<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
STONE CONTAINER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
STONE CONTAINER CORPORATION
[LOGO]
150 North Michigan Avenue
Chicago, IL 60601-7568
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 13, 1997
To the Stockholders of
Stone Container Corporation:
The Annual Meeting of Stockholders of Stone Container Corporation (the
"Company") will be held on Tuesday, May 13, 1997 on the 80th Floor, The
Mid-America Club, 200 East Randolph Drive, 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 stockholder proposal concerning the
discontinuance of all options, rights and stock appreciation rights
("SAR's") for officers and directors; and
3. 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, 1997 will
be entitled to vote at the Annual Meeting.
By order of the Board of Directors.
LESLIE T. LEDERER,
SECRETARY
Chicago, Illinois, April 15, 1997
<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 13, 1997, 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, 1997 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 99,319,186 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 14, 1997. 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 proposed by
the Company 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 proposed by the Company 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
proposed by the Company 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 proposed by the Company
1
<PAGE>
named below. The 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.
A stockholder may, with respect to each other matter specified in the notice
of the meeting, (i) vote "FOR," (ii) vote "AGAINST" or (iii) "ABSTAIN" from
voting. An affirmative vote of a majority of the shares present in person or by
proxy and entitled to vote at the Annual Meeting is required for approval of the
other matters presented. Shares represented by proxies which are marked
"abstain" on such matters will be counted as shares present for purposes of
determining the presence of a quorum; such shares will also be treated as shares
present and entitled to vote, which will have the same effect as a vote against
such matters. Proxies relating to "street name" shares which are not voted by
brokers on one or more but less than all matters will be treated as shares
present for purposes of determining the presence of a quorum, but will not be
treated as shares present and entitled to vote at the Annual Meeting as to such
matter or matters.
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 Dionisio Garza and Phillip B. Rooney 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 proposed
by the Company named below. In case any of the named nominees proposed by the
Company 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.
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>
William F. Aldinger, ++ ++ Chairman of the Board and Chief 1996 1,475 (a)
Executive Officer of Household
International, Inc.
Dionisio Garza Chairman of the Board and Chief -- -- (a)
Executive Officer of Alfa, S.A. de
C.V.
Richard A. Giesen* ++ ++# Chairman of the Board and Chief 1974 15,317 (a)
Executive Officer of Continental Glass
& Plastic, Inc.
James J. Glasser ++ ++ Chairman Emeritus of GATX Corporation 1986 10,800 (a)
Jack M. Greenberg+# Chairman, McDonald's USA and Vice 1995 1,100 (a)
Chairman McDonald's Corporation
John D. Nichols+ Retired Chairman of the Board and Chief 1989 2,640 (a)
Executive Officer of Illinois Tool
Works Inc.
Jerry K. Pearlman*+ ++ ++# Retired Chairman of the Board and Chief 1984 7,772 (a)
Executive Officer of Zenith
Electronics Corporation
Richard J. Raskin Attorney 1983 652,427 (a)(b)
Phillip B. Rooney Chairman of the Board of F.N.B.C. of -- 5,000 (a)
LaGrange, Inc.
Alan Stone* Consultant 1969 1,051,423 1.0%(b)
Ira N. Stone Senior Vice President 1969 951,164 1.0%(b)
James H. Stone* President of Stone Management 1969 701,277 (a)(b)
Corporation
Roger W. Stone* Chairman of the Board, President and 1969 1,226,203 1.2%(b)
Chief Executive Officer
</TABLE>
- ------------------------
<TABLE>
<S> <C>
*Member of the Executive Committee ++ ++Member of the Compensation Committee
+Member of the Audit Committee #Member of the Nominating Committee
</TABLE>
(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".
3
<PAGE>
(c) Each person has sole voting and investment power with respect to the shares
listed. Shares are shown as of February 10, 1997.
INFORMATION AS TO DIRECTORS AND EXECUTIVE OFFICERS
The following information indicates the principal occupation and employment
for the Directors and named Executive Officers for the last five years, unless
otherwise indicated.
DIRECTORS:
WILLIAM F. ALDINGER, born June 25, 1947, has been Chairman of the Board and
Chief Executive Officer of Household International, Inc., a major financial
services company, since May, 1996 and Chief Executive Officer from 1994 to 1996.
