<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
STONE CONTAINER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
STONE CONTAINER CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
STONE CONTAINER CORPORATION
150 North Michigan Avenue
Chicago, IL 60601-7568
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 9, 1995
To the Stockholders of
Stone Container Corporation:
The Annual Meeting of Stockholders of Stone Container Corporation (the
"Company") will be held on Tuesday, May 9, 1995 on the Fifty-Seventh Floor, The
First National Bank of Chicago, One First National Plaza, Clark and Madison
Streets, Chicago, Illinois, at 10:30 a.m. (C.D.S.T.) for the following purposes:
1. To elect thirteen directors to serve until the next succeeding Annual
Meeting of Stockholders or until their respective successors are elected
and qualified;
2. To consider and act upon a proposal to approve the Stone Container
Corporation 1995 Long-Term Incentive Plan;
3. To consider and act upon a proposal to approve the Stone Container
Corporation 1995 Key Executive Officer Short-Term Incentive Plan; and
4. To transact such other business as may properly come before the meeting.
Even though you may now plan to attend the Annual Meeting in person, please
complete, date, sign and promptly return the enclosed Proxy in the envelope
enclosed for that purpose, which requires no postage if mailed in the United
States. If you attend the Annual Meeting and desire to withdraw your Proxy and
vote in person, you may do so.
Only stockholders of record at the close of business on March 31, 1995 will
be entitled to vote at the Annual Meeting.
By order of the Board of Directors.
LESLIE T. LEDERER,
SECRETARY
Chicago, Illinois, April 7, 1995
<PAGE>
STONE CONTAINER CORPORATION
150 N. Michigan Avenue
Chicago, Illinois 60601-7568
----------
P R O X Y S T A T E M E N T
I. VOTING AND PROXY
The Annual Meeting of Stockholders of Stone Container Corporation (the
"Company") will be held on Tuesday, May 9, 1995, pursuant to the By-Laws, for
the purposes set forth in the accompanying notice. The only matters which the
Company's management intends to present are those set forth in such notice.
Management knows of no matters which will be presented by others. Should any
other matters properly come before the Annual Meeting, it is the intention of
the persons named in the enclosed Proxy to act upon them according to their best
judgment.
The close of business on March 31, 1995 has been fixed as the record date
for determining stockholders entitled to notice of and to vote at the Annual
Meeting. On that day, the issued and outstanding voting securities of the
Company consisted of 90,523,524 shares of Common Stock, $.01 par value (the
"Common Stock"). The Company first sent this Proxy Statement and enclosed Proxy
to stockholders entitled to notice and to vote at the Annual Meeting on or about
April 7, 1995. Each stockholder has one vote for each share of Common Stock
held, except in the case of the election of directors, and the holders of a
majority of the shares of Common Stock of the Company issued and outstanding and
entitled to vote at the Annual Meeting, present in person or by proxy, will
constitute a quorum for the transaction of business.
At the Annual Meeting, thirteen directors are to be elected with each
stockholder being entitled to cumulate his or her votes. Under cumulative
voting, each stockholder entitled to vote is entitled to vote as many votes as
shall equal the number of shares of Common Stock owned multiplied by the number
of directors to be elected (13). Each stockholder may cast all of such votes for
a single candidate or distribute them among the number of director positions to
be voted for or any two or more of them as such stockholder may see fit. Except
as otherwise instructed by a stockholder, each properly executed and returned
Proxy that grants authority to vote for one or more of the nominees named below
will authorize the proxies to cumulate all votes which the stockholder is
entitled to cast and to allocate such votes among such nominees as such proxies
determine, in their sole and absolute discretion. If individuals other than the
nominees named below are nominated for director of the Company, the proxies
intend to distribute the number of votes as to which they have discretionary
authority with respect to cumulative voting in such manner as will assure the
election of all nominees named below or, if they shall have insufficient votes
for such purpose, the election of as many of such nominees as is possible.
If a quorum is present at the Annual Meeting, the thirteen candidates for
director receiving the greatest number of votes will be elected. Except as
otherwise instructed by a stockholder, each properly executed and returned Proxy
will be voted FOR the election of the nominees named below. The
1
<PAGE>
enclosed Proxy permits each stockholder to withhold authority to vote for one or
more of such nominees, but withholding authority to vote for a director nominee
will not prevent such nominee from being elected.
The enclosed Proxy is solicited by the Board of Directors. If the Proxy in
such form is properly executed and returned, the shares of Common Stock
represented thereby will be voted in accordance with the instructions thereon at
the Annual Meeting. Such Proxy, if given, may be revoked by the stockholder
executing it any time prior to its being voted by giving written notice of such
revocation to the Secretary of the Company or by attending the Annual Meeting
and requesting its revocation at the beginning of the Annual Meeting.
II. DIRECTORS
NOMINEES FOR DIRECTORS
Directors are to be elected to serve until the next succeeding Annual
Meeting of Stockholders or until their successors are elected and qualified. All
of the nominees except Jack M. Greenberg were elected directors at the last
Annual Meeting. It is intended that the Proxy, if given, and unless otherwise
specified thereon, will be voted for the persons named below. In case any of the
named nominees is not a candidate at the Annual Meeting, an event which
management does not anticipate, it is intended that the enclosed Proxy, if
given, and unless it is otherwise specified thereon, may be voted for a
substitute nominee and will be voted for the other nominees named.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON PERCENT OF
YEAR FIRST STOCK COMMON
ELECTED A BENEFICIALLY STOCK
NAME PRINCIPAL OCCUPATION DIRECTOR OWNED(C) OUTSTANDING
- ------------------------------ ---------------------------------------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
Richard A. Giesen* ++ Chairman of the Board and Chief 1974 14,717 (a)
Executive Officer of Continental Glass
& Plastic, Inc.
James J. Glasser ++ Chairman of the Board and Chief 1986 10,200 (a)
Executive Officer of GATX Corporation
Jack M. Greenberg Vice Chairman of the Board and Chief -- 500 (a)
Financial Officer of McDonald's
Corporation
George D. Kennedy+# Former Chairman of the Board of 1989 1,020 (a)
Mallinckrodt Group Inc.
Howard C. Miller, Jr.*+ Consultant 1981 2,066 (a)
John D. Nichols+# Chairman of the Board and Chief 1989 2,040 (a)
Executive Officer of Illinois Tool
Works Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON PERCENT OF
YEAR FIRST STOCK COMMON
ELECTED A BENEFICIALLY STOCK
NAME PRINCIPAL OCCUPATION DIRECTOR OWNED(C) OUTSTANDING
- ------------------------------ ---------------------------------------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
Jerry K. Pearlman*+ ++ Chairman of the Board and Chief 1984 5,172 (a)
Executive Officer of Zenith
Electronics Corporation
Richard J. Raskin Attorney 1983 514,423 (a)(b)
Alan Stone* Consultant 1969 1,066,336 1.2%(b)
Avery J. Stone President of International Design 1969 896,415 1.0%(b)
Corporation
Ira N. Stone Senior Vice President 1969 961,164 1.1%(b)
James H. Stone* President of Stone Management 1969 522,177 (a)(b)
Corporation
Roger W. Stone* Chairman of the Board, President and 1969 1,707,087 1.9%(b)
Chief Executive Officer
<FN>
- --------------
*Member of the Executive Committee ++Member of the Compensation Committee
+Member of the Audit Committee #Member of the Nominating Committee
(a) Does not exceed one percent (1%) of the outstanding Common Stock.
(b) There is included in the common stock beneficially owned in the foregoing
table, Common Stock owned by spouses and associates, except those
associates separately listed in the table, beneficial ownership of which is
disclaimed. See footnote (b) under "Security Ownership by Management".
(c) Each person has sole voting and investment power with respect to the shares
listed.
</TABLE>
INFORMATION AS TO DIRECTORS AND EXECUTIVE OFFICERS
The following information indicates the principal occupation and employment
for the named Directors and Executive Officers for the last five years, unless
otherwise indicated.
DIRECTORS:
RICHARD A. GIESEN, born October 7, 1929, is Chairman of the Board and Chief
Executive Officer of Continental Glass & Plastic, Inc., a packaging distribution
company. Mr. Giesen is a director of GATX Corporation and Continere Corporation.
JAMES J. GLASSER, born June 5, 1934, is Chairman of the Board and Chief
Executive Officer of GATX Corporation, a leasing and financial services company.
Mr. Glasser is a director of General American Transportation Corporation, GATX
Leasing Corporation, The B.F. Goodrich Company, Harris Bankcorp, Inc., Harris
Trust & Savings Bank and Bank of Montreal.
JACK M. GREENBERG, born September 28, 1942, is Vice Chairman of the Board
and Chief Financial Officer of McDonald's Corporation, a food service and
restaurant company, since January, 1992. Previously, Mr. Greenberg was Senior
Executive Vice President of McDonald's Corporation. Mr. Greenberg is a director
of Arthur J. Gallagher and Company and Harcourt General, Inc.
3
<PAGE>
GEORGE D. KENNEDY, born May 30, 1926, is the former Chairman of the Board of
Mallinckrodt Group Inc. and a director of Illinois Tool Works Inc., Kemper
Corporation, Kemper National Insurance Co., Brunswick Corporation, American
National Can Corporation and Scottsman Industries, Inc.
HOWARD C. MILLER, JR., born September 2, 1926, is a consultant in private
practice, consulting in general business matters. Mr. Miller is a director of
Automobile Protection Corporation.
JOHN D. NICHOLS, born September 20, 1930, is Chairman of the Board and Chief
Executive Officer of Illinois Tool Works Inc., a diversified manufacturing
company. Mr. Nichols is a director of Philip Morris Companies, Inc., Household
International, Inc. and Rockwell International Corporation.
JERRY K. PEARLMAN, born March 27, 1939, is Chairman of the Board and Chief
Executive Officer of Zenith Electronics Corporation, a manufacturer of consumer
electronics and cable television products. Mr. Pearlman is a director of First
Chicago Corporation and The First National Bank of Chicago.
RICHARD J. RASKIN, born April 4, 1945, is an attorney in private practice
with the law firm of Richard J. Raskin, Attorney at Law. See Footnote (b) under
"Security Ownership of Management".
ALAN STONE, born February 5, 1928, is a consultant to the Company since his
retirement from the Company on December 31, 1994. Prior to his retirement, Mr.
Stone was Senior Vice President of Purchasing and Transportation of the Company.
See Footnote (b) under "Security Ownership of Management".
AVERY J. STONE, born November 7, 1932, is President of International Design
Corporation, a management and investment company. See Footnote (b) under
"Security Ownership of Management".
IRA N. STONE, born February 4, 1932, Senior Vice President since 1989 is
responsible for Corporate Marketing, Communication and Public Affairs. See
Footnote (b) under "Security Ownership of Management".
JAMES H. STONE, born March 4, 1939, is President of Stone Management
Corporation, a management consulting firm (not affiliated with the Company). Mr.
Stone is a director of Fullerton Metals Company. See Footnote (b) under
"Security Ownership of Management".
ROGER W. STONE, born February 16, 1935, is Chairman of the Board, President
and Chief Executive Officer. Mr. Stone is a director of First Chicago
Corporation, The First National Bank of Chicago, McDonald's Corporation, Morton
International, Inc., Stone-Consolidated Corporation, Option Care, Inc. and
Continere Corporation. See Footnote (b) under "Security Ownership of
Management".
OTHER EXECUTIVE OFFICERS:
ARNOLD F. BROOKSTONE, born April 8, 1930, Executive Vice President, Chief
Financial and Planning Officer since 1991. Previously, Mr. Brookstone was Senior
Vice President, Chief Financial and Planning Officer. Mr. Brookstone is a
director of Stone-Consolidated Corporation, Donnelly Corporation, MFRI, Inc.,
Rembrandt Funds and Continere Corporation.
JAMES DOUGHAN, born November 9, 1933, President and Chief Executive Officer
of Stone-Consolidated Corporation since 1993. Previously, Mr. Doughan was
Executive Vice President, Containerboard and Paper and Pulp Marketing and Sales.
Mr. Doughan is a director of Stone-Consolidated Corporation.
MORTY ROSENKRANZ, born February 21, 1928, Executive Vice President,
Administration since 1993. Previously, Mr. Rosenkranz was Executive Vice
President North American Integrated Packaging.
4
<PAGE>
JOHN D. BENCE, born June 18, 1932, Senior Vice President, European Packaging
Operations, joined the Company in December 1988 and was elected Vice President
in March 1989 and Senior Vice President in January 1991.
THOMAS W. CADDEN, SR., born September 4, 1933, Senior Vice President and
General Manager Industrial and Retail Packaging since 1993. Previously, Mr.
Cadden was Senior Vice President and General Manager of the Corrugated Container
Division.
THOMAS P. CUTILLETTA, born July 5, 1943, Senior Vice President and Corporate
Controller, is the Company's Chief Accounting Officer. Mr. Cutilletta was
elected Senior Vice President in January 1991.
GERALD M. FREEMAN, born April 18, 1937, Senior Vice President and General
Manager, Forest Products Division since 1987, is responsible for the operations
of that division.
JAMES B. HEIDER, born July 27, 1943, Senior Vice President, North American
Containerboard, Paper and Pulp Division since December, 1988.
MATTHEW S. KAPLAN, born March 13, 1957, Senior Vice President and General
Manager, Corrugated Container Division, since June, 1993. Previously, Mr. Kaplan
was Vice President and General Manager, Retail Bag Division. Mr. Kaplan is the
son-in-law of Roger W. Stone.
GORDON L. JONES, born November 7, 1949, Vice President since January, 1995
and General Manager -- Worldwide Market Pulp Sales and Export Containerboard and
Kraft Paper Sales and President of Stone Container International since June,
1993. Previously, Mr. Jones was Division Vice President of Containerboard and
Kraft Paper Marketing from January, 1991 and prior to that Division Vice
President Export Containerboard/Kraft Paper Sales from April 1, 1989.
WILLIAM J. KLAISLE, born September 13, 1941, Vice President Corporate
Development since April, 1993. Previously, Mr. Klaisle was Vice President,
Corporate Marketing and Communications.
LESLIE T. LEDERER, born July 20, 1948, Vice President, Secretary and Counsel
since 1987.
MICHAEL B. WHEELER, born February 15, 1945, Vice President since 1984 and
Treasurer and Assistant Secretary since 1981.
MEETINGS AND COMMITTEES OF DIRECTORS
During 1994, the Board of Directors met seven times. As to meetings of the
Committees of the Board, the Audit Committee met three times; the Compensation
Committee met twice and the Executive Committee and the Nominating Committee did
not meet. Each of the incumbent directors attended at least 75% of the aggregate
of the meetings of the Board and the Committees of which he was a member.
The Audit Committee of the Board meets, as necessary, to receive and review
the results of the audits of the Company's books and records performed by the
independent auditors, to review matters relating to internal auditing,
accounting policies, procedures and adjustments, and to participate in the
selection of independent auditors for the following year.
The Compensation Committee of the Board meets, as necessary, to review the
Company's programs for the development of management personnel and to consider
recommendations and proposals to be made to the Board on directors' fees and
management compensation.
