SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
FORT HOWARD CORPORATION
................................................................................
(Name of Registrant as Specified in Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement)
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1) Title of each class of securities to which transactions applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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paid previously. Identify the previous filing by the registration
statement number, or the Form or Schedule and the date of its filing.
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4) Date Filed:________________________
[LOGO]
FORT HOWARD
MICHAEL T. RIORDAN
Chairman,
President
and
Chief Executive Officer
March 26, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders that
will be held on Tuesday, May 13, 1997, at 10:00 a.m., local time, in Chicago,
Illinois.
The enclosed notice and proxy statement contain details concerning the
business to be acted upon at the meeting. You will note that the Board of
Directors of the Company recommends (i) a vote "FOR" the election of three
directors to serve until the 2000 Annual Meeting of Stockholders and (ii) a
vote "FOR" the proposed amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock.
Please sign and return your proxy card in the enclosed postage-paid envelope
at your earliest convenience to assure that your shares will be represented
and voted at the meeting even if you cannot attend.
To help us plan for the meeting, please mark the appropriate box on the
accompanying proxy card telling us if you will be attending.
Sincerely,
/s/ Michael T. Riordan
Michael T. Riordan
[LOGO]
FORT HOWARD
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS
OF FORT HOWARD CORPORATION
The Annual Meeting of Stockholders of Fort Howard Corporation will be
held at the Metropolitan Club, 66th Floor, Sears Tower, 233 South Wacker Drive,
Chicago, Illinois, on Tuesday, May 13, 1997, at 10:00 a.m., local time, for the
following purposes:
1. To elect three directors to serve until the 2000 Annual
Meeting of Stockholders;
2. To consider a proposed amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized
shares of Common Stock; and
3. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Stockholders of record at the close of business on March 17, 1997 are
entitled to notice of, and to vote at, the meeting and any adjournments thereof.
By Order of the Board of Directors
/s/ James W. Nellen II
James W. Nellen II
Vice President and Secretary
Green Bay, Wisconsin
March 26, 1997
EACH STOCKHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY. IN THE EVENT A STOCKHOLDER DECIDES TO ATTEND THE MEETING, HE OR SHE
MAY, IF SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
FORT HOWARD CORPORATION
1919 SOUTH BROADWAY
GREEN BAY, WISCONSIN 54304
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PROXY STATEMENT
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FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1997
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Fort Howard Corporation, a Delaware
corporation (the "Company"), to be voted at the Annual Meeting of Stockholders
of the Company (the "Annual Meeting") to be held at the Metropolitan Club,
66th Floor, Sears Tower, 233 South Wacker Drive, Chicago, Illinois, on May 13,
1997, at 10:00 a.m., local time, and at any adjournments thereof. The
approximate date on which this Proxy Statement and form of proxy are first
being sent to stockholders is March 26, 1997.
Only holders of record of shares of Common Stock of the Company at the close
of business on March 17, 1997, are entitled to vote at the Annual Meeting or
any adjournments thereof. Each owner of record on the record date is entitled
to one vote for each share of Common Stock of the Company so held. The
presence, either in person or by properly executed proxy, of the owners of a
majority of the outstanding shares of Common Stock of the Company is necessary
to constitute a quorum at the Annual Meeting and to permit action to be taken
by the stockholders at such meeting. On February 14, 1997, there were
74,523,746 shares of Common Stock of the Company outstanding.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting in accordance with the
directions given. Stockholders voting by proxy for the election of directors
nominated to serve until the 2000 Annual Meeting may vote in favor of all
nominees or withhold their votes as to all nominees or withhold their votes as
to specific nominees. Stockholders voting by proxy regarding the proposed
amendment to the Company's Restated Certificate of Incorporation to increase
the number of authorized shares of Common Stock may vote for or against the
proposed amendment or may withhold their vote. Stockholders should specify
their choices on the enclosed form of proxy. If no specific instructions are
given with respect to the matters to be acted upon, the shares represented by
a signed proxy will be voted FOR the election of all nominees for director and
FOR the proposed amendment to increase the number of authorized shares of
Common Stock.
Directors will be elected by a plurality of the votes cast by the holders of
the shares of Common Stock voting in person or by proxy at the Annual Meeting.
Approval of the proposed amendment to increase the number of authorized shares
of Common Stock requires the affirmative vote of a majority of the outstanding
shares of Common Stock. Abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting and will not affect the outcome
of the vote for the election of directors. However, abstentions and broker
non-votes will have the practical effect as votes cast against the proposed
amendment to increase the number of authorized shares of Common Stock.
