<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
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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) 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
Stone Container Corporation
150 North Michigan Avenue
Chicago, IL 60601-7568
Notice of Annual Meeting of Stockholders
TO BE HELD ON MONDAY, May 15, 2000
To the Holders of Series E Cumulative
Convertible Exchangeable Preferred Stock of
Stone Container Corporation:
You are cordially invited to attend the Annual Meeting of Stockholders of
Stone Container Corporation (the "Company") to be held on Monday, May 15, 2000
at the Plaza Club, 130 East Randolph Street, 40th Floor, Chicago, Illinois, at
10:00 a.m. (C.S.T.) for the following purposes:
1. To elect three ordinary directors to serve until the next succeeding
Annual Meeting of Stockholders or until their respective successors
are elected and qualified;
2. To elect two additional directors to be elected solely by the holders
of the Company's Series E Cumulative Convertible Exchangeable
Preferred Stock (the "Preferred Stock"), voting as a separate class,
to serve until the next succeeding Annual Meeting of Stockholders or
until their respective successors are elected and qualified, or, if
earlier, the date on which the full dividends accumulated on all
outstanding shares of the Preferred Stock have been declared and paid
or set apart for payment;
3. To consider a shareholder proposal, if presented to the Annual
Meeting; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
All stockholders of record at the close of business on March 21, 2000, are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment or
postponement thereof.
The Board of Directors of the Company has authorized the solicitation of
proxies. Unless otherwise directed, the proxies will be voted FOR the election
of the nominees listed in the attached proxy statement to be members of the
Board of Directors of the Company; AGAINST the shareholder proposal, if
presented to the Annual Meeting; and, on any other business that may properly
come before the Annual Meeting, as the named proxies in their best judgment
shall decide.
Any stockholder submitting a proxy may revoke such proxy at any time prior
to its exercise by notifying the Secretary of the Company in writing at 150 N.
Michigan Avenue, Chicago, Illinois 60601-7568, prior to the Annual Meeting, and
if you attend the Annual Meeting you may revoke your proxy if previously
submitted and vote in person by notifying the Secretary of the Company at the
Annual Meeting.
By Order of the Board of Directors
CRAIG A. HUNT,
Secretary
Chicago, Illinois
April 14, 2000
<PAGE>
STONE CONTAINER CORPORATION
---------------------------
PROXY STATEMENT
---------------------------
FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
Background
Pursuant to the Restated Certificate of Incorporation of the Company (the
"Certificate"), and except as otherwise required by law, the holders of Series E
Cumulative Convertible Exchangeable Preferred Stock, $.01 par value, of the
Company (the "Preferred Stock") are entitled, in addition to their voting rights
under the terms of the Preferred Stock, to one vote per share upon all matters
upon which holders of common stock, $.01 par value, of the Company (the "Common
Stock") have the right to vote.
The Certificate provides that in the event that the Company shall have
failed to declare and pay or set apart for payment in full the dividends
accumulated on the outstanding shares of Preferred Stock for any six quarterly
dividend payment periods, the number of directors of the Company shall be
increased by two and the holders of the Preferred Stock, voting as a class,
shall be entitled to elect such two additional directors (the "Preferred
Directors") until the full dividends accumulated on all outstanding shares of
the Preferred Stock have been declared and paid or set apart for payment. More
than six quarterly dividends remain unpaid in respect of the Preferred Stock,
and the Company is presently unable to declare or pay dividends on the Preferred
Stock as a result of covenants in certain of its credit agreements; accordingly,
the holders of the Preferred Stock, voting as a class, are entitled to elect the
Preferred Directors.
The Board presently consists of five members, including David Gale and Mark
A. Weissman as Preferred Directors, and Ray M. Curran, Patrick J. Moore, and
Leslie T. Lederer as Ordinary Directors.
Voting and Proxy
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company, for use at the 2000 Annual
Meeting of Stockholders to be held on Monday, May 15, 2000 at 10:00 a.m.
(C.S.T.) at the Plaza Club, 130 East Randolph Street, 40th Floor, Chicago,
Illinois (the "Annual Meeting"). The Board of Directors of the Company urges
that your proxy be executed and returned promptly in the enclosed envelope. If
the proxy is properly executed and returned, the shares of Preferred 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. The only
matters that the Company's management intends to present are those set forth in
Item 1 in the accompanying notice. Management knows of no other matters other
than the shareholder proposal set forth in Item 2 of the accompanying Notice
that may be presented at the Annual Meeting. 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 21, 2000 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 110,000,000 shares of Common Stock and 4,599,300 shares of
Preferred 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, 2000. Each stockholder has one vote for each share of Common Stock and
Preferred Stock held. The holders of a majority of the shares of Common Stock
and Preferred Stock 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, two Preferred Directors are to be elected by a vote
of the holders of Preferred Stock, voting as a separate class, and three
directors are to be elected by a vote of the holders of Common Stock and
Preferred Stock voting on a combined basis (the "Ordinary Directors"). As noted
under "Principal Stockholders", Smurfit-Stone Container Corporation ("SSCC")
owns 100% of the outstanding Common Stock, and has sufficient votes, without any
additional votes of the holders of the Preferred Stock, to elect each of the
three nominees for Ordinary Director.
