JEFFERSON SMURFIT CORPORATION
8182 Maryland Avenue
St. Louis, MO 63105
April 2, 1997
Dear Stockholder:
You are cordially invited to attend our Company's 1997 Annual
Meeting of Stockholders, which will be held on Thursday, May 1,
1997, 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 OF PROXY
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________________________, 1997
Please sign name or names exactly
as appearing on this proxy. If
signing as a representative,
please include capacity.
(OVER)
<PAGE>
BACK OF PROXY
COMMON STOCKHOLDERS
PROXY
JEFFERSON SMURFIT CORPORATION
Annual Meeting May 1, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned stockholder of Jefferson Smurfit Corporation, a
Delaware corporation, appoints RICHARD W. GRAHAM, PATRICK J. MOORE
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 1, 1997 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 [ ] WITHOLD AUTHORITY
(excepted as marked to the contrary to vote for all
below) nominees listed
below.
Donald P. Brennan, James S. Hoch, Michael W.J. Smurfit,
James E. Terrill
INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the line below.
2. Adoption of the Company's Amended and Restated 1992 Stock
Option Plan.
3. Ratification of the appointment of Ernst & Young LLP as
independent auditors for the Company for 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. On any other matter that may properly 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 1, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of
Stockholders of Jefferson Smurfit Corporation, a Delaware
corporation (the "Company"), will be held on Thursday, May 1,
1997, 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 four directors for terms of office
expiring at the annual meeting of stockholders in
2000;
2. The adoption of the Company's Amended and Restated
1992 Stock Option Plan;
3. The ratification of the appointment of Ernst & Young
LLP as independent auditors of the Company for 1997;
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 3, 1997 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 adoption of the Company's
Amended and Restated 1992 Stock Option Plan; FOR the
ratification of the appointment of independent auditors of
the Company for 1997; 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 2, 1997
<PAGE>
JEFFERSON SMURFIT CORPORATION
Proxy Statement
For 1997 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 1997 Annual Meeting of Stockholders to be held
on Thursday, May 1, 1997 (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 3,
1997 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 3, 1997, 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 four nominees named below to the Board
of Directors of the Company, in favor of adopting the Amended
and Restated 1992 Stock Option Plan and in favor of ratifying
the appointment of Ernst & Young LLP as independent auditors
for the Company for 1997. 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 the adoption
of the Company's Amended and Restated 1992 Stock Option Plan
and the ratification of the appointment of independent
auditors 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 adopt the Company's Amended and
Restated 1992 Stock Option Plan and the proposal to ratify
the appointment of independent auditors will be treated as
shares present and will have the same effect as a vote
against the proposal. Broker non-votes will not be
considered "entitled to vote" on the proposal to adopt the
Company's Amended and Restated 1992 Stock Option Plan and the
proposal to ratify the appointment of independent auditors;
therefore, broker non-votes will have no effect on the number
of affirmative votes required to adopt such proposal.
<PAGE>
As noted under the "Principal Stockholders" section
herein, as of the close of business on March 3, 1997, Smurfit
International B.V., an entity organized under the laws of The
Netherlands ("SIBV"), and certain of its subsidiaries were
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 (representing
approximately 75.2%, in the aggregate, of the outstanding
Common Stock), have sufficient votes, without any additional
votes, to elect the four nominees named herein, to adopt the
Company's Amended and Restated 1992 Stock Option Plan and to
ratify the appointment of independent auditors 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 and amended January 13, 1997 (the "Stockholders
Agreement"), have advised the Company that they are obligated
to vote their respective shares of Common Stock FOR the four
nominees of the Board of Directors named herein, and that
they intend to vote their respective shares of stock FOR the
adoption of the Company's Amended and Restated 1992 Stock
Option Plan and FOR the ratification of the appointment of
independent auditors. 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 2, 1997.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists
of ten directors. The directors are classified into three
groups: four directors having terms expiring at the
forthcoming Annual Meeting; three directors having terms
expiring in 1998; and three directors having terms expiring
in 1999.
<PAGE>
Set forth below is information concerning the four
nominees for directorships having terms expiring at the
forthcoming 1997 Annual Meeting. Donald P. Brennan, James S.
Hoch, Dr. Michael Smurfit and James E. Terrill 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, Donald P. Brennan and James S. Hoch
have been designated as nominees by MSLEF II, and Dr. Michael
Smurfit and James E. Terrill have been designated as nominees
by SIBV. The Board of Directors of the Company recommends a
vote FOR these four nominees. If elected, each nominee will
serve until the annual election of directors for the year
2000 or until his successor is duly elected and qualified, or
until his earlier death, resignation or removal. Donald P.
Brennan, James S. Hoch, Dr. Michael Smurfit and James E.
Terrill 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 in
accordance with the terms of the Stockholders Agreement.
Also set forth below is information concerning directors
whose terms are not expiring this year.
Nominees for Directors to be Elected at the 1997 Annual
Meeting
Name and Year
First Elected
Director Principal Occupation and Other Information
Donald P. Brennan Mr. Brennan, 56, is an Advisory
1989 Director of Morgan Stanley & Co.
Incorporated ("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 also serves as a Director
of Fort Howard Corporation, ICT Group,
Inc. and SITA Telecommunications
Holdings N.V.
James S. Hoch Mr. Hoch, 36, joined MS&Co. in 1986 and
1997 is a Principal in MS&Co.'s Merchant
Banking Division. He is a Vice
President of Morgan Stanley Capital
Partners III, Inc. ("MSCP III, Inc.")
and The Morgan Stanley Leveraged
Equity Fund, Inc. ("MSLEF"), which is
the general partner of MSLEF II. He
also serves as a Director of
Kabelmedia Holding GmbH, Nordic
Aluminum, Inc., SITA
Telecommunications Holdings N.V. and
Shuttleway.
Michael W.J. Smurfit Dr. Smurfit, 60, has been Chairman and
1989 Chief Executive Officer of JS Group
since 1977 and has been Chairman of
the Board of the Company since 1989.
He was Chief Executive Officer of the
Company prior to July 1990.
<PAGE>
James E. Terrill Mr. Terrill, 63, was Chief Executive
1994 Officer from July 1996 to December
1996 and President and Chief Executive
Officer of the Company from February
1994 to July, 1996. He has been Vice
Chairman of the Board since February
1997. He served as Executive Vice
President - Operations of the Company
from August 1990 to February 1994. He
also served as President of SNC from
February 1986 to February 1993.
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
Leigh J. Abramson Mr. Abramson, 28, joined MS&Co. in 1990 and
1997 is a Senior Associate in MS&Co.'s Merchant
Banking Division. He is a Vice President
of MSCP III, Inc. and MSLEF, which is the
general partner of MSLEF II. Mr. Abramson
also serves as a Director of Pagemart
Wireless, Inc., Pagemart, Inc. and Silgan
Holdings Inc.
