc.") and The Morgan Stanley Leveraged
Equity Fund II, Inc. ("MSLEF II, Inc.").
Mr. Goldberg also serves as a Director of
Amerin Guaranty Corporation, CIMIC
Holdings Limited, Centre Cat Limited,
Hamilton Services Limited and Risk
Management Solutions, Inc.
Howard E. Kilroy Mr. Kilroy, 60, was Chief Operations
1989 Director of JS Group from 1978 until March
1995 and President of JS Group from
October 1986 until March 1995. He was a
member of the Supervisory Board of SIBV
from January 1978 to January 1992. He was
Senior Vice President of the Company for
over 5 years. He retired from his
executive positions with JS Group and the
Company at the end of March 1995, but
remains a Director of JS Group and the
Company. In addition, he is Governor
(Chairman) of Bank of Ireland and a
Director of CRH plc.
<PAGE>
James R. Thompson Mr. Thompson, 59, is Chairman of Winston &
1994 Strawn, a law firm that regularly
represents the Company on numerous
matters. He served as Governor of the
State of Illinois from 1977 to 1991. Mr.
Thompson serves as a Director of FMC
Corporation, the Chicago Board of Trade,
Inc., International Advisory Council of
the Bank of Montreal, Prime Retail, Inc.,
Pechiney International, Wackenhut
Corrections Corporation, Hollinger
International, Inc. and Union Pacific
Resources, Inc.
Members of the Board of Directors
Continuing in Office with Terms Expiring in 1997
Name and Year
First Elected
Director Principal Occupation and Other Information
Donald P. Brennan Mr. Brennan, 55, is an Advisory Director
1989 of MS&Co. He was a Managing Director of
MS&Co. from 1984 to February 1996,
responsible for MS&Co.'s Merchant
Banking Division. Mr. Brennan serves as
a Director of Fort Howard Corporation
and SITA Telecommunications Holdings
N.V.
Michael W.J. Smurfit Dr. Smurfit, 59, has been Chairman and
1989 Chief Executive Officer of JS Group
since 1977. Dr. Smurfit has been
Chairman of the Board of the Company
since 1989. He was Chief Executive
Officer of the Company prior to July
1990.
Members of the Board of Directors
Continuing in Office with Terms Expiring in 1998
Name and Year
First Elected
Director Principal Occupation and Other
Information
G. Thompson Hutton Mr. Hutton, 40, has been President and
1994 Chief Executive Officer of Risk
Management Solutions, Inc., an
information services company based in
Menlo Park, California, since 1991.
Prior to that he was a management
consultant with McKinsey & Company, Inc.
from 1986 to 1991. He also serves as a
Trustee for Colorado Outward Bound
School.
<PAGE>
David R. Ramsay Mr. Ramsay, 32, joined MS&Co. in 1989 and
1989 is a Vice President of MS&Co.'s
Merchant Banking Division. Mr. Ramsay
also serves as a Director of ARM
Financial Group Inc., Integrity Life
Insurance Company, National Integrity
Life Insurance Company, Consolidated
Hydro, Inc., Hamilton Services Limited,
Risk Management Solutions, Inc. and PSF
Finance Holdings, Inc.
James E. Terrill Mr. Terrill, 62, was named President and
1994 Chief Executive Officer of the Company
in February 1994. He served as
Executive Vice President - Operations of
the Company from August 1990 to February
1994. He also served as Executive Vice
President of Smurfit Newsprint
Corporation ("SNC") from February 1993
to February 1994 and was President of
SNC from February 1986 to February 1993.
<PAGE>
BOARD AND BOARD COMMITTEE MEETINGS,
COMMITTEE FUNCTIONS AND COMPOSITION
Each non-employee director receives as compensation for
serving on the Board of Directors an annual fee of $35,000,
a fee of $2,000 for attendance at each meeting in excess of
four meetings per year and travel expenses in connection with
attendance at such meetings. Directors who are employees of
the Company do not receive any additional compensation by
reason of their membership on, or attendance at, meetings of
the Board. The Board of Directors held five meetings in
1995.
The Board of Directors has appointed an Audit Committee,
a Compensation Committee and an Appointment Committee. The
number of meetings held by these committees, their functions
and the members of the Board serving on such committees are
set forth below.
The Audit Committee is responsible for making
recommendations to the Board of Directors regarding the
independent auditors to be appointed for the Company, meeting
with the independent auditors, the manager of internal audit
and other corporate officers to review matters relating to
corporate financial reporting and accounting procedures and
policies, adequacy of financial, accounting and operating
controls and the scope of the audits of the independent
auditors and internal auditors and reviewing and reporting on
the results of such audits to the Board of Directors. The
members of the Audit Committee are Messrs. Kilroy, Goldberg
and Thompson. The Audit Committee held two meetings during
1995.
The Compensation Committee is responsible for
administering stock-based compensation programs (including
the Company's 1992 Stock Option Plan and the Management
Incentive Plan) for all participants in such programs and
determining other compensation (including fringe benefits) of
the Chief Financial Officer of the Company, officers and
employees of the Company who are directors of the Company
(other than the Chief Executive Officer) and all officers and
employees of the Company whose principal employer is JS Group
(including Dr. Smurfit). The Board of Directors is
responsible for approving awards under any nonstock-based
programs. The members of the Compensation Committee are
Messrs. Brennan, Goldberg and Ramsay. The Compensation
Committee held one meeting during 1995.
The Appointment Committee is responsible for
determining the compensation (including fringe benefits but
excluding compensation awarded pursuant to executive
compensation programs) of those officers of the Company whose
compensation is not determined by the Compensation Committee.
The members of the Appointment Committee are Dr. Smurfit and
Messrs. Kilroy, Terrill and Goldberg. [Mr. Terrill abstains
from votes concerning his own compensation.] The Appointment
Committee held two meetings in 1995.
<PAGE>
PRINCIPAL STOCKHOLDERS
Security Ownership of Certain Beneficial Owners
The table below sets forth certain information regarding
the beneficial ownership of the Common Stock by each person
who is known to the Company to be the beneficial owner of
more than 5% of the Company's voting stock as of March 11,
1996. Except as set forth below, the stockholders named
below have sole voting and investment power with respect to
all shares of Common Stock shown as being beneficially owned
by them.
