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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 Section 240.14a-11(c) or Section 240.14a-2.
Shorewood Packaging Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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SHOREWOOD PACKAGING CORPORATION
277 PARK AVENUE
NEW YORK, NEW YORK 10172-0124
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 22, 1999
------------------------
TO THE STOCKHOLDERS OF SHOREWOOD PACKAGING CORPORATION
NOTICE is hereby given that the Annual Meeting (the "Meeting") of
Stockholders of SHOREWOOD PACKAGING CORPORATION (the "Company"), a Delaware
corporation, will be held at The Chase Manhattan Bank, 270 Park Avenue, 11th
Floor, Room A, New York, New York, on September 22, 1999 at 9:30 A.M. for the
following purposes:
1. To elect three directors comprising the Class I Directors to serve until
the 2002 Annual Meeting of Stockholders and one director as a Class III
Director to serve until the 2001 Annual Meeting of Stockholders.
2. To ratify the selection of Deloitte & Touche LLP as the independent
auditors of the Company for the fiscal year ending April 29, 2000.
3. To consider and vote upon proposed amendments to the Company's 1993
Incentive Program.
4. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
All of the above matters are more fully described in the accompanying Proxy
Statement.
The Board of Directors has fixed the close of business on August 17, 1999
as the date for the determination of stockholders entitled to notice of, and to
vote at, the Meeting. A list of stockholders entitled to vote at the Meeting
will be open to examination by stockholders during ordinary business hours for a
period of ten (10) days prior to the Meeting at the executive offices of the
Company, 277 Park Avenue, New York, New York 10172-0124.
By order of the Board of Directors,
Andrew N. Shore
Secretary
New York, New York
August 23, 1999
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE
MEETING, YOU MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
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SHOREWOOD PACKAGING CORPORATION
277 PARK AVENUE
NEW YORK, NEW YORK 10172-0124
------------------------
ANNUAL MEETING OF STOCKHOLDERS
------------------------
PROXY STATEMENT
APPROXIMATE DATE OF MAILING: AUGUST 26, 1999
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board" or the "Board of Directors") of Shorewood Packaging Corporation (the
"Company") for use at the Annual Meeting of Stockholders to be held at the time
and place set forth in the foregoing notice and at any adjournment thereof (the
"Meeting"). Only stockholders of record (the "Stockholders") of the Company's
common stock, $.01 par value per share (the "Common Stock"), at the close of
business on August 17, 1999 are entitled to notice of, and to vote at, the
Meeting. Proxies in the accompanying form, which are properly executed and duly
returned to the Company and not revoked prior to exercise, will be voted in
accordance with the instructions contained therein. If a Proxy is executed and
returned without instructions as to how it is to be voted, such Proxy will be
voted in favor of all proposals contained in this Proxy Statement. Each Proxy
granted pursuant to this solicitation is revocable and may be revoked at any
time prior to its exercise provided written notice of revocation is received by
the Secretary of the Company prior to the Meeting. A Stockholder who attends the
Meeting in person may, if he or she wishes, vote by ballot at the Meeting,
thereby canceling any Proxy previously given by such Stockholder.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting, present in person or
represented by proxy, shall constitute a quorum at the Meeting. Any Stockholder
present in person or by proxy who abstains from voting on any particular matter
described herein will be counted for purposes of determining a quorum. For
purposes of voting on the matters described herein, (i) directors shall be
elected by a plurality of the voting power present in person or represented by
proxy at the Meeting and entitled to vote and (ii) the other matters shall be
determined by the affirmative vote of the majority of the voting power present
in person or represented by proxy at the Meeting and entitled to vote on the
matter. With respect to the election of directors, only shares that are voted in
favor of a particular nominee will be counted towards such nominee's achievement
of a plurality. Shares present at the Meeting that are not voted for a
particular nominee, shares present by proxy where the Stockholder properly
withholds authority to vote for such nominee and broker non-votes will not be
counted towards such nominee's achievement of a plurality. With respect to any
of the other matters to be voted upon, if the Stockholder abstains from voting
or directs his or her proxy to abstain from voting, the shares are considered
present at the Meeting for such matter but, since they are not affirmative votes
for the matter, they will have the same effect as votes against the matter. With
respect to broker non-votes on any such matter, the shares are not considered
present at the Meeting for such matter and they are, therefore, not counted in
respect of such matter. Provided that a quorum is otherwise present, such broker
non-votes do have the practical effect of reducing the number of affirmative
votes required to achieve a majority for such matter by reducing the total
number of shares from which the majority is calculated.
All share information appearing in this Proxy Statement gives effect to a
50% stock dividend in the form of a 3-for-2 stock split of the Company's Common
Stock effected in May 1998.
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PRINCIPAL STOCKHOLDERS
The outstanding voting stock of the Company as of July 1, 1999 consisted of
27,561,427 shares of Common Stock, with each share entitled to one vote.
Beneficial ownership has been determined for purposes herein in accordance with
Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), under which a person is deemed to be the beneficial owner of securities
if such person has or shares voting power or investment power in respect of such
securities or has the right to acquire beneficial ownership within 60 days. So
far as is known to the Company, the following were the only beneficial owners of
more than 5% of the outstanding Common Stock of the Company on such date:
NAME AND ADDRESS AMOUNT OF SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------- ------------------ --------
Marc P. Shore(1)........................................... 4,859,904 17.38%
c/o Shorewood Packaging Corporation 277 Park Avenue New
York, NY 10172-0124
Ariel Capital Management, Inc.(2).......................... 5,590,072 20.28%
307 North Michigan Avenue Chicago, Illinois 60601
Brinson Partners, Inc.(3).................................. 1,548,722 5.62%
209 South LaSalle Chicago, Illinois 60604-1295
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(1) Marc P. Shore is the Chairman and Chief Executive Officer of the Company.
The shares reflected in this column consist of: (1) 955,601 shares owned
outright by Marc P. Shore, of which 85,650 shares are restricted shares
awarded pursuant to the Company's Long Term Incentive Program and are
subject to forfeiture (for a description of the restricted shares, see
"Executive Compensation -- Summary Compensation Table -- Footnote (3)"); (2)
401,953 shares which could be acquired on or within 60 days after July 1,
1999 upon the exercise of stock options granted under the Company's
incentive and stock option plans (collectively, the "Incentive Plans"); (3)
732,150 shares held by the Estate of Paul B. Shore (the "Estate") (see
discussion below); (4) 3,900 shares held by a marital trust created under
the will of Paul B. Shore for the benefit of his wife (the "Marital Trust")
(see discussion below); (5) 2,700,000 shares held by the Shore Family
Partnership, L.P., a California limited partnership (the "Family
Partnership") (see discussion below); and (6) 66,300 shares held by the
Shore Trust (see discussion below).
Pursuant to the terms of the will of Paul B. Shore, the founder of the
Company who passed away in December 1995, Marc P. Shore has sole
decision-making power with respect to all shares of Common Stock included in
the Estate. The Estate held 732,150 shares of Common Stock as of July 1,
1999. Marc P. Shore disclaims beneficial ownership with respect to 732,150
of such shares.
The Marital Trust is a testamentary trust for the benefit of Paul B. Shore's
wife created under the terms of his will. By the terms of the will, Marc P.
Shore has sole decision-making power with respect to all shares of Common
Stock owned by the Marital Trust. The Marital Trust held 3,900 shares of
Common Stock as of July 1, 1999. Marc P. Shore disclaims beneficial
ownership with respect to 3,900 of such shares.
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The Family Partnership is an investment partnership for the benefit of Marc
P. Shore and the other children of Paul B. Shore. The Family Partnership
terminates on January 1, 2030, subject to earlier termination by operation
of law or under the terms of the Limited Partnership Agreement. By virtue of
his control over the Shore Family LLC, which is the sole general partner of
the Family Partnership, Marc P. Shore has effective decision-making power
with respect to all shares of Common Stock owned by the Family Partnership.
The Family Partnership owned 2,700,000 shares of Common Stock as of July 1,
1999. Marc P. Shore disclaims beneficial ownership as to 2,459,970 of such
shares.
As of July 1, 1999, Marc P. Shore served as co-trustee of a trust (the
"Shore Trust") which held 66,300 shares of Common Stock for the benefit of
one other child of Paul B. Shore. As co-trustee, Marc P. Shore shared
decision-making authority with respect to any shares of Common Stock held by
the Shore Trust. Marc P. Shore disclaims beneficial ownership of all of such
shares.
(2) Represents shares held by investment advisory clients of Ariel Capital
Management, Inc. This information is based solely upon the contents of
filings under Section 13 of the Exchange Act made by Ariel Capital
Management, Inc.
(3) Represents shares held in managed discretionary accounts for advisory
clients which are advised by Brinson Partners, Inc. and/or its parent, UBS
AG, Inc. This information is based solely upon the contents of filings under
Section 13 of the Exchange Act made by Brinson Partners, Inc.
EXECUTIVE OFFICERS
The executive officers of the Company are identified in the table below.
Each executive officer of the Company serves at the pleasure of the Board of
Directors.
YEAR
BECAME AN
EXECUTIVE
NAME AGE OFFICER POSITIONS
---- --- --------- ---------
Marc P. Shore................... 45 1982 Chairman of the Board, Chief
Executive Officer
Howard M. Liebman............... 57 1994 President, Chief Financial
Officer and Director
Charles Kreussling.............. 70 1966 Executive Vice President --
Manufacturing
Kenneth M. Rosenblum............ 56 1988 Senior Vice President -- Sales
William H. Hogan................ 40 1995 Senior Vice
President -- Finance/ Corporate
Controller
Andrew N. Shore................. 46 1996 Vice President, General Counsel
and Secretary
Eric Kaltman.................... 56 1998 Executive Vice President
Leonard J. Verebay.............. 54 1998 Executive Vice President and
Director
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ELECTION OF DIRECTORS
At the Meeting, three directors comprising the Class I Directors are to be
elected for three-year terms expiring in 2002 and until their successors are
elected and qualified. The Board of Directors has designated Virginia A. Kamsky,
Andrew N. Shore and Sharon R. Fairley as nominees. Messrs. Melvin L. Braun and
Floyd S. Glinert, the Company's Class I Directors, have decided not to seek
re-election upon the expiration of their terms.
At the Meeting, one Class III Director is to be elected for a term expiring
in 2001 and until his successor is elected and qualified. The Board of Directors
has designated Leonard J. Verebay as nominee.
Proxies received from Stockholders will be voted, unless authority to so
vote is withheld, for the election of the nominees identified in the following
table. Authority to vote for any or all of the nominees may be withheld in the
manner indicated on the enclosed Proxy. If for any reason any of the nominees
becomes unavailable for election, the Proxies solicited will be voted for such
other nominees as are selected by the Board of Directors. The Board of Directors
has no reason to believe that any of the nominees will not be available or will
not serve if elected.
Set forth in the following table is certain information with respect to (i)
each nominee nominated to serve as a Class I Director for a term to expire in
2002 or as a Class III Director for a term to expire in 2001 and (ii) the
remaining Class III Directors and the Class II Directors whose terms expire in
2001 and 2000, respectively.
None of the nominees for election to the Board at the Meeting was
previously elected to the Board by the Stockholders. Virginia A. Kamsky was
elected by the Board as a Class I Director in June 1999 and is presently a
Director. Sharon R. Fairley and Andrew N. Shore are being nominated to fill the
vacancies which will be created in the Class by the expiration of Messrs.
Braun's and Glinert's terms. They are not presently Directors. Leonard J.
Verebay was elected by the Board as a Class III Director in February 1999 to
fill the vacancy created by the retirement of Seymour Leslie and is presently a
Director.