Richard W. Graham Mr. Graham, 62, has been President and 1997
1997 Executive Officer of the Company since
January 1997. He was President of the
Company from July 1996 to December 1996.
He served as Senior Vice President from
February 1994 until July 1996. Prior to
that, he held various positions in the
Folding Carton and Boxboard Mill Division,
including Vice President and General
Manager from February 1991 to January
1994.
G. Thompson Hutton Mr. Hutton, 41, 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 of Colorado Outward
Bound School.
<PAGE>
Members of the Board of Directors
Continuing in Office with Terms Expiring in 1999
Name and Year
First Elected
Director Principal Occupation and Other Information
Alan E. Goldberg Mr. Goldberg, 42, has been a Managing
1989 MS&Co. since January 1988, is co-head of
MS&Co.'s Merchant Banking Division and is
a Vice Chairman of MSLEF, which is the
general partner of MSLEF II, and of MSCP
III, Inc. Mr. Goldberg also serves as
Director of CIMIC Holdings Limited, Cat
Limited, Hamilton Services Limited, Amerin
Corporation and Amerin Guaranty
Corporation, Direct Response Corporation
and several other companies, which are
also private.
Howard E. Kilroy Mr. Kilroy, 61, 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.
James R. Thompson Mr. Thompson, 60, is Chairman of the
1994 Executive Committee and a Partner of
Winston & 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 also serves as a
Director of FMC Corporation, the Chicago
Board of Trade, International Advisory
Council of the Bank of Montreal, Prime
Retail, Inc., American National Can
Corporation, National Council on
Compensation Insurance, Hollinger
International, Inc., Union Pacific
Resources, Inc. and The Japan Society
(N.Y.).
<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 four meetings in
1996.
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 Director 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. Abramson, Hutton,
Kilroy, and Thompson. The Audit Committee held two meetings
during 1996.
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. Abramson, Brennan and Goldberg. The Compensation
Committee held one meeting during 1996.
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. Goldberg, Graham and Kilroy. Mr. Graham abstains
from votes concerning his own compensation. The Appointment
Committee held two meetings in 1996.
<PAGE>
Nominations to the Board of Directors are made pursuant
to the terms of the Stockholders Agreement. See "Certain
Transactions - The Stockholders Agreement."
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 3,
1997. 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>
<CAPTION>
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 <fn1> 5,000,000 4.5%
One Mellon Bank Center
Pittsburgh, PA 15258
<FN>
<fn1> 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
20, 1997 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>
<CAPTION>
Shares of Common Stock
Amount and
Nature of Percent
Beneficial of Common
Beneficial Owner Ownership<fn1><fn2> Stock<fn3>
<S> <C> <C>
Michael W.J. Smurfit<fn4> 117,700 0.1%
James E. Terrill<fn4> 47,913 --
Richard W. Graham<fn4> 47,730 --
Eric Priestley 157 --
John R. Funke 36,307 --
Patrick J. Moore 10,358 --
Howard E. Kilroy<fn4> 42,300 --
Leigh J. Abramson<fn5> 0 --
Donald P. Brennan<fn5> 0 --
Alan E. Goldberg<fn5> 0 --
James S. Hoch<fn5> 0 --
G. Thompson Hutton 0 --
James R. Thompson 510 --
All directors and
executive officers as
a group (29 persons)<fn4><fn5> 454,190 0.4%
<FN>
<fn1> 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 20, 1997 pursuant to
exercisable options under the
Company's 1992 Stock Option Plan.
<fn2> Shares shown include the number of
shares of Common Stock held in the
Company's Savings Plan, which the
executive officers have the right to
vote.
<fn3> Based upon a total of 110,989,156
shares of Common Stock issued and
outstanding.
<fn4> Excludes shares of Common Stock owned
by JS Group. Dr. Smurfit, Mr. Kilroy,
Mr. Terrill and Mr. Graham own 6.0%,
0.8% and less than 0.1% and 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.
<fn5> Excludes shares of Common Stock owned
by MSLEF II Associated Entities.
</FN>
</TABLE>
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 next five most highly compensated executive officers of the
Company (the "Named Executive Officers") during 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Awards Payouts All Other
Annual Compensation Securities LTIP Compen-
Name and Principal 1997 Other Annual Underlying Payouts sation
Position Year Salary($) Bonus($) Bonus($)<fn1> Compensation($) Options(#) ($)<fn2> ($)<fn3>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael W.J. Smurfit, 1996 $834,000 $ 0 $ 0 $ 30,000 0 $ 0 $18,611
Chairman of the Board 1995 834,000 650,437 0 30,000 0 0 16,956
1994 834,000 299,084 0 30,000 0 1,964,088 11,922
James E. Terrill, Chief 1996 900,000 0 0 84,689 250,000 0 45,075
Executive Officer 1995 800,000 623,919 0 54,445 0 0 35,907
<fn4><fn5> 1994 678,333 251,029 1,000,000 52,471 319,000 346,604 26,235
Richard W. Graham, 1996 581,833 0 0 3,975 390,000 0 16,712
President<fn4> 1995 405,000 315,931 0 12,115 10,000 0 13,601
1994 378,667 110,876 475,000 9,270 9,000 173,302 9,937
Eric Priestley, Executive 1996 312,500 1,000,000 0 25,246 250,000 0 0
Vice President and Chief
Operating Officer<fn6>
Patrick J. Moore, Vice 1996 230,000 104,218 0 5,875 57,000 0 6,566
President and Chief 1995 200,000 64,494 0 3,089 0 0 5,095
Financial Officer 1994 150,000 53,792 250,000 0 23,000 86,651 4,413
John R. Funke, Vice 1996 332,000 0 0 30,499 0 0 15,376
President<fn7> 1995 315,000 245,632 0 28,753 0 0 12,663
1994 300,000 107,584 500,000 28,599 29,000 231,069 10,779
<FN>
<fn1> 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.
<fn2> 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.
<fn3> Amounts shown under "All Other Compensation" for 1996 include a $4,750 Company contribution
to the Company's Savings Plan for each Named Executive Officer (other than Dr. Smurfit and
Mr. Priestley) and Company-paid split-dollar term life insurance premiums for Dr. Smurfit
($18,611) and Messrs. Terrill ($40,325), Graham ($11,962), Priestley ($0), Moore ($1,816)
and Funke ($7,804). Mr. Funke also had reportable (above 120% of the applicable federal
long-term rate) earnings equal to $2,822 credited to his account under the Company's
Deferred Compensation Capital Enhancement Plan.
<fn4> Upon Mr. Terrill's retirement on December 31, 1996, Mr. Terrill became Vice Chairman of the
Board of Directors and Mr. Graham became President and Chief Executive Officer of the
Company. Previously, Mr. Terrill was Chief Executive Officer and Mr. Graham was President
of the Company.