Each stockholder is entitled to cumulate his or her votes for the election
of Ordinary Directors. Under cumulative voting, each stockholder is entitled to
vote as many votes as shall equal the number of shares of Common Stock and
Preferred Stock owned multiplied
<PAGE>
by the number of directors to be elected (three). Each stockholder may cast all
of such votes for a single candidate or distribute them among the number of
director positions to be filled or among any two or more candidates 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 for Ordinary Directors that 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 for Ordinary Directors 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. Holders of Preferred
Stock are not entitled to cumulate votes in the election of Preferred Directors.
If a quorum is present at the Annual Meeting, the three candidates for
Ordinary Directors and the two candidates for Preferred Directors 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 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. In the election of directors,
abstentions and broker non-votes will not affect the outcome, except in
determining the presence of a quorum and in the sense that such proxies will not
count toward the votes required for any nominee's election.
Except as otherwise instructed by a stockholder, if the stockholder
proposal set forth in Item 2 is presented to the Annual Meeting, each properly
executed and returned proxy will be voted AGAINST approval of such proposal and
as recommended by the Board of Directors with regard to all other matters or, if
no such recommendation is given, in their own discretion. As previously
described, SSCC owns 100% of the outstanding Common Stock, and has sufficient
votes, without any additional votes of the holders of the Preferred Stock, to
defeat the shareholder proposal.
ITEM 1 - ELECTION OF DIRECTORS
Ordinary Directors are to be elected to serve until the next succeeding
Annual Meeting of Stockholders or until their successors are elected and
qualified. Preferred Directors are to be elected to serve until the earlier of
the next succeeding Annual Meeting of Stockholders, their successors are elected
and qualified or the date on which all accumulated dividends on the shares of
Preferred Stock have been declared and paid or set aside for payment in full. 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 by
the Company.
Nominees for Election as Ordinary Directors
-------------------------------------------
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned
(a)
---------------------
Year First SSCC
Elected a Preferred Common
Name Principal Occupation Director Stock Stock(b)
- ----------------- -------------------- ---------- --------- --------
<S> <C> <C> <C> <C>
Ray M. Curran President and Chief Executive Officer of 1998 0 696,879
the Company and Smurfit-Stone Container
Corporation
Leslie T. Lederer Vice President - Strategic Investment 1999 0 140,455
Dispositions of the Company and
Smurfit-Stone Container Corporation
Patrick J. Moore Vice President and Chief Financial Officer 1998 0 553,299
of the Company and Smurfit-Stone Container
Corporation
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Nominees for Election as Preferred Directors
--------------------------------------------
Number of Shares
Beneficially Owned
(a)
---------------------
Year First SSCC
Elected a Preferred Common
Name Principal Occupation Director Stock Stock(b)
- ----------------- -------------------- ---------- --------- --------
<S> <C> <C> <C> <C>
David Gale President of Delta Dividend Group, Inc. 1999 28,930 (c) 0
Mark A. Weissman Manager of Corporate Bond Trading of 1999 6,838 (d) 0
Mariner Investment Group, Inc.
</TABLE>
(a) All of the shares of Common Stock are owned by SSCC. Each person has sole
voting and investment power with respect to the shares listed. Shares are
shown as of March 1, 2000. All amounts represent less than one percent of
the outstanding Preferred Stock and SSCC common stock, respectively.
(b) Shares shown as beneficially owned include the number of shares of SSCC
common stock that directors and executive officers have the right to
acquire within 60 days after March 1, 2000 pursuant to exercisable options
under the stock option plans maintained by the Company and SSCC. Shares of
SSCC common stock shown include the number of shares held in the Savings
Plan maintained by the Company and SSCC as of December 31, 1999, which the
executive officers have the right to vote.
(c) Includes 27,930 shares of Preferred Stock owned by Delta Dividend Group,
Inc. ("Delta"). Mr. Gale owns 49% of Delta, which owns 57,000 shares of
Preferred Stock.
(d) Excludes 455,350 shares of Preferred Stock owned by Mariner Investment
Partners, an affiliate of Mr. Weissman, as to which beneficial ownership is
disclaimed. Mr. Weissman owns 5% of Caspian Capital Partners, L.P., which
owns 136,750 shares of Preferred Stock.
INFORMATION AS TO DIRECTORS
The following information indicates the principal occupation and employment
for the Directors for the last five years, unless otherwise indicated. All
Executive Officers of the Company serve in the same capacity for SSCC and
certain of its other subsidiaries.