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YEAR FIRST
BECAME
NAME AGE A DIRECTOR
---- --- ----------
NOMINEES
CLASS I: TERM TO EXPIRE IN 2002
Virginia A. Kamsky.......................................... 46 1999
Sharon R. Fairley........................................... 38 --
Andrew N. Shore............................................. 46 --
CLASS III: TERM TO EXPIRE IN 2001
Leonard J. Verebay.......................................... 54 1999
DIRECTORS CONTINUING IN OFFICE
CLASS II: TERM TO EXPIRE IN 2000
R. Timothy O'Donnell........................................ 43 1991
Kevin J. Bannon............................................. 47 1992
William P. Weidner.......................................... 54 1993
CLASS III: NEW TERM TO EXPIRE IN 2001
Howard M. Liebman........................................... 57 1996
Marc P. Shore............................................... 45 1982
The Board of Directors recommends a vote FOR each of the nominees for
election as CLASS I DIRECTORS and FOR the nominee for election as a CLASS III
DIRECTOR.
BIOGRAPHICAL INFORMATION
Certain information about the executive officers and directors of the
Company is set forth below. This information has been furnished to the Company
by the individuals named.
Marc P. Shore was elected Chairman of the Board and Chief Executive Officer
of the Company in January 1996 following the passing of his father, Paul B.
Shore, the founder of the Company. He served as the President of the Company
from October 1991 until the election of Howard M. Liebman as President in June
1999. Mr. Shore has been employed by the Company in various executive capacities
since 1982.
Howard M. Liebman joined the Company as Executive Vice President and Chief
Financial Officer in June 1994. He was elected as a director of the Company in
January 1996 to fill the vacancy created by the passing of Paul B. Shore, and
was elected as President of the Company in June 1999. Mr. Liebman is a Certified
Public Accountant.
Virginia A. Kamsky is the Founder, Chief Executive Officer and Chairman of
Kamsky Associates, Inc., a consulting firm, with offices in both the United
States and Beijing, China, which provides advisory services to corporate clients
in connection with commercial dealings in China and the Far East. She has served
in those capacities since 1980. Ms. Kamsky serves on the Board of Directors and
Compensation Committee of Sealed Air Corporation (the successor company to W.R.
Grace & Co.)
R. Timothy O'Donnell is the President of Jefferson Capital Group, Ltd., an
investment banking firm located in Richmond, Virginia. He has served in that
capacity since August 1989.
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Kevin J. Bannon is an Executive Vice President and Chief Investment Officer
of The Bank of New York. From April 1979 to the present date, Mr. Bannon has
held various management positions with The Bank of New York. He is a Chartered
Financial Analyst.
William P. Weidner is the President of LVSI Development, Inc., a developer
of hotel and casino properties based in Las Vegas, Nevada. He assumed that
position in December 1995. From 1985 until December 1995, he served as the
President and Chief Operating Officer of Pratt Hotel Corporation, a worldwide
operator and developer of casino and resort properties. He also served as the
President of Hollywood Casino-Aurora, Inc., an operator of riverboat casinos,
from 1992 until December 1995.
Charles Kreussling has been employed by the Company since its inception in
1966 and has been an Executive Vice President of the Company since 1979. Mr.
Kreussling is responsible for the Company's overall manufacturing and plant
administration.
Kenneth M. Rosenblum joined the Company in 1969 as an account executive for
the music industry. From 1970 until 1993, Mr. Rosenblum served as Vice
President -- Sales of the Company. In 1993, he was promoted to Senior Vice
President -- Sales, Home Entertainment, and he is presently responsible for the
video and computer software markets.
William H. Hogan joined the Company as Corporate Controller in June 1995.
He was elected Vice President -- Finance of the Company in October 1996 and was
promoted to Senior Vice President -- Finance of the Company in June 1999. Mr.
Hogan, a Certified Public Accountant, was a senior manager with the accounting
firm of Grant Thornton, LLP, from 1994 to 1995. From 1981 until 1994, Mr. Hogan
was employed by the accounting firm of Deloitte & Touche LLP, where he was
actively involved in servicing the Company. He was a senior manager with
Deloitte & Touche LLP from 1989 until 1994.
Andrew N. Shore joined the Company as General Counsel in June 1996. Mr.
Shore was elected Secretary of the Company in August 1996 and was appointed a
Vice President of the Company in November 1996. Prior to joining the Company,
Mr. Shore practiced law in Los Angeles, California, concentrating in the areas
of real estate finance and commercial law. For a period of two years prior to
joining the Company, Mr. Shore provided legal services to the Company. Prior to
engaging in private law practice, Mr. Shore served as general counsel of DeAnza
Group, Inc., a real estate investment firm. Andrew N. Shore is the brother of
Marc P. Shore, the Company's Chief Executive Officer and Chairman of the Board.
Leonard J. Verebay joined the Company as Executive Vice President in
October 1998 following the acquisition (the "Queens Transaction") by the Company
of substantially all of the assets of the Queens Group, Inc. and certain of its
affiliates ("Queens"). He was elected as a Class III Director in February 1999
to fill the vacancy created by the retirement of Seymour Leslie. Mr. Verebay
served as the President of Queens, a manufacturer of value added packaging for
the music, multimedia and consumer product industries, at the time of its
acquisition by the Company. Mr. Verebay had held such position since 1979. Mr.
Verebay was elected to the Board pursuant to a right granted to Messrs. Leonard
J. Verebay and Eric Kaltman under a certain Stockholders' and Registration
Rights Agreement dated October 30, 1998 (the "Stockholders' Agreement") to
designate one member of the Board. Upon the expiration of Mr. Verebay's term, if
either Mr. Verebay or Mr. Kaltman (i) holds at least 400,000 shares of Common
Stock (subject to adjustment for stock splits and like events) and (ii) is then
either employed by the Company or subject to a then effective non-competition
restriction, that person will be entitled to be included in management's slate
of nominees for election to the Board at the next meeting. If both of them are
so qualified, they shall jointly designate one of
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them to so serve. Further, under the terms of the Stockholders' Agreement, for
so long as Messrs. Verebay and Kaltman own in the aggregate at least 800,000
shares of Common Stock (subject to adjustment for stock splits and like events),
whichever one of Messrs. Verebay and Kaltman is not then serving on the Board
will, provided he meets certain qualification requirements, be entitled to
participate in Board meetings as an observer, subject to certain limitations
regarding confidentiality. These provisions terminate under various
circumstances, including the occurrence of certain types of capital events and
"change of control" transactions, as defined in the agreement.
Eric Kaltman joined the Company as Executive Vice President in October 1998
following the closing of the Queens Transaction. Mr. Kaltman was serving as Vice
President and Chief Executive Officer of Queens at the time of its acquisition
by the Company. He held various managerial positions at Queens for more than
five years.
Sharon R. Fairley has been employed by Pharmacia & UpJohn since 1998 as
director of Direct to Consumer Communications with responsibility for consumer
directed marketing activities on a global basis. Prior to joining Pharmacia &
UpJohn, Ms. Fairley was Senior Vice President of the Senior Network, Inc.
overseeing the company's consumer goods marketing consulting practice. She
served in that capacity from June 1995 to August 1998. From February 1993
through June 1995, Ms. Fairley was senior vice president at the DMB&B
advertising agency.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Executive Committee which is currently composed of
Messrs. Marc P. Shore, Howard M. Liebman, Kevin J. Bannon and Melvin L. Braun.
Melvin L. Braun is not seeking re-election to the Board for an additional term.
The Executive Committee has the responsibility, between meetings of the Board,
to take all actions with respect to the management of the Company's business
that require action by the Board, except for certain specified matters that by
law must be approved by the entire Board. The Executive Committee also
coordinates and implements financial and other policies and reviews the status
of all operational activities.
In addition, the Company has an Audit Committee which is currently composed
of Messrs. Melvin L. Braun, William P. Weidner and R. Timothy O'Donnell, each of
whom is not an officer or employee of the Company or its subsidiaries. Melvin L.
Braun is not seeking re-election to the Board for an additional term. The Audit
Committee has the responsibility of recommending the Company's outside auditors,
reviewing the scope and results of audits, and examining procedures for ensuring
compliance with the Company's policies on conflicts of interest.
The Company has a Compensation and Stock Option Committee (the "Committee"
or the "Compensation Committee") which currently consists of Messrs. William P.
Weidner, Kevin J. Bannon and R. Timothy O'Donnell. In addition, during the
fiscal year ended May 1, 1999 ("fiscal year 1999"), Melvin L. Braun served as an
alternate member with respect to any matter in connection with which a regular
member is by statute or regulation deemed not to be disinterested. However, Mr.
Braun is not seeking reelection to the Board for an additional term. The Board
of Directors intends to appoint a new alternate member in respect of fiscal year
2000. No member or alternate member of the Compensation Committee is a current
or former officer or employee of the Company or any of its subsidiaries. The
Compensation Committee works closely with the Board in establishing and
implementing the Company's compensation policies and practices. See "Report of
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Compensation Committee." Additionally, it administers the Company's bonus and
other compensation programs and the Company's Incentive Programs under which
employees of the Company are eligible to receive stock options, restricted stock
and other benefits.
The Company does not have a nominating committee.
MEETINGS OF THE BOARD
During fiscal year 1999, the Board of Directors held five meetings, two of
which were held by telephone conference call, and the Compensation Committee
held one meeting. In July 1999, the Audit Committee held a meeting in respect of
fiscal year 1999. During fiscal year 1999, each of the directors attended at
least 75% of the aggregate of (1) the total number of meetings of the Board
(held during the period that such director served) and (2) the total number of
meetings held by all committees of the Board on which such director served
(during the period that he served). The Company's directors discharge their
responsibilities throughout the year, not only at Board of Directors' and
committee meetings, but also through personal meetings and other communications,
including telephone contacts with the Chairman and others.
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EQUITY SECURITIES BENEFICIALLY OWNED BY THE DIRECTORS AND NAMED EXECUTIVE
OFFICERS
According to information furnished to the Company as of July 1, 1999, the
directors of the Company, the nominees for election to the Board at the Meeting,
the Company's "named executive officers" (the "Named Executive Officers") within
the meaning of Item 402(a)(3) of Regulation S-K of the Securities Act of 1933,
as amended (the "Act"), and all directors and executive officers as a group,
beneficially owned shares of Common Stock of the Company as set forth below.
Beneficial ownership has been determined for purposes herein in accordance with
Rule 13d-3 of the Exchange Act under which a person is deemed to be the
beneficial owner of securities if such person has or shares voting power or
investment power in respect of such securities or has the right to acquire
beneficial ownership within 60 days.
AMOUNT OF SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED OF CLASS
- ------------------------ ---------------- ---------
Marc P. Shore(1)......................................... 4,859,904 17.38%
Leonard J. Verebay(2).................................... 500,000 1.81%
Charles Kreussling(3).................................... 322,377 1.17%
R. Timothy O'Donnell(4).................................. 276,118 1%
Howard M. Liebman(5)..................................... 233,269 (6)
Kenneth M. Rosenblum(7).................................. 123,342 (6)
William P. Weidner(8).................................... 57,000 (6)
Kevin J. Bannon(8)....................................... 27,750 (6)
Virginia A. Kamsky....................................... 4,500 (6)
Andrew N. Shore(9)....................................... 223,750 (6)
Sharon R. Fairley........................................ 0 (6)
All directors and executive officers as a group
(11 persons)(10)(11)................................... 7,090,710 25.09%
- ---------------
(1) See "Principal Stockholders -- Footnote (1)."
(2) Shares held in grantor retained annuity trust. Under the terms of the
Stockholders' Agreement, these shares are subject to contractual
restrictions on transfer until the second anniversary of the closing of the
Queens Transaction, i.e., until October 30, 2000, with limited exceptions
for certain types of inter-family, estate planning and affiliate
transactions. These restrictions terminate in various circumstances,
including the occurrence of certain types of capital events and "change of
control" transaction.
(3) Includes 90,000 shares owned by Charles Kreussling's wife, as to which Mr.
Kreussling disclaims beneficial ownership. The table does not include 750
shares owned by one of Mr. Kreussling's adult children who shares the same
household.