5
<PAGE>
The Nominating Committee of the Board meets, as necessary, to seek out,
review the qualifications of, and propose to the Board, nominees for election as
directors. The Company's By-Laws provide, in general, that any stockholder
entitled to vote in the election of directors generally may nominate one or more
persons for election as directors at a meeting of stockholders at which
directors are to be elected only if written notice of such stockholder's intent
to make such nomination has been received by the Secretary of the Company not
less than 60 nor more than 90 days prior to such meeting. The By-Laws further
specify the requirements of such notice. Stockholders wishing to suggest
nominees for the Board may address their suggestions in writing to the Secretary
of the Company, Stone Container Corporation, 150 N. Michigan Avenue, Chicago, IL
60601.
The Executive Committee of the Board exercises the power and authority of
the Board of Directors as may be necessary during intervals between meetings of
the Board of Directors, subject to such limitations as are provided by law, the
Company's By-Laws or resolutions of the Board of Directors.
The members of the Audit, Compensation and Nominating Committees, none of
whom is an employee of the Company, and members of the Executive Committee, are
indicated under "Nominees for Directors".
CERTAIN TRANSACTIONS
During 1994, Sunland Sales Company, a Company controlled by Mr. Avery Stone,
a nominee for reelection to the Board of Directors, owed the Company $1,291,000
as a result of sales by the Company of kraft paper.
During 1994, the Company sold to Zenith Electronics Corporation products
valued at approximately $5.3 million. Mr. Jerry Pearlman, who is the Chairman
and President of Zenith Electronics Corporation, is a nominee for reelection to
the Board of Directors.
During 1994, the Company received a management services fee of $600,000 from
Illinois Tool Works, Inc., and sold kraft paper and poly sheeting to Illinois
Tool Works, Inc. approximating $3.7 million. In addition, Illinois Tool Works,
Inc. sold materials and supplies to the Company approximating $6.4 million. Mr.
John Nichols is Chairman and CEO of Illinois Tool Works, Inc. and is a nominee
for reelection to the Board of Driectors.
During 1994, the Company leased equipment from GATX Corporation and its
subsidiaries at an annual lease amount of approximately $1.8 million. Mr. James
Glasser is Chairman and CEO of GATX Corporation and is a nominee for reelection
to the Board of Directors.
During 1994, the Company sold to McDonald's Corporation retail bags for
approximately $3.4 million. Mr. Jack Greenberg, who is the Vice Chairman of the
Board and Chief Financial Officer of McDonald's Corporation, is a nominee for
election to the Board of Directors.
During 1984, the Company loaned to Mr. James Doughan, President and Chief
Executive Officer of Stone-Consolidated Corporation the amount of $347,250 in
connection with Mr. Doughan's relocation to Chicago upon his assuming his duties
with the Company. Mr. Doughan subsequently repaid a portion of such loan. In
addition, in 1994, Mr. Doughan borrowed $137,482.50 which was subsequently
repaid, with interest, on January 20, 1995 in conjunction with Mr. Doughan's
move to Montreal to leave an outstanding balance of $275,000. During 1988, the
Company made a loan to Mr. James B. Heider, Senior Vice President North American
Containerboard, Paper and Pulp Division, in the amount of
6
<PAGE>
$320,000 in connection with his move to Chicago. Mr. Heider has subsequently
repaid a portion of such loan; the outstanding balance as of March 1, 1995 was
$250,000. Except for Mr. Doughan's 1994 loan, such loans bear no interest and
are repayable on demand by the Company. The interest rate imputed on such loans
was 4.8% during 1994. Such imputed interest is reported as compensation for
these individuals.
During 1994, Mr. James B. Heider failed to file on a timely basis one report
required by Section 16(a) of the Exchange Act with respect to one sale of the
Company's Common Stock.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 15, 1995, the following persons were known to the Company to
own beneficially more than 5% of the outstanding Common Stock of the Company:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF
BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OWNED(1) OUTSTANDING
- ---------------------------------------------- ----------------- --------------
<S> <C> <C>
FMR Corporation............................... 14,369,858(2) 15.23%
82 Devonshire Street,
Boston, MA 02109
Capital Growth Management Ltd. Partnership.... 6,035,100 6.68%
One International Place,
Boston, MA 02110
Goldman, Sachs & Co........................... 4,652,173 5.10%
85 Broad Street,
New York, NY 10004
<FN>
- --------------
(1) Information with respect to beneficial ownership is based upon information
furnished by each owner.
(2) Includes (i) 3,445,278 shares resulting from the assumed conversion of
$39,793,000 principal amount of the Company's 8 7/8% Convertible Senior
Subordinated Notes due 2000, (ii) 447,186 shares of common stock resulting
from the assumed conversion of $5,165,000 principal amount of the 8 7/8%
Convertible Senior Subordinated Notes due 2000 described in (i) and (iii)
59,515 shares of Common Stock resulting from the assumed conversion of
$2,020,000 principal amount of the Company's 6 3/4% Convertible
Subordinated Debentures due 2007.
</TABLE>
7
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
As of March 1, 1995, each of the executive officers named in the Summary
Compensation Table, individually, and all directors and executive officers as a
group, beneficially owned the following shares of Common Stock of the Company:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK PERCENT OF
BENEFICIALLY COMMON STOCK
NAME OWNED OUTSTANDING
- ---------------------------------------------- ------------ ---------------
<S> <C> <C>
Arnold F. Brookstone.......................... 126,668 (a)
James Doughan................................. 48,846 (a)
James B. Heider............................... 43,295 (a)
Morty Rosenkranz.............................. 90,005 (a)
Roger W. Stone................................ 1,707,087 1.9%(b)
All directors and executive officers as a 11,101,657 12.2%(b)
group........................................
<FN>
- --------------
(a) Does not exceed one percent (1%) of the outstanding Common Stock.
(b) The shares of Common Stock owned by all directors and executive officers
as a group include those of Jerome H. Stone and Marvin N. Stone, each of
whom is a Founding Director and as such is, pursuant to the Company's
By-Laws, entitled to attend and participate at meetings of directors but
have no vote. Jerome H. Stone, Marvin N. Stone and Norman H. Stone
(deceased) are brothers. Alan Stone and Ira N. Stone are sons of Norman H.
Stone. Avery J. Stone and Roger W. Stone are sons of Marvin N. Stone.
James H. Stone is the son and Richard J. Raskin is the son-in-law of
Jerome H. Stone. Matthew S. Kaplan is the son-in-law of Roger W. Stone.
The members of the Stone family own an aggregate (but not as a group) of
approximately 12,775,000 shares of Common Stock (approximately 14% of the
outstanding shares).
</TABLE>
III. COMPENSATION
The following table sets forth the compensation paid to, as well as the
value of stock awards earned by, the Company's Chief Executive Officer and the
Company's four other most highly compensated executive officers during the past
three fiscal years.
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ------------ --------------
RESTRICTED LONG-TERM
STOCK INCENTIVE PLAN
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(1)(2) PAYOUTS(3)
- ------------------------------- --------- -------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Roger W. Stone 1994 $ 730,000 -- $ 395,604 $ -0-
Chairman, President and 1993 730,000 -- 395,604 -0-
Chief Executive Officer 1992 730,000 -- 389,360 172,150
Morty Rosenkranz 1994 420,000 -- 156,553 -0-
Executive Vice President 1993 410,000 -- 156,545 -0-
1992 391,250 -- 154,836 65,340
James Doughan 1994 407,000 $271,412(4) n/a(5) -0-
President and Chief 1993 373,000 -- 131,000 -0-
Executive Officer -- 1992 358,000 -- 118,856 65,340
Stone-Consolidated
Corporation
Arnold F. Brookstone 1994 322,000 -- 104,844 -0-
Executive Vice President 1993 310,000 -- 113,004 -0-
1992 295,000 -- 104,295 61,270
James B. Heider 1994 285,000 -- 87,774 -0-
Senior Vice President 1993 275,000 -- 87,770 -0-
1992 253,250 -- 87,210 25,300
<FN>
- --------------
(1) Common Stock awards made under the Long-Term Incentive Plan do not vest
until the fifth anniversary of the award.
(2) Dividends on shares of restricted stock will be paid at the same time and
at the same rate as dividends on all other shares of the Company's Common
Stock. The aggregate number and value of each named executive's restricted
stock holdings as of December 31, 1994 are as follows: Mr. Stone, 158,153
shares, $2,747,908; Mr. Rosenkranz, 49,792 shares, $865,136; Mr. Doughan,
-0-shares $-0-; Mr. Brookstone, 32,916 shares, $571,916; Mr. Heider,
27,017 shares, $469,420. Mr. Doughan is not eligible to receive restricted
stock awards under the Company's Long-Term Incentive Plan.
(3) Cash payouts under the Long-Term Incentive Plan reflected in this column
are on account of awards made and earned over the preceding five year
period.
(4) In 1994, Mr. Doughan earned a bonus as a result of the operations of
Stone-Consolidated Corporation (Stone-Consolidated), the Company's 74.6%
owned Canadian subsidiary. The compensation of Mr. Doughan is set by the
Compensation Committee of the Board of Directors of Stone-Consolidated, a
Canadian public company.
(5) In 1994, Mr. Doughan received 19,904 phantom shares in Stone-Consolidated
which at the time of the grant had a fair market value of $15 per share
(Cdn) for an aggregate value of $298,560 (Cdn). The phantom shares will
vest on the fifth anniversary of the grant.
</TABLE>
9
<PAGE>
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
The following table sets forth the long-term incentive plan performance unit
awards made to each of the named executives in 1994.
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
OTHER PERIOD NON-STOCK PRICE BASED PLANS(1)
UNTIL -------------------------------
NUMBER OF MATURATION OR THRESHOLD TARGET MAXIMUM
NAME UNITS PAYOUT ($) ($) ($)
- ------------------------------------------------- ---------- -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Roger W. Stone................................... 3,956 5 years 197,800 395,600 593,400
Morty Rosenkranz................................. 1,566 5 years 78,300 156,600 234,900
James Doughan.................................... n/a(2) 5 years n/a(2) n/a(2) n/a(2)
Arnold F. Brookstone............................. 1,048 5 years 52,400 104,800 157,200
James B. Heider.................................. 878 5 years 43,900 87,800 131,700
<FN>
- --------------
(1) Cash payout under the Company's Long-Term Incentive Plan.
(2) Mr. Doughan is not eligible to receive performance units under the
Company's Long-Term Incentive Plan. Mr. Doughan is eligible to receive
performance units and cash pay-outs under Stone-Consolidated's Long-Term
Incentive Plan, which mirrors the mechanics of the Company's Plan.
However, the criteria for the payout are dependent upon the targeted
performance of Stone-Consolidated. Mr. Doughan received 1,179 performance
units which have a range of payments of $149,300 (Cdn), $298,600 (Cdn) and
$447,900 (Cdn) for the threshold, target and maximum awards, respectively.
</TABLE>
In addition to the restricted stock awards reflected in the Summary
Compensation Table, the Company's Long-Term Incentive Plan provides for
incentive awards to each named executive officer, in the form of performance
units, based upon the long-term performance of the Company. Such awards may be
earned upon the expiration of the five-year period after the date of award to
the extent that the Company has achieved the designated performance measures for
such five-year performance cycle. Awards are granted each year based upon each
participant's level of responsibility and average salary mid-point level
projected as of the end of each five-year performance cycle with awards ranging
from 40% to 100% of such salary mid-point. Performance unit awards are payable
in cash, if earned, upon the completion of each five-year performance cycle. The
targeted performance goal for each performance cycle is realization by the
Company of a designated average corporate return on beginning equity. Cash
payments (from 0% to 150% of the performance unit award) are then determined by
the degree to which the Company attains or exceeds the targeted goal, ranging
from a minimum of 88% to a maximum of 133% of such goal. No cash payments will
be made if the Company does not achieve at least 88% of such goal. For example,
the cash payment, if any, to be paid to a participant under the plan will be in
an amount equal to (i) 100% of the value of the performance unit at the time of
its award if the Company attains the targeted goal at the end of the performance
cycle; (ii) 150% of such value if the Company attains 133% of such targeted
goal; (iii) 50% of such value if the Company attains 88% of such targeted goal,
or (iv) nothing, if the Company does not attain 88% of its targeted goal.
SALARIED EMPLOYEES RETIREMENT PLAN
The Stone Container Corporation Salaried Employees Retirement Plan provides
for the payment of a monthly pension to retiring salaried employees equal to the
larger of (a) 1.67% of his or her average monthly compensation based on the
highest 60 consecutive months compensation (within the last 180
10
<PAGE>
months) for each year of service to a maximum of 30 years service, reduced by
3/4 of 1% of the employee's covered compensation under social security or (b) 1%
of such average monthly compensation (not greater than $900) for each year of
service. This benefit is then reduced, if applicable, by the monthly retirement
income that could be provided on an actuarial equivalent basis from the
employee's participation in certain previously sponsored retirement plans of the
Company. Employees become vested for retirement income benefits after completion
of 5 years of service or, if earlier, upon reaching age 65. The payment or
accrual in respect of any specified person is not and cannot readily be
separately or individually calculated by the actuaries for this defined benefit
plan. The following table shows the estimated annual benefits payable upon
retirement to persons in specified remuneration and years-of-service
classifications.
PENSION PLAN TABLE
ILLUSTRATIVE PROJECTED ANNUAL RETIREMENT BENEFIT
FOR SELECTED REMUNERATION AND YEARS OF SERVICE CLASSIFICATIONS(A)
<TABLE>
<CAPTION>
YEARS OF SERVICE AT RETIREMENT
---------------------------------------------------------------
REMUNERATION(B) 15 20 25 30 35
- ------------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 100,000....................................... $ 25,050 $ 33,400 $ 41,750 $ 50,100 $ 50,100
150,000....................................... 37,575 50,100 62,625 75,150 75,150
200,000....................................... 50,100 66,800 83,500 100,200 100,200
250,000....................................... 62,625 83,500 104,375 125,250 125,250
300,000....................................... 75,150 100,200 125,250 150,300 150,300
400,000....................................... 100,200 133,600 167,000 200,400 200,400
600,000....................................... 150,300 200,400 250,500 300,600 300,600
800,000....................................... 200,400 267,200 334,000 400,800 400,800
1,000,000...................................... 250,500 334,000 417,500 501,000 501,000
<FN>
- --------------
(a) Benefit shown would be reduced by 3/4 of 1% of the retiree's covered
compensation under social security while employed by the Company, as
defined in the Plan, and would be limited to the extent required by the
provisions of the Internal Revenue Code of 1986. Under federal law, an
employee's benefits under a qualified pension plan such as the Stone
Container Corporation Salaried Employees Retirement Plan are limited to
certain maximum amounts. The Company maintains the Stone Container
Corporation Excess Benefit Plan, which supplements the benefits of any
participant in the qualified pension plan by direct payment of a lump sum
or by an annuity, on an unfunded basis, of the amount by which any
participant's benefits under the pension plan are limited by law. The
table illustrates the amount of annual pension without regard to such
limitations for an employee retiring in 1995 calculated on a single life
annuity basis.
(b) In estimating the annual benefit it is assumed that the five year average
monthly compensation is equal to 1994 earnings.