<TABLE>
Amount and
Nature of Percent of
Name and Address of Beneficial Common
Beneficial Owner Ownership Stock
<S> <C> <C>
SIBV 51,638,462 46.5%
Smurfit International B.V.
Strawinskylaan 2001
Amsterdam 1077ZZ, The Netherlands
Attention: Rokin Corporate Services B.V.
MSLEF II Associated Entities 31,800,000 28.7%
c/o Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, NY 10020
Attention: Alan E. Goldberg
Mellon Bank, N.A., as Trustee for
First Plaza Group Trust <F1> 5,000,000 4.5%
One Mellon Bank Center
Pittsburgh, PA 15258
<FN>
<F1> Amounts shown exclude shares of Common Stock owned by
MSLEF II, of which First Plaza Group Trust is a limited
partner. If MSLEF II were to distribute its shares of
Common Stock to its partners, First Plaza Group Trust
would receive a number of shares based on its pro rata
ownership of MSLEF II.
</FN>
</TABLE>
<PAGE>
Security Ownership of Management
The table below sets forth certain information regarding
the beneficial ownership of the Common Stock as of February
9, 1996 for (i) each of the directors and nominees for
director, (ii) each of the Named Executive Officers (as
defined below), and (iii) all directors and executive
officers of the Company as a group.
<TABLE>
Shares of Common Stock
Amount and
Nature of Percent
Beneficial of Common
Beneficial Owner Ownership<F1><F2> Stock <F3>
<S> <C> <C>
Michael W.J. Smurfit<F4> 102,600 0.1%
Howard E. Kilroy<F4> 42,300 --
James E. Terrill<F4> 18,100 --
John R. Funke 16,900 --
Richard W. Graham 9,100 --
Edward F. McCallum 14,100 --
Donald P. Brennan<F5> 0 --
Alan E. Goldberg<F5> 0 --
David R. Ramsay<F5> 0 --
G. Thompson Hutton 0 --
James R. Thompson 510 --
All directors and xecutive officers as
a group (24 persons)<F4><F5> 273,410 0.2%
<FN>
<F1> Shares shown as beneficially owned include the
number of shares of Common Stock that executive
officers have the right to acquire within 60 days
after February 9, 1996 pursuant to exercisable
options under the Company's 1992 Stock Option Plan.
<F2> Shares shown exclude any shares that may be held by
the Company's Savings Plan.
<F3> Based upon a total of 110,989,156 shares of Common
Stock issued and outstanding on March 11, 1996.
<F4> Excludes shares of Common Stock owned by JS Group,
which, through its indirect wholly-owned subsidiary
SIBV, owns 46.5% of the Common Stock. Dr. Smurfit,
Mr. Kilroy and Mr. Terrill own 6.0%, 0.9% and less
than 0.1%, respectively, of the outstanding shares
of JS Group. Dr. Smurfit is an officer and a
director of JS Group and Mr. Kilroy is a director of
JS Group.
<F5> Excludes shares of Common Stock owned by MSLEF II
Associated Entities.
</FN>
</TABLE>
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash
compensation for each of the last three fiscal years awarded
to or earned by the Chief Executive Officer of the Company and
the four other most highly compensated executive officers of
the Company (the "Named Executive Officers") during 1995.
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Awards Payouts All Other
Annual Compensation Securities LTIP Compen-
1997 Other Annual Underlying Payouts ation($)
Name and Principal Position Year Salary($) Bonus($) Bonus<F1> Compensation($) Options(#) ($)<F2> <F3>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James E. Terrill, President and 1995 $800,000 $623,919 $ 0 $ 54,445 0 $ 0 $ 35,907
Chief Executive Officer 1994 678,333 251,029 1,000,000 52,471 319,000 346,604 26,235
1993 440,000 0 0 17,318 0 0 19,545
Michael W.J. Smurfit, Chairman 1995 834,000 650,437 0 30,000 0 0 16,956
of the Board 1994 834,000 299,084 0 30,000 0 1,964,088 11,922
1993 832,369 0 0 30,000 0 0 16,775
Richard W. Graham, Senior Vice 1995 405,000 315,931 0 12,115 10,000 0 13,601
President 1994 378,667 110,876 475,000 9,270 9,000 173,302 9,937
1993 337,000 0 0 5,215 0 0 10,817
John R. Funke, Vice President 1995 315,000 245,632 0 28,753 0 0 12,663
and Chief Financial Officer 1994 300,000 107,584 500,000 28,599 29,000 231,069 10,779
1993 300,000 0 0 13,163 0 0 10,167
Edward F. McCallum, Vice President 1995 270,000 115,550 0 46,304 5,000 0 14,564
and General Manager -- 1994 250,000 98,758 375,000 44,770 0 86,651 7,257
Container Division 1993 250,000 86,169 0 17,597 0 0 12,522
<FN>
<F1> Amounts awarded in 1994 pursuant to the Company's 1994 Long-Term Incentive Plan. These
awards are not due and payable until April 30, 1997 and may be subject to forfeiture if the
executive's employment is terminated, other than for death or disability, prior to such
date.
<F2> Aggregate long-term incentive payment of $7.67 million was made in 1994 prior to
consummation of the Company's initial public offering of Common Stock on May 4, 1994 to a
number of the Company's and its affiliates' officers, including the Named Executive Officers
and officers of JS Group and its affiliates. These amounts represent deferred settlement
of the cancellation in 1992 of the Company's 1990 Long-Term Management Incentive Plan. The
amount paid to the officers of JS Group and its affiliates (exclusive of Dr. Smurfit) was
$1.69 million.
<F3> Amounts shown under "All Other Compensation" for 1995 include a $3,500 Company contribution
to the Company's Savings Plan for each Named Executive Officer (other than Dr. Smurfit) and
Company-paid split-dollar term life insurance premiums for Dr. Smurfit ($16,956) and Messrs.
Terrill ($32,407), Graham ($10,101), Funke ($6,996) and McCallum ($11,064). Mr. Funke also
had reportable (above 120% of the applicable federal long-term rate) earnings equal to
$2,167 credited to his account under the Company's Deferred Compensation Capital
Enhancement Plan.
</FN>
</TABLE>
<PAGE>
Option Grants in Last Fiscal Year -- The following table provides
information concerning stock options granted to the Named Executive
Officers during 1995.