Previously, Mr. Aldinger was Vice Chairman of Wells Fargo Bank in San Francisco
from 1986 to 1994. Mr. Aldinger is a director of Venture Board of First Source
Financial, and SunAmerica, Inc.
DIONISIO GARZA, born January 6, 1954, has been Chairman of the Board and
Chief Executive Officer of Alfa, S.A. de C.V., a Mexican Company, since 1994.
Previously Mr. Garza was President of Sigma Alimentos, S.A. de C.V. from 1990 to
1993 and President of Empaques de Carton Titan, S.A. from 1987 to 1990. Mr.
Garza is a director of Vitro, S.A., Grupo Financiero Serfin, S.A., Grupo
Financiero Bancomer, S.A., Cydsa, S.A., Cementos Mexicanos, S.A., Seguros
Comercial America, S.A., Afore Banamex, S.A. de C.V., Hylsamex, S.A. de C.V. and
Sigma Alimentos, S.A. de C.V.
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, Continere Corporation and
Asia House Funds.
JAMES J. GLASSER, born June 5, 1934, is Chairman Emeritus of GATX
Corporation, a leasing and financial services company. Mr. Glasser is a director
of The B.F. Goodrich Company, Harris Bankcorp, Inc., Harris Trust & Savings Bank
and Mutual Trust Life Insurance Company.
JACK M. GREENBERG, born September 28, 1942, has been Chairman of McDonald's
USA since October, 1996 and Vice Chairman of the Board of McDonald's
Corporation, a food service and restaurant company since 1992. Previously, Mr.
Greenberg was Chief Financial Officer of McDonald's Corporation since January,
1982. Mr. Greenberg is a director of McDonald's Corporation, Arthur J. Gallagher
and Company and Harcourt General, Inc.
JOHN D. NICHOLS, born September 20, 1930, is retired 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., Rockwell International Corporation and
Grand Eagle Companies, Inc.
JERRY K. PEARLMAN, born March 27, 1939, is the retired 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 American National Bank, Ryerson-Tull, Inc. and Current Assets LLC.
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".
PHILLIP B. ROONEY, born July 8, 1944, is Chairman of F.N.B.C. of LaGrange,
Inc. a multi-bank holding company since March, 1997. Previously, Mr. Rooney was
the President, Chief Operating Officer and
4
<PAGE>
Director of WMX Technologies, Inc. from 1990 to 1996 and from June 7, 1996 to
February 17, 1997 was the President, Chief Executive Officer and Director. Mr.
Rooney is a director of Illinois Tool Works, Inc., The ServiceMaster Company and
Urban Shopping Centers, Inc.
ALAN STONE, born February 5, 1928, has been a consultant 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".
IRA N. STONE, born February 4, 1932, Senior Vice President since 1989, has
been 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 Stone-Consolidated
Corporation and Venepal S.A.C.A., both affiliates of the Company and McDonald's
Corporation, Morton International, Inc., Option Care, Inc., and Continere
Corporation. See Footnote (b) under "Security Ownership of Management".
OTHER EXECUTIVE OFFICERS:
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 P. CUTILLETTA, born July 5, 1943, Senior Vice President --
Administration and Corporate Controller, is the Company's Chief Accounting
Officer. Mr. Cutilletta was elected Senior Vice President in January, 1991. Mr.
Cutilletta is a director of the University of Illinois at Chicago HMO.
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.
GORDON L. JONES, born November 7, 1949, effective April 1, 1997 was
appointed Senior Vice President and General Manager Corrugated Container
Division. Previously, Mr. Jones was Vice President and General Manager --
Worldwide Market Pulp Sales and Export Containerboard and Kraft Paper Sales and
President of Stone Container International since June, 1993 and Division Vice
President of Containerboard and Kraft Paper Marketing from January, 1991.
MATTHEW S. KAPLAN, born March 13, 1957, effective April 1, 1997, was
appointed Senior Vice President--North American Operations, responsible for all
manufacturing, sales, marketing and converting operations in North America.
Previously, Mr. Kaplan was Senior Vice President and General Manager, Corrugated
Container Division since June, 1993 and Vice President and General Manager,
Retail Bag Division since May, 1990. Mr. Kaplan is a director of McMillan
Bathurst, Inc., an affiliate of the Company. Mr. Kaplan is the son-in-law of
Roger W. Stone.