</TABLE>
The base compensation covered by the Plan includes salary and any bonus
earned. Since no bonuses were paid to the individuals named in the summary
compensation table for the years 1992, 1993 and 1994, the base compensation
covered by the Plan for those years is equal to the amounts set
11
<PAGE>
forth in the Salary column of that table. The years of service as of January 1,
1995 for such individuals are: 38.4 for Mr. Stone, 30.9 for Mr. Rosenkranz, 10.9
for Mr. Doughan, 29.7 for Mr. Brookstone and 14.2 for Mr. Heider.
Mr. James Doughan, President and Chief Executive Officer of
Stone-Consolidated, has entered into an agreement with the Company whereby the
Company has agreed to pay Mr. Doughan a supplemental retirement benefit
commencing when Mr. Doughan attains age 65. The supplemental retirement benefit
is computed by taking the difference between $12,500 per month and the amount
Mr. Doughan will receive from the Stone Container Corporation Salaried Employees
Retirement Plan and, if applicable, the Stone Container Corporation Excess
Benefit Plan at age 65. The estimated annual pension benefits to Mr. Doughan if
he retires in 1995 would be $12,500 from all sources. Such supplemental monthly
benefit will be payable to Mr. Doughan only in the event Mr. Doughan is either
an employee of the Company at age 65 or becomes disabled while employed. In the
event Mr. Doughan dies either while an employee of Stone or after commencement
of such supplemental monthly benefit, his surviving spouse will receive 50% of
such supplemental monthly benefit for the remainder of her life.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual retainer of $25,000 for their
services plus $1,000 per meeting for attendance at Board and Board Committee
meetings. In addition, the Chairman of the Audit Committee and the Chairman of
the Compensation Committee receive an additional $3,000 per year retainer. Under
the Company's unfunded deferred director fee plans, a director may elect to
defer payment of his director's fees so that payment would be made in ten equal
annual installments commencing in the year following the director's retirement
from the Board of Directors, plus earnings on the deferred amounts. In addition,
the Company maintained a policy pursuant to which it appointed a director with
ten or more years service as a director to be a consultant to the Company for a
period of five years after retirement from the Board with an annual consulting
fee, equal to an annual fee based upon the director's retainer in effect at the
date of retirement. On January 23, 1995, this policy was amended to reduce the
service requirement to five years of service and to retain the Director as a
consultant for the number of years equal to the number of years the Director
served on the Board with an annual consulting fee equal to the director's
retainer in effect at the date of retirement. The compensation of the members of
the Board of Directors will be increased commencing May 9, 1995 by the value of
the annual grant of 300 shares of the Company's Common Stock if the stockholders
approve the 1995 Long-Term Incentive Plan which is described under "Proposal to
Adopt The Long-Term Incentive Plan" of this Proxy Statement.
EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
The Board of Directors has authorized management to execute continuity
contracts for corporate and divisional officers (other than Roger W. Stone) who,
with certain exceptions approved by the Board of Directors, have been employed
by the Company for at least five years, providing for continuation of salary,
bonus (based upon the average bonus for the last three calendar years) and
certain fringe benefits, in the event of involuntary termination of employment
after a change in control as defined in such continuity contracts, which
includes the acquisition by a person or a group other than those which are
exempt of 20% or more of the Common Stock of the Company. Payments under these
contracts
12
<PAGE>
would continue until the earliest of three years from the date of such officer's
involuntary termination, age 70, death, disability or an offer of comparable
employment. The Company has entered into such contracts with each of the
individuals named in the cash compensation table other than Mr. Stone. The
amount of such payments to be received by the individuals named in the Summary
Compensation Table is dependent upon whether such individual obtains employment
elsewhere. Any amounts received by such individual from other employment will
offset the payment made pursuant to these contracts.
The Company entered into consulting agreements in 1974 with each of Messrs.
Jerome H. Stone, Marvin N. Stone and Norman H. Stone (deceased), under which
each serves or was to serve as a consultant to the Company for a fee of $80,000
per annum during his lifetime and, should he die leaving a widow, $40,000 per
annum to such widow during her lifetime. Mr. Norman H. Stone died during 1985
and his widow receives the specified payments. The consulting fees are in
addition to the retirement benefits previously noted.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Roger W. Stone, Chairman of the Board, President and Chief Executive Officer
of the Company, serves as a director of Continere Corporation, whose Chairman
and Chief Executive Officer, Richard A. Giesen, serves on the Compensation
Committee of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, consisting of Mr. Giesen as Chairman, Mr.
Glasser and Mr. Pearlman, has provided the following Board Compensation
Committee Report on Executive Compensation.
COMPENSATION POLICY
Under the direction of the Compensation Committee of the Board of Directors,
the Company's executive compensation program is based upon a "pay for
performance" philosophy and is designed to attract and retain highly qualified,
key executives by offering competitive base compensation supplemented with
performance-based incentives linked to corporate performance factors and
position within the Company. The three components of the Company's total
compensation program for executive officers are (i) base salary, (ii) annual
(short-term) incentive compensation awards and (iii) long-term incentive
compensation awards. The total compensation package is designed to be
competitive with compensation programs offered to comparable executive officers
in a hybrid model group consisting of a pool of executive officers who are
currently employed in similar positions in comparable paper companies and with
other companies with sales in excess of $1 billion (the "Peer Group"). The
Company believes that its total compensation practices will be competitive if
the Company performs within the targets established by the Company both on the
basis of short-term and long-term goals. The Company did not meet the objectives
of its policy in 1994 due to the Company's recent performance.
BASE SALARIES
All executive officer base salaries are reviewed and adjustments, if any,
are approved annually by the Compensation Committee. The Company's executive
officers' base salaries are targeted to be in the 50th percentile of the average
base salaries of similarly situated executive officers within the Peer Group,
and a salary range is established for each position with the midpoint of the
range being set at such 50th
13
<PAGE>
percentile level. Any adjustment in an executive officer's base salary is made
each year based upon an evaluation of individual performance subject to
corporate salary budget guidelines and the relationship of current salary level
to the midpoint of the applicable salary range. In addition, the Compensation
Committee retains the right to take into account factors such as the overall
corporate performance in establishing any adjustments. The Company did not
achieve the objectives of its policy in 1994 due to the recent performance of
the Company.
In March, 1994, the Compensation Committee reviewed executive officer
salaries to consider adjustments thereto. Based upon the Company's current
performance and economic conditions, the Committee determined that no
adjustments should be made to current salary levels of the CEO. The Compensation
Committee did award the other executive officers named in the summary
compensation table increases in compensation based upon their individual
performance.
SHORT-TERM INCENTIVE AWARDS
The short-term incentive award component of the Company's executive
compensation program is based on the Company's consolidated operating division
profits and the Company's consolidated net income for the fiscal year just
completed. The program provides for the payment of cash incentive awards to
participants to the extent that actual consolidated operating division profits
or operating division profits, as applicable and the Company's consolidated net
income meet or exceed certain target levels. Early in the calendar year, the
Committee establishes targeted consolidated operating division profit at four
distinct levels which trigger incentive payouts ranging from 0% to 100%. The
target levels are established based upon budgeted consolidated operating
division profits for the fiscal year. To the extent that the Company attains a
targeted performance level, each participant is entitled to receive a cash
incentive award. Such cash awards are based upon the performance level attained
and each participant's level of responsibility within the Company, ranging from
40% to 100% of the participant's base salary multiplied by the incentive payout
percentage established for the targeted performance level attained. The four
levels of targeted profit are competent, commendable, excellent, and
distinguished. A participant will earn anywhere from 0% to 100% dependent on the
target level attained. In the event, however, that the Company does not have
positive consolidated net income for the relevant year all participants will be
limited to 2/3 of the maximum payout regardless of the consolidated operating
division profits or operating division profits, as applicable. For purposes of
the foregoing, consolidated operating division profits is defined as profit
prior to interest expense, corporate expenses, non-recurring charges and income
taxes.
No short-term incentive awards were earned in 1994 by the CEO or the
executive officers named in the summary compensation table except for Mr.
Doughan because the Company failed to attain positive consolidated net income
which was the minimum target objective for these individuals. Mr. Doughan earned
his 1994 bonus as a result of his position with Stone-Consolidated. Mr.
Doughan's compensation is governed by the Compensation Committee of the Board of
Directors of Stone-Consolidated.
LONG-TERM INCENTIVE COMPENSATION
The long-term incentive element of the executive compensation program
provides for incentive awards based upon the long-term performance of the
Company. Typically, such awards consist of a combination of shares of Common
Stock, restricted to preclude sale or transfer for a five-year period, and cash
compensation which may be earned upon the expiration of the five-year period to
the extent that the Company has achieved the designated performance goals for
such performance cycle. Awards are granted based upon each participant's level
of responsibility and average salary mid-point level
14
<PAGE>
projected through the end of the five-year performance cycle with awards ranging
from 40% to 100% of such salary mid-point. One-half of each award is made in
restricted stock and one-half is made in performance units payable in cash, if
earned, upon the completion of the five-year performance cycle. The targeted
performance goal for each performance cycle is realization by the Company of a
designated average corporate return on beginning equity. The restricted stock
portion of the award is not subject to the attainment of these goals. Cash
payments (from 0% to 150% of the performance unit award) are then determined by
the degree to which the Company attains or exceeds the targeted goal, ranging
from a minimum of 88% to a maximum of 133% of such goal. The current target goal
for the participants is a 15% return on equity. No cash payments will be made if
the Company does not achieve at least 88% of such goal. For example, the cash
payment, if any, to be paid to a participant under the plan will be in an amount
equal to (i) 100% of the value of the performance unit at the time of its award
if the Company attains the targeted goal at the end of the performance cycle;
(ii) 150% of such value if the Company attains 133% of such targeted goal; (iii)
50% of such value if the Company attains 88% of such targeted goal, or (iv)
nothing, if the Company does not attain 88% of its targeted goal.
There were no performance unit payouts in 1994 to the CEO or any of the
executive officers named in the summary compensation table for the five-year
period ended December 31, 1993 because the Company did not attain the return on
equity target for the five-year cycle. In 1994, the CEO was awarded 39,072
shares of restricted stock for the January 1994 -- December 1999 performance
cycle pursuant to the terms of the plan described above. In 1995, the Committee
has determined that the long-term incentive element of executive compensation
will consist primarily of grants of stock options. The 1995 award will primarily
be made under the 1993 Incentive Stock Option Plan. The Compensation Committee
intends to provide future grants of stock options to the Company's executives,
if the Company's stockholders approve the 1995 Long-Term Incentive Plan to be
presented at the 1995 Annual Meeting.
The limitation on the tax deductibility of executive compensation in excess
of $1 million under the Omnibus Budget Reconciliation Act of 1993 may impact the
Company. Accordingly, if the taxable compensation of any named individual during
any year is reasonably anticipated to exceed $1 million, short-term incentive
awards and long-term incentive compensation payments to such individual which
are not qualified performance-based compensation will be deferred to the extent
necessary until the earlier of (i) the first year in which the payment of the
deferred amount (or any portion thereof) would be deductible by the Company or
(ii) the year following the individual's retirement.
COMPENSATION COMMITTEE
Richard A. Giesen -- Chairman
James J. Glasser
Jerry K. Pearlman
15
<PAGE>
IV. PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in the
Company's cumulative total stockholder return on its Common Stock (on a dividend
reinvested basis utilizing the closing price on December 31, 1989 as the base)
with the cumulative total return of the S & P Composite 500 Stock Index and the
S & P Paper and Forest Products Composite Index for the period of five years
commencing January 1, 1990 and ended December 31, 1994.
COMPARISON OF FIVE YEAR TOTAL RETURN*
AMONG STONE CONTAINER CORP., S&P 500 INDEX AND
S&P PAPER & FOREST PRODUCTS INDEX**
[GRAPH]
<TABLE>
<CAPTION>
S&P
PAPER & STONE
S&P 500 FOREST PROD CONTAINER
----------- ----------- -----------
<S> <C> <C> <C>
1989......................................................... 100.00 100.00 100.00
1990......................................................... 96.89 90.34 50.53
1991......................................................... 126.42 114.59 117.80
1992......................................................... 136.05 131.02 78.87
1993......................................................... 149.76 144.40 45.32
1994......................................................... 151.74 150.46 81.81
Feb 1995..................................................... 161.74 161.90 110.06
</TABLE>
V. PROPOSAL TO ADOPT THE LONG-TERM INCENTIVE PLAN
GENERAL
The Board of Directors is proposing for stockholder approval the Stone
Container Corporation 1995 Long-Term Incentive Plan (the "1995 Plan"). The
purposes of the 1995 Plan are (i) to align the interests of the Company's
shareholders and recipients of awards under the 1995 Plan by increasing the
proprietary interest of such recipients in the Company's growth and success and
(ii) to advance the interests of the Company by attracting and retaining
officers, other employees and non-employee directors. Under the 1995 Plan, the
Company may grant to officers and other employees non-qualified stock options,
incentive stock options (within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")), stock appreciation rights
("SARs"), restricted stock, bonus stock and performance shares. On the date of
each annual meeting of stockholders of the Company, commencing with the 1995
Annual Meeting of Stockholders, 300 shares of Common Stock will be granted
automatically to the non-employee directors of the Company immediately following
such annual meeting. All employees of the Company and its subsidiaries
(approximately 25,000 persons) and 11 non-employee directors are eligible to
participate in the 1995 Plan. Reference is made to Exhibit A of this Proxy
Statement for the complete text of the 1995 Plan which is summarized below.
STOCKHOLDER VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR approval of the 1995 Plan. Approval of the 1995 Plan
requires the affirmative vote of the majority of the shares of
16
<PAGE>
common stock present or represented by Proxy at the annual meeting. Abstentions
and broker non-votes will not be counted as votes cast. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR APPROVAL OF THE STONE CONTAINER CORPORATION 1995 LONG-TERM
INCENTIVE PLAN.
DESCRIPTION OF THE 1995 PLAN
ADMINISTRATION. The 1995 Plan will be administered by a committee of the
Board of Directors (the "Committee") consisting of not less than three directors
who are not eligible to receive discretionary awards under the 1995 Plan or any
other plan of the Company.
Subject to the express provisions of the 1995 Plan, and except for shares
awarded to non-employee directors, the Committee will have the authority to
select eligible officers and other employees who will receive awards and
determine all of the terms and conditions of each award. Each award will be
evidenced by a written agreement containing such provisions not inconsistent
with the 1995 Plan as the Committee shall approve. The Committee will also have
authority to prescribe rules and regulations for administering the 1995 Plan and
to decide questions of interpretation or application of any provision of the
1995 Plan. Except with respect to grants to officers of the Company, the
Committee may delegate some or all of its power and authority to administer the
1995 Plan to the Chief Executive Officer or other executive officer of the
Company.
AVAILABLE SHARES. Under the 1995 Plan, the number of shares of Common Stock
available for grants of awards, other than incentive stock options, to officers,
other employees and non-employee directors in any calendar year will be 1.5% of
the outstanding Common Stock as of January 1 of such year beginning January 1,
1995, plus the number of shares which shall have become available for grants of
awards, other than incentive stock options, under the 1995 Plan in prior years
but which shall not have become subject to such an award in any prior year. The
number of shares of Common Stock available for grants of incentive stock options
under the 1995 Plan in any calendar year, beginning with calendar year
17
<PAGE>
1995, is 200,000 shares, plus the number of shares which shall have become
available for grants of incentive stock options under the 1995 Plan in prior
years, but which shall not have become subject to the grant of incentive stock
options in any prior year. The number of shares available under the 1995 Plan is
subject to adjustment in the event of a stock split, stock dividend,
recapitalization, reorganization, merger or other similar event or change in
capitalization. In general, shares covered by an option, SAR or other award that
expires or terminates unexercised or is cancelled or forfeited would again be
available for awards under the 1995 Plan. The maximum number of shares of Common
Stock with respect to which options and SARs may be granted during any calendar
year to any participant in the 1995 Plan is 300,000, subject to adjustment as
described above.