<TABLE>
OPTION GRANTS IN 1995
Potential Realizable Value
Number of Sec- % of Total at Annual Rates of
urities Under- Options Granted Exercise or Stock Price Appreciation
lying Options to employees Base Price Expiration for Option Term $ <F1>
Name Granted in Fiscal Year ($ Per Share) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
James E. Terrill 0 N/A N/A N/A N/A N/A
Michael W.J. Smurfit 0 N/A N/A N/A N/A N/A
Richard W. Graham 10,000 7.1% 17.625 2/8/2007 140,270 376,898
John R. Funke 0 N/A N/A N/A N/A N/A
Edward F. McCallum 5,000 3.5% 17.625 2/8/2007 70,135 188,449
<FN>
<F1> The dollar amounts under these columns are the result of calculations
at 5% and 10% rates, as set by the Securities and Exchange
Commission's executive compensation disclosure rules. Actual gains,
if any, on stock option exercises depend on future performance of the
Common Stock and overall stock market conditions. No assurance can
be made that the amounts reflected in these columns will be achieved.
</FN>
</TABLE>
<PAGE>
Option Exercises and Year-End Value Table -- The following table
summarizes the exercise of options and the value of options held by
the Named Executive Officers as of the end of 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
<TABLE>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired on Value at January 1, 1996 (#) at January 1, 1996($)<F1>
Name Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
James E. Terrill 0 N/A 18,100 / 481,900 0 / 0
Michael W.J. Smurfit 0 N/A 102,600 / 923,400 0 / 0
Richard W. Graham 0 N/A 9,100 / 100,900 0 / 0
John R. Funke 0 N/A 12,100 / 137,900 0 / 0
Edward F. McCallum 0 N/A 9,100 / 86,900 0 / 0
<FN>
<F1> The closing market value of the Common Stock on December 29, 1995
was $9.50 per share. On that date, the exercise prices per share
for outstanding options held by the Named Executive Officers
ranged from $10.00 to $17.63.
</FN>
</TABLE>
<PAGE>
PENSION PLANS
Salaried Employees' Pension Plan and Supplemental Income
Pension Plans
The Company and its subsidiaries maintain a non-
contributory pension plan for salaried employees (the
"Pension Plan") and two non-contributory supplemental income
pension plans ("SIP I" and "SIP II" and together, the "SIP
Plans") for certain key executive officers, under which
benefits are determined by final average earnings and years
of credited service and are offset by a certain portion of
social security benefits. For purposes of the Pension Plan,
final average earnings equals the participant's average
earnings for the five consecutive highest-paid calendar years
of the participant's last 10 years of service, including
overtime and certain bonuses, but excluding bonus payments
under the Management Incentive Plan, deferred or acquisition
bonuses, fringe benefits and certain other compensation. For
purposes of each SIP, final average earnings equals the
participant's average earnings, including bonus payments made
under the Management Incentive Plan, for the five consecutive
highest-paid calendar years of the participant's last 10
years of service. SIP I recognizes up to 20 years of
credited service and SIP II recognizes up to 22.5 years of
credited service.
The pension benefits for the Named Executive Officers can
be calculated pursuant to the following table, which shows
the total estimated single life annuity payments that would
be payable to the Named Executive Officers participating in
the Pension Plan and one of the SIP Plans after various years
of service at selected compensation levels. Payments under
the SIP Plans are an unsecured liability of the Company.
<TABLE>
SIP I Participants
Annual Benefits (Single Life Annuity)
Upon Final Retirement with Final
Years of Service Indicated
Remuneration (Prior to Adjustment for Social Security)
Final Average Earnings 5 years 10 years 15 years 20 years
<C> <C> <C> <C> <C>
$ 200,000 . . . . . . . . . . . . . . . . $ 25,000 $ 50,000 $ 75,000 $ 100,000
400,000 . . . . . . . . . . . . . . . . 50,000 100,000 150,000 200,000
600,000 . . . . . . . . . . . . . . . . 75,000 150,000 225,000 300,000
800,000 . . . . . . . . . . . . . . . . 100,000 200,000 300,000 400,000
1,000,000 . . . . . . . . . . . . . . . . 125,000 250,000 375,000 500,000
1,200,000 . . . . . . . . . . . . . . . . 150,000 300,000 450,000 600,000
1,400,000 . . . . . . . . . . . . . . . . 175,000 350,000 525,000 700,000
1,600,000 . . . . . . . . . . . . . . . . 200,000 400,000 600,000 800,000
1,800,000 . . . . . . . . . . . . . . . . 225,000 450,000 675,000 900,000
2,000,000 . . . . . . . . . . . . . . . . 250,000 500,000 750,000 1,000,000
</TABLE>
<TABLE>
SIP II Participants
Annual Benefits (Single Life Annuity)
Upon Final Retirement with Final
Years of Service Indicated
Remuneration (Prior to Adjustment for Social Security)
Final Average
Earnings 5 years 10 years 15 years 20 years 22.5 years
<C> <C> <C> <C> <C> <C>
$ 200,000 . . . . . . . . . $ 20,000 $ 40,000 $ 60,000 $ 80,000 $ 90,000
400,000 . . . . . . . . . 40,000 80,000 120,000 160,000 180,000
600,000 . . . . . . . . . 60,000 120,000 180,000 240,000 270,000
800,000 . . . . . . . . . 80,000 160,000 240,000 320,000 360,000
1,000,000 . . . . . . . . . 100,000 200,000 300,000 400,000 450,000
1,200,000 . . . . . . . . . 120,000 240,000 360,000 480,000 540,000
1,400,000 . . . . . . . . . 140,000 280,000 420,000 560,000 630,000
1,600,000 . . . . . . . . . 160,000 320,000 480,000 640,000 720,000
1,800,000 . . . . . . . . . 180,000 360,000 540,000 720,000 810,000
2,000,000 . . . . . . . . . 200,000 400,000 600,000 800,000 900,000
</TABLE>
Dr. Smurfit participates in SIP I and has 40 years of
credited service. SIP II became effective January 1, 1993,
and Messrs. Terrill, Graham, Funke and McCallum participate
in such plan and have 24, 37, 19 and 25 years of credited
service, respectively. Current average earnings as of
December 31, 1995 for each of the Named Executive Officers
are as follows: Dr. Smurfit ($1,069,000); Mr. Terrill
($673,000); Mr. Graham ($383,000); Mr. Funke ($353,000); and
Mr. McCallum ($309,000).