RANDOLPH C. READ, born June 4, 1952, Senior Vice President and Chief
Financial and Planning Officer since January, 1996. Previously, Mr. Read was
President and Chief Executive Officer of International Capital Markets Group,
Inc. since 1990. Mr. Read is a director of Stone-Consolidated Corporation,
Venepal S.A.C.A., both affiliates of the Company, Con Pac, Inc. and Railcar
Specialties, Inc.
5
<PAGE>
HAROLD D. WRIGHT, born June 16, 1937, Senior Vice President North American
Containerboard, Paper and Pulp Division since January, 1996. Previously Mr.
Wright was Divisional Vice President of the Mill Division since September, 1988.
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.
JOHN RICONOSCIUTO, born September 4, 1952, Vice President and General
Manager -- Industrial and Specialty Packaging Division since January, 1997.
Previously, Mr. Riconosciuto was Vice President and General Manager of the
Multiwall Group from July, 1995 and prior to that Vice President of Marketing
and Specialty Packaging of the Industrial and Specialty Packaging Division.
MICHAEL B. WHEELER, born February 15, 1945, Vice President since 1984 and
Treasurer and Assistant Secretary since 1981.
EMIL B. WINOGRAD, born February 12, 1953, effective April 1, 1997 became
Vice President and General Manager--Worldwide Market Pulp Sales and Export
Containerboard and Kraft Paper Sales and President of Stone Container
International since April, 1997. Previously, Mr. Winograd was Division Vice
President and Regional Manager, Corrugated Container Division since December,
1995 and General Manager of the Glendale, AZ Corrugated Container Plant from
April, 1990.
MEETINGS AND COMMITTEES OF DIRECTORS
During 1996, the Board of Directors met six times. As to meetings of the
Committees of the Board, the Audit Committee met three times; the Compensation
Committee met five times, and the Nominating Committee and the Executive
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.
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.
6
<PAGE>
The members of the Audit, Nominating and Compensation 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 1996, the Company paid approximately $350,000 to Decade Films, Inc.
for production services related to the Company's BREAKTIME video, an internal
employee communication presentation produced quarterly. Lauren Stone, daughter
of Roger Stone, is President of Decade Films, Inc.
During 1996, Sunland Sales Company owed the Company approximately $850,000
as a result of sales made by the Company of kraft paper to Sunland. Avery Stone,
the brother or Roger Stone, controls Sunland.
During 1996, the Company sold to Morton International industrial bags for
approximately $4.8 million. Mr. Roger Stone is a Director of Morton
International.
During 1996, the Company sold to Prairie Packaging, Inc. containers produced
by the Company for $700,000. Mr. Roger W. Stone is a 26% owner of Prairie
Packaging.
During 1996, the Company sold to Con Pac, Inc. certain of the Company's
products for $422,632 and purchased from Con Pac products for $67,179. Mr.
Randolph Read is a director of this private corporation.
During 1996, the Company leased equipment from GATX Corporation and its
subsidiaries at an annual lease amount of approximately $3.4 million. Mr. James
Glasser, who is Chairman Emeritus of GATX Corporation, is a nominee for
reelection to the Board of Directors.
During 1996, the Company sold to McDonald's Corporation retail bags for
approximately $3.1 million. Mr. Jack Greenberg, who is Vice Chairman of the
Board of McDonald's Corporation, is a nominee for reelection to the Board of
Directors.
During 1996, 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 $2.3 million. In addition, Illinois Tool Works,
Inc. sold materials and supplies to the Company approximating $4.6 million. Mr.
John Nichols is the retired Chairman of Illinois Tool Works, Inc. and is a
nominee for reelection to the Board of Directors.
During 1996, Paper Recycling International ("PRI"), a joint venture 50%
owned by the Company and 50% owned by WMX Technologies, Inc., purchased $15.6
million of products from WMX Technologies. Mr. Phillip Rooney, who was Chairman
and Chief Executive Officer of WMX Technologies is a nominee for the Board of
Directors.
During 1996, the Company made loans to Mr. Randolph Read, Senior Vice
President and Chief Financial and Planning Officer of the Company, in the
aggregate amount of $306,130 in connection with Mr. Read's relocation to Chicago
upon his assuming his duties with the Company. Also during 1996, the Company
loaned to Mr. Harold Wright, Senior Vice President of the Company, the amount of
$300,000 in connection with his relocation to Chicago. These loans bear no
interest and are repayable (i) with respect to Mr. Read, on demand by the
Company, and (ii) with respect to Mr. Wright, on or before December 1, 2002. The
interest rate imputed on all such loans was 5.77% during 1996. Such imputed
interest is reported by the Company as compensation to Mr. Wright and Mr. Read.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 7, 1997, 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>
Wellington Management Company/The Vanguard 9,775,000 9.83%
Group(2)(3)..................................