CHANGE IN CONTROL. In the event of certain acquisitions of 20% or more of
the then outstanding shares of Common Stock, a change in the Board of Directors
resulting in the incumbent directors ceasing to constitute at least two-thirds
of the Board of Directors, the approval by stockholders of a reorganization,
merger or consolidation (unless the Company's stockholders receive 60% or more
of the stock of the resulting company) or the approval by stockholders of a
liquidation, dissolution or sale of all or substantially all of the Company's
assets, all awards will be cashed-out by the Company except, in the case of a
merger or similar transaction in which the stockholders receive publicly traded
common stock, all outstanding options and SARs will become exercisable in full,
all other awards will vest, and each option, SAR and other award will represent
a right to acquire the appropriate number of shares of common stock received in
the merger or similar transaction.
EFFECTIVE DATE, TERMINATION AND AMENDMENT. If approved by stockholders, the
1995 Plan will become effective as of May 9, 1995, the date of approval by the
Board of Directors, and will terminate 10 years thereafter, unless terminated
earlier by the Board of Directors. The Board of Directors may amend the 1995
Plan at any time except that, without the approval of the stockholders of the
Company, no amendment may, among other things (i) increase the number of shares
of Common Stock available under the 1995 Plan, (ii) reduce the minimum purchase
price of a share of Common Stock subject to an option or the base price of an
SAR or (iii) extend the term of the 1995 Plan.
NON-QUALIFIED STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. The period for
the exercise of a non-qualified stock option or SAR, the exercise price of an
option and the base price of an SAR will be determined by the Committee,
provided that, in either case, the price may not be less than the fair market
value of the Common Stock on the date of grant. The exercise of an SAR entitles
the holder thereof to receive (subject to withholding taxes) shares of Common
Stock (which may be restricted stock), cash or a combination thereof with a
value equal to the difference between the fair market value of the Common Stock
on the exercise date and the base price of the SAR.
In the event of termination of employment of a holder of a non-qualified
stock option or SAR for any reason other than for retirement on or after age 55,
disability, death, voluntary termination by such holder or termination by the
Company for cause, each non-qualified stock option and SAR will be exercisable
only to the extent that such option or SAR is exercisable on the effective date
of such termination and may thereafter be exercised after the date of such
termination until the earlier of the date set forth in the agreement relating to
such option or SAR and the expiration of such option or SAR. In the event of
termination of employment by reason of retirement on or after age 55, disability
or death, each non-qualified stock option and SAR will become fully exercisable
and may thereafter be exercised by such holder or such holder's executor,
administrator or similar person until the earlier of the date set forth in
18
<PAGE>
the agreement relating to such option or SAR and the expiration of such option
or SAR. In the event of voluntary termination of employment by the holder of a
non-qualified stock option or SAR or the involuntary termination of employment
of such holder by the Company for cause, each non-qualified stock option and SAR
will terminate on the date of such termination of employment. If the holder of a
non-qualified stock option or SAR dies during the period of exercisability of
such option or SAR following termination of employment for any reason other than
voluntary termination or termination for cause, each non-qualified stock option
or SAR will be exercisable only to the extent that such option or SAR was
exercisable on the date of such holder's death and may thereafter be exercised
until the earlier of the date set forth in the agreement relating to such option
or SAR and the expiration of such option or SAR.
INCENTIVE STOCK OPTIONS. No incentive stock option will be exercisable more
than 10 years after its date of grant, and in the case of a recipient of an
incentive stock option who owns more than 10 percent of the voting power of all
shares of capital stock of the Company (a "ten percent holder"), the option must
be exercised within five years of its date of grant. The option exercise price
of an incentive stock option will not be less than the fair market value of the
Common Stock on the date of grant of such option and, in the case of a recipient
of an incentive stock option who is a ten percent holder, the option exercise
price will be the price required by the Code, currently 110% of fair market
value. To the extent that the aggregate fair market value of Common Stock with
respect to which an incentive stock option is exercisable for the first time by
any individual during a calendar year exceeds $100,000, such option is treated
as a non-qualified stock option. In the event of termination of employment of a
holder of an incentive stock option by reason of retirement on or after age 55,
such option (including any related tandem SAR) will become fully exercisable and
may thereafter be exercised until the earlier of three months after such
retirement and the expiration of such incentive stock option or SAR. In the
event of termination of employment of a holder of an incentive stock option by
reason of permanent and total disability (as defined in section 22(e)(3) of the
Code), such option (including any related tandem SAR) will become fully
exercisable and may thereafter be exercised until the earlier of one year (or
such shorter period set forth in the agreement relating to such option or SAR)
after such termination and the expiration of such incentive stock option or SAR.
In the event of termination of employment by reason of death, each incentive
stock option (including any related tandem SAR) will become fully exercisable
and may thereafter be exercised by such holder's executor, administrator or
similar person until the earlier of the date set forth in the agreement relating
to such option or SAR and the expiration of such option or SAR. In the event of
voluntary termination of employment by the holder of an incentive stock option
or the involuntary termination of employment of such holder by the Company for
cause, each incentive stock option (including any related tandem SAR) will
terminate on the date of such termination of employment. In the event of a
termination of employment for any reason other than retirement on or after age
55, permanent and total disability, death, cause or voluntary termination, each
incentive stock option (including any related tandem SAR) will be exercisable
only to the extent such option or SAR is exercisable on the effective date of
such termination and may thereafter be exercised until the earlier of three
months after such termination and the expiration of such incentive stock option
or SAR. If the holder of an incentive stock option dies during the one-year
period following termination of employment and such termination was by reason of
permanent and total disability, or during the three- month period following
termination of employment for any reason other than permanent and total
disability, death, cause or voluntary termination, each incentive stock option
(including any related tandem SAR) will be
19
<PAGE>
exercisable only to the extent such option or SAR is exercisable on the date of
the holder's death and may thereafter be exercised until the earlier of the date
set forth in the agreement relating to such option or SAR and the expiration of
such option or SAR.
BONUS STOCK AND RESTRICTED STOCK AWARDS. The 1995 Plan provides for the
grant of (i) bonus stock awards, which are vested upon grant, and (ii) stock
awards which may be subject to a restriction period ("restricted stock"). An
award of restricted stock may be conditioned upon, or subject to, attainment of
preestablished performance measures. If a restricted stock award is tied to
performance measures, the fair market value of the Common Stock subject to such
an award granted to a "covered employee" within the meaning of Section 162(m) of
the Code will not exceed $2,000,000 at the time the performance measures are
satisfied, if such a limitation is necessary to ensure the deductibility of the
award. Shares of restricted stock will be non-transferable and subject to
forfeiture if the holder does not remain continuously in the employment of the
Company during the restriction period or, if the restricted stock is subject to
performance measures, if such performance measures are not attained during the
restriction period; provided, however, that in the event of termination of
employment, any cancellation or forfeiture of the portion of a restricted stock
award which is then subject to a restriction period will be subject to the terms
set forth in the agreement relating to such award. Unless otherwise determined
by the Committee, the holder of a restricted stock award will have rights as a
stockholder of the Company, including the right to vote and receive dividends
with respect to the shares of restricted stock.
PERFORMANCE SHARE AWARDS. The 1995 Plan also provides for the grant of
performance shares. Each performance share is a right, contingent upon the
attainment of performance measures within a specified performance period, to
receive one share of Common Stock, which may be restricted stock, or the fair
market value of such performance share in cash. Prior to the settlement of a
performance share award in shares of Common Stock, the holder of such award will
have no rights as a stockholder of the Company with respect to the shares of
Common Stock subject to the award. Performance shares will be non-transferable
and subject to forfeiture if the specified performance measures are not attained
during the applicable performance period; provided, however, that in the event
of termination of employment, any cancellation or forfeiture of the portion of a
performance share award which is then subject to a performance period will be
subject to the terms set forth in the agreement relating to such award. If an
employee who has been granted a Performance Share Award is a "covered employee"
within the meaning of Section 162(m) of the Code at the time of settlement of
such award, the maximum amount payable under such award shall be $2,000,000.
PERFORMANCE MEASURES. Under the 1995 Plan, the vesting or payment of
performance share awards and the vesting of certain awards of restricted stock
will be subject to the satisfaction of certain performance measures. All
officers and other employees are eligible to be selected by the Committee to
receive such awards. The performance measures applicable to a particular award
will be determined by the Committee. No such awards are currently outstanding
and, no performance measures have been designated by the Committee. Under the
1995 Plan, such performance measures may be one or more of the following: Common
Stock value, earnings per share, return to stockholders (including dividends),
return on equity, earnings of the Company, revenues, market share, cash flow,
cost reduction measures or any combination of the foregoing. If the performance
measure or measures applicable to a performance share award is satisfied, the
holder of the award would receive either (i) the number of shares of Common
Stock equal to the performance shares subject to the award or (ii) the number of
performance
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<PAGE>
shares subject to such award multiplied by (i) the closing sale price of a share
of Common Stock as reported in the New York Stock Exchange Composite
Transactions at the time the performance shares vest. In the case of restricted
stock awards which are subject to one or more performance measures, the amount
of compensation would equal the number of shares of restricted stock subject to
such award multiplied by the value of a share of Common Stock at the time such
restricted stock vests.
NON-EMPLOYEE DIRECTOR SHARES. Under the 1995 Plan, on May 9, 1995 (or, if
later, on the date on which a person is first elected or begins to serve as a
non-employee director other than by reason of termination of employment), and,
thereafter, on the date of each annual meeting of stockholders of the Company,
each person who is a non-employee director after such meeting of stockholders
shall be granted 300 shares of Common Stock (which amount shall be pro-rated if
such non-employee director is first elected or begins to serve as a non-employee
director on a date other than the date of an annual meeting of stockholders).
The annual amount of shares awarded shall be subject to adjustment in the event
of a stock split, stock dividend, recapitalization, reorganization, merger or
other similar event or change in capitalization.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary of the
U.S. federal income tax consequences of awards made under the 1995 Plan.
STOCK OPTIONS. A participant will not recognize any income upon the grant
of a stock option. A participant will recognize compensation taxable as ordinary
income (and subject to income tax withholding) upon exercise of a non- qualified
stock option equal to the excess of the fair market value of the shares
purchased over their exercise price, and the Company will be entitled to a
corresponding deduction. A participant will not recognize income (except for
purposes of the alternative minimum tax) upon exercise of an Incentive Stock
Option. If the shares acquired by exercise of an Incentive Stock Option are held
for the longer of two years from the date the option was granted and one year
from the date it was exercised, any gain or loss arising from a subsequent
disposition of such shares will be taxed as long-term capital gain or loss, and
the Company will not be entitled to any deduction. If, however, such shares are
disposed of within the above-described period, then in the year of such
disposition the participant will recognize compensation taxable as ordinary
income equal to the excess of the lesser of (i) the amount realized upon such
disposition and (ii) the fair market value of such shares on the date of
exercise over the exercise price, and the Company will be entitled to a
corresponding deduction.
SARS. A participant will not recognize any taxable income upon the grant of
an SAR. A participant will recognize compensation taxable as ordinary income
(and subject to income tax withholding) upon exercise of an SAR equal to the
fair market value of any shares delivered and the amount of cash paid by the
Company upon such exercise, and the Company will be entitled to a corresponding
deduction.
RESTRICTED STOCK. A participant will not recognize taxable income at the
time of the grant of shares of restricted stock, and the Company will not be
entitled to a tax deduction at such time, unless the participant makes an
election to be taxed at the time restricted stock is granted. If such election
is not made, the participant will recognize taxable income at the time the
restrictions lapse in an amount equal to the excess of the fair market value of
the shares at such time over the amount, if any, paid for such shares. The
amount of ordinary income recognized by a participant by making the
above-described election or upon the lapse of the restrictions is deductible by
the Company as compensation expense, except to the extent the limit of section
162(m) of the Code applies. In addition, a participant receiving
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dividends with respect to restricted stock for which the above-described
election has not been made and prior to the time the restrictions lapse will
recognize compensation taxable as ordinary income (subject to income tax
withholding), rather than dividend income, in an amount equal to the dividends
paid and the Company will be entitled to a corresponding deduction, except to
the extent the limit of section 162(m) of the Code applies.
BONUS STOCK. A participant will recognize compensation taxable as ordinary
income (and subject to income tax withholding) in respect of awards of shares of
bonus stock at the time such shares are transferred in an amount equal to the
then fair market value of such shares and the Company will be entitled to a
corresponding deduction, except to the extent the limit of section 162(m) of the
Code applies.
PERFORMANCE SHARES. A participant will not recognize taxable income upon
the grant of performance shares and the Company will not be entitled to a tax
deduction at such time. Upon the settlement of performance shares, the
participant will recognize compensation taxable as ordinary income (and subject
to income tax withholding) in an amount equal to the fair market value of any
shares delivered and any cash paid by the Company, and the Company will be
entitled to a corresponding deduction, except to the extent the limit of section
162(m) of the Code applies.
NON-EMPLOYEE DIRECTOR SHARES. Each non-employee director will recognize
compensation taxable as ordinary income in respect of shares of Common Stock
awarded at the time such shares are transferred in an amount equal to the then
fair market value of such shares, and the Company will be entitled to a
corresponding deduction.
SECTION 162(M) OF THE CODE. Section 162(m) of the Code generally limits to
$1 million the amount that a publicly held corporation is allowed each year to
deduct for the compensation paid to each of the corporation's chief executive
officer and the corporation's four most highly compensated officers. However,
certain types of compensation paid to such executives are not subject to the $1
million deduction limit. One such type is "qualified performance-based"
compensation. Qualified performance-based compensation must satisfy all the
following requirements: (i) compensation must be payable solely on account of
the attainment of preestablished objective performance measures, (ii) the
performance measures must be determined by a committee consisting solely of two
or more "outside directors," (iii) the material terms under which the
compensation is to be paid, including the performance measures, must be approved
by a majority of the corporation's stockholders, and (iv) the committee
administering the plan must certify that the applicable performance measures
were satisfied before payment of any performance-based compensation is made. The
Committee will consist solely of "outside directors" as defined for purposes of
section 162(m) of the Code. As a result, and based on certain proposed
regulations published by the Internal Revenue Service, certain compensation
under the 1995 Plan, such as that payable with respect to options and certain
SARs, is not expected to be subject to the $1 million deduction limit under
section 162(m) of the Code, but other compensation payable under the 1995 Plan,
such as grants of Bonus Stock and Restricted Stock with restrictions not based
upon attainment of performance measures, is expected to be subject to such
limit.
The following table sets forth the number of shares of Common Stock which
would be granted to the indicated persons or groups if the 1995 Plan is approved
by stockholders.