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
AND APPOINTMENT COMMITTEE ON
EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") consists of
three members of the Company's Board of Directors who are not
employees of the Company and who have no interlocking
relationships requiring disclosure. The Appointment
Committee consists of four members of the Company's Board of
Directors, two of whom are current officers or employees of
the Company (see below). These committees oversee the
administration of executive compensation programs and
determine the compensation of the executive officers,
including the Named Executive Officers. See "Board and Board
Committee Meetings, Committee Functions and Composition"
above for a description of the allocation of responsibilities
between these committees.
The goals of the Company's executive compensation program
are to attract, retain and motivate qualified executives with
outstanding abilities; to tie a significant portion of the
overall compensation of executive officers to the Company's
profitability; and to seek to enhance the Company's
profitability by aligning the interests of executive officers
with those of the Company's stockholders.
In determining base salaries for each of the Named
Executive Officers, as well as other executive officers,
consideration is given to national and local salary surveys
and the results of an informal, internal review of salaries
paid to officers with comparable qualifications, experience
and responsibilities at other companies of similar size.
The Company's executive officers, as well as other key
employees of the Company, participate in an annual management
incentive plan (the "MIP"), with awards based upon the
attainment of pre-established goals and profit targets for
the Company. The MIP has been operated historically in
substantially the same manner as the Management Incentive
Plan being presented for stockholder approval.
Each fiscal year the Committee considers the desirability
of granting awards under the Company's 1992 Stock Option Plan
to executive officers, including the Named Executive
Officers. In determining the amount and nature of awards
under the Plan to executive officers other than the Chief
Executive Officer, the Committee takes into account the
respective scope of accountability, strategic and operational
goals, and anticipated performance requirements and
contributions of each executive officer. Stock options
awarded to the Chief Executive Officer are established
separately. The Committee believes that past grants of stock
options have successfully focused the Company's senior management on
building profitability and shareholder value.
<PAGE>
Section 162(m) ("Section 162(m)") of the Internal Revenue
Code of 1986, as amended (the "Code"), generally limits to
$1,000,000 per person a publicly held corporation's federal
income tax deduction for compensation paid in any year to its
Chief Executive Officer and each of its four other highest
paid executive officers to the extent such compensation is
not "performance-based" within the meaning of Section 162(m).
Section 162(m) does not apply to the Company for the 1995 tax
year because the Company is not "publicly held" as defined
for this purpose in the Code. The Company has historically
set compensation and bonuses based upon performance, and the
Company intends to continue this practice. At such time as
Section 162(m) becomes applicable to the Company, the
committees will, in general, seek to qualify compensation
paid to its executive officers for deductibility under
Section 162(m) although the committees believe it is
appropriate to retain the flexibility to authorize payments
of compensation that may not qualify for deductibility if, in
the committees' judgment, it is in the Company's best
interest to do so. The Management Incentive Plan described
under Proposal 3 - "Adoption of Management Incentive Plan" is
intended to be a qualified performance-based compensation
program under Section 162(m).
<PAGE>
CEO Compensation
Mr. Terrill's salary as the Chief Executive Officer was
set by the Appointment Committee. Mr. Terrill's salary was
based on an informal review of salaries paid to officers with
comparable qualifications, experience and responsibilities at
other companies of similar size. Based on this assessment,
the Chief Executive Officer was awarded a base salary for
1995 of $800,000. Pursuant to the terms of the 1995 MIP, he
received a performance based incentive award of $623,919 for
1995.
The Appointment Committee undertakes the responsibility
for reviewing the salary level and the overall compensation
of the Chief Executive Officer based upon a periodic review
of peer group companies, the performance of the Company in
relation to its peers and the performance of the individual.
The evaluation recognizes the major role of the Chief
Executive Officer in strategic initiatives to be accomplished
by the Company, including cost savings measures instituted
under the tenure of the Chief Executive Officer; growth in
the market price for the Company's securities; and favorable
corporate developments for increased sales volume. Mr.
Terrill abstains from votes concerning his own compensation.
Submitted by the Compensation Committee and the
Appointment Committee of the Company's Board of Directors.
Compensation Committee Appointment Committee
D.P. Brennan M.W.J. Smurfit
A.E. Goldberg H.E. Kilroy
D.R. Ramsay J.E. Terrill
A.E. Goldberg
APPOINTMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following two members of the Appointment Committee are
officers or employees of the Company: Michael W.J. Smurfit
and James E. Terrill.
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder
return on the Common Stock, the S&P 500 Index, the index of
a peer group of paper companies used in the Company's Proxy
Statement dated March 21, 1995 (the "1995 Peer Group") and an
index of a newly defined peer group of paper companies (the
"1996 Peer Group"), for the period from May 4, 1994, the date
on which the Common Stock commenced trading on the Nasdaq
Stock Market, until December 31, 1995. The 1996 Peer Group
index comprises the following 11 medium to large sized
companies whose primary business is the manufacture and sale
of paper products: Chesapeake Corporation, Gaylord Container
Corporation, Georgia Pacific Corporation, International
Paper, Rock-Tenn Company, Sonoco Products Company, Stone
Container Corporation, Temple-Inland Inc., Union Camp
Corporation, Weyerhaeuser Company and Willamette Industries,
Inc. The 1995 Peer Group included Federal Paper Board
Company, Inc., and Caraustar Industries, Inc., and excluded
Georgia Pacific Corporation, International Paper and
Weyerhaeuser Company. The revisions to the peer group in
1996 were desirable, in the Company's view, in order to make
the peer group list more representative of the Company's
lines of business. The graph assumes the value of the
investment in the Common Stock and each index was $100.00 at
May 4, 1994 and that all dividends were reinvested.
Cumulative Total Return
(from May 4, 1994 to December 31, 1995)
[PERFORMANCE GRAPH]
May 4, 1994 December 31, 1994 December 31, 1995
Jefferson Smurfit Corporation $100.00 $130.77 $ 73.08
S&P 500 Index 100.00 105.91 145.71
1995 Peer Group 100.00 113.77 127.18
1996 Peer Group 100.00 109.21 116.41
<PAGE>
CERTAIN TRANSACTIONS
Net sales by the Company to JS Group, its subsidiaries and
affiliates were $44 million for the year ended December 31,
1995. Net sales by JS Group, its subsidiaries and affiliates
to the Company were $108 million for the year ended December
31, 1995. Product sales to and purchases from JS Group, its
subsidiaries and affiliates were consummated on terms
generally similar to those prevailing with unrelated parties.