(4) Includes: (i) 450 shares owned by Mr. O'Donnell's wife as custodian for
their three minor children; (ii) 22,231 shares owned by Jefferson Capital
Group, Ltd. (of which Mr. O'Donnell is the President and a principal
stockholder); (iii) 87,500 shares which could be acquired on or within 60
days after July 1, 1999 upon the exercise of warrants granted to Jefferson
Capital Group, Ltd.; and (iv) 18,000 shares which could be acquired on or
within 60 days after July 1, 1999 upon the exercise of director options
granted to Mr. O'Donnell under the Company's Incentive Plans. (See
"Executive Compensation -- Compensation of Directors").
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(5) Includes (i) 94,168 which could be acquired on or within 60 days after July
1, 1999 upon the exercise of stock options granted under the Company's
Incentive Plans (see "Executive Compensation -- Aggregated Option Exercises
and Fiscal Year-End Option Values"); and (ii) 79,101 shares of restricted
stock awarded under the Company's Long-Term Incentive Program, all of which
are subject to forfeiture. (See "Executive Compensation -- Summary
Compensation Table -- Footnote (3)").
(6) Less than 1%.
(7) Includes: (i) 34,060 shares which could be acquired on or within 60 days
after July 1, 1999 upon the exercise of stock options granted under the
Company's Incentive Plans (see "Executive Compensation -- Aggregated Option
Exercises and Fiscal Year-End Option Values"); and (ii) 5,178 shares of
restricted stock awarded under the Company's Long-Term Incentive Program,
all of which are subject to forfeiture. (See "Executive
Compensation -- Summary Compensation Table -- Footnote (3)").
(8) Includes (i) 24,000 shares owned by William P. Weidner's wife, as to which
Mr. Weidner disclaims beneficial ownership; and (ii) 18,000 shares which
could be acquired on or within 60 days after July 1, 1999 upon the exercise
of director options granted under the Company's Incentive Plans. (See
"Executive Compensation -- Compensation of Directors").
(9) Includes (i) 3,500 shares which could be acquired on or within 60 days
after July 1, 1999 upon exercise of stock options granted under the
Company's Incentive Plans; (ii) 6,000 shares of restricted stock awarded
under the Company's Long Term Incentive Program, all of which are subject
to forfeiture; (iii) 650 shares owned by Andrew N. Shore's wife, as to
which Mr. Shore disclaims beneficial ownership; and (iv) 66,300 shares held
by the Shore Trust (as described below) (see "Executive
Compensation -- Aggregated Option Exercises and Fiscal Year End Option
Values"). As of July 1, 1999, Andrew N. Shore served as co-trustee of the
Shore Trust which held 66,300 shares of Common Stock for the benefit of one
other child of Paul B. Shore. As co-trustee, Andrew N. Shore shared
decision-making authority with respect to any shares of Common Stocks held
by the Shore Trust. Andrew N. Shore disclaims beneficial ownership of all
of such shares.
(10) The total number of directors and executive officers of the Company
includes two executive officers who were not included as Named Executive
Officers for fiscal year 1999.
(11) Includes 695,181 shares subject to stock options or warrants which could be
acquired on or within 60 days after July 1, 1999 and 184,929 shares of
restricted stock awarded pursuant to the Company's Long-Term Incentive
Program, all of which are subject to forfeiture. Does not include the
shares held by Messrs. Melvin L. Braun and Floyd S. Glinert, presently
Class I Directors of the Company, who are not seeking re-election at the
Meeting. Where more than one person is deemed to be a beneficial owner of
any particular shares, such shares have been counted toward the total
listed only once.
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EXECUTIVE COMPENSATION
The following summary compensation table sets forth certain information
concerning the compensation of the Named Executive Officers for each of the
three fiscal years during the period ending May 1, 1999.
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM ALL OTHER
COMPENSATION(1) COMPENSATION AWARDS COMPENSATION(5)
------------------ ------------------------- ---------------
OPTIONS TO
RESTRICTED PURCHASE
SALARY BONUS STOCK AWARDS SHARES(4)
NAME AND PRINCIPAL POSITION YEAR* ($) ($) ($)(3) (#) ($)
- --------------------------- ----- ------ ----- ------------ ---------- ---
Marc P. Shore.............. Fiscal 1999 800,000 1,093,000 825,000 350,000 149,625
Chairman of the Board, Fiscal 1998 800,000 302,000 -- -- 149,125(6)
Chief Executive Officer Fiscal 1997 815,385 450,000(2) -- 269,565 155,520(6)
------------------------------------------------------------------------------
Howard M. Liebman.......... Fiscal 1999 450,000 150,000 481,250 150,000 107,875(7)(8)
Executive Vice President, Fiscal 1998 325,000 100,000 497,490 -- 214,970(7)(8)
Chief Financial Officer Fiscal 1997 331,250 100,000 -- 26,737 142,043(7)(8)
and Director
------------------------------------------------------------------------------
Floyd S. Glinert**......... Fiscal 1999 299,988 -- -- -- 4,950
Executive Vice Fiscal 1998 299,988 -- -- -- 5,950
President -- Marketing Fiscal 1997 305,757 -- -- -- 16,938
and Director
------------------------------------------------------------------------------
Charles Kreussling......... Fiscal 1999 250,000 125,000 -- -- 19,090
Executive Vice Fiscal 1998 250,000 125,000 -- -- 15,964
President -- Manufacturing Fiscal 1997 215,385 125,000 -- -- 18,449
------------------------------------------------------------------------------
Kenneth M. Rosenblum....... Fiscal 1999 175,692 100,000 -- 40,000 6,072
Senior Vice President -- Fiscal 1998 163,366 125,000 -- -- 6,179
Sales Fiscal 1997 154,903 100,000 -- 43,507 5,895
------------------------------------------------------------------------------
- ---------------
* 1997 was a 53-week year
** Mr. Glinert resigned as an Executive Officer of the Company effective fiscal
year end 1999.
(1) The aggregate amount of perquisites and other personal benefits for each of
the Named Executive Officers did not equal or exceed the lesser of either
$50,000 or 10% of the total of such individual's base salary and bonus, as
reported herein for the applicable fiscal years, and is not reflected in the
table.
(2) In fiscal 1997, Marc P. Shore received a $450,000 bonus. Mr. Shore was
entitled to receive a cash bonus in excess of $1.2 million in fiscal 1997
under a bonus plan of the Company (the "Bonus Plan") (see "Employment and
Consulting Agreement"); however, Mr. Shore waived such bonus and accepted
the $450,000 bonus.
(3) Represents the dollar value on the date of grant of shares of restricted
stock awarded by the Compensation Committee to the named recipients under
the Company's Long-Term Incentive Program ("LTIP"). The value of the
restricted shares reported in this column was calculated by multiplying the
closing market price of the Common Stock as reported on the New York Stock
Exchange ("NYSE") on
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the date of grant by the number of restricted shares, without any adjustment
for forfeiture or termination contingencies. The restricted stock awards
identified in this column consist of the following stock grants: (i) 30,000
shares to Howard M. Liebman on October 30, 1997, (ii) 35,000 shares to
Howard M. Liebman on June 8, 1998 and (iii) 60,000 shares to Marc Shore on
June 8, 1998. These awards are subject to three or four year vesting
requirements based on the performance of the Company's Common Stock or,
alternatively, an eight year employment vesting requirement. Under the terms
of the awards, if the grantee's employment terminates prior to vesting, the
restricted shares awarded to him will be forfeited. During the vesting
period, the grantee may not dispose of, but may vote, the restricted shares
and is entitled to receive any dividends paid on such shares.
In addition, in July 1994 the Compensation Committee awarded restricted
stock to certain executives pursuant to the LTIP. Set forth below are the
number and value of the aggregate restricted share holdings of each Named
Executive Officer as of May 1, 1999. Values were calculated by multiplying
the closing price of the Common Stock as reported on NYSE on April 30, 1999
(the last trading day in this fiscal year) by the respective number of
shares.
NAMED EXECUTIVE OFFICER SHARES(#) VALUE($)
- ----------------------- ---------- ---------
Marc P. Shore......................................... 85,650 1,691,588
Howard M. Liebman..................................... 79,101 1,562,245
Kenneth M. Rosenblum.................................. 5,178 102,266
(4) Stock options are granted under the terms and provisions of the Company's
Incentive Plans.
(5) Amounts reported under this column include the dollar value of the
following:
VALUE OF LIFE- CONTRIBUTIONS TO
INSURANCE 401(K) EMPLOYEE
NAME YEAR PREMIUMS(A)($) SAVINGS PLAN(B)($)
---- ---- -------------- ------------------
Marc P. Shore...................... Fiscal 1999 14,120 6,500
Fiscal 1998 15,170 6,500
Fiscal 1997 19,070 8,395
------------------------------------------------------------
Floyd S. Glinert................... Fiscal 1999 -- 4,950
Fiscal 1998 -- 5,950
Fiscal 1997 10,538 6,400
------------------------------------------------------------
Charles Kreussling................. Fiscal 1999 14,965 4,125
Fiscal 1998 12,214 3,750
Fiscal 1997 11,841 6,608
------------------------------------------------------------
Howard M. Liebman.................. Fiscal 1999 12,121 6,975
Fiscal 1998 13,501 4,371
Fiscal 1997 13,281 8,449
------------------------------------------------------------
Kenneth M. Rosenblum............... Fiscal 1999 -- 6,072
Fiscal 1998 1,800 4,379
Fiscal 1997 1,800 4,095
------------------------------------------------------------
- ---------------
(a) Reflects life-insurance premiums paid by the Company on behalf of the
Named Executive Officer.
(b) Reflects contributions to the Company's tax-qualified 401(k) Employee
Savings Plan that covers all employees who have completed 1,000 hours
of service and one year of employment.
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(6) Includes (i) $122,367 paid in fiscal 1999, $120,817 paid in fiscal 1998 and
$121,417 paid in fiscal 1997, which represent the Company's share of
premiums paid in the respective years under a Split Dollar Life Insurance
Arrangement for the benefit of Marc P. Shore whereby the Company will
generally recover in full its share of the premiums upon the cancellation,
or purchase by Mr. Shore, of the life insurance policy or the payment of
death benefits under the life insurance policy and (ii) $6,638 paid in
fiscal 1999, $6,638 paid in fiscal 1998 and in fiscal 1997, which represent
disability premiums paid by the Company in the respective years on behalf of
Marc P. Shore.
(7) Includes ($1,585) lost in fiscal 1999, $108,114 earned in fiscal 1998, and
$30,959 earned in fiscal 1997 by a trust established by the Company for Mr.
Liebman's benefit, pursuant to which income earned on the trust principal is
accumulated for payment to Mr. Liebman upon his retirement from the Company.
For a description of the trust, see "Employment Agreements with Named
Executive Officers".
(8) Includes $90,364 paid in fiscal 1999, $88,984 paid in fiscal 1998 and
$89,354 paid in fiscal 1997, which represent the Company's share of premiums
paid in the respective years under a Split Dollar Life Insurance Arrangement
for the benefit of Howard M. Liebman whereby the Company will generally
recover in full its share of the premiums upon the cancellation, or purchase
by Mr. Liebman, of the life insurance policy or the payment of death
benefits under the life insurance policy.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain summary information concerning
individual grants of stock options made to Named Executive Officers during the
fiscal year ended May 1, 1999 under the Company's Incentive Plans. Except as set
forth in the table below, during fiscal year 1999, the Company did not grant any
stock options under the Company's Incentive Plans to any of the Named Executive
Officers.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE APPRECIATION
SHARES OPTIONS GRANTED TO FOR OPTION TERM(1)
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION -------------------------
NAME GRANT(#) FISCAL YEAR(%) PRICE($) DATE 5%($) 10%($)
- ---- ---------- ------------------- -------- ---------- ----------- -----------
Marc P. Shore................ 350,000 42.4% 13.75 6/08/08 3,026,555 7,669,886
Howard M. Liebman............ 150,000 18.2% 13.75 6/08/08 1,297,095 3,287,094
Kenneth M. Rosenblum......... 40,000 4.8% 13.75 6/08/08 345,892 876,558
- ---------------
(1) Amounts represent hypothetical gains that could be achieved from the
exercise of the respective stock options and the subsequent sale of the
Common Stock underlying such options if the options were exercised at the
end of the option terms. The gains are based upon assumed rates of stock
price appreciation of 5% and 10% compounded annually from the date the
respective options were granted. The rates of appreciation are mandated by
the rules of the Exchange Act and do not represent the Company's estimate or
projection of the future Common Stock price.