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1995 LONG-TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE NUMBER OF SHARES
- ----------------------------------------------------------- ------------ -------------------
<S> <C> <C>
All Non-Employee Directors as a Group
(11 persons).............................................. $ 75,488* 3,300
<FN>
- --------------
* Based on the closing price of Common Stock on March 31, 1995, as reported in
THE WALL STREET JOURNAL as New York Stock Exchange Composite Transactions.
</TABLE>
VI. PROPOSAL TO ADOPT THE KEY EXECUTIVE OFFICER SHORT-TERM INCENTIVE PLAN
GENERAL
The Key Executive Officer Short-Term Incentive Plan (the "Plan") is an
annual bonus plan designed to provide certain senior managers of the Company or
its subsidiaries who have been designated as "Key Executive Officers" with
incentive compensation based upon the achievement of preestablished performance
measures. The Board believes that an annual incentive plan is an important
vehicle to measure the yearly performance of executives and to reward the
executives for the actual results achieved during the year. Presently, there are
approximately 15 employees who will be eligible to be selected to participate in
the Plan. Subject to stockholder approval of the Plan, only the individuals
named in the compensation table will be selected to participate in the Plan for
1995. Reference is made to Exhibit B to this Proxy Statement for the complete
text of the Plan which is summarized below.
STOCKHOLDER VOTE REQUIRED AND BOARD OF DIRECTOR RECOMMENDATION
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR approval of the Plan. Approval of the Plan requires the
affirmative vote of the majority of the shares of Common Stock present or
represented by Proxy at the annual meeting. Abstentions and broker non-votes
will not be counted as votes cast. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE STONE CONTAINER CORPORATION KEY EXECUTIVE OFFICER SHORT-TERM
INCENTIVE PLAN.
DESCRIPTION OF THE PLAN
The Plan is designed to comply with the exception for qualified
performance-based compensation under Section 162(m) of the Code, which limits
the tax deductibility by the Company of compensation paid to officers named in
the Proxy Statement in excess of $1 million. Because the Company's Short Term
Incentive Plan ("STIP") may not comply with Section 162(m) of the Code, the Plan
will allow the Committee to designate certain of the senior managers as
participants in the Plan rather than the STIP and thereby maintain the
deductibility by the Company of compensation paid to these managers under the
Plan. The Board intends to modify other plans where practical to comply with the
legislation and maintain the deductibility of executive compensation.
Under the Plan, for each calendar year ("Award Year"), the Committee will
set a target award dollar amount for each manager designated a Key Executive
Officer by the Committee. A Key Executive Officer's target award may not exceed
150% of the officer's annual base salary and in no event shall exceed
$2,000,000. The Committee will also establish performance measures in accordance
with the Plan. The performance measures may relate to a particular area of the
business for which the participant
23
<PAGE>
is responsible, to the Company as a whole, or a combination of both. The
Committee will establish a payout table which will determine the amount payable
based upon the achievement of the predetermined performance measures.
The performance measures may include one or more of the following
performance measures for an Award Year:
a. Financial performance of the Company and its consolidated subsidiaries. Such
financial performance may only include net income and/or operating earnings.
b. Attainment of certain value of a share of Common Stock for a specified
period of time, earnings per share, return on equity, return to stockholders
including dividends, cash flow, market share, cost reduction goals,
revenues, earnings of the Company or any combination of the foregoing.
The Target Awards, payout table and performance measures will be determined on
or before March 31 of each year.
After the end of the calendar year, the Committee will review the
performance measures and determine the percentages of the Target Awards which
will be paid out under the Plan in accordance with the payout tables established
by the Committee. The performance measures, to the extent appropriate, may be
adjusted to compensate for extraordinary changes which may have occurred during
the year, including extraordinary items, accounting changes, income from
discontinued operations, and the impact of material events that have been
publicly disclosed.
If the Plan had been in effect for 1994, none of the individuals listed in
the compensation table would have received an award.
Notwithstanding any provision in the Plan to the contrary, the Plan may only
be operated in a manner that would allow all awards under the Plan to be
deductible by the Company under Section 162(m) of the Code.
VII. INDEPENDENT AUDITORS
The Board of Directors has upon recommendation of its Audit Committee
selected the certified public accounting firm of Price Waterhouse LLP as
independent auditors of the accounts of the Company for the year ending December
31, 1995. Price Waterhouse LLP served as independent auditors of the Company
during the past fiscal year. Price Waterhouse LLP has advised the Company that
neither it, nor any of its partners, has or has had any direct or indirect
financial interest in the Company or any of its subsidiaries. It is expected
that a representative of Price Waterhouse LLP will be present at the Annual
Meeting of Stockholders. Such representative may make a statement if he or she
desires to do so, and is expected to be available to respond to appropriate
questions.
VIII. DISCRETIONARY AUTHORITY
While the notice of the Annual Meeting of Stockholders calls for the
transaction of such other business as may properly come before the meeting,
management is not aware of any matters to be
24
<PAGE>
presented for action by the stockholders at the meeting other than as set forth
in this Proxy Statement. The enclosed Proxy gives discretionary authority,
however, in the event that any additional matters should be presented.
IX. COST OF SOLICITATION; STOCKHOLDER PROPOSALS
The Company will bear the costs of its solicitation of proxies. In addition
to the use of the mails, proxies may be solicited by personal interview,
telephone, telegram and telefax by the directors, officers and employees of the
Company. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation material
to the beneficial owners of stock held of record by such persons, and the
Company may reimburse such custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection therewith.
Stockholders are referred to the Company's Annual Report for the fiscal year
ended December 31, 1994 which has been mailed to stockholders, for financial and
other information about the activities of the Company for such fiscal year. The
Annual Report is not to be deemed incorporated in the Proxy Statement nor is it
to be deemed a part of the proxy solicitation material. In addition, D.F. King &
Co., Inc., 77 Water Street, New York, NY 10005 has been engaged to solicit
proxies for the Company. The anticipated fees of D.F. King & Co., Inc. are
$7,500 plus certain expenses.
Under the rules of the Securities and Exchange Commission (the "SEC"), in
order to be considered for inclusion in the Company's Proxy Statement for the
1996 Annual Meeting of Stockholders (to be held May 14, 1996), a stockholder
proposal must be received by the Secretary of the Company at the offices of the
Company at 150 N. Michigan Avenue, Chicago, IL 60601-7568 no later than the
close of business on December 15, 1995, as well as meet other SEC requirements.
In addition, the Company's By-Laws provide, in general, that any stockholder who
proposes to bring any item of business before an annual meeting of stockholders
must be a stockholder entitled to vote at such meeting and written notice of
such business must have been received by the Secretary of the Company, not less
than 60 nor more than 90 days prior to such annual meeting, except as provided
by the By-Laws.
By order of the Board of Directors.
Leslie T. Lederer
Chicago, Illinois -- April 7, 1995
25
<PAGE>
EXHIBIT A
STONE CONTAINER CORPORATION
1995 LONG-TERM INCENTIVE PLAN
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1995 Long-Term Incentive Plan (the
"PLAN") of Stone Container Corporation (the "COMPANY") and its subsidiaries from
time to time (individually a "SUBSIDIARY" and collectively the "SUBSIDIARIES")
are to align the interests of the Company's stockholders and the recipients of
awards under this Plan by increasing the proprietary interest of such recipients
in the Company's growth and success and to advance the interests of the Company
by attracting and retaining officers and other employees and other persons who
are not officers or employees of the Company for services as directors of the
Company. For purposes of this Plan, references to employment by the Company
shall also mean employment by a Subsidiary.
1.2 CERTAIN DEFINITIONS.
"AGREEMENT" shall mean the written agreement evidencing an award hereunder
between the Company and the recipient of such award.
"BOARD" shall mean the Board of Directors of the Company.
"BONUS STOCK" shall mean shares of Common Stock which are not subject to a
Restriction Period or Performance Measures.
"BONUS STOCK AWARD" shall mean an award of Bonus Stock under this Plan.
"CAUSE" shall have the meaning set forth in Section 2.3(d).
"CHANGE IN CONTROL" shall have the meaning set forth in Section 6.8(b).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Committee designated by the Board, consisting of
three or more members of the Board, each of whom shall be (i) a "disinterested
person" within the meaning of Rule 16b-3 under the Exchange Act and (ii) an
"outside director" within the meaning of Section 162(m) of the Code, subject to
any transition rules applicable to the definition of outside director.
"COMMON STOCK" shall mean the common stock, $.01 par value, of the Company.
"COMPANY" shall mean Stone Container Corporation and any successor thereto.
"DISABILITY" shall mean the inability of the holder of an award to perform
substantially such holder's duties and responsibilities for a continuous period
of at least six months, as determined solely by the Committee.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXEMPT PERSON" shall mean any lineal descendant of Joseph H. Stone.
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<PAGE>
"FAIR MARKET VALUE" shall mean the closing sale price of a share of Common
Stock as reported in the New York Stock Exchange Composite Transactions on the
date as of which such value is being determined, or, if the Common Stock is not
listed on the New York Stock Exchange, the closing sale price of a share of
Common Stock on the principal national stock exchange on which the Common Stock
is traded on the date as of which such value is being determined, or, if there
shall be no reported sale for such date, on the next preceding date for which a
sale was reported; provided that if Fair Market Value for any date cannot be so
determined, Fair Market Value shall be determined by the Committee by whatever
means or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate.
"FREE-STANDING SAR" shall mean an SAR which is not issued in tandem with, or
by reference to, an option, which entitles the holder thereof to receive, upon
exercise, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock with
respect to which such SARs are exercised.
"INCENTIVE STOCK OPTION" shall mean an option to purchase shares of Common
Stock that meets the requirements of Section 422 of the Code, or any successor
provision, which is intended by the Committee to constitute an Incentive Stock
Option.
"INCUMBENT BOARD" shall have the meaning set forth in Section 6.8(b)(2).
"MATURE SHARES" shall mean shares of Common Stock for which the holder
thereof has good title, free and clear of all liens and encumbrances and which
such holder either (i) has held for at least six months or (ii) has purchased on
the open market.
"NON-EMPLOYEE DIRECTOR" shall mean any director of the Company who is not an
officer or employee of the Company or any Subsidiary.
"NON-QUALIFIED STOCK OPTION" shall mean a stock option which is not an
Incentive Stock Option.
"PERFORMANCE MEASURES" shall mean the criteria and objectives, established
by the Committee, which shall be satisfied or met (i) as a condition to the
exercisability of all or a portion of an option or SAR, or (ii) as a condition
to the grant of a Restricted Stock Award, or (iii) during the applicable
Restriction Period or Performance Period as a condition to the holder's receipt,
in the case of a Restricted Stock Award, of the shares of Common Stock subject
to such award, or, in the case of a Performance Share Award, of payment or
receipt of shares with respect to such award. Such criteria and objectives may
include one or more of the following: the attainment by a share of Common Stock
of a specified Fair Market Value for a specified period of time, earnings per
share, return to stockholders (including dividends), return on equity, earnings
of the Company, revenues, market share, cash flow or cost reduction goals, or
any combination of the foregoing. If the Committee desires that compensation
payable pursuant to any award subject to Performance Measures be "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code, the Performance Measures shall be established by the Committee no later
than the end of the first quarter of the Performance Period (or such other time
designated by the Internal Revenue Service).
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<PAGE>
"PERFORMANCE PERIOD" shall mean a period designated by the Committee during
which the Performance Measures applicable to a Performance Share Award shall be
measured.
"PERFORMANCE SHARE" shall mean a right, contingent upon the attainment of
specified Performance Measures within a specified Performance Period, to receive
one share of Common Stock, which may be Restricted Stock, or in lieu thereof,
the Fair Market Value of such Performance Share in cash.
"PERFORMANCE SHARE AWARD" shall mean an award of Performance Shares under
the Plan.
"PERMANENT AND TOTAL DISABILITY" shall have the meaning set forth in Section
22(e)(3) of the Code or any successor thereto.
"RESTRICTED STOCK" shall mean shares of Common Stock which are subject to a
Restriction Period.
"RESTRICTED STOCK AWARD" shall mean an award of Restricted Stock under this
Plan.
"RESTRICTION PERIOD" shall mean a period designated by the Committee during
which the Common Stock subject to a Restricted Stock Award may not be sold,
transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed
of, except as provided in this Plan or the Agreement relating to such award.
"SAR" shall mean a stock appreciation right which may be a Free-Standing SAR
or a Tandem SAR.
"STOCK AWARD" shall mean a Restricted Stock Award or a Bonus Stock Award.
"TANDEM SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Qualified Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock subject to
such option, or portion thereof, which is surrendered.
"TAX DATE" shall have the meaning set forth in Section 6.5.
"TEN PERCENT HOLDER" shall have the meaning set forth in Section 2.1(a).
1.3 ADMINISTRATION. This Plan shall be administered by the Committee. Any
one or a combination of the following awards may be made under this Plan to
eligible officers and other employees of the Company and its Subsidiaries: (i)
options to purchase shares of Common Stock in the form of Incentive Stock
Options or Non-Qualified Stock Options, (ii) SARs in the form of Tandem SARs or
Free-Standing SARs, (iii) Stock Awards in the form of Restricted Stock or Bonus
Stock and (iv) Performance Shares. The Committee shall, subject to the terms of
this Plan, select eligible officers and other employees for participation in
this Plan and determine the form, amount and timing of each award and, if
applicable, the number of shares of Common Stock, the number of SARs and the
number of Performance Shares subject to an award, the exercise price or base
price associated with the award, the time and conditions of exercise or
settlement of the award, the ability to defer any payment of an award and all
other terms and conditions of the award, including, without limitation, the form
of the Agreement evidencing the award. The Committee shall, subject to the terms
of this Plan, interpret this Plan and the application thereof, establish rules
and regulations for the administration of this Plan and may impose, incidental
to
A-3
<PAGE>
the grant of an award, conditions with respect to the award, such as limiting
competitive employment or other activities. All such interpretations, rules,
regulations and conditions shall be conclusive and binding on all parties.
The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other executive officer of the Company as the
Committee deems appropriate; provided, however, that the Committee may not
delegate its power and authority with regard to (i) the grant of an award under
this Plan, or the terms of such award, to any person who is a "covered employee"
within the meaning of Section 162(m) of the Code or who, in the Committee's
judgment, is likely to be a covered employee at any time during the period an
award hereunder to such employee would be outstanding or (ii) the selection for
participation in this Plan of an officer or other person subject to Section 16
of the Exchange Act or decisions concerning the timing, pricing or amount of an
award to such an officer or other person.
No member of the Board of Directors or Committee, and neither the Chief
Executive Officer nor any other executive officer to whom the Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interpretation, construction or determination made in connection with
this Plan in good faith, and the members of the Board of Directors and the
Committee and the Chief Executive Officer or other executive officer shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including attorneys' fees) arising therefrom to
the full extent permitted by law, except as otherwise may be provided in the
Company's Certificate of Incorporation or By-laws, and under any directors' and
officers' liability insurance that may be in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by a majority of the members of the Committee without a meeting.
1.4 ELIGIBILITY. All employees, including officers of the Company and its
Subsidiaries are eligible to participate in this Plan. Participants in this Plan
shall consist of such officers or other employees of the Company and its
Subsidiaries as the Committee in its sole discretion may select from time to
time or as may be selected pursuant to delegated authority in accordance with
Section 1.3. The Committee's selection of a person to participate in this Plan
at any time shall not require the Committee to select such person to participate
in this Plan at any other time. Non-Employee Directors shall be eligible to
participate in this plan in accordance with Article V.