<fn5> On October 24, 1996, Mr. Terrill entered into a Consulting Agreement (the "Agreement"),
effective January 1, 1997, to furnish consultation and advisory services to the Board of
Directors of the Company, on a stand-by basis, upon the request of the Board. The Agreement
provides for annual payments of $75,000 for a period of 10 years, beginning January 1, 1997.
<fn6> Pursuant to a letter dated August 1, 1996, the Company has agreed to pay Mr. Priestley a
salary of $750,000 per year (pro rated for 1996) for a period of 2 years beginning on the
commencement date of his employment. Mr. Priestley's employment arrangement can only be
terminated by the Company for cause or in the event that Mr. Priestley quits, dies or
becomes permanently disabled. In addition, pursuant to the letter, the Company paid Mr.
Priestley a one-time signing bonus of $1,000,000, which amount was deferred pursuant to the
terms of the Company's Deferred Compensation Plan.
<fn7> Mr. Funke will retire as of May 1, 1997.
</FN>
</TABLE>
<PAGE>
Option Grants in Last Fiscal Year -- The following table provides
information concerning stock options granted to the Named Executive
Officers during 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1996
Number of Potential Realizable Value
Securities % of Total at Annual Rates of
Underlying Options Granted Exercise or Stock Price Appreciation
Options to Employees Base Price Expiration for Option Term ($)<fn1>
Name Granted in Fiscal Year ($ Per Share) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Michael W.J. Smurfit 0 N/A N/A N/A N/A N/A
James E. Terrill 250,000 16.7% $13.00 10/23/08 $2,586,533 $ 6,949,892
Richard W. Graham 390,000 26.0% $13.00 10/23/08 $4,034,992 $10,841,832
Eric Priestley 250,000 16.7% $13.00 10/23/08 $2,586,533 $ 6,949,892
Patrick J. Moore 57,000 3.8% $13.00 10/23/08 $ 589,730 $ 1,584,575
John R. Funke 0 N/A N/A N/A N/A N/A
<FN>
<fn1> 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>
As of December 31, 1996, there were 8,049,306 shares of Common Stock
reserved for issuance under the Company's 1992 Stock Option Plan, including
931,833 shares available for future grants.
<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 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired on Value at January 1, 1997 (#) at January 1, 1997($)<fn1>
Name Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Michael W.J. Smurfit 0 N/A 102,600 / 923,400 $622,013 / $5,598,113
James E. Terrill 0 N/A 18,100 / 731,900 109,731 / 2,889,644
Richard W. Graham 0 N/A 9,100 / 490,900 55,169 / 1,722,956
Eric Priestley 0 N/A 0 / 250,000 0 / 765,625
Patrick J. Moore 0 N/A 4,500 / 120,500 27,281 / 502,031
John R. Funke 0 N/A 12,100 / 137,900 73,356 / 763,519
<FN>
<fn1> The closing market value of the Common Stock on December 31, 1996 was $16.06 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 Plan
The Company and its subsidiaries maintain a non-
contributory pension plan for salaried employees (the
"Pension Plan") and a non-contributory supplemental income
pension plan (the "SIP") 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. Effective May 1, 1996,
the previous SIP plans (SIP I and SIP II) were merged into
the surviving SIP. The benefit formula was changed to 2.5%
of earnings times service up to 20 years, plus 1% of earnings
times service in excess of 20 years. 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 SIP, final average earnings
equals the participant's average earnings, including bonuses
under the Management Incentive Plan, for the five consecutive
highest-paid calendar years of the participant's last 10
years of service. SIP recognizes all 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 (prior to
adjustment for Social Security) that would be payable to the
Named Executive Officers participating in the Pension Plan
and the SIP after various years of service at selected
compensation levels. Payments under the SIP are an unsecured
liability of the Company.
<PAGE>
<TABLE>
<CAPTION>
Renumeration Each year
Final Average in excess of
Earnings 5 years 10 years 15 years 20 years 20 years
<C> <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 *
*An additional 1% of earnings is accrued for each year in
excess of 20 years.
</TABLE>
Dr. Smurfit and Messrs. Terrill, Graham, Priestley, Moore
and Funke, participate in SIP and have 41, 25, 38, 1, 10 and
20 years of credited service, respectively. Current average
earnings as of December 31, 1996, for each of the Named
Executive Officers was as follows: Dr. Smurfit ($1,123,110);
Mr. Terrill ($896,575); Mr. Graham ($506,871); Mr. Priestley
($750,300); Mr. Moore ($231,831); and Mr. Funke ($414,458).
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
AND APPOINTMENT COMMITTEE ON
EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any
of the Company's previous or future filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934
that might incorporate this Proxy Statement or future filings
with the Securities and Exchange Commission, in whole or in
part, the following report and the Performance Graph shall
not be deemed to be incorporated by reference into any such
filings.
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 and one of whom is a former officer 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 individual goals and profit
targets for the Company.
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 1996 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.
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
1996 of $900,000. Pursuant to the terms of the MIP, he did
not receive a performance based incentive award for 1996.
Mr. Terrill was awarded 250,000 stock options in 1996 in
accordance with the general award policies described above.
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 abstained 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
L.J. Abramson R.W. Graham
A.E. Goldberg
<PAGE>
COMPENSATION/APPOINTMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Company's Compensation Committee (the
current members of which are Messrs. Abramson, Brennan and
Goldberg) was, during the year ended December 31, 1996, an
officer, former officer or employee of the Company or any of
its subsidiaries. With regard to the Appointment Committee
of the Company (the current members of which are Messrs.
Goldberg, Graham and Kilroy and Dr. Smurfit), Mr. Graham and
Dr. Smurfit are currently officers of the Company and Mr.
Kilroy is a former officer of the Company. No executive
officer of the Company served as a member of (i) the
compensation committee of another entity in which one of the
executive officers of such entity served on the Company's
Compensation or Appointment Committees, (ii) the Board of
Directors of another entity in which one of the executive
officers of such entity served on the Company's Compensation
or Appointment Committees, or (iii) the compensation
committee of another entity in which one of the executive
officers of such entity served as a member of the Company's
Board of Directors, during the year ended December 31, 1996.
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder
return on the Common Stock, the S&P 500 Index and an index of
a peer group of paper companies for the period from May 4,
1994, the date on which the Common Stock commenced trading on
the Nasdaq Stock Market, until December 31, 1996. The 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 graph assumes the value of an investment in the
Common Stock and each index was $100.00 at May 4, 1994 and
that all dividends were reinvested.