75 State Street P.O. Box 2600
Boston, MA 02109 Valley Forge,
PA 19482
Scudder Stevens & Clark Inc................... 5,332,680 5.36%
345 Park Avenue
New York, NY 10154-0010
</TABLE>
- ------------------------
(1) Information with respect to beneficial ownership is based upon information
furnished by each owner.
(2) Wellington Management Company ("WMC"), in its capacity as investment
adviser, may be deemed to have beneficial ownership of these shares, which
are owned by the Vanguard/Windsor Fund. WMC reports that it has no sole or
shared voting power as to such shares, but has shared dispositive power as
to 9,775,000 of such shares.
(3) Vanguard/Windsor Fund reports that it has sole voting power and shared
dispositive power with respect to 9,470,000 of the reported shares. These
shares are also included in the shares beneficially owned by Wellington
Management Company, as investment adviser to Vanguard/Windsor Fund, as
described in note (2).
SECURITY OWNERSHIP OF MANAGEMENT
As of March 1, 1997, 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>
Thomas W. Cadden, Sr.......................... 73,855 (a)
Matthew S. Kaplan............................. 263,343 (a)(b)
Randolph C. Read.............................. 38,671 (a)
Roger W. Stone................................ 1,226,203 1.2%(b)
Harold D. Wright.............................. 13,928 (a)
All directors and executive officers as a 10,039,194 10.1%(b)
group........................................
</TABLE>
8
<PAGE>
- ------------------------
(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 has 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 12,500,000 shares of
Common Stock (approximately 12.6% of the outstanding shares).
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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------------
SECURITIES
UNDERLYING
ANNUAL COMPENSATION RESTRICTED OPTIONS
------------------------- STOCK (NUMBER OF
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(4) AWARDS($)(1) SHARES)
- ------------------------------- --------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Roger W. Stone 1996 $ 934,000 -- 278,840
Chairman, President and 1995 790,000 $ 678,250 -- 201,700
Chief Executive Officer 1994 730,000 -- $ 395,604 --
Randolph C. Read (3)*** 1996 419,000 -- -- 100,000
Senior Vice President 1995 -- -- --
1994 -- -- --
Harold Wright** 1996 335,000 -- -- 60,555
Senior Vice President 1995 187,000 67,800 -- 10,800
1994 169,000 45,400 35,903 --
Thomas W. Cadden, Sr.* 1996 292,000 -- -- 55,645
Senior Vice President 1995 275,500 99,650 210,808(2) --
1994 250,000 81,050 80,646 --
Matthew S. Kaplan 1996 274,000 -- -- 55,645
Senior Vice President 1995 235,000 110,100 -- 40,300
1994 210,000 69,050 80,645 --
</TABLE>
- ------------------------
* Thomas W. Cadden, Sr., who had been Senior Vice President and General
Manager Industrial and Retail Packaging from 1993 through December, 1996,
became President of S&G Packaging Company, L.L.C., a 65%-owned affiliate of
the Company, as of January, 1997.
9
<PAGE>
** Harold Wright received $66,633 in relocation expenses, which amount is
included as compensation for 1996.
*** Randolph C. Read received $103,700 in relocation expenses, which amount is
included as compensation for 1996.
(1) Except as described in note (2) below, awards of shares of restricted Common
Stock made under the 1995 Long-Term Incentive Plan do not vest until the
fifth anniversary of the award. 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, 1996 are as
follows: Mr. Stone, 158,153 shares, $2,352,526; Mr. Cadden, 37,959 shares,
$564,640; Mr. Wright, 7,158 shares, $106,475; Mr. Read, -0- shares, $0 and
Mr. Kaplan, 17,048 shares, $253,589.
(2) In 1995, shares of restricted stock were awarded to Mr. Cadden, vesting of
which shares is subject to performance levels of the Company Common Stock
over the three year period ending December 31, 1997. Such restricted stock
awards will become vested on January 23, 1998 if the average annual return
to stockholders has been at least 5% in such period which will result in 40%
vesting; 7.5% in such period which will result in 50% vesting, 10% in such
period which will result in 75% vesting, 12.5% in such period which will
result in 90% vesting or 15% in such period which will result in 100%
vesting. If the returns to stockholders are not achieved as of December 31,
1997, the shares of restricted stock or portions of such shares will be
forfeited at that time.