1.5 SHARES AVAILABLE. Subject to adjustment as provided in Section 6.7,
the total number of shares of Common Stock available for grants of all awards
under this Plan in any calendar year, other than Incentive Stock Options, shall
be one and one-half percent (1.5%) of the outstanding Common Stock as of January
1 of such year beginning January 1, 1995, plus the number of shares of Common
Stock which shall have become available for grants of awards under this Plan,
other than Incentive Stock Options, in any and all prior calendar years, but
which shall not have become subject to the grant of such awards in any prior
year. Subject to adjustment as provided in Section 6.7, the total number of
shares of Common Stock available for grants of Incentive Stock Options in any
calendar year, beginning with
A-4
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calendar year 1995, shall be 200,000 shares, plus the number of shares of Common
Stock which shall have become available for grants of Incentive Stock Options
under this Plan in any and all prior calendar years, but which shall not have
become subject to the grant of Incentive Stock Options in any prior year.
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options or SARs or a combination thereof may be granted during
any calendar year to any person shall be 300,000, subject to adjustment as
provided in Section 6.7.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 STOCK OPTIONS. The Committee may, in its discretion, grant options to
purchase shares of Common Stock to such eligible persons as may be selected by
the Committee. Each option, or portion thereof, that is not an Incentive Stock
Option, shall be a Non-Qualified Stock Option. Each option shall be granted
within ten years of the effective date of this Plan. To the extent that the
aggregate Fair Market Value (determined as of the date of grant) of shares of
Common Stock with respect to which options designated as Incentive Stock Options
are exercisable for the first time by a participant during any calendar year
(under this Plan or any other plan of the Company, or any parent or Subsidiary)
exceeds the amount (currently $100,000) set forth in the Code, such options
shall constitute Non-Qualified Stock Options.
Options shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:
(a) NUMBER OF SHARES AND PURCHASE PRICE. The number of shares of
Common Stock subject to an option and the purchase price per share of Common
Stock purchasable upon exercise of the option shall be determined by the
Committee; provided, however, that the purchase price per share of Common
Stock purchasable upon exercise of an option shall not be less than 100% of
the Fair Market Value of a share of Common Stock on the date of grant of
such option; provided further, that if an Incentive Stock Option shall be
granted to any person who, at the time such option is granted, owns capital
stock possessing more than ten percent of the total combined voting power of
all classes of capital stock of the Company (or of any parent or Subsidiary)
(a "TEN PERCENT HOLDER"), the purchase price per share of Common Stock shall
be the price (currently 110% of Fair Market Value) required by the Code in
order to constitute an Incentive Stock Option.
(b) OPTION PERIOD AND EXERCISABILITY. The period during which an
option may be exercised shall be determined by the Committee; provided,
however, that no Incentive Stock Option shall be exercised later than ten
years after its date of grant; provided further, that if an Incentive Stock
Option shall be granted to a Ten Percent Holder, such option shall not be
exercised later than five years after its date of grant. The Committee may,
in its discretion, establish Performance Measures which shall be satisfied
or met as a condition to the grant of an option or to the exercisability of
all or
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a portion of an option. The Committee shall determine whether an option
shall become exercisable in cumulative or non-cumulative installments and in
part or in full at any time. An exercisable option, or portion thereof, may
be exercised only with respect to whole shares of Common Stock.
(c) METHOD OF EXERCISE. An option may be exercised (i) by giving
written notice to the Company specifying the number of whole shares of
Common Stock to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's satisfaction) either (A)
in cash, (B) in Mature Shares having a Fair Market Value, determined as of
the date of exercise, equal to the aggregate purchase price payable by
reason of such exercise, (C) by authorizing the Company to withhold whole
shares of Common Stock which would otherwise be delivered upon exercise of
the option having a Fair Market Value, determined as of the date of
exercise, equal to the aggregate purchase price payable by reason of such
exercise, (D) in cash by a broker-dealer acceptable to the Company to whom
the optionee has submitted an irrevocable notice of exercise or (E) a
combination of (A), (B) and (C), in each case to the extent set forth in the
Agreement relating to the option, (ii) if applicable, by surrendering to the
Company any Tandem SARs which are cancelled by reason of the exercise of the
option and (iii) by executing such documents as the Company may reasonably
request. The Committee shall have sole discretion to disapprove of an
election pursuant to any of clauses (B)-(E) and in the case of an optionee
who is subject to Section 16 of the Exchange Act, the Company may require
that the method of making such payment be in compliance with Section 16 and
the rules and regulations thereunder. Any fraction of a share of Common
Stock which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the
holder. No certificate representing Common Stock shall be delivered until
the full purchase price therefor has been paid.
2.2 STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant
SARs to such eligible persons as may be selected by the Committee. The Agreement
relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:
(a) NUMBER OF SARS AND BASE PRICE. The number of SARs subject to an
award shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted and the base price thereof shall be the purchase
price per share of Common Stock of the related option. The base price of a
Free-Standing SAR or an SAR granted in tandem with, or by reference to, a
Non-Qualified Stock Option shall be determined by the Committee; provided,
however, that such base price shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the date of grant of such SAR.
(b) EXERCISE PERIOD AND EXERCISABILITY. The Agreement relating to an
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a combination
thereof. The period for the exercise of an SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later
than the expiration, cancellation, forfeiture or other termination of the
related option. The Committee may, in its discretion, establish Performance
Measures which shall be satisfied or met as a condition to
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the exercisability of an SAR. The Committee shall determine whether an SAR
may be exercised in cumulative or non-cumulative installments and in part or
in full at any time. An exercisable SAR, or portion thereof, may be
exercised, in the case of a Tandem SAR, only with respect to whole shares of
Common Stock and, in the case of a Free-Standing SAR, only with respect to a
whole number of SARs. If an SAR is exercised for shares of Restricted Stock,
a certificate or certificates representing such Restricted Stock shall be
issued in accordance with Section 3.2(c) and the holder of such Restricted
Stock shall have such rights of a stockholder of the Company as determined
pursuant to Section 3.2(d). Prior to the exercise of an SAR for shares of
Common Stock, including Restricted Stock, the holder of such SAR shall have
no rights as a stockholder of the Company with respect to the shares of
Common Stock subject to such SAR and shall have rights as a stockholder of
the Company in accordance with Section 6.10.
(c) METHOD OF EXERCISE. A Tandem SAR may be exercised (i) by giving
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
cancelled by reason of the exercise of the Tandem SAR and (iii) by executing
such documents as the Company may reasonably request. A Free-Standing SAR
may be exercised (i) by giving written notice to the Company specifying the
whole number of SARs which are being exercised and (ii) by executing such
documents as the Company may reasonably request.
2.3 TERMINATION OF EMPLOYMENT. (a) DISABILITY. Subject to paragraph (f)
below and Section 6.8 and unless otherwise specified in the Agreement
relating to an option or SAR, as the case may be, if the employment with the
Company of the holder of an option or SAR terminates by reason of Disability,
each option and SAR held by such holder shall be fully exercisable on the
effective date of such holder's termination of employment and may thereafter
be exercised by such holder (or such holder's legal representative or similar
person) until the earlier to occur of (i) the date set forth in the Agreement
relating to such option or SAR after the effective date of such holder's
termination of employment and (ii) the expiration date of the term of such
option or SAR.
(b) RETIREMENT. Subject to paragraph (f) below and Section 6.8 and
unless otherwise specified in the Agreement relating to an option or SAR, as
the case may be, if the employment with the Company of the holder of an
option or SAR terminates by reason of retirement on or after age 55, each
option and SAR held by such holder shall be fully exercisable and may
thereafter be exercised on the effective date of such holder's termination
of employment and may thereafter be exercised by such holder (or such
holder's legal representative or similar person) until the earlier to occur
of (i) the date set forth in the Agreement relating to such option or SAR
after the effective date of such holder's termination of employment and (ii)
the expiration date of the term of such option or SAR.
(c) DEATH. Subject to paragraph (f) below and unless otherwise
specified in the Agreement relating to an option or SAR, as the case may be,
if the employment with the Company of the holder of an option or SAR
terminates by reason of death, each option and SAR held by such holder shall
be fully exercisable and may thereafter be exercised by such holder's
executor, administrator, legal representative, beneficiary or similar
person, as the case may be, until the earlier to occur of (i) the date set
forth in the Agreement relating to such option or SAR after the date of
death and (ii) the expiration date of the term of such option or SAR.
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(d) OTHER TERMINATION. If the employment with the Company of the
holder of an option or SAR is terminated by the Company for Cause or is
voluntarily terminated by such holder, each option and SAR held by such
holder shall terminate automatically on the effective date of such holder's
termination of employment. "Cause" shall mean any act of dishonesty,
commission of a felony, significant activities harmful to the reputation of
the Company or any of its Subsidiaries, refusal to perform or substantial
disregard of duties properly assigned or significant violation of any
statutory or common law duty of loyalty to the Company or any of its
Subsidiaries.
Subject to paragraph (f) below and Section 6.8 and unless specified in
the Agreement relating to an option or SAR, as the case may be, if the
employment with the Company of the holder of an option or SAR terminates for
any reason other than Disability, retirement on or after age 55, death,
Cause or voluntary termination, each option and SAR held by such holder
shall be exercisable only to the extent that such option or SAR is
exercisable on the effective date of such holder's termination of employment
and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until the earlier to occur of (i) the date
set forth in the Agreement relating to such option or SAR after the
effective date of such holder's termination of employment and (ii) the
expiration date of the term of such option or SAR.
(e) DEATH FOLLOWING TERMINATION OF EMPLOYMENT. Subject to paragraph
(f) below and Section 6.8 and unless otherwise specified in the Agreement
relating to an option or SAR, as the case may be, if the holder of an option
or SAR dies during the period of exercisability of such option or SAR
following termination of employment for any reason other than death,
disability or retirement after age 55, Cause or voluntary termination, each
option and SAR held by such holder shall be exercisable only to the extent
that such option or SAR, as the case may be, is exercisable on the date of
such holder's death and may thereafter be exercised by the holder's
executor, administrator, legal representative, beneficiary or similar
person, as the case may be, until the earlier to occur of (i) the date set
forth in the Agreement relating to such option or SAR after the date of
death and (ii) the expiration date of the term of such option or SAR.
(f) TERMINATION OF EMPLOYMENT -- INCENTIVE STOCK OPTIONS. Subject to
Section 6.8, if the employment with the Company of a holder of an Incentive
Stock Option terminates by reason of Permanent and Total Disability, each
Incentive Stock Option (including any related Tandem SAR) held by such
holder shall be fully exercisable on the effective date of such holder's
termination of employment and may thereafter be exercised by such holder (or
such holder's legal representative or similar person) until the earlier to
occur of (i) the date which is one year (or such shorter period as set forth
in the Agreement relating to such option or SAR) after the effective date of
such holder's termination of employment and (ii) the expiration date of the
term of such Incentive Stock Option.
Subject to Section 6.8, if the employment with the Company of a holder
of an Incentive Stock Option terminates by reason of retirement on or after
age 55, each Incentive Stock Option (including any related Tandem SAR) held
by such holder shall be fully exercisable on the effective date of such
holder's termination of employment and may thereafter be exercised by such
holder (or holder's legal representative or similar person) until the
earlier to occur of (i) the date which is three months after the effective
date of such holder's termination of employment and (ii) the expiration date
of the term of the Incentive Stock Option.
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Subject to Section 6.8, if the employment with the Company of the holder
of an Incentive Stock Option terminates by reason of death, each Incentive
Stock Option (including any related Tandem SAR) held by such holder shall be
fully exercisable and may thereafter be exercised by such holder's executor,
administrator, legal representative, beneficiary or similar person, as the
case may be, until the earlier to occur of (i) the date set forth in the
Agreement relating to such option or SAR after the date of death and (ii)
the expiration date of the term of such Incentive Stock Option.
If the employment with the Company of the holder of an Incentive Stock
Option is terminated by the Company for Cause or is voluntarily terminated
by such holder, each Incentive Stock Option held by such holder shall
terminate automatically on the effective date of such holder's termination
of employment. If the employment with the Company of a holder of an
Incentive Stock Option terminates for any reason other than Permanent and
Total Disability, retirement on or after age 55, death, Cause or voluntary
termination, each Incentive Stock Option (including any related Tandem SAR)
held by such holder shall be exercisable only to the extent such option is
exercisable on the effective date of such holder's termination of employment
and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until the earlier to occur of (i) the date
which is three months after the effective date of such holder's termination
of employment and (ii) the expiration date of the term of the Incentive
Stock Option.
If the holder of an Incentive Stock Option dies during the one-year
period following termination of employment by reason of Permanent and Total
Disability, or if the holder of an Incentive Stock Option dies during the
three-month period following termination of employment for any reason other
than Permanent and Total Disability, Cause or voluntary termination, each
Incentive Stock Option (including any related Tandem SAR) held by such
holder shall be exercisable only to the extent such option is exercisable on
the date of the holder's death and may thereafter be exercised by the
holder's executor, administrator, legal representative, beneficiary or
similar person until the earlier to occur of (i) the date which is one year
(or such shorter period as set forth in the Agreement relating to such
option or SAR) after the date of death and (ii) the expiration date of the
term of such Incentive Stock Option.
III. STOCK AWARDS
3.1 STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards
to such eligible persons as may be selected by the Committee. Grants of
Restricted Stock Awards may be conditioned upon the attainment of Performance
Measures. The Agreement relating to a Stock Award shall specify whether the
Stock Award is a Restricted Stock Award or Bonus Stock Award.
3.2 TERMS OF STOCK AWARDS. Stock Awards shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) NUMBER OF SHARES AND OTHER TERMS. The number of shares of Common
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a
Restricted Stock Award shall be determined by the Committee.
(b) VESTING AND FORFEITURE. The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of
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this Plan, for the vesting of the shares of Common Stock subject to such
award (i) if specified Performance Measures are satisfied or met during the
specified Restriction Period or (ii) if the holder of such award remains
continuously in the employment of the Company during the specified
Restricted Period and for the forfeiture of the shares of Common Stock
subject to such award (x) if specified Performance Measures are not
satisfied or met during the specified Restriction Period or (y) if the
holder of such award does not remain continuously in the employment of the
Company during the specified Restriction Period.
Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods.
(c) SHARE CERTIFICATES. During the Restriction Period, a certificate
or certificates representing a Restricted Stock Award shall be registered in
the holder's name and may bear a legend, in addition to any legend which may
be required pursuant to Section 6.6, indicating that the ownership of the
shares of Common Stock represented by such certificate is subject to the
restrictions, terms and conditions of this Plan and the Agreement relating
to the Restricted Stock Award. All such certificates shall be deposited with
the Company, together with stock powers or other instruments of assignment
(including a power of attorney), each endorsed in blank with a guarantee of
signature if deemed necessary or appropriate, which would permit transfer to
the Company of all or a portion of the shares of Common Stock subject to the
Restricted Stock Award in the event such award is forfeited in whole or in
part. Upon termination of any applicable Restriction Period (and the
satisfaction or attainment of applicable Performance Measures), or upon the
grant of a Bonus Stock Award, in each case subject to the Company's right to
require payment of any taxes in accordance with Section 6.5, a certificate
or certificates evidencing ownership of the requisite number of shares of
Common Stock shall be delivered to the holder of such award.