<PAGE>
Cumulative Total Return
(from May 4, 1994 to December 31, 1996)
[PERFORMANCE GRAPH]
Jefferson Smurfit Corporation S&P 500 Index Peer Group
<TABLE>
<CAPTION>
May 4, December 31, December 31, December 31,
1994 1994 1995 1996
<S> <C> <C> <C> <C>
Jefferson Smurfit Corporation $100.00 $130.77 $ 73.08 $123.55
S&P 500 Index 100.00 105.91 145.71 179.16
Peer Group 100.00 109.21 116.41 129.79
</TABLE>
CERTAIN TRANSACTIONS
Net sales by the Company to JS Group, its subsidiaries and
its affiliates were $34 million for the year ended December
31, 1996. Net sales by JS Group, its subsidiaries and its
affiliates to the Company were $64 million for the year ended
December 31, 1996. Product sales to and purchases from JS
Group, its subsidiaries and its 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
elective 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 1996. In
consideration for elective services provided in 1996, the
Company received reimbursements of approximately $4 million
in 1996. In addition, the Company paid JS Group and its
affiliates less than $1 million in 1996 for certain other
services.
<PAGE>
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 $54
million in 1996.
The Stockholders Agreement
Pursuant to the Stockholders Agreement 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 five directors selected by
MSLEF II (one of whom is not affiliated with MSLEF II or the
Company) and five 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 ten
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 - ADOPTION OF 1992 STOCK OPTION PLAN
(As Amended and Restated Effective as of May 1, 1997)
The Company's 1992 Stock Option Plan, as amended (the
"Plan") became effective on August 26, 1992 and will
continue in effect until the later of August 26, 2004 and
the expiration of all outstanding options granted
thereunder unless terminated sooner by the Company's Board
of Directors (the "Board"). No options may be granted
under the Plan after August 25, 2004 or such earlier date
determined by the Board. The Plan was amended and restated
effective as of May 1, 1997, subject to stockholder
approval. Other than providing for the issuance of
5,000,000 additional shares of Common Stock, the only
changes to the Plan were to delete provisions no longer
applicable because of the reclassification of the Company's
equity securities at the time of the Company's initial
public offering in May 1994, and the occurrence of such
offering and certain conforming changes.
<PAGE>
The purpose of the Plan is to advance the interests of
the Company, its subsidiaries and affiliates, and their
prospective stockholders by providing certain eligible
employees of the Company and its subsidiaries and
affiliates with an opportunity to acquire a proprietary
interest in the Company. Each salaried employee is
eligible to be an optionee, provided he or she is approved
by the Board.
The Plan provides for the granting of nonqualified
stock options, which are options that do not qualify as
incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the
"Code").
The Plan is administered by the Compensation Committee
of the Board (the "Option Plan Committee").
The number of shares of Common Stock reserved for
issuance under the Plan is 13,049,306 subject to adjustment
upon changes in capitalization. Shares may be treasury
shares or authorized but unissued shares.
Under the Plan, the Named Executive Officers and
certain other eligible employees have been granted options
to purchase shares of Common Stock. Options may not be
exercised unless they are both "exercisable" and "vested".
The vesting schedule varies according to the schedule set
forth in each individual option agreement (as defined in
the Plan) and provides for vesting over a period of time.
The options which have been granted to date have generally
become fully vested four years from the date of grant.
Options vest in their entirety upon the death, disability
or retirement, as defined in the Plan, of the optionee.
Non-vested options are forfeited upon any other termination
of employment. The Option Plan Committee, with the consent
of the Board, may accelerate the vesting of options at such
times and under such circumstances as it deems appropriate.
Exercisability of the options is determined in
accordance with the following rules. Upon the earliest to
occur of (i) MSLEF II's transfer of all its Common Stock
or, if MSLEF II distributes its Common Stock to its
partners after its dissolution, the transfer by those
partners of at least 50% of the aggregate Common Stock
received from MSLEF II in its dissolution, (ii) the
eleventh anniversary of the grant date of the options, and
(iii) a public offering of Common Stock by MSLEF II (a
"MSLEF II Public Offering") (each, a "Trigger Date"), all
vested options will become exercisable and all options
which vest subsequently shall become exercisable upon
vesting. However, if a public offering occurs prior to the
Threshold Date (defined below), all vested options and all
options which vest subsequent to a MSLEF II Public Offering
but prior to the Threshold Date will be exercisable in an
amount (as of periodic determination dates) equal to the
product of (a) the number of shares of Common Stock vested
pursuant to the option (whether previously exercised or
not) and (b) the Morgan Percentage (as defined below) as of
such date. In any event and notwithstanding the foregoing
rules, (i) 10% of stock options granted prior to 1993
became exercisable on January 1, 1995, and (ii) a holder's
options will become exercisable from time to time in an
amount equal to the percentage that the number of shares
sold or distributed to its partners by MSLEF II represents
of its aggregate ownership of shares on May 11, 1994 (with
vested options becoming exercisable up to such number
before any non-vested options become so exercisable) less
the number of options, if any, which became exercisable on
January 1, 1995.
<PAGE>
The Threshold Date is the earlier of (x) the date the
MS Holders (as defined in the Plan) shall have received
collectively $200,000,000 in cash and/or other property as
a return of their investment in the Company (as a result of
sales of shares of Common Stock) and (y) the date that the
MS Holders shall have transferred an aggregate of at least
30% of Common Stock owned by the MS Holders as of August
26, 1992.
The Morgan Percentage as of any date is the percentage
determined from the quotient of (a) the number of shares of
Common Stock held as of August 26, 1992, that were
transferred by the MS Holders as of the determination date
and (b) the number of shares of Common Stock outstanding as
of such determination date.
The Option Plan Committee, with the consent of the
Board, may also accelerate the exercise of options at such
time and under such circumstances as it deems appropriate.
The purchase price of the stock purchased pursuant to
the exercise of an option is $10 per share for options
granted as of August 26, 1992 and $12.50 per share for
options granted as of February 15, 1994; and for all other
options, such price must be the fair market value of the
stock on the day the option is granted. Under certain
circumstances, the option price may be adjusted in
accordance with the antidillution provisions of the Plan.
Upon the exercise of any option, the purchase price must be
fully paid in cash or its equivalent or with already owned
shares or shares otherwise issuable upon exercise.
<PAGE>
Certain Federal Income Tax Effects. The following is
a summary discussion of certain federal income tax effects
applicable to options granted under the Plan.
An employee generally will not be taxed and the
Company will not be entitled to a deduction upon the grant
of an option. Rather, at the time of exercise of the
option, the employee will recognize ordinary income for
federal income tax purposes in an amount equal to the
difference between the fair market value of the shares
purchased and the option price. The Company, or its
affiliates and subsidiaries, as the case may be, will
generally be entitled to a tax deduction at such time and
in the same amount that the employee recognizes ordinary
income. Different rules may apply in the case of an
employee who is subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934.
If shares acquired upon exercise of an option are
later sold or exchanged, then the difference between the
sales price and the fair market value of such shares on the
date that the options were exercised, and ordinary income
was recognized with respect thereto, will generally be
taxable as long-term or short-term capital gain or loss (if
the shares are a capital asset of the employee) depending
upon whether the shares have been held for more than one
year after such date.