(2) The stock options reported were awarded pursuant to the 1993 Program at
exercise prices equal to the fair market value of the Common Stock on the
date of grant. The options vest in specified installments over a five-year
period after the grant date and terminate ten years after the grant date,
subject to early termination in the event of death or termination of the
optionee's employment for any reason. Payment
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for options exercised may be in cash or shares of Common Stock, the fair
market value of which is determined under the 1993 Program.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides certain summary information concerning stock
option exercises during the fiscal year ended May 1, 1999 by the Named Executive
Officers and the value of unexercised stock options held by the Named Executive
Officers as of May 1, 1999.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED "IN THE MONEY"
NUMBER OF OPTIONS AT FISCAL OPTIONS AT FISCAL
SHARES YEAR END(1)(#) YEAR END(2)($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
Marc P. Shore.............. -- -- 331,953 376,739 2,626,682 2,330,996
Floyd S. Glinert........... -- -- -0- -0- -0- -0-
Charles Kreussling......... -- -- -0- -0- -0- -0-
Howard M. Liebman.......... -- -- 124,168 166,042 1,025,973 1,038,585
Kenneth M. Rosenblum....... 10,856 87,271 18,560 66,104 162,801 468,009
- ---------------
(1) Represents the aggregate number of stock options held as of May 1, 1999
which could and could not be exercised on that date pursuant to the terms of
the stock option agreements related thereto and the Incentive Plans.
(2) Values were calculated by multiplying (i) the respective number of shares by
(ii) the closing market price of the Common Stock as reported on NYSE on
April 30, 1999 (the last trading day of the fiscal year) less the exercise
price per share, without any adjustment for any termination or vesting
contingencies.
EMPLOYMENT AND CONSULTING AGREEMENTS
Marc P. Shore
Marc P. Shore, the Company's Chairman and Chief Executive Officer, and the
Company entered into a new five-year employment agreement on June 8, 1998,
effective as of May 3, 1998. The agreement granted Mr. Shore a signing bonus in
the aggregate amount of $1 million, payable immediately in full but earned
ratably over his five-year employment period, provided that Mr. Shore continues
to be employed with the Company at the end of each such year. If a "change in
control" of the Company, as defined in the agreement, occurs at any time during
the last two years of the agreement, the term of the agreement will be
automatically extended for an additional two years. If Mr. Shore's employment by
the Company is terminated in connection with a "change in control" of the
Company, as defined in the agreement, he would be entitled to a lump sum payment
equal to approximately three times his average annual compensation, as defined
in the agreement, during the Base Period. The agreement grants Mr. Shore an
annual base salary of $800,000 per annum, subject to periodic increases at the
discretion of the Board of Directors. Mr. Shore's annual base salary is
currently $800,000. Mr. Shore is also entitled to participate in the Company's
Bonus Plan, effective until 2003, pursuant to which he is eligible to receive
performance bonuses of up to $2 million per covered year if certain
pre-established thresholds are met. Mr. Shore earned a bonus of $1,093,000 under
the Bonus Plan on account
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of fiscal year 1999 (see "Executive Compensation -- Summary Compensation Table"
and "Report of the Compensation Committee"). The agreement also authorizes the
Company to grant Mr. Shore discretionary bonuses outside of the scope of the
Bonus Plan. The agreement requires the Company to maintain term life insurance
on the life of Mr. Shore and to carry supplemental disability insurance for his
benefit. Simultaneously with the authorization of Mr. Shore's employment
agreement by the Board, the Company granted to Mr. Shore 60,000 shares of
restricted stock and options to acquire 350,000 shares.
Howard M. Liebman
The Company and Howard M. Liebman entered into a new five-year employment
agreement on June 8, 1998, effective as of May 3, 1998. If a "change in control"
of the Company, as defined in the agreement, occurs at any time during the last
two years of the agreement, the term of the agreement will be automatically
extended for an additional two years. Pursuant to the employment agreement, Mr.
Liebman is entitled to receive an annual base salary of $450,000, subject to
periodic increases at the discretion of the Board. Mr. Liebman's annual base
salary is currently $450,000. The agreement provides that if Mr. Liebman's
employment by the Company is terminated in connection with a "change in control"
of the Company, as defined in the agreement, Mr. Liebman will be entitled to
receive a lump sum payment equal to approximately three times his average annual
compensation, as defined in the agreement, during the Base Period.
Simultaneously with the authorization of Mr. Liebman's employment agreement by
the Board, the Company granted to Mr. Liebman 35,000 shares of restricted Common
Stock and options to purchase 150,000 shares of Common Stock. The Company has
also established a trust, pursuant to which income earned on the trust principal
fund of $300,000 is accumulated for payment to Mr. Liebman upon his retirement
from the Company, with the principal fund then being returned to the Company.
However, the assets of the trust are subject to claims of creditors of the
Company in the event of its insolvency. The trust declined in value by $1,585 in
fiscal year 1999.
Leonard J. Verebay
In connection with the Queens Transaction, Leonard J. Verebay entered into
a three year employment agreement with the Company, expiring on December 31,
2001. The Agreement provides for a five year consulting period following the
expiration of the initial employment term. Under the agreement, Mr. Verebay is
to be employed by the Company as an Executive Vice President at a salary of
$500,000 per annum, subject to annual increases at the discretion of the Board.
Mr. Verebay is also entitled to participate, to the extent eligible, in Company
sponsored benefit plans to the same extent as similarly situated executives.
During any consultancy period, Mr. Verebay would be entitled to receive a fee of
$10,000 per annum and an automobile allowance as well as participation, to the
extent eligible, in the Company's group family medical insurance plan. The
agreement contains customary confidentiality, work-for-hire and non-competition
covenants applicable for the duration of all applicable employment and
consultancy periods. The agreement is subject to early termination by the
Company in the case of the death or disability of Mr. Verebay or if he engages
in certain types of "objectionable conduct" specified in the agreement. Mr.
Verebay may terminate the agreement upon the occurrence of certain types of
capital events and "change of control" transactions specified in the agreement.
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Eric Kaltman
In connection with the Queens Transaction, Eric Kaltman entered into a
three year employment agreement with the Company to be employed as an Executive
Vice President of the Company, which agreement is substantially identical to the
agreement between the Company and Mr. Verebay, as described above.
Virginia A. Kamsky
Kamsky Associates, Inc. ("KAI"), of which Virginia A. Kamsky (a director of
the Company and a nominee for election at this Meeting) is the founder, chief
executive officer, chairman and principal stockholder, has been advising the
Company for approximately three years in connection with the establishment of a
manufacturing facility for paperboard folding carton packages in Guangzhou,
Guandong Province, China (the "China Business"), pursuant to the terms of a
consulting agreement dated effective January 1, 1996 (the "KAI Consulting
Agreement"). The Company pays KAI a consulting fee of $25,000 per month under
the KAI Consulting Agreement. Additionally, under the terms of a Profit
Participation Agreement between KAI and the Company (the "Profit Participation
Agreement"), KAI is entitled to receive up to 5% of the Company's allocable
share (presently 55%) of any "net profits" -- as defined in the agreement --
generated from the operation of the China Business or from any sale of the China
Business or the Company's interest in the China Business (the "Profit
Participation"). Transfer of the Profit Participation is subject to a right of
first refusal in favor of the Company. KAI may put its Profit Participation
rights to the Company at any time after three years from the production of the
China Business' first commercial product at the then fair market value of such
interest, as determined by a mutually agreeable third party appraiser. Under the
terms of the Profit Participation Agreement, the Company is required to exert
its reasonable best efforts to cause Ms. Kamsky to be elected to the board of
directors or other governing body of the operating entity which manages the
China Business.
COMPENSATION OF DIRECTORS
During the fiscal year ended May 1, 1999, each director who was not an
officer or an employee of the Company (an "Outside Director") received a
director's fee of $8,000 per annum plus $2,000 for attendance at each meeting of
the Board of Directors and $1,000 for attendance at each meeting of a committee
of the Board of Directors, ordinarily excluding Board or committee meetings held
by telephone conference call. All directors of the Company are also reimbursed
for expenses. Under the 1993 Program, as amended in fiscal year 1997, the full
Board of Directors, in its discretion, is authorized to grant to each Outside
Director options to purchase shares of the Company's Common Stock, at option
prices equal to the fair market value of the Company's Common Stock on the date
of grant. In June 1999, each Outside Director received an option to purchase
4,000 shares of Common Stock pursuant to the 1993 Program on account of services
in 1999. The vesting of the options and certain other terms of the options are
determined by the full Board of Directors in its discretion. Typically, the
terms of the options provide that the options are exercisable in full
immediately upon the death of the grantee or retirement from the Board by reason
of disability or upon a "change of control" of the Company (as defined in the
1993 Program). The options have a term of ten years, subject to early
termination in the event the grantee retires or is removed from the Board.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs. William P.
Weidner, Kevin J. Bannon and R. Timothy O'Donnell. During fiscal year 1999,
Melvin L. Braun served as an alternate member of the Compensation Committee;
however, he is not seeking re-election at the Meeting. The Board of Directors
intends to appoint a new alternate member in respect of fiscal year 2000. No
member of the Company's Compensation Committee is a current or former officer or
employee of the Company or any of its subsidiaries. There are no compensation
committee interlocks between the Company and any other entities involving any of
the executive officers or directors of such other entities.
Jefferson Capital Group, Ltd. ("Jefferson Capital"), an investment banking
firm of which R. Timothy O'Donnell is the President and a principal stockholder,
has served as an investment advisor to the Company on various matters. In
connection with investment advisory services rendered by Jefferson Capital with
respect to the Queens Transaction, the Company, in November 1998, paid Jefferson
Capital a fee of approximately $1,300,000 and awarded Jefferson Capital,
effective as of October 30, 1998, a warrant to purchase 50,000 shares of Common
Stock at an exercise price of $16 per share. The warrant was exercisable in full
upon grant and may be exercised by Jefferson Capital for a period of five years
from grant.
The Bank of New York, of which Kevin J. Bannon is an Executive Vice
President, is a participant in the Company's lending syndicate. The aggregate
amount of The Bank of New York's participation in the Company's outstanding
borrowings pursuant to credit facilities as at the end of fiscal year 1999 was
approximately $25,039,500. The Bank of New York also acts as the Company's
transfer agent.
CERTAIN TRANSACTIONS
In May 1995, the Company loaned $2.0 million to Marc P. Shore, the Chairman
and Chief Executive Officer of the Company. The loan is due on May 4, 2000 and
bears interest payable quarterly at the Applicable Federal Rate, as defined,
adjusted monthly. Mandatory prepayments of the loan are required if Mr. Shore's
compensation exceeds certain specified thresholds. The Compensation Committee
waived the required prepayment for 1999. The aggregate principal amount
outstanding under this loan as at the end of fiscal year 1999 was $2.0 million.
In May 1997, the Company guaranteed a portion of an $8.5 million loan made
by The Chase Manhattan Bank to Marc P. Shore in connection with his purchase of
certain real estate. As a result of provisions in the related agreement and
payments made by Marc P. Shore, the guaranty was terminated in September 1998.
Bryan Shore Resnick, the sister of Marc P. Shore and Andrew N. Shore, is a
travel agent with Reliable Travel, a travel agency which provides travel
services to the Company. Based upon information provided to the Company by
Reliable Travel, in fiscal year 1999, Reliable Travel earned approximately
$182,500 in commissions, of which approximately $89,500 was paid to Bryan Shore
Resnick. Such commissions were earned in the ordinary course of business and, to
the best knowledge of the Company, the services performed were at terms no less
favorable to the Company than had the services been provided by an unrelated
third party.