Preferred Directors:
David Gale, born February 22, 1959, has been President of Delta Dividend
Group, Inc. since 1992. He also serves as a director of Preferred Income
Fund Incorporated, Preferred Income Opportunity Fund Incorporated and
Freerealtime.com.
Mark A. Weissman, born February 14, 1961, has been Manager of Corporate Bond
Trading of Mariner Investment Group, Inc. since 1996. He was a managing
director with Bear, Stearns & Co., Inc. from 1988 to 1994, and was with
Cantor Fitzgerald & Co. from 1994 to 1996.
Ordinary Directors:
Ray M. Curran, born May 13, 1946, has served as President and Chief
Executive Officer of the Company and SSCC since April 1, 1999. He was
Executive Vice President and Deputy Chief Executive Officer of the Company
and SSCC from November 1998 until March 31, 1999. He was Financial Director
of Jefferson Smurfit Group plc ("JS Group") from February 1996 to November
1998 and prior to that served as Chief Financial Officer of JS Group since
1992. JS Group beneficially owns approximately 33% of the SSCC common stock.
Leslie T. Lederer, born July 20, 1948, has been Vice President - Strategic
Investment Dispositions since November 1998. He was Vice President,
Secretary and General Counsel of the Company from 1987 to November 1998.
3
<PAGE>
Patrick J. Moore, born September 7, 1954, has been Vice President and Chief
Financial Officer of SSCC since October 1996 and was appointed to the same
position with the Company in November 1998. He was Vice President and
General Manager - Industrial Packaging Division of Jefferson Smurfit
Corporation ("JSC") from December 1994 to October 1996. He served as Vice
President and Treasurer of JSC from February 1993 to December 1994 and was
Treasurer of JSC from October 1990 to February 1993. He joined JSC in 1987
as Assistant Treasurer. He is a director of First Financial Planners, Inc.
BOARD AND BOARD COMMITTEE MEETINGS,
COMMITTEE FUNCTIONS AND COMPOSITION
During 1999, the Board of Directors held three meetings. There are no
committees of the Board of Directors
CERTAIN TRANSACTIONS
Transactions with JS Group
The Company is regularly engaged in ordinary course transactions involving
the purchase and sale of products with JS Group, a principal shareholder of
SSCC. Net sales by the Company to JS Group, its subsidiaries and its affiliates
were $12 million for the year ended December 31, 1999. Net sales by JS Group,
its subsidiaries and its affiliates to the Company were $5 million for the year
ended December 31, 1999. Product sales to and purchases from JS Group, its
subsidiaries and its affiliates were consummated on terms generally similar to
those prevailing with unrelated parties.
Transactions with JSC(U.S.)
The Company is regularly engaged in ordinary course transactions involving
the purchase and sale of products with Jefferson Smurfit Corporation (U.S.)
("JSC(U.S.)"), an indirect wholly owned subsidiary of SSCC. Net sales by the
Company to JSC(U.S.), its subsidiaries and its affiliates were $237 million for
the year ended December 31, 1999. Net sales by JSC(U.S.), its subsidiaries and
its affiliates to the Company were $248 million for the year ended December 31,
1999. Product sales to and purchases from JSC(U.S.), its subsidiaries and its
affiliates were consummated on terms generally similar to those prevailing with
unrelated parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of any class of the Company's voting stock, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission ("SEC"). Executive officers, directors and greater than ten percent
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a review of the
copies of such forms furnished to the Company and written representations from
the Company's executive officers and directors, the Company believes that during
the period from January 1, 1999 through February 29, 2000, its executive
officers, directors and greater than ten percent beneficial owners complied with
all Section 16(a) filing requirements applicable to them, except that Forms 4,
Statement of Changes in Beneficial Ownership, were not filed on a timely basis
with the SEC by Mark A. Weissman, a Preferred Director of the Company, in
connection with a purchase of Preferred Stock in November 1999, and by David
Gale, a Preferred Director of the Company, in connection with purchases of
Preferred Stock in March, April and November 1999.
4
<PAGE>
PRINCIPAL STOCKHOLERS
Security Ownership of Certain Beneficial Owners
As of March 31, 2000, the following persons were known to the Company to own
beneficially more than 5% of the outstanding shares of the respective classes of
stock of the Company.
<TABLE>
<CAPTION>
Number of Number of
Shares of Shares of
Common Stock Percent of Preferred Stock Percent of
Beneficially Common Stock Beneficially Preferred Stock
Name and Address Owned Outstanding Owned Outstanding
- ----------------------------------- ------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Smurfit-Stone Container Corporation 110,000,000 100.0% 0 0
150 North Michigan Avenue
Chicago, IL 60601-7568
Mariner Investment Partners 0 0 455,350 9.9%
65 East 55th Street
New York, NY 10022
</TABLE>
Security Ownership of Management
As of March 1, 2000, the directors and executive officers as a group
beneficially owned 35,768 shares of Preferred Stock, which represents less than
one percent of the issued and outstanding shares of Preferred Stock.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by, as well as the
number of shares of SSCC common stock underlying options granted to each of the
Company's named executive officers during the past three fiscal years.