(3) Mr. Read's employment with the Company commenced January, 1996. Mr. Read
also received a payment from the Company of $10,000 during 1996 as partial
payment for consulting services provided to the Company prior to
commencement of Mr. Read's employment with the Company.
(4) The Company, in prior year Proxy Statements reported bonuses in the year
paid. This Proxy Statement reflects bonuses earned and accrued for the
relevant year.
10
<PAGE>
OPTION GRANTS IN 1996
The following table provides information with respect to option grants made
during 1996 to each of the executives named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
-------------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (# OF SHARES) FISCAL YEAR (DOLLAR/SHARE) DATE (DOLLARS)
- ------------------------------------ ------------- ------------------------ ------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Roger W. Stone...................... 278,840 14.08% $ 13.375 1/22/06 $ 1,098,472
Randolph C. Read.................... 100,000(2) 5.0% 13.375 1/22/06 394,000
Harold D. Wright.................... 60,555 3.1% 13.375 1/22/06 238,764
Thomas W. Cadden.................... 55,645 2.8% 13.375 1/22/06 219,064
-- -- -- --
Matthew S. Kaplan................... 55,645 2.8% 13.375 1/22/06 219,064
</TABLE>
- ------------------------
(1) Each executive officer who received an award of stock options under the
Company's 1995 Long-Term Incentive Plan (1995 Plan) is eligible to exercise
the option for a ten year period. Options granted are vested over a five
year period with a right to exercise 25% of the option 24 months after the
grant and 25% in each of the remaining three years. Currently the option
agreements under the 1995 Plan do not permit the exercise of an option upon
voluntary termination or termination for cause. In the event of death,
disability or other termination, the option is exercisable until the
expiration of the option grant. In the event of a change-in-control of the
Company, as such term is defined in the 1995 Plan, all options granted
become immediately vested.
(2) Mr. Read's stock option grant included a special option related to his
employment with the Company in January, 1996.
AGGREGATED OPTION EXERCISES
IN 1996 AND 1996 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
SECURITIES UNDERLYING
NUMBER OF
UNEXERCISED OPTIONS UNEXERCISED VALUE OF IN THE
AT 1996 YEAR END MONEY OPTIONS AT 1996 YEAR END
SHARES ACQUIRED VALUE (# OF SHARES) (DOLLARS)
ON EXERCISE REALIZED -------------------------- ------------------------------
(# OF SHARES) (DOLLARS) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------- ------------- ----------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger Stone.................. -0- -0- 50,425 430,115 -0- $ 174,250
Randolph Read................ -0- -0- -0- 100,000 -0- 62,500
Harold Wright................ -0- -0- 6,321 68,655 -0- 37,875
Thomas Cadden................ -0- -0- -0- 55,645 -0- 34,750
Matthew Kaplan............... -0- -0- 14,716 85,870 -0- 34,750
</TABLE>
11
<PAGE>
SALARIED EMPLOYEES RETIREMENT PLAN
The Stone Container Corporation Salaried Employees Retirement Plan (the
"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 months) for each year of service to a maximum of 30 years
of 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
</TABLE>
- ------------------------
(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 Retirement 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 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 1997 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 1996 earnings.
12
<PAGE>
The compensation covered by the Retirement Plan includes salary and any
bonus earned. The years of service as of January 1, 1997 for the executive
officers named in the Summary Compensation Table are: 40.4 for Mr. Stone, 18.6
for Mr. Cadden, 27.6 for Mr. Wright, 1.0 for Mr. Read and 18.8 for Mr. Kaplan.
COMPENSATION OF DIRECTORS
In 1996, non-employee directors received an annual retainer of $25,000 for
their services plus $1,500 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. In addition, each non-employee director received an annual award of
300 shares of the Company stock. Beginning in 1997, non-employee directors will
receive an annual retainer of $30,000 payable $20,000 in cash and $10,000 in
Common Stock of the Company valued at the date of the Annual Meeting of
Stockholders. Under the Company's unfunded deferred director fee plans, a
director may elect to defer payment of his director's fees to the year following
the director's retirement from the Board of Directors, plus earnings on the
deferred amounts under various options. In addition, the Company maintains a
policy pursuant to which it appoints a director with five or more years of
service as a consultant for a number of years equal to the number of years the
Director served on the Board and pays an annual consulting fee equal to the
director's retainer in effect at the date of such director's retirement.
EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
The Board of Directors has authorized management to execute Change in
Control Agreements for corporate and divisional officers providing for lump sum
payment of salary and bonus (based upon the average bonus for the last three
calendar years) plus the payment of certain fringe benefits, in the event of
termination of employment by the executive for good reason (as defined in the
Agreement) after a change in control (as defined in the Agreement) 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
Agreements would continue until the earliest of three years from the date of
such officer's involuntary termination, death, disability or an offer of
comparable employment. The Company has entered into Agreements with each of the
individuals named in the Summary Compensation Table. Mr. Stone, if he is
eligible to receive benefits under this Agreement, will receive three times
salary and bonus with a gross up for any excise taxes. The other individuals
named in the summary Compensation Table would receive benefits under this
Agreement equal to three times salary and bonus without any gross up for excise
taxes.
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.
13
<PAGE>
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 as Chairman of the
Compensation Committee of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, consisting of Mr. Giesen as Chairman, Mr.
Glasser, Mr. Pearlman and Mr. Aldinger, 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 Company has designed and administered executive
compensation programs so that compensation is linked to Company performance and
so that the interests of executives are aligned with the interests of
stockholders. This philosophy is articulated in the following guiding principles
of the Company's compensation programs:
- A significant percentage of compensation will be determined by the
Company's annual and long term financial performance, including the
creation of stockholder value.
- Compensation programs will be designed to encourage and balance the
attainment of short term operational goals and long term strategic goals.
- Total compensation will be targeted at competitive levels to allow the
Company to attract, retain and motivate highly qualified employees;
however, a greater percentage of compensation will be performance-based
and variable (versus fixed compensation) than competitive practices might
suggest.
- Compensation programs will be designed to encourage stock ownership by
executives. In 1996, the Company instituted a program which will be phased
in over a five year period requiring key employees to maintain prescribed
minimum stock ownership based on the level of the key employee.
There are three elements to the Company's compensation program, each
consistent with its compensation philosophy: annual base salary, annual cash
bonus incentives and long term incentives. Both the annual and the longer term
incentives are directed toward specific financial measures, including earnings
growth and total return to stockholders, with each of the targets calling for
progressively excellent results. 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. In 1996, the Company did not achieve
either its short-term or long-term goals.
14
<PAGE>
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 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. Although
competitive practices are viewed as important, the Company and the Compensation
Committee concur in the view that the more important considerations in setting
annual compensation are individual merit and the Company's financial
performance.
In April, 1996, the Compensation Committee reviewed executive officer
salaries to consider adjustments thereto. Based upon the Company's current
performance and economic conditions, the Committee recommended to the Board that
an adjustment should be made to the current salary level of the CEO effective
March 1, 1996 of $50,000 or approximately 6%. The Board adopted this
recommendation effective as of March 1, 1996. The increases to compensation were
based upon individual performance as well as the performance of the
responsibility area of the executive as well as corporate performance. The
Compensation Committee recommended and the Board awarded 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. The target levels for operating
division executives are established based upon budgeted consolidated operating
division profits for the fiscal year. For staff executives, the target levels
are based upon consolidated net income. 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% depending 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 profit, 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. The CEO did not earn a short-term incentive award for 1996.
15
<PAGE>
EQUITY-BASED COMPENSATION
An important consideration in the design of the Company's compensation
program is the use of equity-based compensation to encourage stock ownership by
management. Equity-based compensation of executive officers was determined by
the Compensation Committee of the Board. In 1996, 53 individuals were eligible
to receive grants of stock options under the 1995 Long-Term Incentive Plan (the
"1995 Plan").
In January 1996, options were granted under the 1995 Plan at an exercise
price equal to fair market value of the Company's Common Stock on the close of
business on the date of the grant and vest over a period of five years after the
date of grant of the option, subject to earlier termination of the option upon
voluntary termination of employment or termination of employment for cause and
subject to automatic acceleration of vesting upon death, disability or
retirement of the optionee or a change in control of the Company. All options
granted under the 1995 Plan expire ten years from the date of grant, unless
previously terminated or unless a shorter term is provided in the option
agreement. Executives were granted options to correlate the performance of the
Company to the amount of long-term incentive compensation received. Options
granted to each executive were granted based upon the executive's "job value" at
the 75th percentile, multiplied by such executive's "opportunity percentage"
divided by the present value of the stock price of the Company on the grant
date. All options issued were non-qualified options.