In April 1998, the Company loaned $630,000 to Howard M. Liebman, the
President and Chief Financial Officer of the Company, in connection with his
purchase of a new residence. The loan is evidenced by a note which is secured by
a first priority mortgage on the property. The Company's interest in the
mortgage is
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insured by a title insurance company. The loan bears interest at the rate of
6.5% per annum. Interest is payable annually on August 1 of each year commencing
August 1, 1999. The final payment of principal and interest is due August 1,
2013. In addition, the Company may accelerate repayment of the loan in the event
Mr. Liebman sells the property prior to maturity or ceases to be employed by the
Company. The aggregate principal amount outstanding under this loan as at the
end of fiscal year 1999 was $630,000.
Effective June 23, 1999 the Company loaned $341,145 to Howard M. Liebman in
connection with his exercise of stock options to purchase 60,000 shares of
Common Stock. (Mr. Liebman paid the equivalent of $358,857 with Shorewood stock
already owned by him as part of the purchase price.) Effective July 26, 1999 the
Company loaned an additional $316,376 to Howard M. Liebman in connection with
his exercise of stock options to purchase 26,736 shares of Common Stock. Both
loans bear interest at the rate of 6.5% per annum, commencing as of the
respective effective dates of the loans. The principal amounts of and accrued
interest on the loans are due and payable October 2, 2000. The loans are
collateralized by a pledge of 55,977 shares of Common Stock.
Effective July 26, 1999 the Company loaned $527,316 to Marc P. Shore in
connection with his exercise of stock options to purchase 44,562 shares of
Common Stock. The loan bears interest at the rate of 6.5% per annum, commencing
as of the effective date of the loan. The principal amount of and accrued
interest on the loan is due and payable October 2, 2000. The loan is
collateralized by a pledge of 44,562 shares of Common Stock.
SECTION 16(A) REPORTING UNDER THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of the Common Stock of
the Company to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the exchange on which the Common Stock is
listed for trading. Executive officers, directors and more than ten percent
stockholders are required by regulations promulgated under the Exchange Act to
furnish the Company with copies of all Section 16(a) reports filed. Based solely
on the Company's review of copies of the Section 16(a) reports filed for the
fiscal year ended May 1, 1999, the Company believes that all reporting
requirements applicable to its executive officers, directors, and more than ten
percent stockholders were complied with for the fiscal year ended May 1, 1999,
except that (i) Jefferson Capital Group, Ltd., an investment banking firm of
which R. Timothy O'Donnell, a member of the Board of Directors of the Company,
is the President and a principal stockholder, failed to timely file a report in
respect of the grant by the Company to Jefferson Capital of a warrant to
purchase 50,000 shares of Common Stock in October 1998, (ii) Marc P. Shore
failed to timely file a report in respect of distributions by the Estate under
Paul B. Shore's will of an aggregate of 11,700 shares of Common Stock in
December 1998, and (iii) Mr. Andrew N. Shore failed to timely file a report in
respect of the transfer of 650 shares of Common Stock by the Estate to Mr.
Shore's wife in December 1998.
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STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the Company's cumulative stockholder return on the Common Stock for the last
five years with the cumulative total return during the same period of (i) the
Russell 2000 Index and (ii) a peer group selected by the Compensation Committee
consisting of: R.R. Donnelley & Sons Co., International Paper Co., Gibraltar
Packaging Group, Graphic Industries (and Wallace Computer Services Inc. as
successor to Graphic Industries as a result of its acquisition of Graphic
Industries on February 13, 1998), Sonoco Products, Co., Union Camp Corporation
and Westvaco Corporation (the "Peer Group").
The Company has a 52-53 week fiscal year ending on the Saturday closest to
April 30th of each fiscal year. Accordingly, for purposes of the line graph, the
Company has selected as the "measurement period" the period beginning on May 1,
1994 and ending on May 1, 1999.
Cumulative total returns are calculated assuming that $100 was invested on
May 1, 1994 in each of the Common Stock, the Russell 2000 Index and the Peer
Group, and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SHOREWOOD PACKAGING CORPORATION, RUSSELL 2000 INDEX
AND SELECTED PEER GROUP
INDEXED RETURNS FOR THE FIVE-YEAR PERIOD ENDED MAY 1, 1999
SHOREWOOD
PACKAGING CORP RUSSELL 2000 INDEX PEER GROUP
-------------- ------------------ ----------
'1994' 100 100 100
'1995' 108.62 107.21 123.62
'1996' 118.96 142.58 134.78
'1997' 131.02 142.65 139.83
'1998' 178.86 200.83 179.27
'1999' 204.29 180 177.14
- -----------------------------------------------------------------------------------------------------------
Company Name/Index 1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------------------------
Shorewood Packaging Corp 100.00 108.62 118.96 131.02 178.86 204.29
- -----------------------------------------------------------------------------------------------------------
Russell 2000 Index 100.00 107.21 142.58 142.65 200.83 180.00
- -----------------------------------------------------------------------------------------------------------
Peer Group Index 100.00 123.62 134.78 139.83 179.27 177.14
- -----------------------------------------------------------------------------------------------------------
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REPORT OF COMPENSATION COMMITTEE
OVERALL POLICY
The Company's executive compensation program is designed to be closely
linked to corporate performance and the total return to stockholders over the
long-term. To that end, the Company has developed an overall compensation
strategy and specific compensation plans which tie executive compensation to the
Company's success in meeting specified objectives and to appreciation in the
Company's stock price. The overall objectives are to attract and retain the best
possible executive talent, motivate key executives to achieve the goals inherent
in the Company's business strategy, link executive and stockholder interests
through participation in the Company's Long-Term Incentive Plan (the "LTIP") and
provide a compensation package that recognizes individual contributions as well
as overall business results.
Each year the Compensation Committee conducts a review of the Company's
executive compensation program. The review includes a comparison of the
Company's executive compensation, corporate performance, stock price
appreciation and total return to stockholders with a peer group of public
corporations that represent the Company's direct competitors for executive
talent. The annual compensation reviews permit an ongoing evaluation of the link
between the Company's performance and its executive compensation in the context
of the compensation programs of other companies. The peer group presently
utilized by the Compensation Committee is the Peer Group. See "Stock Performance
Graph."
The Compensation Committee approves the compensation of executive officers
of the Company, including the individuals whose compensation is detailed in this
Proxy Statement. In reviewing the individual performance of the executive
officers of the Company whose compensation is detailed in this Proxy Statement,
the Compensation Committee takes into account the views of Mr. Marc P. Shore,
the Chairman and Chief Executive Officer of the Company, and the other members
of the Board of Directors.
The key elements of the Company's executive compensation during the last
fiscal year consisted of base salary, an annual bonus and grants of stock
options and restricted stock under the LTIP. The Compensation Committee's
policies with respect to each of these elements, are discussed below. In
addition, while the elements of compensation described below are considered
separately, the Compensation Committee takes into account the full compensation
package afforded by the Company to each individual.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION PLANS
It is the policy of the Compensation Committee to have the executive
compensation plans of the Company treated as fully tax deductible under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") whenever,
in the judgment of the Committee, to do so would be consistent with the business
objectives of those plans. All compensation paid during fiscal year 1999 was, in
fact, fully tax deductible. The Compensation Committee, however, has granted
awards which may not be fully tax deductible, and reserves the right to grant
future compensation awards in such amounts as it may deem appropriate in the
exercise of its business judgment, notwithstanding whether those awards are
fully tax deductible.
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BASE SALARIES AND ANNUAL BONUSES
Base salaries and annual bonuses for executive officers are determined by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for executive
talent, including a comparison of base salaries for comparable positions at
other companies in the Peer Group. Annual salary adjustments and bonuses, if
any, are determined by evaluating the performance of the Company and of each
executive officer, and by taking into account added responsibilities. The
Compensation Committee, where appropriate, also considers non-financial
performance measures. These include increases in market share, manufacturing
efficiency gains, improvements in product quality and improvements in relations
with customers, suppliers and employees. These factors are afforded varying
levels of significance by the Committee depending upon the circumstances. All
final determinations are subjective.
In establishing the annual base salary of Marc P. Shore, the Company's
Chairman and Chief Executive Officer, the Committee also took into account a
comparison of base salaries of chief executive officers of the Peer Group, the
Company's results of operations, the performance of the Company's Common Stock
and the subjective assessment by the members of the Committee of Mr. Shore's
individual performance.
The Committee has established, with the approval of the Board and the
Stockholders, a performance Bonus Plan for the benefit of Marc P. Shore, which
is effective through fiscal year 2003. The Bonus Plan provides for the grant of
graduated performance bonuses, up to $2 million per annum, to Mr. Shore based
upon yearly comparisons of the Company's earnings from operations plus
depreciation and amortization. Bonuses pursuant to the Bonus Plan are payable
only if certain pre-established thresholds are met. The Bonus Plan is based
solely upon the performance criteria described above. Mr. Shore earned a bonus
in the amount of $1,093,000 in respect of fiscal year 1999 under the Bonus Plan.
(See "Executive Compensation -- Summary Compensation Table"). Pursuant to the
new five year employment agreement which the Company and Mr. Shore entered into
on June 8, 1998, Mr. Shore was granted a signing bonus in the aggregate amount
of $1,000,000, payable immediately in full but earned ratably over his five year
employment period, provided that Mr. Shore continues to be employed with the
Company at the end of each such year. The full amount of the signing bonus was
paid to Mr. Shore in fiscal year 1999. Because Mr. Shore was employed with the
Company at the end of the first year of his employment term, the ratable portion
of the signing bonus for the first year has been earned. (See "Employment and
Consulting Agreements").
The Committee may also grant, and has in the past granted, Mr. Shore
discretionary bonuses outside of the Bonus Plan and his employment agreement.
LONG TERM INCENTIVE PLANS
Pursuant to the 1993 Incentive Program, approved by the Stockholders in
1993, the Committee adopted the LTIP which allows various types of awards keyed
to corporate performance, including stock options (focus on absolute growth in
shareholder value) and Restricted Shares (focus on relative growth in
shareholder value), subject to performance-based contingencies, which are made
available in amounts which the Committee determines to be competitive based on
the competitive market analyses described above.
STOCK OPTIONS
Under the LTIP and the Company's other Incentive Plans, stock options are
periodically granted to the Company's employees, including executive officers.
The Compensation Committee sets guidelines for the size
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of the stock option awards based on similar factors, including competitive
compensation data, as are used to determine base salaries and bonuses, if any.
In the event of poor corporate performance, the Compensation Committee can elect
not to award stock options. Final determinations are subjective.
Stock options are designed to align the interests of executives with those
of the stockholders. Stock options are granted with an exercise price equal to
the market price of the Common Stock on the date of grant and generally vest in
increments over a period of four or five years. This approach is designed to
incentivize the creation of stockholder value over the long term since the full
benefit of the compensation package cannot be realized by the option recipients
unless stock price appreciation occurs over a number of years.
PERFORMANCE BASED RESTRICTED STOCK
Under the LTIP, awards of restricted stock are made preceding a three-year
or four-year performance period. The Committee, together with the Company's
Chief Executive Officer, determine the size of the awards based on the same
competitive compensation data as are used to determine base salaries and
bonuses. Final determinations are subjective. At the end of the three-year or
four-year performance period, some or all of the shares of restricted stock may
vest depending upon the Company's relative shareholder growth compared to that
of the peer group over the same period. The peer group for grants of restricted
stock through fiscal year 1998 consisted of the same companies that make up the
Peer Group for the stock performance graph. The peer group for grants of
restricted stock in fiscal year 1999 consists both of the companies that make up
the Peer Group for the stock performance graph plus certain other public
companies. The Committee chose to expand the peer group for grants of restricted
stock in order to have reference to a wider pool of companies including certain
companies not directly competitive with the Company. The Committee believes that
the expanded peer group for such purposes is more meaningful and instructive.