Except as noted, the following table sets forth certain compensation
information for the chief executive officer and certain other executive officers
of the Company who, based on the salary and bonus compensation information from
SSCC and its subsidiaries, were the most highly compensated for the year ended
December 31, 1999. All information set forth in this table reflects
compensation earned by these individuals for services with SSCC and its
subsidiaries for the fiscal years ended December 31, 1997, 1998 and 1999.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------------
Other Awards All Other
Annual Securities Payouts Compen-
Annual Compensation Compensation Underlying LTIY Payouts sation
Name and Principal Position Year Salary($) Bonus($) ($) Options ($)(a) ($)(b)
- --------------------------- ---- --------- --------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael W. J. Smurfit (c)........ 1999 900,000 445,140 $217,768 250,000 0 24,483
Chairman of the Board 1998 834,000 185,248 0 0 0 32,691
of SSCC 1997 834,000 0 0 0 0 26,757
Ray M. Curran (d)(f)............. 1999 1,206,252 1,274,970 4,213 0 0 5,000
President and 1998 102,567 0 0 910,000 0 0
Chief Executive Officer 1997 0 0 0 0 0 0
Roger W. Stone (d)............... 1999 212,500 0 0 0 0 6,055,064
Former President and 1998 850,000 0 0 1,897,836 297,000 4,000
Chief Executive Officer 1997 858,475 0 0 0 283,301 0
Patrick J. Moore (e)(f).......... 1999 761,250 573,752 0 0 0 11,257
Vice President and 1998 350,016 828,779 9,489 325,000 0 7,736
Chief Financial Officer 1997 305,000 0 70,333 200,000 337,671 6,987
William N. Wandmacher............ 1999 340,008 167,395 6,215 0 0 15,084
Vice President and General 1998 291,000 99,778 1,178 75,000 0 12,767
Manager - Containerboard 1997 279,000 0 532 54,000 498,674 11,616
Mill Division
David C. Stevens................. 1999 274,992 230,127 0 0 0 15,506
Vice President and General 1998 257,016 36,281 0 30,000 0 14,046
Manager - Reclamation 1997 238,000 131,648 0 100,000 270,048 12,276
Division
</TABLE>
- ---------
(a) Reflects amounts awarded under SSCC's 1994 Long-Term Incentive Plan.
Amounts were either payable in cash or deferred into the Company's Deferred
Compensation Plan at the election of the Named Executive Officer.
(b) Amounts shown under "All Other Compensation" for 1999 include a $5,000
contribution to SSCC's Savings Plan for each of the Named Executive
Officers (other than Dr. Smurfit) and SSCC-paid split-dollar term life
insurance premiums for Dr. Smurfit ($24,483) and Messrs. Moore ($6,257),
Wandmacher ($10,084) and Stevens ($10,506). Upon his retirement, Mr. Stone
received a payment of $5,833,747 under his Severance Agreement with the
Company. Mr. Stone also received $195,884 as a pension payment and $20,433
as vacation pay.
(c) The amount shown in "Other Annual Compensation" for 1999 represents a
"gross up" payment for a portion of Dr. Smurfit's Federal and State income
tax liability.
(d) Mr. Curran was named to succeed Mr. Stone as President and Chief Executive
Officer of the Company as of April 1, 1999. Mr. Stone served as President
and Chief Executive Officer of the Company upon completion of the merger
with SSCC (the "Merger") on November 18, 1998, and retired from the Company
as of March 31, 1999. All of Mr. Stone's restricted stock and options were
vested at the time of the Merger and were converted into shares or options
to acquire shares of SSCC common stock, adjusted to reflect the .99 to one
ratio at which shares of the Company's common stock were exchanged into
shares of SSCC common stock in connection with the Merger.
(e) The amount under Bonus for 1998 includes a one-time special bonus of
$750,000 awarded to Mr. Moore in recognition of his significant
contributions in connection with the Merger.
6
<PAGE>
(f) In addition to their awards under the MIP for 1999 ($630,670 for Mr. Curran
and $378,402 for Mr. Moore), Messrs. Curran and Moore received additional
bonuses of $644,300 and $195,350, respectively, for 1999 in recognition of
their performance in significantly exceeding the Company's objectives in
key areas such as asset divestitures, debt reduction and attainment of
synergies from the Merger.