(d) RIGHTS WITH RESPECT TO RESTRICTED STOCK AWARDS. Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and subject
to the terms and conditions of a Restricted Stock Award, the holder of such
award shall have all rights as a stockholder of the Company, including, but
not limited to, voting rights, the right to receive dividends and the right
to participate in any capital adjustment applicable to all holders of Common
Stock; provided, however, that a distribution with respect to shares of
Common Stock, other than a distribution in cash, shall be deposited with the
Company and shall be subject to the same restrictions as the shares of
Common Stock with respect to which such distribution was made.
(e) AWARDS TO CERTAIN EXECUTIVE OFFICERS. Notwithstanding any other
provision of this Article III, and only to the extent necessary to ensure
the deductibility of the award to the Company, the Fair Market Value of the
number of shares of Common Stock subject to a Restricted Stock Award granted
to a "covered employee" within the meaning of Section 162(m) of the Code
shall not exceed $2,000,000 (i) at the time of grant in the case of an award
granted upon the attainment of Performance Measures and (ii) the earlier of
(x) the date on which restrictions lapse in the case of a Restricted Stock
Award with restrictions which lapse upon the attainment of Performance
Measures, and (y) the date the holder makes an election under Section 83(b)
of the Code.
3.3 TERMINATION OF EMPLOYMENT. Subject to Section 6.8, all of the terms
relating to the satisfaction of Performance Measures and the termination of the
Restriction Period relating to a Restricted Stock
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Award, or any cancellation or forfeiture of such Restricted Stock Award upon a
termination of employment with the Company of the holder of such Restricted
Stock Award, whether by reason of Disability, retirement, death or other
termination, shall be set forth in the Agreement relating to such Restricted
Stock Award.
IV. PERFORMANCE SHARE AWARDS
4.1 PERFORMANCE SHARE AWARDS. The Committee may, in its discretion, grant
Performance Share Awards to such eligible persons as may be selected by the
Committee.
4.2 TERMS OF PERFORMANCE SHARE AWARDS. Performance Share Awards shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable.
(a) NUMBER OF PERFORMANCE SHARES AND PERFORMANCE MEASURES. The number
of Performance Shares subject to any award and the Performance Measures and
Performance Period applicable to such award shall be determined by the
Committee.
(b) VESTING AND FORFEITURE. The Agreement relating to a Performance
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of
such award, if specified Performance Measures are satisfied or met during
the specified Performance Period, and for the forfeiture of such award, if
specified Performance Measures are not satisfied or met during the specified
Performance Period.
(c) SETTLEMENT OF VESTED PERFORMANCE SHARE AWARDS. The Agreement
relating to a Performance Share Award (i) shall specify whether such award
may be settled in shares of Common Stock (including shares of Restricted
Stock) or cash or a combination thereof and (ii) may specify whether the
holder thereof shall be entitled to receive, on a current or deferred basis,
dividend equivalents, and, if determined by the Committee, interest on any
deferred dividend equivalents, with respect to the number of shares of
Common Stock subject to such award. If a Performance Share Award is settled
in shares of Restricted Stock, a certificate or certificates representing
such Restricted Stock shall be issued in accordance with Section 3.2(c) and
the holder of such Restricted Stock shall have such rights of a stockholder
of the Company as determined pursuant to Section 3.2(d). Prior to the
settlement of a Performance Share Award in shares of Common Stock, including
Restricted Stock, the holder of such award shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock
subject to such award.
(d) AWARDS TO CERTAIN EXECUTIVE OFFICERS. Notwithstanding any other
provision of this Article IV, and only to the extent necessary to ensure
deductibility of any payment under an award made by the Company, the maximum
amount payable upon the attainment of the Performance Measures applicable to
an award granted to any employee who is a "covered employee" within the
meaning of Section 162(m) of the Code at the time of such payment shall be
$2,000,000.
4.3 TERMINATION OF EMPLOYMENT. Subject to Section 6.8, all of the terms
relating to the satisfaction of Performance Measures and the termination of the
Performance Period relating to a Performance Share Award, or any cancellation or
forfeiture of such Performance Share Award upon a termination of
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employment with the Company of the holder of such Performance Share Award,
whether by reason of Disability, retirement, death or other termination, shall
be set forth in the Agreement relating to such Performance Share Award.
V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
5.1 ELIGIBILITY. Each Non-Employee Director shall be granted shares of
Common Stock in accordance with this Article V.
5.2 AWARDS OF SHARES. Subject to Section 6.7, on May 9, 1995 (or, if
later, on the date on which a person is first elected or begins to serve as a
Non-Employee Director other than by reason of termination of employment), and,
thereafter, on the date of each annual meeting of stockholders of the Company,
each person who is a Non-Employee Director after such meeting of stockholders
shall be granted 300 shares of Common Stock (which amount shall be pro-rated if
such Non-Employee Director is first elected or begins to serve as a Non-Employee
Director on a date other than the date of an annual meeting of stockholders).
VI. GENERAL
6.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the
stockholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 1995 annual meeting of stockholders, shall become
effective as of the date of approval by the Board. This Plan shall terminate 10
years after its effective date unless terminated earlier by the Board.
Termination of this Plan shall not affect the terms or conditions of any award
granted prior to termination.
Awards hereunder may be made at any time on or after the effective date, and
prior to the termination, of this Plan, provided that no award may be made later
than 10 years after the effective date of this Plan. In the event that this Plan
is not approved by the stockholders of the Company, this Plan and any awards
hereunder shall be void and of no force or effect.
6.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation including Rule 16b-3 under the Exchange Act and Section
162(m) of the Code; provided, however, that no amendment shall be made without
stockholder approval if such amendment would (a) increase the maximum number of
shares of Common Stock available for issuance under this Plan (subject to
Section 6.7), (b) reduce the minimum purchase price in the case of an option or
the base price in the case of an SAR, (c) effect any change inconsistent with
Section 422 of the Code or (d) extend the term of this Plan; provided further
that, subject to Section 6.7, the number of shares of Common Stock to be awarded
to Non-Employee Directors pursuant to Article V, the date of the award of such
shares and the category of persons eligible to be awarded such shares shall not
be amended more than once every six months, other than to comply with changes in
the Code or ERISA, or the rules and regulations thereunder. No amendment may
impair the rights of a holder of an outstanding award without the consent of
such holder.
6.3 AGREEMENT. Each award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions applicable to such award. No
award shall be valid until an Agreement is
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executed by the Company and the recipient of such award and, upon execution by
each party and delivery of the Agreement to the Company, such award shall be
effective as of the effective date set forth in the Agreement.
6.4 NON-TRANSFERABILITY OF STOCK OPTIONS, SARS AND PERFORMANCE SHARES. No
option, SAR or Performance Share shall be transferable other than (i) by will,
the laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company or (ii) as otherwise permitted under Rule
16b-3 under the Exchange Act as set forth in the Agreement relating to such
award. Each option, SAR or Performance Share may be exercised or settled during
the participant's lifetime only by the holder or the holder's guardian, legal
representative or similar person. Except as permitted by the second preceding
sentence, no option, SAR or Performance Share may be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any option, SAR or Performance Share, such
award and all rights thereunder shall immediately become null and void.
6.5 TAX WITHHOLDING. The Company shall have the right to require, prior to
the issuance or delivery of any shares of Common Stock or the payment of any
cash pursuant to an award made hereunder, payment by the holder of such award of
any federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. An Agreement may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the "TAX DATE"), or withhold an amount of cash which would otherwise be
payable to a holder, in the amount necessary to satisfy any such obligation or
(ii) the holder may satisfy any such obligation by any of the following means:
(A) a cash payment to the Company, (B) delivery to the Company of Mature Shares
having an aggregate Fair Market Value, determined as of the Tax Date, equal to
the amount necessary to satisfy any such obligation, (C) authorizing the Company
to withhold whole shares of Common Stock which would otherwise be delivered
having an aggregate Fair Market Value, determined as of the Tax Date, or
withhold an amount of cash which would otherwise be payable to a holder, equal
to the amount necessary to satisfy any such obligation, (D) in the case of the
exercise of an option, a cash payment by a broker-dealer acceptable to the
Company to whom the optionee has submitted an irrevocable notice of exercise or
(E) any combination of (A), (B) and (C), in each case to the extent set forth in
the Agreement relating to the award; provided, however, that the Committee shall
have sole discretion to disapprove of an election pursuant to any of clauses
(B)-(E) and that in the case of a holder who is subject to Section 16 of the
Exchange Act, the Company may require that the method of satisfying such an
obligation be in compliance with Section 16 and the rules and regulations
thereunder. An Agreement may provide for shares of Common Stock to be delivered
or withheld having an aggregate Fair Market Value in excess of the minimum
amount required to be withheld, but not in excess of the amount determined by
applying the holder's maximum marginal tax rate. Any fraction of a share of
Common Stock which would be required to satisfy such an obligation shall be
disregarded and the remaining amount due shall be paid in cash by the holder.
6.6 RESTRICTIONS ON SHARES. Each award made hereunder shall be subject to
the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of
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Common Stock subject to such award upon any securities exchange or under any
law, or the consent or approval of any governmental body, or the taking of any
other action is necessary or desirable as a condition of, or in connection with,
the delivery of shares thereunder, such shares shall not be delivered unless
such listing, registration, qualification, consent, approval or other action
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company may require that certificates evidencing shares of
Common Stock delivered pursuant to any award made hereunder bear a legend
indicating that the sale, transfer or other disposition thereof by the holder is
prohibited except in compliance with the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
6.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option and the
purchase price per security, the number of shares of Common Stock to be awarded
to Non-Employee Directors pursuant to Article V, the terms of each outstanding
SAR, the number and class of securities subject to each outstanding Stock Award,
and the terms of each outstanding Performance Share shall be appropriately
adjusted by the Committee, such adjustments to be made in the case of
outstanding options and SARs without an increase in the aggregate purchase price
or base price, other than an increase resulting from rounding. The decision of
the Committee regarding any such adjustment shall be final, binding and
conclusive. If any such adjustment would result in a fractional security being
(i) available under this Plan, such fractional security shall be disregarded, or
(ii) subject to an award under this Plan, the Company shall pay the holder of
such award, in connection with the first vesting, exercise or settlement of such
award, in whole or in part, occurring after such adjustment, an amount in cash
determined by multiplying (i) the fraction of such security (rounded to the
nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on
the vesting, exercise or settlement date over (B) the exercise or base price, if
any, of such award.
6.8 CHANGE IN CONTROL.
(a)(1) Notwithstanding any provision in this Plan or any Agreement, in the
event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive shares of common
stock that are registered under Section 12 of the Exchange Act, (i) all
outstanding options and SARS shall immediately become exercisable in full,
(ii) the Restriction Period applicable to any outstanding Restricted Stock
Award shall lapse, (iii) the Performance Period applicable to any
outstanding Performance Share shall lapse, (iv) the Performance Measures
applicable to any outstanding Restricted Stock Award (if any) and to any
outstanding Performance Share shall be deemed to be satisfied at the maximum
level and (v) there shall be substituted for each share of Common Stock
available under this Plan, whether or not then subject to an outstanding
award, the number and class of shares into which each outstanding share of
Common Stock shall be converted pursuant to such Change in Control. In the
event of any such substitution, the purchase price per share in the case of
an option and the base price in the case of an SAR shall be appropriately
adjusted by the Committee, such adjustments to be made in the case of
outstanding options and SARs without a change in the aggregate purchase
price or base price.
(2) Notwithstanding any provision in this Plan or any Agreement, in the
event of a Change in Control pursuant to Section (b)(1) or (2) below, or in the
event of a Change in Control pursuant to
A-14
<PAGE>
Section (b)(3) or (4) below in connection with which the holders of Common Stock
receive consideration other than shares of common stock that are registered
under Section 12 of the Exchange Act, each outstanding award shall be
surrendered to the Company by the holder thereof, and each such award shall
immediately be cancelled by the Company, and the holder shall receive, within
ten days of the occurrence of a Change in Control pursuant to Section (b)(1) or
(2) below or within ten days of the approval of the stockholders of the Company
contemplated by Section (b)(3) or (4) below, a cash payment from the Company in
an amount equal to (i) in the case of an option, the number of shares of Common
Stock then subject to such option, multiplied by the excess, if any, of the
greater of (A) the highest per share price offered to stockholders of the
Company in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control, over the purchase price per share of Common Stock subject to
the option, (ii) in the case of a Free-Standing SAR, the number of shares of
Common Stock then subject to such SAR, multiplied by the excess, if any, of the
greater of (A) the highest per share price offered to stockholders of the
Company in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control, over the base price of the SAR, (iii) in the case of a
Restricted Stock Award or Performance Share Award, the number of shares of
Common Stock or the number of Performance Shares, as the case may be, then
subject to such award, multiplied by the greater of (A) the highest per share
price offered to stockholders of the Company in any transaction whereby the
Change in Control takes place or (B) the Fair Market Value of a share of Common
Stock on the date of occurrence of the Change in Control. In the event of a
Change in Control, each Tandem SAR shall be surrendered by the holder thereof
and shall be cancelled simultaneously with the cancellation of the related
option. The Company may, but is not required to, cooperate with any person who
is subject to Section 16 of the Exchange Act to assure that any cash payment in
accordance with the foregoing to such person is made in compliance with Section
16 and the rules and regulations thereunder.