The Company provides certain subsidiaries and affiliates
of JS Group with general management and elective management
services under separate management services agreements. The
services provided include, but are not limited to, management
information services, accounting, tax and internal auditing
services, financial management and treasury services,
manufacturing and engineering services, research and
development services, employee benefit plan and management
services, purchasing services, transportation services and
marketing services. In consideration of general management
services, the Company is paid a negotiated fee, which
amounted to approximately $1 million for 1995. In
consideration for elective services provided in 1995, the
Company received reimbursements of approximately $3 million
in 1995. In addition, the Company paid JS Group and its
affiliates less than $1 million in 1995 for certain other
services.
In October 1991, an affiliate of JS Group completed a
rebuild of the No. 2 paperboard machine owned by it, located
in Jefferson Smurfit Corporation (U.S.)'s ("JSC (U.S.)")
Fernandina Beach, Florida paperboard mill (the "Fernandina
Mill"). Pursuant to the Fernandina Operating Agreement, JSC
(U.S.) operates and manages the machine, which is owned by a
subsidiary of SIBV. As compensation to JSC (U.S.) for its
services, the affiliate of JS Group agreed to reimburse JSC
(U.S.) for production and manufacturing costs directly
attributable to the No. 2 paperboard machine and to pay JSC
(U.S.) a portion of the indirect manufacturing, selling and
administrative costs incurred by JSC (U.S.) for the entire
Fernandina Mill. The compensation is determined by applying
various formulas and agreed upon amounts to the subject
costs. The amounts reimbursed to JSC (U.S.) totaled $57.0
million in 1995.
The Registration Rights Agreement
Pursuant to the Registration Rights Agreement, dated as
of May 3, 1994, among MSLEF II, SIBV, the Company and certain
other parties (the "Registration Rights Agreement"), each of
MSLEF II and SIBV have certain rights, upon giving a notice
as provided in the Registration Rights Agreement, to cause
the Company to use its best efforts to register under the
Securities Act of 1933 the shares of Common Stock owned by
MSLEF II (including its partners) and certain other entities
(including their affiliates) and certain shares of Common
Stock owned by SIBV and its affiliates. Under the terms of
the Registration Rights Agreement, the Company may not effect
a common stock registration for its own account until the
earlier of (i) such time as MSLEF II shall have effected two
demand registrations and (ii) July 31, 1996. The
Registration Rights Agreement contains customary terms and
provisions with respect to, among other things, registration
procedures and certain rights to indemnification and
contribution granted by parties thereunder in connection with
the registration of Common Stock subject to such agreement.
<PAGE>
The Stockholders Agreement
Pursuant to the Stockholders Agreement, dated as of May
3, 1994, among MSLEF II, SIBV, the Company and certain other
parties, SIBV and the MS Holders (as defined in the
Stockholders Agreement) shall vote their shares of Common
Stock subject to the Stockholders Agreement to elect as
directors of the Company a certain number of individuals
selected by SIBV and a certain number of individuals selected
by MSLEF II, with such numbers varying depending on the
amount of Common Stock collectively owned by the MS Holders,
the amount of Common Stock owned by SIBV and the magnitude of
the Initial Return (as defined in the Stockholders Agreement)
received by the MS Holders on their investment of Common
Stock. Currently, the Company's Board of Directors consists
of four directors selected by MSLEF II (one of whom is not
affiliated with MSLEF II or the Company) and four directors
selected by SIBV (one of whom is not affiliated with SIBV or
the Company). Pursuant to the Stockholders Agreement, SIBV
and MSLEF II have agreed to ensure the Board of Directors
will consist of only eight directors (unless they otherwise
agree). Depending on the amount of Common Stock collectively
owned by the MS Holders and the magnitude of the Initial
Return received by the MS Holders on their investment of
Common Stock, approval of certain specified actions of the
Board shall require certain approval as specified in the
Stockholders Agreement.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
Upon the recommendation of the Company's Audit Committee,
Ernst & Young LLP, independent auditors of the Company since
July 1982, have been appointed by the Board of Directors of
the Company as independent auditors for the Company for the
fiscal year ending December 31, 1996. This selection is
being presented to the stockholders for ratification. The
Board of Directors of the Company recommends a vote FOR
ratification. The persons named on the enclosed proxy card
intend to vote the proxies solicited hereby FOR ratification
unless specifically directed otherwise on such proxy card.
<PAGE>
Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and such representatives
are expected to be available to respond to appropriate
questions.
PROPOSAL 3--ADOPTION OF MANAGEMENT INCENTIVE PLAN
General
The stockholders are being asked to consider and approve
the Jefferson Smurfit Corporation (U.S.) Management Incentive
Plan (the "Plan"), as described herein. The Plan became
effective upon its adoption by the Board on February 8, 1996,
subject to approval of the Company's stockholders. The
purposes of the Plan are to attract and retain highly
qualified employees by providing appropriate performance-
based incentive awards and to align employee and stockholder
interests by creating a direct link between employee
compensation and the success of the Company. Additional
purposes of the Plan are to satisfy the requirements of Rule
16b-3 promulgated under Section 16 of the Securities Exchange
Act of 1934, as from time to time amended ("Rule 16b-3"), and
to serve as a qualified performance-based compensation
program under Section 162(m) of the Code.
Section 162(m) limits the deductibility of certain
compensation in excess of $1 million per year paid by a
publicly traded corporation to the following individuals who
are employed as of the end of the corporation's tax year:
the chief executive officer and the four other executive
officers named in the summary compensation table of the
corporation's proxy statement ("Covered Employees").
Compensation that qualifies as "performance-based"
compensation is, however, exempt from the $1 million
deductibility limitation. In order for compensation granted
pursuant to the Plan to qualify for this exemption, among
other things, the material terms under which the compensation
is to be paid must be disclosed to and approved by
stockholders in a separate vote prior to payment, and the
compensation must be paid solely on account of the attainment
of preestablished, objective performance goals.