Option Grants in the Last Fiscal Year -- The following table shows all
grants of options to acquire shares of SSCC common stock granted to the
executive officers named in the Summary Compensation Table on pages 5 and 6 (the
"Named Executive Officers") for the year ended December 31, 1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1999
Potential Realizable Value
Number of % of Total at Annual Rates of Stock
Securities Options Price Appreciation
Underlying Granted to Exercise or for Option Term ($)(b)
Options Employees in Base Price Expiration --------------------------
Name Granted Fiscal Year(a) ($ Per Share) Date 5% 10%
- --------------------------- ---------- -------------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. J. Smurfit (c).. 250,000 55.2% 17.19 03/03/09 2,702,282 6,848,112
Ray M. Curran.............. 0 N/A N/A N/A N/A N/A
Roger W. Stone............. 0 N/A N/A N/A N/A N/A
Patrick J. Moore........... 0 N/A N/A N/A N/A N/A
William N. Wandmacher...... 0 N/A N/A N/A N/A N/A
David C. Stevens........... 0 N/A N/A N/A N/A N/A
</TABLE>
- ---------
(a) Reflects percentage of total options granted to employees in 1999 under
SSCC's 1998 Long Term Incentive Plan.
(b) The dollar amounts under these columns are the result of calculations at 5%
and 10% rates, as set by the Securities and Exchange Commission's executive
compensation disclosure rules. Actual gains, if any, on stock option
exercises depend on future performance of the SSCC common stock and overall
stock market conditions. No assurance can be made that the amounts
reflected in these columns will be achieved.
(c) Upon exercise of these options, Dr. Smurfit is also entitled to receive an
additional cash payment from SSCC equal to $2.19 per option exercised.
As of December 31, 1999, there were approximately 18,317,149 shares of
SSCC common stock reserved for issuance under all of the stock-based incentive
plans of SSCC and its subsidiaries, including the Company, with approximately
3,357,000 shares available for future grants.
Option Exercises and Year-End Value Table -- The following table shows
aggregate exercises of options to purchase SSCC common stock in the year ended
December 31, 1999 and the number of securities underlying unexercised options to
purchase SSCC common stock held at the end of 1999 by the Named Executive
Officers.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired on Value at January 1, 2000(#) at January 1, 2000($)(a)
Name Exercise(#) Realized Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------------- ----------- ---------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Michael W. J. Smurfit...... 0 0 1,026,000 / 250,000 $14,879,000 / 1,828,125
Ray M. Curran.............. 0 0 393,333 / 606,667 4,850,204 / 7,090,421
Roger W. Stone............. 170,676 692,471 885,809 / 0 9,860,476 / 0
Patrick J. Moore........... 0 0 433,333 / 216,667 5,125,142 / 2,532,296
William N. Wandmacher...... 0 0 168,750 / 56,250 2,187,266 / 657,422
David C. Stevens........... 75,000 964,842 82,500 / 22,500 940,781 / 262,969
</TABLE>
- ---------
(a) The closing market value of the SSCC common stock on December 31, 1999 was
$24.50 per share. On that date, the exercise price per share for
outstanding options held by the Named Executive Officers ranged from $10.00
to $19.82.
Pension Plans
Salaried Employees Retirement Plan and Excess Benefit Plan
For purposes of calculating pension benefits payable to former Stone
salaried employees, the Company currently maintains the Stone Container
Corporation Salaried Employees Retirement Plan (the "Retirement Plan"). The
benefit formula under the Retirement Plan is different than that under SSCC's
pension plan. Of the Named Executive Officers, only Mr. Stone, who retired from
the Company as of March 31, 1999, will receive pension benefits under the
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 five 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.
Illustrative Projected Annual Retirement Benefit
for Selected Remuneration and Years of Service Classifications(a)
<TABLE>
<CAPTION>
Years of Service at Retirement
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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
8
<PAGE>
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 1999 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 1999 earnings.
The compensation covered by the Retirement Plan includes salary and any
bonus earned. Mr. Stone had 42 years of service at the time of his retirement.
Each of the Named Executive Officers (other than Mr. Stone) will receive pension
benefits pursuant to the pension plans maintained by SSCC.
Pension Plans of SSCC
Salaried Employees' Pension Plan and Supplemental Income Pension Plan
SSCC and its subsidiaries maintain a non-contributory pension plan for
salaried employees (the "Pension Plan") and a non-contributory supplemental
income pension plan (the "SIP") for certain key executive officers, under which
benefits are determined by final average earnings and years of credited service
and are offset by a certain portion of social security benefits. For purposes of
the Pension Plan, final average earnings equals the participant's average
earnings for the five consecutive highest-paid calendar years of the
participant's last 10 years of service, including overtime and certain bonuses,
but excluding bonus payments under SSCC's annual management incentive plan (the
"MIP"), deferred or acquisition bonuses, fringe benefits and certain other
compensation. For purposes of the SIP, final average earnings equals the
participant's average earnings, including bonuses under the MIP, for the five
consecutive highest-paid calendar years of the participant's last 10 years of
service. The SIP recognizes all years of credited service.
The pension benefits for the Named Executive Officers (other than Mr.