See "Stock Performance Graph." Shares that do not vest, due to relative
shareholder performance, will vest at the end of eight years assuming continued
employment. Initial grants of restricted stock were made during fiscal year
1995, of which the first performance based vesting opportunity arose in April
1997 and the remaining shares are due to vest in April 2002. Additional grants
of restricted stock were made during fiscal years 1998 and 1999 to certain key
employees and executives. See "Executive Compensation -- Summary Compensation
Table -- Footnote (3)."
In connection with the extension of Mr. Shore's employment agreement for a
period of five years, and in order to adequately incentivize Mr. Shore for the
duration of the employment term extension, the Committee granted Mr. Shore
60,000 shares of restricted Common Stock and stock options to acquire 350,000
shares of Common Stock.
Compensation Committee
KEVIN J. BANNON
R. TIMOTHY O'DONNELL
WILLIAM P. WEIDNER
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INDEPENDENT AUDITORS
Deloitte & Touche LLP, certified public accountants, have been appointed by
the Board of Directors, upon recommendation of the Audit Committee of the Board
of Directors, as independent auditors for the Company to examine and report on
its financial statements for the fiscal year ending April 29, 2000, which
appointment is being submitted to the Stockholders for ratification at the
Meeting. Representatives of Deloitte & Touche LLP are expected to be present at
the Meeting, with the opportunity to make a statement if they desire to do so,
and to be available to respond to appropriate questions. The appointment of the
independent auditors will be ratified if it receives the affirmative vote of the
holders of a majority of shares of the Common Stock of the Company present at
the Meeting, in person or by proxy. Submission of the appointment of the
auditors to the Stockholders for ratification will not limit the authority of
the Board of Directors to appoint another accounting firm to serve as
independent auditors if the present auditors resign or their engagement is
otherwise terminated.
The Board of Directors recommends a vote FOR the appointment of Deloitte &
Touche LLP as independent auditors for the fiscal year ending April 29, 2000.
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APPROVAL OF AMENDMENTS TO 1993 INCENTIVE PROGRAM
The Board has adopted certain amendments to the Company's 1993 Incentive
Program, as amended on May 4, 1995, August 8, 1996 and January 29, 1997 (the
"Program"), subject to the approval by the Company's Stockholders at the
Meeting. The complete text of the Program, as amended, is attached as Exhibit A
to this Proxy Statement and the amendments for which stockholder approval is
being sought are described below. The following summary of the Program and these
amendments are qualified by reference to the text of the Program.
PROPOSED AMENDMENTS
The following is a summary of the amendments to the Program for which
stockholder approval is being sought.
Increase in Number of Shares
The Board has amended the Program to increase the number of shares that may
be issued pursuant to benefit awards under the Program from (a) 3,000,000 plus
(i) any Incremental Amount (as defined in the Program), plus (ii) the number of
shares repurchased by the Company in the open market and otherwise with an
aggregate price no greater than the cash proceeds received by the Company from
the sale of shares under the Program, plus (iii) any shares surrendered to the
Company in payment of the exercise price of options issued under the Program, to
(b) 4,500,000 plus (i) any Incremental Amount, plus (ii) the number of shares
repurchased by the Company in the open market and otherwise with an aggregate
price no greater than the cash proceeds received by the Company from the sale of
shares under the Program, plus (iii) any shares surrendered to the Company in
payment of the exercise price of options issued under the Program. In addition,
the Board has amended the Program to increase the maximum number of shares which
may be issued under the Program from 4,500,000 to 6,000,000 shares, subject to
dilution or adjustment in the event of a merger, recapitalization or the like.
SUMMARY OF PROGRAM
1. Purpose
The purpose of the Program is to attract, retain, motivate, and reward
officers, directors, key executives, employees, consultants and advisors of the
Company and its direct and indirect subsidiaries (the "Eligible Grantees") who
contribute to the management, growth and profitability of the business of the
Company, and to strengthen the mutuality of interests between such individuals
and the Company's stockholders by offering them equity or equity-based
incentives. The number of shares of Common Stock that may be issued pursuant to
Program awards is 4,500,000 plus (i) any Incremental Amount, plus (ii) the
number of shares repurchased by the Company in the open market and otherwise
with an aggregate price no greater than the cash proceeds received by the
Company from the sale of shares under the Program, plus (iii) any shares
surrendered to the Company in payment of the exercise price of options issued
under the Program. However, in no event may the number of shares issued under
the Program exceed 6,000,000 shares, subject to dilution or adjustment in the
event of a merger, recapitalization or the like. The maximum number of shares
for which stock options may be granted under the Program to any individual
during any calendar year is 375,000.
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As of July 1, 1999, there were eight executive officers, five Outside
Directors (defined below) and an indeterminate number of other key executives
and employees eligible to participate in the Program. The number of consultants
and advisors of the Company who may be eligible to participate in the Program
also is not currently determinable.
2. Summary
The Program may be administered either by the full Board or by one or more
committees of the Board appointed by the full Board of Directors of the Company
(referred to herein as the "Plan Administrator"); provided, however, that only
the full Board of Directors may grant awards under the Program to directors of
the Company who are neither employees nor officers of the Company or any of its
subsidiaries (the "Outside Directors"). Under the Program, the Plan
Administrator may grant incentive stock options, non-qualified stock options,
stock appreciation rights in tandem with stock options or freestanding, and
restricted stock grants (the "Benefits") to Eligible Grantees. A summary of the
principal characteristics of various types of Benefits that may be granted under
the Program is set forth below.
Stock Options
Two types of stock options may be granted under the Program: (i) stock
options intended to qualify for special tax treatment (referred to herein as
"Incentive Stock Options" or "ISOs") under Section 422 of the Code and (ii)
options not intended to so qualify (referred to herein as "Non-Qualified Stock
Options" or "NQOs"). The option price, term and other conditions of Stock
Options awarded under the Program are determined by the Plan Administrator,
subject, in the case of Stock Options intended to qualify as "Incentive Stock
Options", to the requirements of Section 422 of the Code.
Restored Options
The Program permits the Plan Administrator to grant "Restored Options" to a
participant in the Program. This feature enables a participant who exercises an
option by exchanging (either actually or constructively) previously-acquired
shares of Common Stock to receive a new option, exercisable at the then market
value, for the same number of shares as were exchanged in payment. In addition,
to the extent that shares are withheld by the Company in a stock-for-stock
exercise in satisfaction of a participant's tax obligations, the Company, at its
discretion, may issue a new option equal to the number of shares so withheld
which are exercisable at the then fair market value of a share of Common Stock.
Thus, a participant may make a stock-for-stock exercise without losing the
potential for appreciation in value of the shares surrendered. Restored Options
are exercisable beginning immediately on the date of grant. Except for the
exercise price, a Restored Option has terms substantially similar to the terms
of the original option (including having a term equal to the remaining term of
the original option).
Stock Appreciation Rights
A Stock Appreciation Right is the right to receive an amount equal to the
appreciation, if any, in the fair market value of one share of Common Stock from
the time the Stock Appreciation Right is granted until the time the grantee
elects to receive payment from the Company. Participants who elect to receive
payment of Stock Appreciation Rights shall receive payment in cash, in Common
Stock or in any combination of cash and Common Stock, as determined by the Plan
Administrator. When Stock Appreciation Rights are granted in
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tandem with an Incentive Stock Option, the Stock Appreciation Rights must
contain such terms and conditions as are necessary for the related option to
qualify as an Incentive Stock Option. In addition, if Stock Appreciation Rights
are granted in tandem with a stock option, the exercise of the option shall
cause a correlative reduction in the Stock Appreciation Rights standing to the
participant's credit that were granted in tandem with the option; and the
payment of Stock Appreciation Rights shall cause a correlative reduction of the
shares under the option. Unless waived in whole or in part by the Company, Stock
Appreciation Rights may be exercised only while the grantee is employed by the
Company.
Restricted Stock
Restricted Stock is Common Stock that is subject to forfeiture until a
period of time has elapsed or certain conditions have been fulfilled, as
determined by the Plan Administrator and set forth in the instrument of grant.
Unless waived in whole or in part by the Plan Administrator, if employment of a
holder of Restricted Stock terminates prior to vesting, all shares of Restricted
Stock held by him or her and still subject to restriction will be forfeited and
reacquired by the Company. Certificates representing shares of Restricted Stock
shall bear a legend referring to the Program, noting the risk of forfeiture of
the shares and stating that such shares are non-transferable until all
restrictions have been satisfied and the legend has been removed. As of the date
Restricted Stock is granted, the grantee shall be entitled to full voting and
dividend rights with respect to all shares of such stock. However, the Plan
Administrator may, in its sole discretion, require that the stock certificates
representing such shares of Restricted Stock be placed into escrow with the
Company until vesting.
TERMINATION
The Board may amend the Program at any time. However, the Board may not
amend the Program without Stockholder approval if such amendment (i) would
increase the maximum number of shares in the aggregate which may be sold
pursuant to options intended to qualify as Incentive Stock Options, (ii) would
change the manner of determining the minimum option price of Incentive Stock
Options, other than to change the manner of determining the fair market value of
any shares underlying the options to conform to any applicable provisions of the
Code or regulations thereunder, (iii) would increase the periods during which
Incentive Stock Options may be granted or exercised under the Program, (iv)
would change the employees or class of employees eligible to receive Incentive
Stock Options under the Program, or (v) would violate applicable law. The
Program will terminate on the tenth anniversary of its effective date unless
terminated earlier by the Board or unless extended.
FEDERAL INCOME TAX CONSEQUENCES UNDER THE PROGRAM
The following is a summary of the Federal income tax consequences of the
issuance and exercise of Stock Options under the Program, based upon current
income tax laws, regulations and rulings.
Incentive Stock Options. Subject to the effect of the Alternative Minimum
Tax, discussed below, an optionee does not recognize income on the grant of an
Incentive Stock Option. If an optionee exercises an Incentive Stock Option in
accordance with the terms of the option and does not dispose of the shares
acquired within two years from the date of the grant of the option nor within
one year from the date of exercise, the optionee will not realize any income by
reason of the exercise, and the Company will be allowed no deduction by reason
of the grant or exercise. The optionee's basis in the shares acquired upon
exercise will be the amount
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paid upon exercise. Provided the optionee holds the shares as a capital asset at
the time of sale or other disposition of the shares, his gain or loss, if any,
recognized on the sale or other disposition will be capital gain or loss. The
amount of his gain or loss will be the difference between the amount realized on
the disposition of the shares and his basis in the shares.
If an optionee disposes of the shares within two years from the date of
grant of the option or within one year from the date of exercise ("Early
Disposition"), the optionee will realize ordinary income at the time of such
Early Disposition, which will equal the excess, if any, of the lesser of (i) the
amount realized on the Early Disposition, or (ii) the fair market value of the
shares on the date of exercise, over the optionee's basis in the shares. The
Company will be entitled to a deduction in an amount equal to such income in the
same year that the income is recognized. The excess, if any, of the amount
realized on the Early Disposition of such shares over the fair market value of
the shares on the date of exercise will be long-term or short-term capital gain,
depending upon the holding period of the shares, provided the optionee holds the
shares as a capital asset at the time of Early Disposition. If an optionee
disposes of such shares for less than his basis in the shares, the difference
between the amount realized and his basis will be a long-term or short-term
capital loss, depending upon the holding period of the shares, provided the
optionee holds the shares as a capital asset at the time of disposition. The
excess of the fair market value of the shares at the time the Incentive Stock
Option is exercised over the exercise price for the shares is treated as an item
of tax preference ("Stock Option Preference").