Approximately 550 key employees of Jefferson Smurfit
Corporation (U.S.) and its subsidiaries and affiliates,
including the Company (collectively, "JSC"), may be eligible
to participate in the Plan, 19 of whom are executive
officers of the Company.
The description of the Plan set forth herein is qualified
in its entirety by reference to the text of the Plan as set
forth in Appendix A.
<PAGE>
Description of Plan
Eligibility. Certain key executives of JSC designated by
the Committee will be eligible to participate in the Plan.
Administration. The Plan will be administered by the
Management Incentive Plan Committee, which shall be the
Compensation Committee of the Board of Directors (the
"Committee"). The Committee will consist of two or more
persons each of whom is a "disinterested person" within the
meaning of Rule 16b-3 and an "outside director" within the
meaning of Section 162(m). The Committee will have the
authority, in its sole discretion, to administer the Plan and
may make such rules and regulations and establish such
procedures for the administration of the Plan as it deems
appropriate. The Committee may delegate to one or more of
its members or to one of more agents such administrative
duties as it may deem advisable, including the authority for
handling day-to-day operations of the Plan.
Performance Goal Attainment Required for Award Payment.
The Plan provides for the payment of annual awards to
participants if, and only to the extent that, performance
goals established by the Committee are met.
Performance Goals. The Committee establishes performance
goals expressed in terms of the achievement by the Company
and/or its divisions or other operational segments of any one
or more of the following performance measures: earnings,
earnings per share, earnings from operations, specified
operational objectives, return on equity, return on assets or
the extent of increase or decrease of any one or more of the
foregoing over a specified period. Performance goals will
include a threshold level of performance below which no award
payment will be made and levels of performance at which
specified percentages of the target award will be paid, and
may also include a maximum level of performance above which
no additional award will be paid. The performance measure or
measures and the performance goals established by the
Committee with respect thereto may be different with respect
to different plan years and different goals may be applicable
to different divisions or other operational segments. The
Committee may reduce or eliminate a participant's award if it
reasonably believes that the participant's actions or failure
to act constitute "cause" (as defined in the Plan).
Awards. A participant's award for each year will be made
in shares of the Company's common stock, in cash, or in a
combination of the Company's common stock and cash, at the
discretion of the Company. A target award is established
during the first quarter of each year, expressed as a
percentage of a specified measure of corporate profitability
in excess of a specified threshold level of performance. In
addition, the Committee may establish a maximum percentage of
salary to be paid to any participant in any plan year and may
provide that excess amounts will be carried over to
subsequent years.
<PAGE>
Termination of Employment. The Plan provides for the
payment of annual awards only if a participant is employed by
JSC on the last day of the Company's fiscal year; provided,
however, that a prorated award (based upon the portion of the
applicable plan year that has elapsed at the time of the
termination of employment) will be paid to participants whose
employment is terminated prior to the last day of the
Company's fiscal year by JSC without "cause" or by reason of
death, "disability" or "retirement" (as defined in the Plan).
In the case of a prorated award, the form of payment will be
entirely in cash unless the participant requests to be paid
in shares of the Company's common stock. If a participant
quits or is terminated by JSC for "cause" prior to the date
on which the payment of awards is made, the participant will
forfeit all claims to unpaid amounts earned or otherwise due
under the Plan.
Limitation of Committee's Discretion. The Committee may
not, in its discretion, increase the amount of the award
payable to a Covered Employee upon attainment of a
performance goal and the amount of such award cannot exceed
$3,500,000.
Committee Certification of Performance Goal Attainment.
Before any awards for a particular year can be paid to
Covered Employees, the Committee must certify the extent to
which performance goals and any other material terms were
satisfied.
Amendments to or Discontinuance of Plan. The Board may
from time to time amend, suspend or discontinue the Plan;
provided, however, that no amendment that requires
stockholder approval in order for the Plan to continue to
comply with Rule 16b-3 or Section 162(m) will be effective
unless it receives the requisite stockholder approval. In
addition, the Committee may make such amendments as it deems
necessary to comply with other applicable laws, rules and
regulations. No amendment shall, however, affect adversely
any of the rights of any participant, without such
participant's consent, under any award theretofore granted
under the Plan.
Shares. The aggregate number of shares of the Company's
common stock that may be issued under the Plan is 5,000,000,
which number may be adjusted in the event of certain
corporate events specified in the Plan, provided, however,
that no more than one percent of the issued and outstanding
shares of the Company's common stock will be distributed
under the Plan in any one fiscal year. Such shares may be
set aside out of the authorized but unissued shares not
reserved for any other purpose or out of shares held in or
acquired for the treasury of the Company.
Benefits under the Plan. Inasmuch as benefits under the
Plan will be determined by the Committee and performance goal
criteria may vary from year to year, benefits to be paid
under the Plan are not determinable at this time. Bonuses
granted to Named Executive Officers under the 1995 Management
Incentive Plan (the "1995 Plan"), which is similar to the
Plan, are set forth above under "Executive Compensation."
Under the 1995 Plan, bonuses awarded for the last fiscal
year were as follows: to all executive officers as a group,
$3,320,165; to all nonemployee directors as a group, $0; to
all other employees as a group, $13,483,715.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
<PAGE>
OTHER MATTERS
Management does not know of any other business which may
be considered at the Annual Meeting. However, if any
matters other than those referred to above should properly
come before the Annual Meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the
proxies held by them in accordance with their best judgment.
The entire expense associated with preparing, assembling
and mailing this Proxy Statement and with the solicitation of
proxies by the Board of Directors of the Company will be
borne by the Company. In addition to solicitation of proxies
by mail, the directors, officers and employees of the Company
may solicit proxies for use at the Annual Meeting by personal
interview, by telephone or by telegraph. Directors, officers
and other employees of the Company will receive no additional
compensation for soliciting such proxies for use at the
Annual Meeting. It is anticipated that the telephone and
telegraph charges so incurred will be minimal.
<PAGE>
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals submitted for inclusion in the proxy
statement for the 1997 Annual Meeting of Stockholders must be
received at the corporate offices of the Company, addressed
to the attention of Mr. Michael E. Tierney, Secretary,
Jefferson Smurfit Corporation, 8182 Maryland Avenue, St.
Louis, Missouri 63105 no later than December 1, 1996.
By Order Of The Board Of Directors
MICHAEL E. TIERNEY
Secretary
April 1, 1996
<PAGE>
Appendix A
JEFFERSON SMURFIT CORPORATION (U.S.)