Stone) can be calculated pursuant to the following table, which shows the total
estimated single life annuity payments (prior to adjustment for Social Security)
that would be payable to the Named Executive Officers participating in the
Pension Plan and the SIP after various years of service at selected compensation
levels. Payments under the SIP are an unsecured liability of SSCC and its
subsidiaries, including the Company.
<TABLE>
<CAPTION>
Each Year
Remuneration in
- ---------------------- Excess of
Final Average Earnings 5 years 10 years 15 years 20 years 20 years
- ---------------------- -------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 25,000 $ 50,000 $ 75,000 $ 100,000 *
400,000 50,000 100,000 150,000 200,000 *
600,000 75,000 150,000 225,000 300,000 *
800,000 100,000 200,000 300,000 400,000 *
1,000,000 125,000 250,000 375,000 500,000 *
1,200,000 150,000 300,000 450,000 600,000 *
1,400,000 175,000 350,000 525,000 700,000 *
1,600,000 200,000 400,000 600,000 800,000 *
1,800,000 225,000 450,000 675,000 900,000 *
2,000,000 250,000 500,000 750,000 1,000,000 *
- ---------
</TABLE>
* An additional 1% of earnings is accrued for each year in excess of 20 years.
Dr. Smurfit and Messrs. Moore, Wandmacher and Stevens participate in the
SIP and have 45, 14, 13, and 35 years of credited service, respectively. Current
average earnings as of December 31, 1999, for each of the Named Executive
Officers was as follows: Dr. Smurfit ($1,182,927); Mr. Moore ($505,190); Mr.
Wandmacher ($371,743) and Mr. Stevens ($354,467). Mr. Curran is not a
participant in the SIP. He has one year of credited service under the Pension
Plan with average annual earnings of $160,000.
9
<PAGE>
COMPENSATION OF DIRECTORS
In 1999, non-employee directors, which included only the Preferred
Directors, received an annual retainer of $5,000, prorated for the partial year
during which they served on the Board of Directors. In addition, the Company
previously maintained a policy pursuant to which it appointed a director with
five or more years of service as a consultant to the Company for a number of
years equal to the number of years the director served on the Board and for an
annual consulting fee equal to the director's retainer in effect at the date of
such director's retirement.
EMPLOYMENT AGREEMENTS AND SEVERANCE AGREEMENTS
SSCC has entered into agreements (the "Employment Agreements") with Messrs.
Curran and Moore effective as of April 1, 1999. The Employment Agreements
require the executives to devote substantially all of their business time to the
operations of SSCC and its subsidiaries, including the Company, each for a term
expiring on April 1, 2002, which term is automatically extended for a one-day
period for each day that passes after April 1, 1999, unless sooner terminated by
either party in accordance with the provisions of the Employment Agreements.
The Employment Agreements provide that Messrs. Curran and Moore shall be
eligible to participate in any annual performance bonus plans, long-term
incentive plans, and/or equity-based compensation plans established or
maintained by SSCC for its senior executive officers, including the MIP and the
Smurfit-Stone Container Corporation 1998 Long-Term Incentive Plan.
The Employment Agreements provide that if SSCC terminates the executive's
employment "without cause" or the executive terminates his employment with "good
reason," SSCC will: (i) pay the executive the full amount of base salary and
annual bonus that SSCC would have paid under the Employment Agreement had the
executive's employment continued to the end of the employment term; (ii)
continue the executive's coverage under SSCC's medical, dental, life,
disability, pension, profit sharing and other executive benefit plans through
the end of the employment term; (iii) provide the executive with certain
perquisites until the end of the employment term, provided that these
perquisites provided by SSCC will be reduced to the extent the executive
receives comparable perquisites without cost during the 36 month period
following his employment termination; (iv) continue to count the period through
the end of the employment term for purposes of determining the executive's age
and service with SSCC with respect to (A) eligibility, vesting and the amount of
benefits under SSCC's executive benefit plans, and (B) the vesting of any
outstanding stock options, restricted stock or other equity-based compensation
awards; and (v) provide outplacement services, as elected by the executive (and
with a firm selected by the executive), not to exceed $50,000 in total.
The Employment Agreements also provide that if, within 24 months following
a "change of control" of SSCC, SSCC terminates the executive's employment
"without cause" or the executive terminates his employment with "good reason,"
SSCC will (i) pay the executive three times the executive's base salary, as in
effect on the date of his termination; (ii) three times the highest of (A) the
average annual bonus paid for the three fiscal years immediately preceding the
executive's employment termination, (B) the target bonus for the fiscal year in
which such termination of employment occurs, or (C) the actual bonus attained
for the fiscal year in which such termination occurs; (iii) continue the
executive's coverage under SSCC's medical, dental, life, disability, pension,
profit sharing and other executive benefit plans for three years following
employment termination; (iv) pay the value of three years of continued coverage
under any pension, profit sharing or other retirement plan maintained by SSCC;
(v) continue to provide the executive with certain perquisites, provided that
these perquisites provided by SSCC will be reduced to the extent the executive
receives comparable perquisites without cost during the 36 month period
following his employment termination; (vi) immediately vest all stock options,
restricted stock and other equity-based awards; and (vii) pay for outplacement
services to the executive not to exceed $50,000. SSCC generally must make the
payments described above within 10 days of the executive's employment
termination. If the payments and benefits described above would be "excess
parachute payments" as defined in Code Section 280G, with the effect that the
executive is liable for the payment of an excise tax, then SSCC will pay the
executive an additional amount to "gross-up" the executive for such excise tax.