An employee who pays the option price upon exercise of
a nonqualified stock option, in whole or in part, by
delivering shares already owned by him should not
recognize gain or loss for federal income tax purposes on
the shares surrendered, but otherwise will be taxed
according to the rules described above. With respect to
shares acquired upon exercise that are equal in number to
the shares surrendered, the basis of such shares will be
equal to the basis of the shares surrendered, and the
holding period of shares acquired will include the holding
period of the shares surrendered. The basis of additional
shares received upon exercise will be equal to the fair
market value of such shares on the date that governs the
determination of the employee's ordinary income, and the
holding period for such additional shares will commence on
such date.
<PAGE>
The following table provides information concerning
stock options granted under the Plan during 1996.
<TABLE>
<CAPTION>
New Plan Benefits
1992 Stock Option Plan
Name and Position Number ofUnits<fn1>
<S> <C>
Michael W.J. Smurfit, Chairman of the Board 0
James E. Terrill, Chief Executive Officer 250,000
Richard W. Graham, President 390,000
Eric Priestley, Executive Vice President-Chief Operating Officer 250,000
Patrick J. Moore, Vice President and Chief Financial Officer 57,000
John R. Funke, Vice President 0
All Executive Officers as a Group 1,325,000
All Current Directors Who are Not Executive Officers as a Group 0
All Employees Other than Executive Officers as a Group 172,500
<FN>
<fn1> Consists of options granted to purchase shares of
the Company's Common Stock. As of March 20, 1997, the fair
market value of a share of the Company's Common Stock was
$13.63.
</FN>
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 3 - 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, 1997. 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.
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.
<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.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals submitted for inclusion in the
proxy statement for the 1998 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,
1997.
By Order Of The Board Of Directors
MICHAEL E. TIERNEY
Secretary
April 2, 1997
<PAGE>
APPENDIX A
JEFFERSON SMURFIT CORPORATION
AMENDED AND RESTATED
1992 STOCK OPTION PLAN
(As Amended and Restated effective as of May 1, 1997)
1. Purpose; Types of Awards.
The name of this plan is the Jefferson Smurfit
Corporation Amended and Restated 1992 Stock Option Plan
(the "Plan"). The purpose of the Plan is to advance the
interests of Jefferson Smurfit Corporation ("JSC"),
Jefferson Smurfit Corporation (U.S.) (the "Company"), the
Company's Subsidiaries and affiliates and their respective
stockholders by providing certain eligible employees of the
Company and its Subsidiaries and affiliates with an
opportunity to acquire a proprietary interest in JSC. The
Committee may grant options which shall constitute
"nonqualified stock options" for federal income tax
purposes.
2. Definitions.
As used in this Plan, the following words and phrases
shall have the meanings indicated:
(a) "Asset Sale" shall mean the sale of all or
substantially all of the assets of JSC.
(b) "Board" shall mean the Board of Directors of JSC.
(c) "Cause" shall mean termination of an Optionee's
employment in connection with (1) the Optionee's conviction
for a felony or plea of guilty or nolo contendere with
respect to a felony, (2) the Board's determination that the
Optionee has committed a common law fraud against JSC, the
Company, a Subsidiary or an affiliate of the Company or (3)
action by the Optionee involving willful malfeasance or
gross negligence in connection with the Optionee's
employment, which is materially injurious to the Company, a
Subsidiary or an affiliate of the Company, monetarily or
otherwise.
(d) "Committee" shall mean the Compensation Committee
appointed by the Board, from time to time, in accordance
with JSC's By-Laws.
(e) "Common Equity" shall mean, collectively: the
Class A common stock of JSC, par value $.01 per share; the
Class B common stock of JSC, par value $.01 per share; the
Class C common stock of JSC, par value $.01 per share; the
Class D common stock of JSC, par value $.01 per share; and
the Class E common stock of JSC, par value $.01 per share;
in each case, prior to the Reclassification.
<PAGE>
(f) "Common Stock" shall mean JSC's common stock, par
value $.01 per share.
(g) "Company" shall mean Jefferson Smurfit Corporation
(U.S.), a Delaware corporation.
(h) "Disability" shall mean incapacity due to physical
or mental illness as a result of which the Optionee becomes
eligible for benefits under the applicable long-term
disability plan or policy of the Company or a Subsidiary or
other affiliate of the Company.
(i) "Effective Date" shall mean August 26, 1992.
(j) "Effective Date Options" shall mean Options granted
upon or in connection with the Effective Date of the Plan.
(k) "Employee" shall mean an employee, including
officers, of the Company or a Subsidiary or other affiliate
of the Company or any other individual designated by the
Committee with the approval of the Board.
(l) "Early Retirement" shall mean the termination of
employment of an Optionee for any reason other than for
Cause on or after the earlier of (i) the attainment of age
fifty-five (55) with five years of service with the Company
and (ii) twenty-five years of service with the Company.
(m) "Event of Default" shall mean an event of default
or an event which, with due notice or lapse of time or
both, would constitute an event of default under any
instrument or agreement relating to any Indebtedness (as
defined in the Amended and Restated Credit Agreement, dated
as of May 17, 1996, among JSC, the Company, JSCE, Inc., the
lenders listed therein, Bankers Trust Company and Chemical
Bank, as Senior Managing Agents (the "Credit Agreement")),
of the Company or any Subsidiary, including, without
limitation, the Credit Agreement, the Company's 9.75%
Senior Notes due 2003, its 11.25% Series A Senior Notes due
2004, and its 10.75% Series B Senior Notes due 2002 and any
amendments, modifications, renewals, extensions or
refinancings thereof of the Company.
(n) "Fair Market Value" per share of Common
Stock, as of any particular date, shall mean (1) the
closing sales price per share of Common Stock on the
national securities exchange on which the Common Stock is
principally traded, for the last preceding date on which
there was a sale of such Common Stock on such exchange, or
(2) if the shares of Common Stock are then traded in an
over-the-counter market, the average of the closing bid and
asked prices for the shares of Common Stock in such over-
the-counter market for the last preceding date on which
there was a sale of such Common Stock in such market, or
(3) if the shares of Common Stock are not then listed on a
national securities exchange or traded in an over-the-
counter market, (A) for purposes of Sections 6(f), 6(g),
and 11 hereof, the value determined by the Committee and
(B) for purposes of Section 7(a)(4) hereof, (i) if the Fair
Market Value of Common Stock has been determined pursuant
to the Stockholders Agreement in connection with the Asset
Sale or Merger resulting in the application of Section
7(a)(4), the value of Common Stock pursuant to such
valuation, (ii) if clause (i) has not been complied with,
the value determined by the Board or (iii) if clause (i)
has not been complied with and the Board cannot agree upon
Fair Market Value, the value of Common Stock determined
pursuant to the valuation procedures of the Stockholders
Agreement.
<PAGE>
(o) "JSC" shall mean Jefferson Smurfit Corporation, a
Delaware corporation.
(p) "Merger" shall mean the merger or
consolidation of JSC with or into another corporation.