(b) "CHANGE IN CONTROL" shall mean:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 20% or more of either (i) the then
outstanding shares of common stock of the Company (the "OUTSTANDING COMPANY
COMMON STOCK") or (ii) the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election of
directors (the "OUTSTANDING COMPANY VOTING SECURITIES"); provided that the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company (excluding any acquisition resulting
from the exercise of a conversion or exchange privilege in respect of
outstanding convertible or exchangeable securities), (B) any acquisition by
the Company, (C) any acquisition by an Exempt Person, (D) any acquisition by
an employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (E) any acquisition
by any corporation pursuant to a reorganization, merger or consolidation
involving the Company, if, immediately after such reorganization, merger or
consolidation, each of the conditions described in clauses (i), (ii) and
(iii) of subsection (3) of this Section 6.8(b) shall be satisfied; provided
further, that for purposes of clause (B), if any Person (other than the
Company, an Exempt Person or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
A-15
<PAGE>
Company) shall become the beneficial owner of 20% or more of the Outstanding
Company Common Stock or 20% or more of the Outstanding Company Voting
Securities by reason of an acquisition by the Company, and such Person
shall, after such acquisition by the Company, become the beneficial owner of
any additional shares of the Outstanding Company Common Stock or any
additional Outstanding Company Voting Securities and such beneficial
ownership is publicly announced, such additional beneficial ownership shall
constitute a Change in Control;
(2) individuals who, as of the date hereof, constitute the Board of
Directors (the "INCUMBENT BOARD") cease for any reason to constitute at
least two-thirds of such Board; provided that any individual who becomes a
director of the Company subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by the
vote of at least two-thirds of the directors then comprising the Incumbent
Board shall be deemed to have been a member of the Incumbent Board; and
provided further, that no individual who was initially elected as a director
of the Company as a result of an actual or threatened election contest, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, or any other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board shall be deemed
to have been a member of the Incumbent Board;
(3) approval by the stockholders of the Company of a reorganization,
merger or consolidation unless, in any such case, immediately after such
reorganization, merger or consolidation, (i) more than 60% of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of the combined
voting power of the then outstanding securities of such corporation entitled
to vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals or
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such reorganization, merger or consolidation and in
substantially the same proportions relative to each other as their
ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (ii) no Person (other than
the Company, an Exempt Person, any employee benefit plan (or related trust)
sponsored or maintained by the Company or the corporation resulting from
such reorganization, merger or consolidation (or any corporation controlled
by the Company) and any Person which beneficially owned, immediately prior
to such reorganization, merger or consolidation, directly or indirectly, 20%
or more of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of the then outstanding shares of common stock of
such corporation or 20% or more of the combined voting power of the then
outstanding securities of such corporation entitled to vote generally in the
election of directors and (iii) at least a majority of the members of the
Board of Directors of the corporation resulting from such reorganization,
merger or consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the Board of Directors
providing for such reorganization, merger or consolidation; or
(4) approval by the stockholders of the Company of (i) a plan of
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company other
than to a corporation with respect to which, immediately after such sale or
A-16
<PAGE>
other disposition, (A) more than 60% of the then outstanding shares of
common stock thereof and more than 60% of the combined voting power of the
then outstanding securities thereof entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities immediately prior to such sale or
other disposition and in substantially the same proportions relative to each
other as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (B) no Person (other than the
Company, an Exempt Person, any employee benefit plan (or related trust)
sponsored or maintained by the Company or such corporation (or any
corporation controlled by the Company) and any Person which beneficially
owned, immediately prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 20% or more of the then outstanding shares of
common stock thereof or 20% or more of the combined voting power of the then
outstanding securities thereof entitled to vote generally in the election of
directors and (C) at least a majority of the members of the Board of
Directors thereof were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for such
sale or other disposition.
6.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any
right to participate in this Plan. Neither this Plan nor any award made
hereunder shall confer upon any person any right to continued employment by the
Company, any Subsidiary or any affiliate of the Company or affect in any manner
the right of the Company, any Subsidiary or any affiliate of the Company to
terminate the employment of any person at any time without liability hereunder.
6.10 RIGHTS AS STOCKHOLDER. No person shall have any right as a
stockholder of the Company with respect to any shares of Common Stock or other
equity security of the Company which is subject to an award hereunder unless and
until such person becomes a stockholder of record with respect to such shares of
Common Stock or equity security.
6.11 GOVERNING LAW. This Plan, each award hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Illinois and construed in
accordance therewith without giving effect to principles of conflicts of laws.
6.12 APPROVAL OF PLAN. This Plan and all awards made hereunder shall be
null and void if the adoption of this Plan is not approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 1995 annual meeting of stockholders.
A-17
<PAGE>
EXHIBIT B
STONE CONTAINER CORPORATION
KEY EXECUTIVE OFFICER SHORT-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of the Stone Container Corporation Key Executive
Officer Short-Term Incentive Plan (the "Plan") is to provide certain designated
persons in senior management positions with Stone Container Corporation (the
"Company") or its subsidiaries (all such persons hereinafter referred to as "Key
Executive Officers") with incentive compensation based upon the achievement of
preestablished performance measures to assure that such compensation is not
denied deductibility pursuant to Section 162(m) of the Internal Revenue Code
("Code").
2. AWARDS. The Compensation Committee ("Committee") may make awards to Key
Executive Officers eligible for awards under the Plan in each calendar year with
respect to such year ("Award Year"). Awards shall be paid in cash in the
calendar year following the Award Year, beginning in 1996 with respect to Award
Year 1995.
The Committee shall approve a target award for each Key Executive Officer
eligible for awards under the Plan for each Award Year it intends to make
awards. Target Awards shall be approved prior to March 31 of the Award Year. A
Key Executive Officer's target award shall not exceed 150% of such Key Executive
Officer's annual base salary of the Award Year and shall in no event exceed
$2,000,000. Utilizing a payout table(s) preestablished by the Committee, a
percentage of the target award for each Award Year will be determined by the
Committee for each eligible Key Executive Officer based upon achievement of
levels during such Award Year of performance measures. Such payout table(s) and
performance measures shall be established in writing by the Committee prior to
March 31 of the Award Year. The Committee shall certify in writing that the
performance goals have been satisfied before payment of any award.
The award made to an individual Key Executive Officer may be less (including
no award) than the target award. The Committee shall be precluded from
increasing the target award but may apply its discretion to reduce or eliminate
such award.
The performance goals that are preestablished by the Committee and upon
which the target awards referred to above shall be based upon, as the Committee
deems appropriate, one or more of the following performance measures for the
Award Year:
a. Financial performance of the Company, and its consolidated
subsidiaries. Such financial performance may only include net income (i.e.,
percentage of net income commitment achieved after adjustment in accordance
with Section 4 hereof) and/or operating profits (i.e., controllable
operating where controllable operating profit is defined as earnings before
interest and income taxes effective at the marginal rate, plus depreciation,
amortization of intangibles).
b. Attainment of certain value of a share of Common Stock for a
specified time, earnings per share, return on equity, return to stockholders
including dividends, cash flow, market share, cost reduction goals,
revenues, earnings of the Company or any combination of the foregoing.
B-1
<PAGE>
3. ELIGIBILITY.
a. Employees of the Company or subsidiary thereof who are designated by
the Committee prior to March 31 following the Award Year are the Key
Executive Officers eligible for awards under the Plan; provided that the
employee had at least three months of active service during the Award Year.
Employees are not rendered ineligible by reason of being a member of the
Board.
b. The target award applicable to an individual otherwise eligible for
awards under the Plan for an Award Year shall be prorated over the Award
Year or the individual shall be ineligible for an award, as follows:
<TABLE>
<C> <S> <C>
(1) retirement prorate to date of retirement
(2) resignation no award
(3) death during an Award Year prorate to date of death
dismissal during or after an Award
(4) Year at the discretion of the Committee
</TABLE>
4. ADJUSTMENTS. In order to assure the incentive features of the Plan and
to avoid distortion in the operation of the Plan, the Committee may make
adjustments in the criteria established for any Award Year, whether before or
after the end of the Award Year to compensate for or reflect any extraordinary
changes which may have occurred during the Award Year which alter the basis upon
which performance levels were determined. Such changes include the following:
extraordinary items, accounting changes, income from discontinued operations,
and the impact of material events that have been publicly disclosed.
Notwithstanding anything to the contrary, the Committee shall not make any
adjustment which would increase the award to any covered employee within the
meaning of Section 162(m) of the Code if such adjustment would render any amount
payable to such "covered employee " nondeductible under Section 162(m) of the
Code.
5. OTHER CONDITIONS.
a. No person shall have any claim to be granted an award under the Plan
and there is no obligations for uniformity of treatment of eligible
employees under the Plan. Awards under the Plan may not be assigned or
alienated.
b. Neither the Plan nor any action taken hereunder shall be construed
as giving to any employee the right to be retained in the employ of the
Company or any Subsidiary thereof.
c. The Company or Subsidiary thereof, as applicable, shall have the
right to deduct from any award to be paid under the Plan any federal, state
or local taxes required by law to be withheld with respect to such payment.
d. Unless otherwise provided by the Committee, awards under the Plan
shall be included in determining benefits under any qualified pension,
retirement, savings, disability, death, or other benefit plans of the
Company except where required by law or any such Plan.
6. DESIGNATION OF BENEFICIARIES. An eligible participant may designate
pursuant to the Stone Container Corporation Rules for Employee Beneficiary
Designations as may hereafter be amended from time to time ("Rules"), which
Rules shall apply hereunder and are incorporated herein by this reference, a
beneficiary or beneficiaries to receive in case of the participant's death all
or part of the awards which may be made to the participant under the Plan. A
designation of beneficiary may be replaced by a new
B-2
<PAGE>
designation or may be revoked by the participant at any time. A designation or
revocation shall be on a form to be provided for the purpose and shall become
effective only when filed with the Company during the participant's lifetime
with written acknowledgment of receipt from the Company. In case of the
participant's death, an award will be made under the Plan with respect to such
designation of beneficiary or beneficiaries. Any award made to a participant who
is deceased and not subject to such a designation shall be distributed in
accordance with the Rules.
7. PLAN ADMINISTRATION.
a. The Committee shall have full power to administer and interpret the
Plan and to establish rules for its administration; provided, however, not
withstanding any other provision of the Plan that might appear to provide to
the contrary, the Plan shall be operated in such manner that awards paid
pursuant to the Plan shall not be subject to loss of deductibility allowed
pursuant to Section 162(m) of the Code. Awards under the Plan shall be
conclusively determined by the Committee. The Committee in making any
determination under or referred to in the Plan shall be entitled to rely on
opinions, reports or statements of officers or employees of the Company
and/or of any subsidiary thereof and of counsel, public accountants and
other professional or expert persons.
b. The Plan shall be governed by the laws of the State of Illinois and
applicable Federal law.
8. MODIFICATION OR TERMINATION OF PLAN. The Board may modify or terminate
the Plan at any time to be effective at such date as the Board may determine.
The Committee shall be authorized to make changes to the Plan that are
consistent with the purpose of the Plan or changes to comply with government
regulations. A modification may affect present and future eligible employees.
B-3
<PAGE>
[LOGO]
STONE CONTAINER CORPORATION
150 North Michigan Avenue
Chicago, IL 60601-7568
T his entire document is printed on paper with recycled content. The entire
report is uncoated free sheet paper produced by Stone-Consolidated's Wayagamack
mill in Trois-Rivieres, Quebec.
<PAGE>
PROXY STONE CONTAINER CORPORATION PROXY
150 N. MICHIGAN AVENUE
CHICAGO IL 60601-7568
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Stone Container Corporation (the "Company")
hereby appoints Arnold F. Brookstone and Leslie T. Lederer, or either of them,
with full power of substitution and revocation, to be attorneys and proxies to
vote, as designated below, all of the shares of Common Stock of the Company
which the undersigned would be entitled to vote at the Annual Meeting of
Stockholders to be held on Tuesday, May 9, 1995, at 10:30 a.m. (C.D.S.T.) on the
Fifty-Seventh Floor, The First National Bank of Chicago, One First National
Plaza, Chicago, Illinois, or any adjournment thereof, upon all subjects that may
properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /X/
WITHHOLD FOR all nominees
AUTHORITY listed below
to vote for all (except as may
nominees be marked to the
FOR listed below contrary below
1. ELECTION OF DIRECTORS / / / / / /
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDER VOTE FOR ALL OF THE NOMINEES
LISTED BELOW.
Richard A. Giesen, James J. Glasser,
Jack M. Greenberg, George D. Kennedy,
Howard C. Miller, Jr., John D. Nichols,
Jerry K. Pearlman, Richard J. Raskin,
Alan Stone, Avery J. Stone, Ira N. Stone,
James H. Stone and Roger W. Stone.
(INSTRUCTION: To withhold authority to
vote for any individual nominee, write
that nominee's name on the space that
follows.)
- --------------------------------------
(NOTE: If authority is granted to vote
for one or more nominees, unless otherwise
specified below this proxy will authorize
the Proxies to cumulate all votes
represented hereby and to allocate such
votes among such nominees as the Proxies
shall determine, in their sole and
absolute discretion, in order to maximize
the number of such nominees elected. To
specify a different manner of cumulative
voting, write "Cumulate For", the name(s)
of the nominees(s) and the number of votes
on the space that follows. See "Voting and
Proxy" in the accompanying proxy statement
for further information.)
- --------------------------------------
For Against Abstain
2. Proposal to approve the Stone / / / / / /
Container Corporation 1995 Long-Term
Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THIS PROPOSAL.
For Against Abstain
3. Proposal to approve the Stone / / / / / /
Container Corporation 1995 Key Executive
Officer Short-Term Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THIS PROPOSAL.
4. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
You are encouraged to specify your choices by marking the appropriate boxes but
you need not mark any boxes if you wish to vote in accordance with the Board of
Directors' recommendations.
This Proxy, when properly executed, will be voted in the manner indicated herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted FOR the election of all directors, FOR the proposal to approve the Stone
Container Corporation 1995 Long-Term Incentive Plan and FOR the proposal to
approve the Stone Container Corporation 1995 Key Executive Officer Short-Term
Incentive Plan.
Signature(s)
---------------------------------------------
---------------------------------------------
Date ---------------------------------------------------, 1995
NOTE: Please date and sign as name appears hereon. If shares are held
jointly or by two or more parties, each stockholder named must sign.
<PAGE>
STONE CONTAINER CORPORATION PROXY/VOTING INTRUCTION CARD
CHICAGO, ILLINOIS
- ------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR
ANNUAL MEETING ON MAY 9, 1995.
PROXY
The undersigned stockholder of Stone Container Corporation (the "Company")
hereby appoints Arnold F. Brookstone and Leslie T. Lederer, or either of them,
with full power of substitution and revocation, to be attorneys and proxies to
vote, as designated below, all of the shares of Common Stock of the Company
which the undersigned would be entitled to vote at the Annual Meeting of
Stockholders to be held on Tuesday, May 9, 1995, at 10:30 a.m. (C.D.S.T.) on the
Fifty-Seventh Floor, The First National Bank of Chicago, One First National
Plaza, Chicago, Illinois, or any adjournment thereof, upon all subjects that may
properly come before the meeting.
ELECTION OF DIRECTORS
Nominees: Richard A Giesen, James J. Glasser, Jack M. Greenberg, George D.
Kennedy, Howard C. Miller, Jr., John D. Nichols, Jerry K. Pearlman,
Richard J. Raskin, Alan Stone, Avery J. Stone, Ira N. Stone,
James H. Stone and Roger W. Stone.
(NOTE: If authority is granted to vote for one of more nominees, unless
otherwise specified below this proxy will authorize the Proxies to cumulate all
votes represented hereby and to allocate such votes among such nominees as the
Proxies shall determine, in their role and absolute discretion, in order to
maximize the number of such nominees elected. To specify a different manner of
cumulative voting, write "Cumulate For", the name(s) of the nominee(s) and the
number of votes on the space that follows. See "Voting and Proxy" in the
accompanying proxy statement for further information.)______________________
____________________________________________________________________________
SEE REVERSE SIDE
<PAGE>
/X/ Please mark your votes as in this example.
- ------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposal 1, 2 and 3.
- ------------------------------------------------------------------------------
FOR Withheld as to ALL Nominees
1. ELECTION OF DIRECTORS / / / /
To withhold authority to vote for
any individual nominees(s), mark the
"FOR" box and write the name of each
such nominee on line provided below
For Against Abstain
2. Proposal to approve the Stone Container / / / / / /
Corporation 1995 Long Term Incentive Plan.
3. Proposal to approve the Stone Container / / / / / /
Corporation 1995 Key Executive Officer Short
Term Incentive Plan.
Signature(s) of Stockholder(s)____________________________________Date , 1995
Please sign exactly as name(s) appear on the left side of this Proxy.If shares
are held jointly or by two or more persons, each stockholder named should sign.
When signing as executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in full
partnership name by authorized person.