The Board of Directors of the Company knows of no business that will be
presented for consideration at the Annual Meeting other than the matters
described in this Proxy Statement. If any other matters are presented at the
Annual Meeting, the persons named in the proxy card will vote in accordance
with their judgment.
All proxies delivered pursuant to this solicitation are revocable at any
time at the option of the persons executing them by giving written notice of
revocation to the Secretary of the Company at the address set forth above
before the Annual Meeting, by delivering another proxy bearing a later date or
by attending the Annual Meeting and voting in person.
ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Board of Directors of the Company is divided into three classes, each
class serving for a period of three years. The Board of Directors of the
Company has set the number of directors of the Company at nine.
One-third of the members of the Board of Directors are elected by the
stockholders annually. The directors whose terms will expire at the Annual
Meeting are Dudley J. Godfrey, Jr., Michael T. Riordan and Frank V. Sica, all
of whom have been nominated by the Board of Directors to stand for reelection
as directors to hold office until the 2000 Annual Meeting of Stockholders and
until their successors are elected and qualified.
Should any one or more of these nominees become unable to serve, or for good
cause will not serve, the Board of Directors may, unless the Board of
Directors by resolution provides for a lesser number of directors, designate a
substitute nominee or nominees, in which event the shares represented by all
valid proxies received may be voted for such substitute nominee or nominees.
The Board of Directors knows of no reason why any nominee may be unable to
serve as a director.
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE ELECTION OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR Dudley J.
Godfrey, Jr., Michael T. Riordan and Frank V. Sica as directors to hold office
until the 2000 Annual Meeting of Stockholders and until their successors are
elected and qualified. Proxies received by the Board of Directors will be so
voted unless stockholders specify a contrary choice in their proxy.
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
FOR TERMS EXPIRING AT THE 2000 ANNUAL MEETING
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Dudley J. Godfrey, Jr. Director since 1995
Milwaukee, Wisconsin Age 70
Mr. Godfrey is an attorney and a principal in the law firm of Godfrey
& Kahn S.C., which he founded in 1956. Mr. Godfrey is also a Director
of ARM Financial Group, Inc., CLARCOR Inc. and Manpower, Inc.
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Michael T. Riordan Director since 1992
Green Bay, Wisconsin Age 46
Mr. Riordan is Chairman, President and Chief Executive Officer of the
Company. He became Chairman on March 1, 1997 and has held the
positions of President and Chief Executive Officer since October 1996.
From March 1992 through September 1996, Mr. Riordan served as
President and Chief Operating Officer of the Company. Prior to that
time, he was a Vice President of the Company. Mr. Riordan is also a
Director of The Dial Corporation.
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Frank V. Sica Director since 1988
New York, New York Age 46
Mr. Sica has been a Managing Director of Morgan Stanley & Co.
Incorporated ("MS&Co") since 1988. He is a Vice Chairman and Director
of Morgan Stanley Leveraged Equity Fund II, Inc. ("MSLEF II, Inc.")
and Morgan Stanley Capital Partners III, Inc. ("MSCP III"). Mr. Sica
is also a Director of ARM Financial Group, Inc., Consolidated Hydro,
Inc., CSG Systems International, Inc., Highlands Gas Corporation,
Ionica L3 Limited, Kohl's Corporation, PageMart Wireless, Inc., SITA
Telecommunications Holdings N.V. and Sullivan Communications, Inc.
2
DIRECTORS WHOSE TERMS EXPIRE
AT THE 1999 ANNUAL MEETING
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Dr. James L. Burke Director since 1995
Dublin, Georgia Age 58
Dr. Burke is President, Chief Executive Officer and a member of the
Management Board of Southeast Paper Manufacturing Company and has held
such positions since 1993. Prior to that time, he was President and
Chief Operating Officer of Garden State Paper Company.
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Kathleen J. Hempel Director since 1979
Green Bay, Wisconsin Age 46
Ms. Hempel is Vice Chairman and Chief Financial Officer of the Company
and has held such positions since March 1992. Prior to that time, she
was Senior Executive Vice President and Chief Financial Officer of the
Company. Ms. Hempel is also a Director of Whirlpool Corporation.
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David I. Margolis Director since 1995
New York, New York Age 67
Until his retirement in February 1995, Mr. Margolis was Chairman of
the Board and Chief Executive Officer of Coltec Industries Inc, a
manufacturer of diversified industrial equipment. Mr. Margolis is also
a Director of Burlington Industries Inc. and Coltec Industries Inc.