The Employment Agreements for Messrs. Curran and Moore also forbid the
executives from: (i) disclosing confidential information, inventions or
developments; (ii) diverting any business opportunities or prospects from SSCC
and its subsidiaries; and (iii) during their employment and for a period of up
to two years following termination of his employment, competing with any
business conducted by SSCC or any of its affiliates, or soliciting any
employees, customers or suppliers of SSCC and its subsidiaries, within the
United States.
In general, each of the following transactions is considered a change of
control under the Employment Agreements: (a) a third party's acquisition of 20%
or more of SSCC's common stock; (b) a change in the majority of the Board of
Directors of SSCC; (c) completing certain reorganization, merger or
consolidation transactions or a sale of all or substantially all of SSCC's
assets; or (d) the
10
<PAGE>
complete liquidation or dissolution of SSCC. The Merger did not constitute a
change of control for purposes of the Employment Agreements because they became
effective subsequent to its consummation.
Each of Messrs. Wandmacher and Stevens is a party to an Employment Security
Agreement (collectively, the "Severance Agreements"). Among other things, the
Severance Agreements provide for a lump sum payment based on a specified
multiple of salary and bonus plus the payment of certain fringe benefits under
certain circumstances within two years after a "change of control" (as such term
is defined in the Severance Agreements). The Merger constituted a change of
control under the Severance Agreements.
The maximum severance benefit, including the value of pension and welfare
benefits, fringe benefits and perquisites payable under the Severance
Agreements, which would have been payable under the Severance Agreements to each
of Messrs. Wandmacher and Stevens in the event of termination of employment as
of December 31, 1999 by the Company without "cause" or resignation by the
executive officer for "good reason" is $1,024,101 for Mr. Wandmacher and
$846,588 for Mr. Stevens.
Mr. Stone retired as President and Chief Executive Officer of the Company
effective as of March 31, 1999. Upon his retirement, Mr. Stone received a
payment of $5,833,477 under his severance agreement with the Company. He also
received $195,884 as a pension payment and $20,433 as vacation pay.
The Company entered into consulting agreements in 1974 with each of Messrs.
Jerome H. Stone, Marvin N. Stone (deceased) 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. Norman H. Stone died in
1985 and Marvin N. Stone died in 1999, and their respective widows receive the
specified payments.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The salary and benefits of the Chief Executive Officer of the Company and
certain other executives are determined by the Compensation Committee of the
Board of Directors of SSCC (the "SSCC Compensation Committee"). Stockholders are
referred to SSCC's 2000 proxy statement for information regarding the report of
the SSCC Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of the SSCC Compensation Committee is currently or was, during
the year ended December 31, 1999, an officer, former officer or employee of the
Company or any of its subsidiaries. No executive officer of the Company served
as a member of (i) the compensation committee of another entity in which one of
the executive officers of such entity served on the SSCC Compensation Committee,
(ii) the Board of Directors of another entity in which one of the executive
officers of such entity served on the SSCC Compensation Committee, or (iii) the
compensation committee of another entity in which one of the executive officers
of such entity served as a member of the Company's Board of Directors, during
the year ended December 31, 1999.
INDEPENDENT AUDITORS
The Board of Directors appointed Ernst & Young LLP as the Company's
independent accountants for the year ended December 31, 1999. Ernst & Young 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. Ernst & Young LLP also serves as the independent accountants of
SSCC. It is expected that a representative of Ernst & Young 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.
11
<PAGE>
ITEM 2 - SHAREHOLDER PROPOSAL
Robert D. Morse, 212 Highland Avenue, Mooresetown, NJ 08057-2717, claiming
beneficial ownership of $2000 or more of the Preferred Stock, has indicated his
intention to present the following proposal for action at the meeting:
Proposal: I propose that the Officers and Directors consider the
discontinuance of all bonuses immediately, and options, rights, SAR's,
etc., after termination of any existing programs for top management. I must
also include discontinuance request of "Severance Contracts", which overpay
a person no longer satisfactory to the Company, just to leave! This does
not include any programs for employees.
Reasons: Management and Directors are compensated enough to buy on open
market, just as you and I, if they are so motivated.
Management is already well paid with base pay, life insurance,
retirement plans, paid vacations, free use of vehicles and other perks.