During 1996, recommendations for grants of options to individual executive
officers were made based upon a market analysis of grants made to officers at
similar levels of responsibility by other companies, and also in comparison to
certain other companies in the paper industry with comparable product lines. The
Compensation Committee as administrator of the 1995 Plan determined stock option
awards for executive officers of the Company based on a comparison of what
officers in comparable positions at other companies receive in terms of the face
value of the options at the time of grant, expressed as an annualized award size
as a multiple of base salary. The value of the options will increase as the
price of the Company's Common Stock increases, which while not assured, is
intended to have a correlative relationship to the Company's long-term
performance.
The Compensation Committee awarded options to executive officers under the
1995 Plan in accordance with the goals of the 1995 Plan, and upon a review of
each officer's individual performance goals, achievements, and long-term
potential to the Company. During fiscal year 1996, grants were awarded under the
1995 Plan to 53 employees, of whom five were officers named in the Summary
Compensation Table.
The Chief Executive Officer received 278,840 shares under the 1995 Plan in
1996, based upon a 133% opportunity percentage.
As often as seems appropriate, but at least annually, the Compensation
Committee studies the Company's executive compensation programs to judge their
consistency with the Company's compensation philosophy, their support of the
Company's strategic and financial objectives and their market competitiveness.
The Company's performance targets will be changed from time to time so as to
maintain the most effective relationship between performance and compensation.
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. The Company received Stockholder approval of the 1995 Long-Term
Incentive Plan and the 1995 Key Executive Short-Term Incentive Plan and the
Company believes that these plans provide qualified performance-based
compensation.
16
<PAGE>
Accordingly, compensation in excess of $1 million paid under these plans would
be deductible. In 1996, of the executive officers named in the Summary
Compensation Table only Roger Stone had current compensation in excess of $1
million.
COMPENSATION COMMITTEE
Richard A. Giesen -- Chairman
James J. Glasser
Jerry K. Pearlman
William F. Aldinger
17
<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, 1991 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
which commenced January 1, 1992 and ended December 31, 1996.
COMPARISON OF FIVE YEAR TOTAL RETURN*
AMONG STONE CONTAINER CORPORATION, S&P 500 INDEX AND
S&P PAPER & FOREST PRODUCTS INDEX**
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P
<S> <C> <C> <C>
Paper & Stone
S&P 500 Forest Products Container
1991 $100.00 $100.00 $100.00
1992 107.62 114.34 66.95
1993 118.46 126.01 38.47
1994 120.03 131.3 69.45
1995 165.13 144.57 58.41
1996 203.05 159.91 62.97
Assumes $100 invested on December 31, 1990 in Stone Container
common stock, S&P 500 index and S&P Paper & Forest Products index.
*Total Return assumes reinvestment of dividends
**Fiscal year ending December 31
</TABLE>
18
<PAGE>
V. STOCKHOLDER PROPOSAL CONCERNING THE DISCONTINUANCE OF ALL OPTIONS,
RIGHTS AND SAR'S FOR OFFICERS AND DIRECTORS
Robert D. Morse, 212 Highland Avenue, Moorestown, NJ 08057-2717 claiming
beneficial ownership of $1,000 or more of Common Stock has presented the
following proposal for action at the meeting:
PROPOSAL: That the directors of the Company consider the discontinuance of
all options, rights, SARs etc. After termination of existing agreements with
officers and directors. This does not include programs for other employees of
the Company.
This stockholder has submitted the following supporting statement with his
proposal:
"The claim that such programs holds and retains qualified personnel does not
hold true. Many management persons have left for other positions by being
offered larger options to lure them.
Shareholders equity is diminished when the stock or profits are distributed;
also the expense of proxy pages printed to outline programs and unmentioned cost
of record keeping and distribution would be saved yearly. Management and
directors are compensated enough to acquire stock on the open market just as you
and I, if we are so inclined. They also have benefits of bonus's, life insurance
programs, retirement benefits and company perks. When is ENOUGH! Please vote
YES.