MANAGEMENT INCENTIVE PLAN
1. Purposes.
The purposes of the Jefferson Smurfit Corporation (U.S.)
Management Incentive Plan (the "Plan") are to attract and
retain highly qualified employees by providing appropriate
performance-based incentive awards and to align employee and
stockholder interests by creating a direct link between
employee compensation and the success of the Company.
Additional purposes of the Plan are to satisfy the
requirements of Rule 16b-3 promulgated under Section 16 of
the Securities Exchange Act of 1934, as from time to time
amended ("Rule 16b-3"), and to serve as a qualified
performance-based compensation program under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the
"Code"), in order to maximize the Company's tax deduction for
compensation paid under the Plan to Covered Employees. The
Plan shall be effective when adopted by the Board of
Directors (the "Board") of Jefferson Smurfit Corporation
("JSC"), subject to the approval of the shareholders of JSC.
2. Definitions.
The following terms, as used herein, shall have the
following meanings:
(a) "Annual Base Salary" shall mean the annual rate of
base salary of a Participant as in effect as of the first day
of the Plan Year, without regard to any optional or mandatory
deferral of base salary pursuant to a salary deferral
arrangement.
(b) "Award" shall mean any annual incentive bonus award
granted pursuant to the Plan, the payment of which shall be
contingent upon the attainment of Performance Goals with
respect to a Plan Year.
(c) "Award Date" shall mean the date on which the price
per Share is set for purposes of determining the number of
Shares to be distributed with respect to the portion of any
Award paid in Stock.
<PAGE>
(d) "Cause" shall mean a plea of guilty or nolo
contendere by the Participant, or conviction of the
Participant, for a felony; a willful failure by the
Participant to perform his or her assigned duties; or the
determination by the Committee in its sole discretion that
the Participant has engaged in misconduct that results in
demonstrable damage to JSC, monetarily or otherwise.
(e) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(f) "Committee" shall mean the "Management Incentive
Plan Committee", which shall be the Compensation Committee of
the Board.
(g) "Company" shall mean Jefferson Smurfit Corporation
(U.S.), a Delaware corporation, and its subsidiaries and
affiliates.
(h) "Covered Employee" shall have the meaning set forth
in Section 162(m) of the Code (or any successor provision).
(i) "Disability" shall mean the total and permanent
incapacity of a Participant to perform the usual duties of
his employment with the Company. Such incapacity shall be
deemed to exist when so declared by, and in the sole
discretion of, the Committee, supported by the written
opinion of at lease one physician acceptable to the
Committee, after the expiration of at least 120 days from the
date of the inception of the incapacity.
(j) "Participant" shall mean an employee of the Company
or a subsidiary or affiliate thereof who is eligible to
participate herein pursuant to Section 3 of the Plan.
(k) "Performance Goals" shall mean the criteria and
objectives that must be met by the Company and/or its
divisions or other operational segments during the Plan Year
as a condition of the Participant's receipt of payment with
respect to an Award, as described in Section 4 hereof.
(l) "Plan" shall mean the Jefferson Smurfit Corporation
(U.S.) Management Incentive Plan.
<PAGE>
(m) "Plan Year" shall mean each fiscal year of the
Company, commencing with the Company's fiscal year beginning
on January 1, 1995.
(n) "Shares" shall mean shares of the common stock of
JSC, par value $0.01.
3. Eligibility.
Certain key employees of the Company, as determined by
the Committee, shall be eligible to participate in the Plan.
4. Performance Goals.
The Committee shall establish Performance Goals expressed
in terms of the achievement of any one or more of the
following performance measures by the Company and/or its
divisions or other operational segments: earnings, earnings
per share, earnings from operations, specified operational
objectives, return on equity, return on assets or the extent
of increase or decrease of any one or more of the foregoing
over a specified period. Performance Goals shall include a
threshold level of performance below which no Award payment
shall be made and levels of performance at which specified
percentages of the target Award shall be paid, and may also
(but need not) include a maximum level of performance above
which no additional Award shall be paid. The performance
measure or measures and the Performance Goals established by
the Committee with respect thereto may (but need not) be
different with respect to each Plan Year, and different goals
may (but need not) be applicable to different divisions or
other operational segments.
5. Awards.
(a) In General. For each Plan Year, the Committee shall
specify the Performance Goals applicable to Participants (by
group or class) for such Plan Year and the amount of, or the
formula for determining, the target Award for Participants
with respect to such Plan Year. A target award is
established during the first quarter of each year, expressed
as a percentage of a specified measure of corporate
profitability in excess of a specified threshold level of
performance. Except as set forth in paragraph (e) of this
Section 5, payment of an Award for a particular Plan Year
shall be made only if and to the extent the Performance Goals
with respect to such Plan Year are attained and only if the
Participant is employed by the Company on the Award Date.
The actual amount of the Award payable under the Plan shall
be determined as a percentage of the Participant's target
Award, which percentage shall vary depending upon the extent
to which the Performance Goals have been attained. The
Committee may (but need not) establish a maximum amount or
percentage of specified profits to be allocated in the
aggregate to Awards in any Plan Year. The Committee may
reduce or eliminate an award to which a Participant is
otherwise entitled upon its reasonable belief that the
Participant's actions or failure to act constitute Cause.
<PAGE>
(b) Special Limitation on Certain Awards.
Notwithstanding anything to the contrary contained in this
Section 5, the Award for each Covered Employee under the Plan
in any Plan Year may not exceed $3,500,000. In addition, the
Committee may (but need not) establish a maximum percentage
of Annual Base Salary to be paid to any Participant in any
Plan Year and may (but need not) provide that excess amounts
shall be carried over to subsequent years.
(c) Time of Payment. Unless otherwise determined by the
Committee, or except as provided herein, all payments in
respect of Awards granted under this Section 5 shall be made
within a reasonable period after the end of the Plan Year,
but in no event later than March 15. In the case of
Participants who are Covered Employees, such payments shall
be made only after achievement of the Performance Goals has
been certified by the Committee.
(d) Form of Payment. Subject to the provisions of
paragraph (e) of this Section 5, payment of a Participant's
Award for any Plan Year shall be made in Shares, in cash, or
a combination of Shares and cash, at the discretion of the
Company.