DIRECTORS WHOSE TERMS EXPIRE
AT THE 1998 ANNUAL MEETING
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Donald Patrick Brennan Director since 1988
New York, New York Age 56
Mr. Brennan has been an Advisory Director of MS&Co since January 1996.
Prior to that time, he was head of MS&Co's Merchant Banking Division
and Chairman of MSLEF II, Inc., MSCP III and Morgan Stanley Venture
Capital II, Inc. Mr. Brennan is also a Director of ICT Group, Inc.,
Jefferson Smurfit Corporation and SITA Telecommunications Holdings
N.V.
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Donald H. DeMeuse Director since 1978
Green Bay, Wisconsin Age 61
Mr. DeMeuse retired as Chairman of the Board of the Company effective
March 1, 1997 and as Chief Executive Officer of the Company effective
October 1, 1996. He had held such positions since March 1992. Prior to
that time, he was President and Chief Executive Officer of the
Company. Mr. DeMeuse is also a Director of Associated Bank Green Bay.
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Robert H. Niehaus Director since 1988
New York, New York Age 41
Mr. Niehaus has been a Managing Director of MS&Co since 1990. He is a
Vice Chairman and a Director of MSLEF II, Inc. and MSCP III. Mr.
Niehaus is also a Director of American Italian Pasta Company, Silgan
Corporation, Silgan Holdings Inc., Waterford Wedgwood UK, plc
(Chairman) and Waterford Crystal Ltd.
3
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has approved and is recommending that the
stockholders approve an amendment to the Company's Restated Certificate of
Incorporation (the "Amendment"), in order to increase the number of authorized
shares of Common Stock from 100 million to 200 million shares, par value $.01
per share. The proposed Amendment would not increase the number of shares of
Preferred Stock of the Company above the 50 million shares, par value $.01 per
share, which is currently authorized.
Although there are sufficient shares to permit all presently contemplated
issuances, the Board believes that the Amendment is in the best interests of
the Company and its stockholders and will provide the Company with flexibility
of action in the future by assuring there will be sufficient authorized but
unissued shares of Common Stock available for issuance in connection with
potential stock dividends or splits, acquisitions, employee benefit plans and
other general corporate purposes without the necessity of further stockholder
action at any special or annual meeting.
The proposed Amendment provides that Section 4.1 of Article IV of the
Company's Restated Certificate of Incorporation be amended in its entirety to
read as follows:
"SECTION 4.1 Authorized Capital. Shares. The total number of shares
of all classes of capital stock that the Corporation shall have
authority to issue is 250,000,000 shares, of which (i) 200,000,000
shares shall be common stock, par value $.01 per share ("Common Stock")
and (ii) 50,000,000 shares shall be preferred stock, par value $.01 per
share ("Preferred Stock")."
Approval of the proposed Amendment requires the affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote and will
become effective upon the filing of a Certificate of Amendment with the
Secretary of State of the State of Delaware. Neither an abstention nor a
broker non-vote is an affirmative vote. Therefore, both will have the
practical effect as votes cast against the proposed Amendment.
The Board of Directors of the Company recommends a vote FOR the proposed
Amendment to increase the number of authorized shares of Common Stock. Proxies
received by the Board of Directors will be so voted unless stockholders
specify a contrary choice in their proxy.
4
COMMITTEES OF THE BOARD OF DIRECTORS;
MEETINGS AND COMPENSATION OF DIRECTORS
The Board of Directors held four meetings during 1996. All of the directors
attended at least 75% of the aggregate number of meetings of the Board of
Directors and of all committees of the Board of Directors on which they
served.
The Board of Directors has, among other committees, an Audit Committee and a
Compensation and Nominating Committee.
The Audit Committee. The Audit Committee, among other things, recommends to
the Board of Directors the selection of the independent auditors of the
Company, reviews with the independent auditors the scope and results of the
Company's audits, approves the audit fees and reviews the adequacy and
effectiveness of the Company's internal auditing, accounting and financial
controls with the independent auditors and the Company's financial and
accounting staff. The Audit Committee is composed entirely of directors who
are not officers of the Company. The members of the Audit Committee are Dr.
Burke (Chairman), Mr. Godfrey and Mr. Niehaus. The Audit Committee met twice
in 1996.