If company directors fail to take this action the recommended nominees can
be voted down time after time until they see that salaries are sufficient
remuneration."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE
FOLLOWING REASONS:
The use of stock-based awards as an element of total compensation is common
to most major corporations. These awards enable companies to transform a portion
of the cash compensation that otherwise would be immediately payable into a form
of risk compensation in which the recipient benefits only if the company is
successful -- an approach which aligns the interests of the executives and all
stockholders because all benefit from increases in the value of the company's
stock.
The proposal characterizes stock-based awards as an added "perk" of
employment. In fact, such awards are an integral part of the Company's overall
compensation program (see the Compensation Committee Report, pages 14-17). As
indicated in the Committee's report, such awards are made not only to assure
that the overall compensation of senior executives remains competitive, but also
to link directly senior executive compensation with the Company's long-term
performance. Stock options only become exercisable to the extent of 25% of the
grant each year following the second anniversary of the grant, emphasizing the
long-term performance orientation of the program.
If the proposal were implemented, stock-based incentives could no longer be
awarded to senior executives. The Company's compensation program would then not
be competitive, both within the paper industry and when compared with other
major U.S. corporations, and alternative, potentially more costly, compensation
arrangements would have to be developed.
The Board opposes the proposal because it believes that the Company and its
stockholders are best served by a compensation program that includes a long-term
compensation component whose value is directly tied to the value of the
Company's Common Stock. FOR THESE REASONS THE BOARD RECOMMENDS A VOTE AGAINST
THIS STOCKHOLDER PROPOSAL.
VI. 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, 1997. Price Waterhouse LLP served as independent auditors of the Company
during
19
<PAGE>
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.
VII. 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 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.
VIII. 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. 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 approximately $5,000, plus certain expenses.
Stockholders are referred to the Company's Annual Report for the fiscal year
ended December 31, 1996 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.
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
1998 Annual Meeting of Stockholders (to be held May 12, 1998), 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 8, 1997, 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 15, 1997
20
<PAGE>
STONE CONTAINER CORPORATION
[LOGO]
150 North Michigan Avenue
Chicago, IL 60601-7568
T his entire document is printed on 75 brightness Mando-Registered Trademark-
Prime from Stone-Consolidated's Fort Frances mill.
<PAGE>
STONE CONTAINER CORPORATION
P 150 N. MICHIGAN AVENUE
R CHICAGO, IL 60601-7568
O
X THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y
The undersigned stockholder of Stone Container Corporation (the "Company")
hereby appoints Randolph C. Read 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 13, 1997, at 10:30 a.m. (C.D.S.T.) on the 80th floor,
The Mid-America Club, 200 East Randolph Drive, Chicago, Illinois 60601, or any
adjournment thereof, upon all subjects that may properly come before the
meeting.
1. ELECTION OF DIRECTORS:
Nominees: William F. Aldinger, Richard A. Giesen, James J. Glasser,
Jack M. Greenberg, Dionisio Garza, John D. Nichols,
Jerry K. Pearlman, Richard J. Raskin, Phillip B. Rooney,
Alan Stone, Ira N. Stone, James H. Stone and Roger W. Stone
(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 nominee(s) and the
number of votes on the space that follows. See "Voting and Proxy" in the
accompanying proxy statement for further information.)
PLEASE VOTE, SIGN AND DATE THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- -------------------------------- --------------------------------
- -------------------------------- --------------------------------
- -------------------------------- --------------------------------
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
<PAGE>
/X/PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE. 3002
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 - THE ELECTION OF
DIRECTORS
WITHHELD AS TO
FOR ALL NOMINEES
1. / / / /
ELECTION OF DIRECTORS
To withhold authority to vote for any individual nominee(s), mark the "FOR" box
and write the name of each such nominee on line provided below.
- ----------------------------------------
FOR AGAINST ABSTAIN
2. Stockholder proposal concerning the / / / / / /
discontinuance of all options, rights and
stock appreciation rights ("SAR's") for
officers and directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST PROPOSAL 2.
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before this meeting.
Signature(s) of Stockholders(s)___________________________ Date _________ , 1997
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.
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[LOGO]
STONE CONTAINER CORPORATION
Annual Meeting of Stockholders
Tuesday, May 13, 1997
10:30 a.m.
The Mid-America Club
80th Floor
200 East Randolph Drive
Chicago, Illinois 60601