(e) Termination of Employment. In the event that, prior
to the last day of the Plan Year, the employment of a
Participant is terminated (1) by the Company without Cause,
or (2) by Death, Disability or Retirement, such Participant's
Award shall be prorated on the basis of the months and
fractional parts thereof during which such Participant shall
have been employed by the Company during such Plan Year and,
in such case, the form of payment shall be entirely in cash
unless the Participant requests Shares. Except as otherwise
determined by the Committee, in the event that, prior to the
date on which the payment of Awards is made, a Participant
(1) quits or resigns or (2) is terminated by the Company for
Cause, such Participant shall forfeit all claims to unpaid
amounts earned or otherwise due under the Plan, including any
carry-over amounts, (even if such termination occurs
subsequent to the last day of a Plan Year).
<PAGE>
6. Shares.
The aggregate number of Shares that may be issued under
the Plan shall be 5,000,000; provided, however, that no more
than one percent of the issued and outstanding Shares may be
distributed under the Plan in any one fiscal year. Such
number of Shares may be set aside out of the authorized but
unissued Shares not reserved for any other purpose or out of
Shares held in or acquired for the treasury of JSC. If the
Shares, as presently constituted, shall be changed into or
exchanged for a different number or kind of share or other
securities of JSC or of another corporation (whether by
merger, reverse split, combination of shares, or otherwise)
or if the number of Shares shall be increased through the
payment of a share dividend, there shall be substituted for
or added to each Share theretofore appropriated the number
and kind of shares or other securities into which each
outstanding Share shall be so changed, or for which each
Share shall be exchanged, or to which each Share shall be
entitled, as the case may be.
7. Administration.
The Plan shall be administered by the Committee. The
Committee shall have the authority in its sole discretion,
subject to and not inconsistent with the express provisions
of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the
administration of the Plan, including without limitation, the
authority to grant Awards; to determine the persons to whom
and the time or times at which Awards shall be granted; to
determine the terms, conditions, restrictions and performance
criteria relating to any Award; to make adjustments in the
Performance Goals in response to changes in applicable laws,
regulations, or accounting principles, except as otherwise
provided herein; to adjust compensation payable upon
attainment of Performance Goals; to construe and interpret
the Plan and any Award; to prescribe, amend and rescind rules
and regulations relating to the Plan; and to make all other
determinations deemed necessary or advisable for the
administration of the Plan.
<PAGE>
The Committee shall at all times consist of two or more
persons each of whom is "disinterested" within the meaning of
Rule 16b-3 and an "outside director" within the meaning of
Section 162(m) of the Code. All determinations of the
Committee shall be made by a majority of its members either
present in person or participating by conference telephone at
a meeting or by unanimous written consent. The Committee may
delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable,
including the authority for handling day-to-day operations of
the Plan, and the Committee or any person to whom it has
delegated duties as aforesaid may employ one or more persons
to render advice with respect to any responsibility the
Committee or such person may have under the Plan. All
decisions, determinations and interpretations of the
Committee shall be final and binding on all persons,
including the Company, the Participant (or any person
claiming any rights under the Plan from or through any
Participant) and any stockholder.
No member of the Board or the Committee shall be liable
for any action taken or determination made in good faith with
respect to the Plan or any Award granted hereunder.
8. General Provisions.
(a) Compliance with Legal Requirements. The Plan and
the granting of Awards, and the other obligations of the
Company under the Plan shall be subject to all applicable
federal and state laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be
required.
(b) Restrictions. Each Award payable in Shares under
the Plan shall be subject to the requirement that, if at any
time the Committee shall determine that (a) the registration,
qualification or exemption from registration of the Shares
subject or related thereto under any state of federal law, or
(b) the consent or approval of any government regulatory
body, or (c) an agreement by the recipient of an Award with
respect to the disposition of Shares is necessary or
desirable as a condition of, or in connection with, the
payment of such Award, payment of such Award shall not be
made in Shares unless such registration, qualification,
exemption, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to
the Committee, or, at the discretion of the Committee, shall
be made in such modified form as the Committee shall
determine.
<PAGE>
(c) No Right To Continued Employment. Nothing in the
plan or in any Award granted shall confer upon any
Participant the right to continue in the employ of the
Company or to be entitled to any remuneration or benefits not
set forth in the Plan or to interfere with or limit in any
way the right of the Company to terminate such Participant's
employment.
(d) Withholding Taxes. The Company shall deduct from
all cash payments and distributions under the Plan any taxes
required to be withheld by federal, state or local
governments, and, if such cash payments and distributions are
insufficient for this purpose, shall require the Participant
to pay to the Company any additional amounts required to be
withheld.
(e) Amendment and Termination of the Plan. The Board
may at any time and from time to time alter, amend, suspend,
or terminate the Plan in whole or in part; provided, however,
that no amendment which requires stockholder approval in
order for the Plan to continue to comply with Rule 16b-3 or
Code Section 162(m) shall be effective unless the same shall
be approved by the requisite vote of the stockholders of the
Company. Additionally, the Committee may make such
amendments as it deems necessary to comply with other
applicable laws, rules and regulations. Notwithstanding the
foregoing, no amendment shall affect adversely any of the
rights of any Participant, without such Participant's
consent, under any Award theretofore granted under the Plan.
(f) Participant Rights. No Participant shall have any
claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment for Participants.
(g) Unfunded Status of Awards. The Plan is intended to
constitute an "unfunded" plan for incentive compensation.
With respect to any payments which at any time are not made
to a Participant pursuant to an Award, nothing contained in
the Plan or any Award shall give any such Participant any
rights that are greater than those of a general unsecured
creditor of the Company.
<PAGE>
(h) Governing Law. The Plan and the rights of all
persons claiming hereunder shall be construed and determined
in accordance with the laws of the State of Delaware without
giving effect to the choice of law principles thereof, except
to the extent that such law is preempted by federal law.
(i) Effective Date. The Plan shall take effect upon its
adoption by the Board, but the Plan (and any grants of Awards
made prior to the stockholder approval) shall be subject to
the requisite approval of the stockholders of JSC. In the
absence of such approval, such Awards shall be null and void.
(j) Interpretation. The Plan is designed and intended
to comply with Rule 16b-3 and Section 162(m) of the Code, to
the extent applicable, and all provisions hereof shall be
construed in a manner to so comply.