The Compensation and Nominating Committee. The Compensation and Nominating
Committee reviews and approves all salary arrangements and other remuneration
for executive officers of the Company. It is also responsible for the
administration of the Fort Howard Corporation 1995 Stock Incentive Plan (the
"Stock Incentive Plan"), the Fort Howard Corporation Management Incentive Plan
(the "MIP") and the Fort Howard Corporation Supplemental Retirement Plan. The
Compensation and Nominating Committee also recommends to the Board of
Directors candidates for election to the Board of Directors. The Compensation
and Nominating Committee will consider recommendations for nominees for
director submitted by stockholders. The Compensation and Nominating Committee
is composed entirely of directors who are not officers of the Company. The
members of the Compensation and Nominating Committee are Mr. Brennan
(Chairman), Mr. Margolis and Mr. Niehaus. The Compensation and Nominating
Committee met three times in 1996.
Compensation of Directors. Officers of the Company who are also directors do
not receive any fee or remuneration for services as members of the Board of
Directors or of any committee of the Board of Directors. Nonmanagement
directors other than Mr. Brennan, Mr. Niehaus and Mr. Sica, each of whom has
waived compensation for his services as a director, receive a $30,000 annual
fee, $2,000 for each Board meeting attended and $1,000 for each committee
meeting attended. The Company pays 50% of the annual fee in the form of cash
and 50% of the annual fee in the form of shares of Common Stock pursuant to
the Company's 1995 Stock Plan for Non-Employee Directors. The payment of the
cash portion of the annual fee may be deferred by any director at such
director's election pursuant to the Company's Deferred Compensation Plan for
Non-Employee Directors until the earlier of (i) the date of termination of
such director's service as a non-employee director, (ii) the date specified by
such director in his deferred election form, or (iii) the date of such
director's death. In addition, the Company reimburses all of its directors for
their travel expenses in connection with their attendance at Board and
committee meetings.
5
OWNERSHIP OF COMMON STOCK BY MANAGEMENT
The following table sets forth information as of February 14, 1997, with
respect to beneficial ownership of the Company's outstanding shares of Common
Stock by each director, each of the Named Executive Officers (as defined
below), and the directors and executive officers of the Company as a group.
Except as otherwise noted below, each of the directors and executive officers
has sole voting and investment power with respect to the shares he or she
owns.
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED OF CLASS
---- ------------------ --------
Donald Patrick Brennan............................. 0 --%
James L. Burke..................................... 1,918 *
Donald H. DeMeuse.................................. 810,449(a) 1.1
Andrew W. Donnelly................................. 197,477(a) *
Dudley J. Godfrey, Jr. ............................ 4,918(b) *
Kathleen J. Hempel................................. 617,691(a) *
David I. Margolis.................................. 6,018 *
James W. Nellen II................................. 156,439(a) *
Robert H. Niehaus.................................. 0 --
Daniel J. Platkowski............................... 155,843(a) *
Michael T. Riordan................................. 223,337(a) *
John F. Rowley..................................... 132,973(a) *
Frank V. Sica...................................... 0 --
All directors and executive officers as a group (14
persons).......................................... 2,416,778(a) 3.2%
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* Less than 1%.
(a) Includes the following numbers of shares which the designated director or
Named Executive Officer has the right to acquire within 60 days upon the
exercise of stock options: Mr. DeMeuse, 643,237 shares; Mr. Donnelly,
178,827 shares; Ms. Hempel, 585,347 shares; Mr. Nellen, 121,989 shares;
Mr. Platkowski, 127,858 shares; Mr. Riordan, 193,608 shares; Mr. Rowley,
121,923 shares; and all directors and executive officers as a group,
2,048,314 shares.
(b) Includes 2,000 shares held in a trust over which Mr. Godfrey exercises
shared voting and investment power.
6
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of December 31, 1996, with
respect to persons known to the Company to be the beneficial owners of more
than five percent of the Company's outstanding shares of Common Stock.
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED(a) OF CLASS
- ---------------- --------------------- --------
Morgan Stanley Group Inc....................... 19,354,905(b) 26.0%
1585 Broadway
New York, New York 10036
State of Wisconsin Investment Board............ 7,035,000(c) 9.5
P.O. Box 7842
Madison, Wisconsin 53707
Mellon Bank, N.A., as Trustee for First Plaza
Group Trust(d)................................ 5,477,586 7.4
1 Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Neuberger & Berman, LLC........................ 4,081,250(e) 5.5
605 Third Avenue
New York, New York 10158
FMR Corp....................................... 3,851,700(f) 5.2
82 Devonshire Street
Boston, Massachusetts 02109
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(a) Stock ownership information is based upon information set forth in the
beneficial owner's Schedule 13G report, filed with the Securities and
Exchange Commission with respect to beneficial ownership of the Company's
Common Stock as of December 31, 1996.