Non-Qualified Stock Options. Non-Qualified Stock Options do not qualify
for the special tax treatment accorded to Incentive Stock Options under the
Code. Although an optionee does not recognize income at the time of the grant of
the option, he recognizes ordinary income upon the exercise of a Non-Qualified
Option in an amount equal to the difference between the fair market value of the
stock on the date of exercise of the option and the amount of cash paid for the
stock. As a result of the optionee's exercise of a Non-Qualified Stock Option,
the Company will be entitled to deduct as compensation an amount equal to the
amount included in the optionee's gross income. The Company's deduction will be
taken in the Company's taxable year in which the option is exercised.
The excess of the fair market value of the stock on the date of exercise of
a Non-Qualified Stock Option over the exercise price is not a Stock Option
Preference.
Taxation of Preference Items. Section 55 of the Code imposes an
Alternative Minimum Tax equal to the excess, if any, of (i) 26% of the
optionee's "alternative minimum taxable income" up to $175,000 ($87,500 in the
case of married taxpayers filing separately) and 28% of "alternative minimum
taxable income" over $175,000 ($87,500 in the case of married taxpayers filing
separately) over (ii) his "regular" federal income tax. Alternative minimum
taxable income is determined by adding the optionee's Stock Option Preference
and any other items of tax preference to the optionee's adjusted gross income
and then subtracting certain allowable deductions and an exemption amount. The
exemption amount is $33,750 for single taxpayers, $45,000 for married taxpayers
filing jointly and $22,500 for married taxpayers filing separately. However,
these exemption amounts are phased out beginning at certain levels of
alternative minimum taxable income.
The foregoing statement is only a general summary of the principal federal
income tax consequences of the exercise and issuance of Stock Options under the
Program and is based on the Company's understanding of present federal tax laws
and regulations. Since tax regulations may change or interpretations may differ,
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each optionee should consult his tax advisor regarding the tax consequences
related to participation in the Program.
MARKET VALUE
The shares of Common Stock issuable under the Program may be either
authorized or unissued shares or treasury shares. The market value of the
Company's Common Stock was $18 1/16 on July 1, 1999.
REASONS FOR AMENDMENTS
The amendment increasing the number of shares that may be issued pursuant
to benefit awards under the Program will enable the Company to continue to use
the Program as an incentive for its employees to promote the long term success
of its business.
If the Stockholders fail to approve the proposed amendments to the Program,
such amendments will not become effective.
The Board recommends a vote FOR approval of the proposed amendments to the
Program.
STOCKHOLDERS' PROPOSALS
Any proposal by a Stockholder of the Company intended to be presented at
the 2000 Annual Meeting of Stockholders must be received by the Company at its
principal executive office not later than April 29, 2000 for inclusion in the
Company's proxy statement and form of proxy relating to that meeting. Any such
proposal must also comply with the other requirements of the proxy solicitation
rules of the Securities and Exchange Commission.
ANNUAL REPORT
Concurrently with the mailing of these Proxy Materials, the Company is
mailing a copy of its Annual Report to Stockholders for the fiscal year ended
May 1, 1999. Such Annual Report is not to be regarded as proxy solicitation
material.
UPON WRITTEN REQUEST BY A STOCKHOLDER ENTITLED TO VOTE AT THE 1999 ANNUAL
MEETING, THE COMPANY WILL FURNISH THAT PERSON WITHOUT CHARGE WITH A COPY OF THE
FORM 10-K ANNUAL REPORT FOR 1999 WHICH IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO. If the
person requesting the report was not a Stockholder of Record on August 17, 1999,
the request must contain a good faith representation that the person making the
request was a beneficial owner of the Common Stock of the Company at the close
of business on such date. Requests should be addressed to Shorewood Packaging
Corporation, Investor Relations Department, 277 Park Avenue, New York, New York
10172-0124.
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OTHER BUSINESS
Management does not know of any other matters to be brought before the
Meeting except those set forth in the notice thereof. If other business is
properly presented for consideration at the Meeting, it is intended that the
proxies will be voted by the persons named therein in accordance with their
judgment on such matters.
SOLICITATION AND EXPENSES OF SOLICITATION
Officers and employees of the Company may solicit proxies. Proxies may be
solicited by personal interview, mail, telegraph and telephone. No compensation
will be paid by the Company to any person in connection with the solicitation of
proxies. Brokers, bankers and other nominees will be reimbursed for out-of-
pocket and other reasonable clerical expenses incurred in obtaining instructions
from beneficial owners of the Company's stock. The cost of preparing this Proxy
Statement and all other costs in connection with solicitation of proxies for the
Annual Meeting of Stockholders are being borne by the Company.
Even if you plan to attend the Meeting in person, please sign, date and
return the enclosed proxy promptly. If you attend the Meeting, your proxy will
be voided at your request and you can vote in person. A postage-paid
return-addressed envelope is enclosed for your convenience.
Your cooperation in giving this matter your immediate attention and in
returning your proxies will be appreciated.
By order of the Board of Directors,
Andrew N. Shore
Secretary
August 23, 1999
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EXHIBIT A
SHOREWOOD PACKAGING CORPORATION
1993 INCENTIVE PROGRAM
AS AMENDED
The 1993 Incentive Program, as amended (the "Program") of Shorewood
Packaging Corporation (the "Company") provides for the grant to officers,
directors, key executives, employees, consultants and advisors of the Company
and its direct or indirect subsidiaries of certain rights to acquire shares of
the Company's common stock (the "Common Stock"). The Company believes that this
Program will cause those persons to contribute materially to the growth of the
Company, thereby benefiting its stockholders.
1. Administration.
The Program shall be administered and interpreted either by the full Board
of Directors of the Company or by one or more committees of the Board consisting
of not less than two persons appointed by the full Board of Directors of the
Company (the committee(s) and the full Board of Directors are collectively
referred to herein as the "Plan Administrator"); provided, however, that only
the full Board of Directors may grant awards under the Program to Outside
Directors. The Board of Directors may appoint different Committees to handle
different duties under the Program. The Plan Administrator shall determine the
fair market value of the Common Stock for purposes of the Program in accordance
with the provisions of Section 9(i) hereof. The Plan Administrator's decisions
shall be final and conclusive with respect to the interpretation and
administration of the Program and any Grant made under it.
2. Grants.
Grants under the Program shall consist of incentive stock options,
non-qualified stock options, stock appreciation rights in tandem with stock
options or freestanding, restricted stock grants, and Restored Options (any of
the foregoing, in any combination, collectively, "Grants"). All Grants shall be
subject to the terms and conditions set forth herein and to such other terms and
conditions consistent with this Program as the Plan Administrator deems
appropriate. The Plan Administrator shall approve the form and provisions of
each Grant. Grants under a particular section of the Program need not be
uniform, and Grants under two or more sections may be combined in one
instrument. Notwithstanding anything contained herein to the contrary, Grants
under the Program to directors of the Company who are neither officers nor
employees of the Company or any of its subsidiaries shall be made by the full
Board of Directors.
3. Eligibility for Grants.
Grants may be made to any employee, officer, key executive, director,
professional or administrative employee, consultant or advisor to the Company or
any subsidiary of the Company selected by the Plan Administrator to receive
Grants under the Program ("Grantees"). The Plan Administrator shall determine
the number of shares subject to any particular Grant.
4. Shares Available for Grant.
(a) Shares Subject to Issuance or Transfer. Subject to adjustment as
provided in Section 4(b), the aggregate number of shares of Common Stock (the
"Shares") that may be issued or transferred under the
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Program is 4,500,000 Shares, plus (i) 10% of any increase (excluding any
increase relating to or arising out of the conversion or exercise of any
convertible securities, options or warrants issued and outstanding as of the
date the Program was adopted by the Board) in the number of shares issued and
outstanding over the number of Shares issued and outstanding on the date the
Program was adopted by the Board (the "Incremental Amount"), plus (ii) the
number of Shares repurchased by the Company in the open market and otherwise
with an aggregate price no greater than the cash proceeds received by the
Company from the sale of Shares under the Program, plus (iii) any Shares
surrendered to the Company in payment of the exercise price of options issued
under the Program. The Shares may be authorized but unissued Shares or treasury
Shares. However, no award may be issued that would bring the total of all
outstanding awards under the Program to greater than 6,000,000 shares. The
number of Shares available for Grants at any given time shall be reduced by the
aggregate of all Shares previously issued or transferred plus the aggregate of
all Shares which may become subject to issuance or transfer under
then-outstanding and then-currently exercisable Grants. The maximum number of
Shares for which stock options may be granted under the Program to any
individual during any calendar year is 375,000. For purposes of this Section 4,
the number of Shares outstanding at any time shall not include Grants under the
Program but shall include Shares issuable under Substituted Stock Incentives (as
defined in Section 9(b) below) assumed by the Company upon or in connection with
an acquisition or a merger with another corporation.
(b) Recapitalization Adjustment. If any subdivision or combination of
shares of Common Stock or any stock dividend, capital reorganization,
recapitalization, consolidation, or merger in which the Company is the surviving
corporation occurs after the adoption of the Program, the Plan Administrator
shall make such proportional adjustments as it determines appropriate in the
number of shares of Common Stock that may be issued or transferred thereafter
under Section 4(a). The Plan Administrator shall similarly adjust the number of
Shares subject to such stock option and option price in all outstanding Grants
made before the event within 60 days of the event.
5. Stock Options.
The Plan Administrator may grant options qualifying as incentive stock
options ("ISOs") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-qualified stock options ("NQOs") not entitled to
special tax treatment under the Code or Restored Options (collectively, "Stock
Options"). The following provisions are applicable to Stock Options:
(a) Exercise of Option. A Grantee may exercise a Stock Option by
delivering a notice of exercise to the Company, either with or without
accompanying payment of the option price. The notice of exercise, once
delivered, shall be irrevocable.
(b) Satisfaction of Option Price. The Grantee shall pay the option
price (the "Option Price") in cash, or with the Plan Administrator's
permission, by delivering shares of Common Stock already owned by the
Grantee, held by the Grantee for a minimum of six (6) months and having a
Fair Market Value on the date of exercise equal to the Option Price, or a
combination of cash and Shares. The Grantee shall pay the Option Price not
later than thirty (30) days after the date of a statement from the Company
following exercise setting forth the Option Price, Fair Market Value of
Common Stock on the exercise date, the number of Shares that may be
delivered in payment of the Option Price, and the amount of withholding tax
due, if any. If the Grantee fails to pay the Option Price within the period
and in the manner prescribed in the specific instrument of Grant, the Plan
Administrator shall have the right to take
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whatever action it deems appropriate, including voiding the option
exercise. The Company shall not issue or transfer Shares upon exercise of a
Stock Option until the Option Price is fully paid. The Plan Administrator
may prescribe such other or different exercise or payment terms as it may
deem appropriate.
(c) Price; Term and Conditions. The exercise price per share, term
and other provisions of stock options granted hereunder shall be specified
by the Grant, as limited, in the case of ISOs, by the provisions of
paragraph (d) below. In addition, the Plan Administrator may prescribe such
other conditions as it may deem appropriate, which conditions shall be
specified by the Grant.
(d) Limits on the ISOs. The aggregate Fair Market Value of the stock
covered by ISOs granted under the Program or any other stock option plan of
the Company or any subsidiary or parent of the Company that becomes
exercisable for the first time by any Grantee in any calendar year shall
not exceed $100,000. The aggregate Fair Market Value will be determined at
the time of grant. The period of exercise of an ISO shall not exceed ten
(10) years from the date of Grant (or five (5) years if the Grantee is also
a 10% stockholder). The price at which Common Stock may be purchased by the
Grantee under an Incentive Stock Option shall be the Fair Market Value (or
110% of the Fair Market Value if the Grantee is a 10% stockholder) of
Common Stock on the date of the Grant.