Options, rights, SAR's are available elsewhere, and a higher offer
would induce transfers, not necessarily "attain and hold" qualified
persons.
Who writes the objections to my proposal? Is it not the same persons
who nominate and pay the directors who in turn will provide Management
these exorbitant extras above a good base salary? Shareowners should start
reading and realizing that these persons are not providing them
entertainment on an individual choice basis, as do athletes, movie stars,
and similar able performers.
"Align management with shareowners" is a repeated ploy or "line" to
lull us as to continually increasing their take of our assets. Do we get
any options to purchase at previous [presumed] lower rates, expecting
prices to increase?
After taxes, present base salaries are way above the $200,000 our
President receives plus free lodging, and Management only looks after a
Company, not the USA and some of the world problems. If they filled out a
daily work or production sheet, what would it show?
Please vote "YES" for this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
The Company believes that a balanced approach to executive compensation
that includes base salaries, performance bonuses and periodic grants of stock-
based awards best serves the interests of the Company's stockholders by
promoting efforts to advance both the short and long-term interests of the
Company.
If Mr. Morse's proposal were implemented, cash and stock-based incentives
could no longer be awarded to senior executives. In the Board's view, the
restrictions imposed by Mr. Morse's proposal would result in a compensation
program that is not competitive with the practices of other participants in the
paper industry or with other major U.S. corporations. As a result, the Company's
ability to retain and motivate executive talent would be significantly harmed.
Under these circumstances, the Board believes the adoption of this proposal
could be against the interests of the Company and its stockholders. Finally, the
Board notes that a similar proposal submitted by Mr. Morse was overwhelmingly
rejected by the Company's stockholders in 1997. FOR THESE REASONS, THE BOARD
RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL.
12
<PAGE>
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.
OTHER MATTERS
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 on Form 10-K for
the fiscal year ended December 31, 1999, 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.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING OF STOCKHOLDERS
Under the rules of the SEC, in order to be considered for inclusion in the
Company's proxy statement for the 2001 Annual Meeting of Stockholders, 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, 2000 and must meet other SEC
requirements.
By order of the Board of Directors.
CRAIG A. HUNT
Secretary
April 14, 2000
13
<PAGE>
PREFERRED STOCKHOLDERS
PROXY
STONE CONTAINER CORPORATION
Annual Meeting May 15, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned stockholder of Stone Container Corporation, a Delaware
corporation (the "Company"), appoints CRAIG A. HUNT and PATRICK J. MOORE, or
either of them, with full power to act alone, the true and lawful
attorneys-in-fact of the undersigned, with full power of substitution and
revocation, to vote all shares of stock of the Company which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held at The
Plaza Club, 130 East Randolph Street, 40th Floor, Chicago, IL, on May 15, 2000
at 10:00 a.m. (C.S.T.) and at any adjournment or postponement thereof, with all
the powers the undersigned would possess if personally present, as indicated on
the reverse hereof.
(NOTE: If authority is granted to vote for one or more nominees for Ordinary
Director, 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) for Ordinary Director(s) and the number of votes in the space
indicated on the reverse hereof. See "Voting and Proxy" in the accompanying
proxy statement for further information.)
(Continued, and to be marked, dated and signed, on the other side)
. FOLD AND DETACH HERE .
<PAGE>
1. Election of Ordinary Directors:
FOR all WITHHOLD
nominees listed below AUTHORITY
(except as marked to to vote for all
the contrary below) nominees listed below.
[_] [_]
Ray M. Curran, Leslie T. Lederer and Patrick J. Moore
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line below. To cumulate votes for a particular
nominee, see instructions on the reverse hereof.
- --------------------------------------------------------------------------------
2. Election of Preferred Directors:
FOR all WITHHOLD
nominees listed below AUTHORITY
(except as marked to to vote for all
the contrary below) nominees listed below.
[_] [_]
David Gale and Mark A. Weismann
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line below.
- --------------------------------------------------------------------------------
3. Shareholder Proposal:
FOR the discontinuance AGAINST discontinuance
of all bonuses, of all bonuses,
options, SAR, etc. for options, SAR, etc. for
top management top management
[_] [_]
ABSTAIN from voting
on this Proposal. [_]
On any other matter that may properly be submitted to a vote of stockholders.
This proxy will be voted "FOR" items 1 and 2 and "AGAINST" item 3 if no
instruction to the contrary is indicated. If any other business is presented at
the meeting, this proxy will be voted in accordance with the recommendation of
management. Please date, sign and mail this proxy in the enclosed envelope. No
postage is required.
Dated , 2000
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign name or names exactly as appearing on this proxy. If signing as a
representative, please include capacity.
(YOU ARE REQUESTED TO COMPLETE, SIGN, AND RETURN THIS PROXY PROMPTLY)
. FOLD AND DETACH HERE .