(q) "Morgan Percentage" shall mean as of any
particular date the percentage determined from the quotient
of (i) the total number of shares of Common Equity held as
of the Effective Date, or Shares of Common Stock into which
such Common Equity was converted pursuant to the
Reclassification, which have been transferred by the MS
Holders as of such date; divided by (ii) the total number
of shares of Common Equity or, Common Stock, as the case
may be, outstanding as of such date.
(r) "Morgan Threshold Date" shall mean the
earlier of (i) the date that the MS Holders shall have
collectively received $200,000,000 in cash or Value of
Other Property (as defined in the Stockholders Agreement),
or a combination thereof as a return of their investment in
the Company, as a result of sales of shares of Common
Equity or shares of Common Stock into which such Common
Equity was converted pursuant to the Reclassification; or
(ii) the date that the MS Holders shall have transferred,
in the aggregate, at least 30% of the Common Equity owned
by the MS Holders as of the Effective Date, including
transfers of the Common Stock into which such Common Equity
was converted pursuant to the Reclassification.
(s) "MS Holders" shall have the meaning ascribed
to such term in the Stockholders Agreement.
(t) "MSLEF II Public Offering" shall mean the
initial sale of Common Stock by the MS Holders to the
public pursuant to a registration statement under the
Securities Act filed with the Securities and Exchange
Commission.
(u) "MSLEF II" shall mean The Morgan Stanley
Leveraged Equity Fund II, L.P., a Delaware limited
partnership.
<PAGE>
(v) "MSLEF II Transfer Date" shall mean the first to
occur of (1) the date MSLEF II transfers all of the Common
Stock held by it pursuant to the Stockholders Agreement, or
(2) if MSLEF II distributes its shares of Common Stock to
its partners pursuant to its dissolution, the date which
such partners have transferred pursuant to the Stockholders
Agreement at least fifty percent (50%) of the aggregate
shares of the Common Stock distributed to them by MSLEF II.
(w) "Nonqualified Stock Option" shall mean an option
not qualified under the Internal Revenue Code of 1986, as
amended.
(x) "Option" or "Options" shall mean a grant to an
Optionee of an option or options to purchase shares of
Common Stock. Options granted by the Committee pursuant to
the Plan shall constitute Nonqualified Stock Options.
(y) "Option Agreement" shall mean a written agreement
between JSC and the Optionee evidencing the grant of an
Option or Options in such form as the Committee shall
approve.
(z) "Option Price" shall mean the purchase price of
each share of Common Stock subject to an Option.
(aa) "Optionee" shall mean those persons who are
granted Options under the Plan and, where the context so
requires, any successor to the Optionee with respect to the
Option.
(bb) "Plan" shall mean the Jefferson Smurfit
Corporation Amended and Restated 1992 Stock Option Plan, as
amended effective as of May 1, 1997, as it may be
subsequently amended from time to time.
(cc) "Reclassification" shall mean the reclassification
of shares of Common Equity into shares of Common Stock
which occurred on or about May 11, 1994.
(dd) "Retirement" shall mean the termination of
employment of an Optionee for any reason other than for
Cause on or after the attainment of age sixty-five (65)
with three years of participation aggregating the years of
participation in the Plan and the Company's 1990 Long-Term
Management Incentive Plan.
(ee) "Stockholders Agreement" means the Stockholders
Agreement, dated as of May 3, 1994 (and as subsequently
amended) among Smurfit International B.V., MSLEF II, JSC,
and certain other parties identified therein.
(ff) "Subsidiary" shall mean any corporation of which
50% or more of the voting stock is owned directly or
indirectly by the Company.
<PAGE>
(gg) "Trigger Date" shall mean the first to occur of
(1) the MSLEF II Transfer Date, (2) the eleventh
anniversary of the date of grant of an Option, (3) the
MSLEF II Public Offering or (4) the discretionary
acceleration of exercisability of an Option by the
Committee with the consent of the Board.
3. Administration.
Notwithstanding anything to the contrary contained in
the Plan, the Plan shall be administered by the Committee.
The Committee shall have the authority in its
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 Options; to
determine the Option Price; to determine, upon the
recommendation of management of the Company, the persons to
whom, and the time or times at which Options shall be
granted and the number of shares to be covered by each
Option granted; to interpret the Plan; to prescribe, amend
and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the Option Agreements
(which need not be identical) entered into in connection
with Options granted under the Plan; and to make all other
determinations deemed necessary or advisable for the
administration of the Plan; provided, however, the
Committee may not adversely affect any right of any
Optionee without either (i) the consent of the Board or
(ii) the Optionee's 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,
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 Optionees.
The Board shall fill all vacancies, however caused, in
the Committee. The Board may from time to time appoint
additional members to the Committee, and may at any time
remove one or more Committee members and substitute others.
The Committee shall hold its meetings at such times and
places as it shall deem advisable. 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 written consent. The
Committee may appoint a chairman and a secretary and make
such rules and regulations for the conduct of its business
as it shall deem advisable, and shall keep minutes of its
meetings.
<PAGE>
No member of the Board or Committee shall be liable for
any action taken or omitted or any determination made in
good faith with respect to the Plan or any award granted
hereunder.
4. Eligibility.
Any Employee shall be eligible to be an Optionee.
5. Common Stock Subject to the Plan.
The maximum number of shares of Common Stock reserved
for the grant of Options shall be 13,049,306 subject to
adjustment as provided in Section 7 hereof. Such shares
may, in whole or in part, be authorized but unissued shares
or shares that shall have been or may be reacquired by JSC.
If any outstanding Option under the Plan should for any
reason expire, be canceled or be terminated, without having
been exercised in full, the shares of Common Stock
allocable to the unexercised, canceled or terminated
portion of such Option shall (unless the Plan shall have
been terminated) become available for subsequent grants of
Options under the Plan.
6. Nonqualified Stock Options.
Options granted pursuant to the Plan are intended to
constitute Nonqualified Stock Options. Each Option granted
pursuant to the Plan shall be evidenced by an Option
Agreement, which Option Agreement shall be subject to and
set forth the following terms and conditions:
(a) Number of Shares. Each Option Agreement shall
state the number of shares of Common Stock to which the
Option relates.
(b) Type of Option. Each Option Agreement shall
specifically state that the Option constitutes a
Nonqualified Stock Option.
(c) Vesting. Options shall vest and become
nonforfeitable pursuant to the schedule set forth in
each Option Agreement; provided, however, that the
Committee, with the consent of the Board, shall have
the authority to accelerate the vesting of any
outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems
appropriate. Except as otherwise provided in an Option
Agreement, upon an Optionee's termination of employment
with the Company and all of its Subsidiaries and
affiliates for any reason other than death, Disability
or Retirement, all outstanding and nonvested Options
awarded to such Optionee shall be forfeited. Upon an
Optionee's death, Disability or Retirement, each
outstanding and nonvested Option shall become fully
vested and nonforfeitable. Vested Options are not
exercisable until the conditions set forth in Section
6(d) hereof are satisfied.