(e) Restored Options. Stock Options granted under the Program may,
with the Plan Administrator's permission, include the right to acquire a
restored option (a "Restored Option"). If a Stock Option grant contains a
Restored Option and if a Grantee pays all or part of the Option Price of
the Stock Option with shares of Common Stock held by the Grantee, then upon
exercise of the Stock Option the Grantee shall be granted a Restored Option
to purchase, at the fair market value as of the date of the grant of the
Restored Option, the number of shares of Common Stock of the Company equal
to the sum of the number of whole shares used by the Grantee in payment of
the Option Price and the number of whole shares, if any, withheld by the
Company as payment for withholding taxes. A Restored Option may be
exercised between the date of grant and the date of expiration, which will
be the same as the date of expiration of the Stock Option to which a
Restored Option is related.
6. Stock Appreciation Right.
The Plan Administrator may grant a Stock Appreciation Right ("SAR") either
independently or in conjunction with any Stock Option granted under the Program
either at the time of grant of the option or thereafter. The following
provisions are applicable to each SAR:
(a) Options to Which Right Relates. Each SAR which is issued in
conjunction with a Stock Option shall specify the Stock Option to which the
SAR is related, together with the Option Price and number of option shares
subject to the SAR at the time of its grant.
(b) Requirement of Employment. Each SAR may be exercised only while
the Grantee is in the employment of the Company, provided that the Plan
Administrator may provide for partial or complete exceptions to this
requirement as it deems equitable.
(c) Exercise. A Grantee may exercise each SAR in whole or in part by
delivering a notice of exercise to the Company, except that the Plan
Administrator may provide for partial or complete exceptions to this
requirement as it deems equitable.
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(d) Payment and Form of Settlement. If a Grantee exercises any SAR
which is issued in conjunction with a Stock Option, the grantee shall
receive the aggregate of the excess of the fair market value of each share
of Common Stock with respect to which the SAR is being exercised over the
Option Price of each such share. Payment, in any event, may be made in
cash, Common Stock or a combination of the two, in the discretion of the
Plan Administrator. Fair Market Value shall be determined as of the date of
exercise.
(e) Expiration and Termination. Each SAR shall expire on a date
determined by the Plan Administrator at the time of grant. If a Stock
Option is exercised in whole or in part, any SAR related to the Shares
purchased in connection with such exercise shall terminate immediately.
7. Restricted Stock Grants.
The Plan Administrator may issue or transfer Shares ("Restricted Stock") to
a Grantee under a Restricted Stock Grant. Upon the issuance or transfer, the
Grantee is entitled to vote the Shares and to receive any dividends paid. The
following provisions are applicable to Restricted Stock Grants:
(a) Requirement of Employment. If the Grantee's employment terminates
during the period designated in the Grant as the "Restriction Period", the
Restricted Stock Grant terminates and the shares of Common Stock must be
returned immediately to the Company. However, the Plan Administrator may
provide for partial or complete exceptions to this requirement as it deems
equitable.
(b) Restrictions of Transfer and Legend on Stock Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge,
or otherwise dispose of the Shares of Restricted Stock except to a
Successor Grantee under Section 9(a). Each certificate for shares issued or
transferred under a Restricted Stock Grant shall contain a legend giving
appropriate notice of the restrictions applicable to the Grant.
(c) Lapse of Restrictions. All restrictions imposed under any
Restricted Stock Grant shall lapse upon the fulfillment of the conditions
for vesting set forth in the instrument of Grant provided that all of the
conditions stated in Sections 7(a) and (b) have been met as of the date of
such lapse. The Grantee shall then be entitled to have the legend removed
from the certificate.
8. Amendment and Termination of the Program.
(a) Amendment. The Board of Directors may amend the Program except that it
may not, with respect to ISOs granted hereunder, (i) increase the maximum number
of Shares in the aggregate which may be sold pursuant to such options granted
hereunder; (ii) change the manner of determining the minimum option prices,
other than to change the manner of determining the fair market value of any
Shares underlying the option to conform to any than applicable provisions of the
Code or regulations thereunder, (iii) increase the periods during which such
options may be granted or exercised or (iv) change the employees or class of
employees eligible to receive such options hereunder. In any event, no
termination, suspension, modification or amendment of the Program may adversely
affect the rights of any Grantee without his consent.
(b) Termination of the Program. The Program shall terminate on the tenth
anniversary of its effective date unless terminated earlier by the Board or
unless extended by the Board.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Program that occurs after a Grant is made shall not result in
the termination or amendment of the Grant unless the
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Grantee consents or unless the Plan Administrator acts under Section 9(e). The
termination of the Program shall not impair the power and authority of the Plan
Administrator with respect to outstanding Grants. Whether or not the Program has
terminated, an outstanding Grant may be terminated or amended under Section 9(e)
or may be amended by agreement of the Company and the Grantee consistent with
the Program.
9. General Provisions.
(a) Prohibitions Against Transfer. Except as otherwise expressly provided
herein or in the instrument of grant, when a Grantee dies, the personal
representative or other person entitled under a prior Stock Option or a Grant
under the Program to succeed to the rights of the Grantee ("Successor Grantee")
may exercise the rights. A Successor Grantee must furnish proof satisfactory to
the Company of his or her right to receive the Grant under the Grantee's will or
under the applicable laws of descent and distribution.
(b) Substitute Grants. The Plan Administrator may make a Grant (a
"Substitute Grant") to an employee of another corporation who becomes an
Eligible Employee by reason of a corporate merger, consolidation, acquisition of
stock or property, reorganization or liquidation involving the Company in
substitution for a stock option, stock appreciation right, performance award, or
restricted stock grant granted by such corporation ("Substituted Stock
Incentive"). The terms and conditions of the Substitute Grant may vary from the
terms and conditions required by the Program and from those of the Substituted
Stock Incentive. The Plan Administrator shall prescribe the exact provisions of
the Substitute Grant, preserving where possible the provisions of the Substitute
Stock Incentive. The Plan Administrator shall also determine the number of
shares of Common Stock to be taken into account under Section 4.
(c) Subsidiaries. The term "subsidiary" means an affiliated corporation
controlled by the Company directly or indirectly through one or more
intermediaries.
(d) Fractional Shares. Fractional shares shall not be issued or
transferred under a Grant, but the Plan Administrator may pay cash in lieu of a
fraction or round the fraction.
(e) Compliance with Law. The Program, the exercise of Grants, and the
obligations of the Company to issue or transfer shares of Common Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. The Plan Administrator may
revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Plan
Administrator may also adopt rules regarding the withholding of taxes on payment
to Grantees.
(f) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a stockholder of the Company with respect to any Shares covered by a
Grant until the Shares are issued or transferred to the Grantee or Successor
Grantee on the Company's books.
(g) No Right to Employment. The Program and the Grants under it shall not
confer upon any Grantee the right to continue in the employment of the Company
or affect in any way the right of the Company to terminate the employment of a
Grantee at any time.
(h) Effective Date of the Program. The Program shall become effective upon
its approval by the Company's stockholders entitled to vote thereon.
(i) Fair Market Value. For the purposes of the Program, the term "Fair
Market Value" means, as of any date, the closing price of a share of Common
Stock of the Company on such date. The closing price shall
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be (i) if the Common Stock is then listed or admitted for trading on any
national securities exchange or, if not so listed or admitted for trading, is
listed or admitted for trading on the Nasdaq National Market, the last sale
price of the common stock, regular way, or the mean of the bid and asked prices
thereof for any trading day on which no such sale occurred, in each case as
officially reported on the principal securities exchange on which the common
stock is listed or admitted for trading or on the Nasdaq National Market, as the
case may be, or (ii) if not so listed or admitted for trading on a national
securities exchange or the Nasdaq National Market, the mean between the closing
high bid and low asked quotations for the Common Stock in the over-the-counter
market as reported by Nasdaq, or any similar system for the automated
dissemination of securities prices then in common use, if so quoted, as reported
by any member firm of the New York Stock Exchange selected by the Company;
provided, however, that if, by reason of extended or continuous trading hours on
any exchange or in any market or for any other reason, the time, with respect to
any trading day, of the close of trading for the purpose of determining the
"last sale price" or the "closing" bid and asked prices is not objectively
determinable, the time on such trading day used for the purpose of reporting any
compilation of last sale prices or closing bid and asked prices in The Wall
Street Journal shall be the time on such trading day as of which the "last sale
price" or "closing" bid and asked prices are determined for purposes of this
definition. If the Common Stock is quoted on a national securities or central
market system in lieu of a market or quotation system described above, the
closing price shall be determined in the manner set forth in clause (i) of the
preceding sentence if actual transactions are reported, and in the manner set
forth in clause (ii) of the preceding sentence if bid and asked quotations are
reported but actual transactions are not. If on the date in question, there is
no exchange or over-the-counter market for the Common Stock, the "fair market
value" of such Common Stock shall be determined by the Plan Administrator acting
in good faith.
(j) Change in Control. For purposes of the Program, the term "Change of
Control" means: the acquisition, without the approval of the Board, by any
person or entity, other than the Company and certain related entities, of more
than 20% of the outstanding shares of Common Stock through a tender offer,
exchange offer, or otherwise; the liquidation or dissolution of the Company
following a sale or other disposition of all or substantially all of its assets;
a merger or consolidation involving the Company that results in the Company not
being the surviving parent corporation; or a change in the majority of the
members of the Board during any two-year period that is not approved by at least
two-thirds of the members of the Board who were members at the beginning of the
two year period.
(k) Withholding. The Plan Administrator may, in its discretion and subject
to such rules as it may adopt, permit or require a Grantee to satisfy, in whole
or in part, any withholding tax obligation which may arise in connection with
the distribution to him or her of Shares of Common Stock or cash pursuant to the
Program by authorizing the Company to withhold from such distribution cash or
Shares having a Fair Market Value equal to the amount of the withholding tax.
Notwithstanding the foregoing, the Plan Administrator shall require, as a
condition to the distribution of any cash or Shares of Common Stock to any
Reporting Person, that the Company withhold from such distribution cash or
Shares having an aggregate Fair Market Value equal to the amount of the
Grantee's liability for any and all taxes required by law to be withheld.
(l) Program Controls. In the case of any conflict between the terms of
this Program and the terms of any instrument of Grant, the terms of this Program
will control.
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1. The election of all nominees FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
for directors listed below. listed below for all nominees listed below
Nominees: Virginia A. Kamsky, Andrew N. Shore, Leonard J. Verebay and Sharon R.Fairley
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the " Exceptions" box and write that nominee's
name in the space provided below)
*Exceptions
-------------------------------------------------------------------------------------------------------------------
2. The ratification of the selection of Deloitte & Touche LLP as the independent 3. The approval of an amendment to the
auditors of the Company for the fiscal year ending April 29, 2000. Company's 1993 Incentive Program.
FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In accordance with their best judgment with respect to any other
business that may properly come before the meeting. Change of address
and or Comments,
mark here. [ ]
(Please sign exactly as name appears hereon.
when signed. When shares are held by joint
tenants both should sign when signing as
attorney, as executor, administrator,
trustee or guardian, please give full title
as such, Only authorized officers should
sign for a corporation. If shares are
registered in more than one name, each
joint owner should sign.)
Dated: ,1999
--------------------------------
--------------------------------------------
(Signature)
--------------------------------------------
(signature if held jointly)
Votes must be indicated
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED (x) in Black or Blue ink X
ENVELOPE.
39
SHOREWOOD PACKAGING CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 22, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints MARC P. SHORE and ANDREW N. SHORE or
either of them, each with full power of substitution, proxies of the
undersigned to vote all shares of Common Stock, par value $.01 per share, of
Shorewood Packaging Corporation (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be
held on the 22nd day of September 1999 at 9:30 a.m. at The Chase Manhattan
Bank, 270 Park Avenue, 11th Floor, Room A, New York, New York, and at all
adjournments thereof, as fully and with the same force and effect as the
undersigned might or could do if personally present thereat. Said proxies are
instructed to vote as follows:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS INDICATED, IT WILL BE VOTED FOR ALL OF THE ABOVE PROPOSALS.
SHOREWOOD PACKAGING CORPORATION
P.O. BOX 11344
NEW YORK, N.Y. 10203-0344