<PAGE>
(d) Exercisability. Upon the occurrence of the
Trigger Date as described in Sections 2(gg)(1) and (2),
all vested Options shall become fully exercisable and
all Options which vest subsequent to either such
Trigger Date shall be exercisable upon vesting. Upon
the occurrence of the Trigger Date described in Section
2(gg)(3) and prior to the Morgan Threshold Date, all
then vested Options and all Options which vest
subsequent to such Trigger Date and prior to the Morgan
Threshold Date shall be exercisable (or upon vesting
shall become exercisable) in an amount (which may be
periodically determined) equal to the product of (i)
the number of shares of Common Stock vested pursuant to
the Option plus the shares of Common Stock previously
vested and exercised pursuant to the Option, all as of
the relevant determination date multiplied by (ii) the
Morgan Percentage as of the relevant determination
date. Upon the occurrence of the Trigger Date
described in Section 2(gg)(3) and after the Morgan
Threshold Date, all vested Options shall become fully
exercisable and all Options which vest subsequent to
such Trigger Date and after the Morgan Threshold Date
shall be exercisable upon vesting, without regard to
the limitation set forth in the immediately preceding
sentence. Notwithstanding anything to the contrary
otherwise contained in this Section 6(d), (i) ten
percent (10%) of the Options granted to each Optionee
with an effective date prior to 1993 became exercisable
on January 1, 1995, and (ii) upon vesting, the Options
of each Optionee shall become exercisable in an amount
(which may be periodically determined) equal to the
percentage that the number of shares of Common Stock
sold or distributed to its partners by MSLEF II
represents of its aggregate ownership of shares of
Common Stock on May 11, 1994, less any number of
Options that previously became exercisable on January
1, 1995, as set forth in clause (i) of this sentence,
or by reason of prior applications of this clause (ii).
The Committee, with the consent of the Board, shall
have the authority to accelerate the exercisability of
any outstanding Option at such times and under such
circumstances as it, in its sole discretion, deems
appropriate.
(e) Term. Except as specifically provided in Section
6(h) hereof, an Option shall expire upon the earlier of
(1) twelve (12) years from the date of grant of such
Option or such earlier date as may be prescribed by
the Committee and set forth in the Option Agreement or
(2) the Optionee's termination of employment with the
Company and all of its Subsidiaries and affiliates.
(f) Option Price. Each Option Agreement shall state
the Option Price. Effective Date Options shall be
granted at an Option Price of $100. The Option Price
for all other Options shall be the Fair Market Value of
the Common Stock on the date the Option is granted.
The Option Price shall be subject to adjustment as
provided in Section 7 hereof.
<PAGE>
(g) Method and Time of Payment. An Option may be
exercised, as to any or all full shares of Common Stock
as to which the Option has become exercisable, by
giving written notice of such exercise to the Committee
or its designated agent; provided, however, that an
Option may not be exercised at any time as to fewer
than 100 shares (or such number of shares as to which
the Option is then exercisable if such number of shares
is less than 100). Each Option Agreement shall require
that the Option Price be paid in full, at the time of
exercise of an Option, in cash, by certified or
cashier's check or in shares of Common Stock (whether
previously owned by, or issuable upon the exercise of
such Option to, the Optionee) having a Fair Market
Value equal to such Option Price, or in a combination
of cash and Common Stock. In its discretion, the
Committee may permit an Optionee to use a "cashless
exercise" procedure to provide for payment of the
Option Price.
(h) Termination of Employment and/or Options.
(1) General. Except as otherwise provided in this
Section 6(h), each Option granted hereunder may,
unless earlier terminated in accordance with its
terms, be exercised (to the extent otherwise vested
upon termination of employment in accordance with the
provisions of Section 6(c) hereof) at any time within
ninety (90) days following the later to occur of (A)
termination of the Optionee's employment with the
Company and all Subsidiaries and affiliates of the
Company for any reason other than for Cause, death,
Disability or Retirement or (B) a Trigger Date;
provided, however, that if the employment of an
Optionee shall be terminated for Cause, all Options
theretofore granted to such Optionee shall, to the
extent not theretofore exercised, expire on the date
of such termination. The Committee may in its
discretion extend the time periods set forth in this
Section 6(h) for exercise of an Option. If the
Committee determines in its sole discretion that an
Optionee has at any time committed a common law fraud
against JSC, the Company, any Subsidiary or any
affiliate of the Company, all Options held by such
Optionee shall immediately terminate and be of no
further force or effect.
<PAGE>
(2) Death, Disability, Early Retirement or
Retirement of Options. If an Optionee shall die
while employed by the Company, a Subsidiary or an
affiliate of the Company, or if an Optionee shall die
within ninety (90) days after the date of termination
of such Optionee's employment other than as a result
of his termination for Cause, or if an Optionee's
employment shall terminate by reason of Disability,
Early Retirement or Retirement, all Options
theretofore granted to such Optionee may, unless
earlier terminated in accordance with their terms, be
exercised (to the extent otherwise vested upon
termination of employment in accordance with
provisions of Section 6(c) hereof) by the Optionee or
by the Optionee's estate or by a person who acquired
the right to exercise such Options by bequest or
inheritance or otherwise by reason of the death or
Disability of the Optionee, at any time within five
(5) years after the later to occur of (A) the date of
death, Disability, Early Retirement or Retirement of
the Optionee or (B) a Trigger Date. In the event
that an Option granted hereunder shall be exercised
by the legal representatives of a deceased or former
Optionee, written notice of such exercise shall be
accompanied by a certified copy of letters
testamentary or equivalent proof of the right of such
legal representative to exercise such Option. If the
Committee determines in its sole discretion that an
Optionee has at any time committed a common law fraud
against JSC, the Company, any Subsidiary or any
affiliate of the Company, all Options held by such
Optionee shall immediately terminate and be of no
further force or effect.
(i) Other Provisions. The Option Agreements
evidencing Options under the Plan shall contain such
other terms and conditions, not inconsistent with the
Plan, as the Committee may determine.
7. Effect of Certain Changes.
(a) If, after the Effective Date, there is any
increase, reduction, change or exchange of the shares of
Common Stock for a different number or kind of shares or
other securities by reason of a reclassification,
recapitalization, reorganization, declaration of
extraordinary dividend, spin-off, stock dividend, stock
split, combination or exchange of shares, repurchase of
shares, or in the event of an Asset Sale or Merger, or in
the event of other similar transactions, the Committee
shall provide for at least one of the following, provided
such act does not cause an Event of Default:
(1) all outstanding Options shall be immediately and
fully exercisable as of the date immediately prior to
the effective date of any such transaction;
(2) the number of shares of Common Stock available
for Options, the number of such shares covered by
outstanding Options, and the Option Price per share of
such Options, shall be proportionately adjusted by the
Committee to reflect any such increase, reduction,
change or exchange of the shares of Common Stock of the
Company, provided that any such adjustment shall
preserve the value inherent in outstanding Options;
<PAGE>
(3) each Option shall be converted into an Option
entitling the holder thereof upon exercise (at its then
Option Price) to receive the kind and amount of shares
of stock and other securities, property, cash or any
combination thereof receivable by a holder of the
number of shares of Common Stock which would be
receivable by such holder upon the exercise of such
Option immediately prior to the effective date of such
transaction; and/or
(4) each outstanding Option whether or not then
exercisable shall be canceled in connection with such
transaction in exchange for a cash payment in an amount
per share subject to such Option equal to the excess of
(A) the greater of (i) the highest Fair Market Value of
the shares of Common Stock during the sixty-day period
ending on the date of such transaction or (ii) the
highest price paid per share of Common Stock to holders
of such shares in any such transaction, over (B) the
Option Price of such Option; provided, however, that
this Section 7(a)(4) shall be applicable only in the
event of an Asset Sale or Merger.
(b) As an alternative to the discretion provided to
the Committee in Section 7(a), in the event of the
dissolution or liquidation of JSC, any corporate separation
or division, including, but not by way of limitation,
split-up, split-off, spin-off or other similar transaction,
or in the event of an Asset Sale or Merger, the Committee
may provide that any or all outstanding Options shall
become immediately and fully exercisable and that:
(1) Optionees shall have the right to exercise such
Options; and/or
(2) each Option granted under the Plan shall
terminate as of the date to be fixed by the Committee,
and that not less than thirty (30) days' written notice
of the date so fixed shall be given to each Optionee,
who shall have the right, during the period of thirty
(30) days preceding such termination, to exercise (to
the extent exercisable) with respect to such Option all
or any part of the shares of Common Stock covered
thereby.
8. Period During Which Options May Be Granted.
Options may be granted pursuant to the Plan from time
to time within a period of twelve (12) years from the
Effective Date.
9. Nontransferability of Options.
Options granted under the Plan shall not be
transferable otherwise than by will or by the laws of
descent and distribution, and Options may be exercised or
otherwise realized, during the lifetime of the
Optionee, only by the Optionee or by his guardian or legal
representative.
<PAGE>
10. Beneficiary.
An Optionee may file with the Committee a written
designation of a beneficiary on such form as may be
prescribed by the Committee and may, from time to time,
amend or revoke such designation. If no designated
beneficiary survives the Optionee, the executor or
administrator of the Optionee's estate shall be deemed to
be the Optionee's beneficiary.
11. Agreement by Optionee Regarding Withholding Taxes.
If the Committee shall so require, as a condition of
exercise of an Option or other realization of an award
granted hereunder, each Optionee shall agree that no later
than the date of exercise or other realization of such
award, the Optionee will pay to JSC or make arrangement
satisfactory to the Committee regarding payment of any
federal, state or local taxes of any kind required by law
to be withheld upon the exercise of an Option. To the
extent provided in the applicable Option Agreement, such
payment may be made by the Optionee with shares of Common
Stock (whether previously owned by, or issuable upon the
exercise of such Option to, such Optionee) having a Fair
Market Value equal to the amount of such taxes.
Alternatively, the Committee may provide that an Optionee
may elect, to the extent permitted or required by law, to
have JSC deduct federal, state and local taxes of any kind
required by law to be withheld upon the exercise of an
Option or realization of any award from any payment of any
kind due to the Optionee. In the event an Optionee does
not pay to JSC, or make arrangements satisfactory to the
Committee regarding the payment of, any such taxes, the
Committee shall be permitted to deduct any such taxes
required to be withheld upon the exercise of an Option or
realization of any award from any payment of any kind due
to the Optionee.
12. Rights as a Stockholder.
An Optionee or a transferee of an Option shall have no
rights as a stockholder with respect to any shares covered
by the award until the date of the issuance of a stock
certificate to him for such shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distribution of
other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in
Section 7 hereof.
<PAGE>
13. No Rights to Employment.
Nothing in the Plan or in any Option granted or Option
Agreement entered into pursuant hereto shall confer upon
any Optionee the right to continue in the employ of the
Company, any Subsidiary or any affiliate of the Company or
to be entitled to any remuneration or benefits not set
forth in the Plan or such Option Agreement or to interfere
with or limit in any way the right of the Company, any
Subsidiary or any affiliate of the Company to terminate
such Optionee's employment.
14. Plan Expenses and Payments.
The expenses (including administrative expenses, but
excluding payments to Optionees) due under the Plan shall
be equitably apportioned in such manner as the Board deems
appropriate among the Company and each Subsidiary or other
affiliate of the Company whose employees participate in the
Plan. Each entity set forth in the preceding sentence
shall be responsible for making any necessary cash payments
to Optionees employed by such entity and shall make such
payments directly to such Employees. This payment
obligation will be an obligation solely of the entity
employing the Optionee, and not of any other entity whose
Employees participate in the Plan.
15. Event of Default.
Notwithstanding anything else contained in this Plan,
no payment shall be made hereunder until the first date as
of which no Event of Default exists and no Event of Default
or violation of applicable law would be caused by the
making of such payment.
16. Amendment and Termination of the Plan.
(a) The Plan may be amended at any time and from time
to time by the Board; provided, however, that approval of
such amendment is given by such vote required by JSC's
Certificate of Incorporation or By-Laws and that no
amendment shall adversely affect any right of any Optionee
with respect to any Option theretofore granted without such
Optionee's written consent; and provided further, if and to
the extent stockholder approval is required as a matter of
law or to secure an exemption from otherwise applicable
law, any amendment that would materially increase the
aggregate number of shares of Common Stock as to which
awards may be granted under the Plan, materially increase
the benefits accruing to Optionees under the Plan, or
materially modify the requirements as to eligibility for
participation in the Plan shall be subject to the approval
of the holders of a majority of the Common Stock, except
that any such increase or modification that may result from
adjustments authorized by Section 7 hereof shall not
require such approval.
(b) The Board may in its discretion terminate this
Plan at any time, provided that approval of such
termination is given, by such vote required by JSC'
Certificate of Incorporation or By-Laws. The Plan shall
also terminate upon a liquidation of JSC.
<PAGE>
17. Governing Law.
The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State
of Delaware without giving effect to the conflict of laws
principles thereof.
18. Effective Date and Duration of the Plan.
This Plan shall be effective as of the Effective Date
and shall terminate on the later of (a) the twelfth
anniversary of the Effective Date and (b) the expiration of
all Options granted hereunder.
19. Restrictions on Public Sale.
In the event of any underwritten public offering of
securities, the Optionee agrees not to effect any public
sale or distribution including any sale pursuant to Rule
144 of any of the Company's common equity securities for
such period as the underwriters of such offering shall
determine.