(b) Includes 2,316,299 shares held directly by Morgan Stanley Group Inc.
("Morgan Stanley Group") and 15,110,144 shares held directly by The
Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"). Morgan
Stanley Leveraged Equity Fund II, Inc. is the sole general partner of
MSLEF II and is a wholly owned subsidiary of Morgan Stanley Group. Also
includes 1,387,678 shares held directly by Fort Howard Equity Investors
II, L.P. and 540,784 shares held directly by Fort Howard Equity
Investors, L.P. Morgan Stanley Equity Investors Inc. is the sole general
partner of both of these partnerships and is a wholly owned subsidiary of
Morgan Stanley Group.
(c) State of Wisconsin Investment Board has sole voting and investment power
with respect to shares beneficially owned.
(d) Mellon Bank, N.A. acts as the trustee (the "Trustee") for First Plaza
Group Trust ("First Plaza"), a trust under and for the benefit of certain
employee benefit plans of General Motors Corporation ("GM") and its
subsidiaries. These shares may be deemed to be owned beneficially by
General Motors Investment Management Corporation ("GMIMCo"), a wholly
owned subsidiary of GM. GMIMCo's principal business is providing
investment advice and investment management services with respect to the
assets of certain employee benefit plans of GM and its subsidiaries and
with respect to the assets of certain direct and indirect subsidiaries of
GM and associated entities. GMIMCo is serving as First Plaza's investment
manager with respect to these shares and in that capacity it has the sole
power to direct the Trustee as to the voting and disposition of these
shares. Because of the Trustee's limited role, beneficial ownership of
the shares by the Trustee is disclaimed.
(e) Includes 3,065,000 shares held by Neuberger & Berman, LLC and Neuberger &
Berman Management Inc., as sub-adviser and investment manager,
respectively, of Neuberger & Berman's various funds and which both
Neuberger & Berman, LLC and Neuberger & Berman Management Inc. have shared
power to make decisions whether to retain or dispose. The remaining balance
of shares is held by Neuberger & Berman, LLC for individual client accounts
over which Neuberger & Berman, LLC has shared power to dispose.
7
(f) Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp., is the beneficial owner of 3,497,500 shares as a
result of acting as investment advisor to various investment companies.
Each of FMR Corp. and Edward C. Johnson 3d, Chairman of FMR Corp.,
through its control of Fidelity and the Fidelity funds (the "Funds"), has
sole power to dispose of the 3,497,500 shares owned by the Funds. Neither
FMR Corp. nor Mr. Johnson has the sole power to vote or direct the voting
of the shares owned directly by the Funds, which power resides with the
Funds' Boards of Trustees. Fidelity carries out the voting of the shares
under written guidelines established by the Funds' Boards of Trustees.
Fidelity Management Trust Company ("Fidelity Trust"), a wholly-owned
subsidiary of FMR Corp., is the beneficial owner of 354,200 shares as a
result of its serving as investment manager of the institutional
account(s). Each of FMR Corp. and Mr. Johnson, through its control of
Fidelity Trust, has sole dispositive power over 354,200 shares and sole
power to vote or to direct the voting of 159,900 shares, and no power to
vote or to direct the voting of 194,300 shares owned by the institutional
accounts referred to above.
8
CERTAIN TRANSACTIONS
Stockholders Agreement
The Company, Morgan Stanley Group, MSLEF II, certain other investors and
certain management investors (each, a "Holder") have entered into a
stockholders agreement dated as of March 1, 1995 (the "Stockholders
Agreement"), which contains certain restrictions with respect to the
transferability of Common Stock by certain parties thereunder and certain
registration rights granted by the Company with respect to such shares.
Pursuant to the terms of the Stockholders Agreement, MSLEF II and Fort
Howard Equity Investors II, L.P. each have the right to have a designee
nominated for election to the Company's Board of Directors at any annual
meeting of the Company's stockholders, so long as MSLEF II or Fort Howard
Equity Investors II, L.P., as the case may be, does not already have a
designee as a member of the Board of Directors at the time of such annual
meeting. In addition, in the event of a vacancy on the Board of Directors
created by the resignation, removal or death of a director nominated by MSLEF
II or Fort Howard Equity Investors II, L.P., such stockholders have the right
to have a designee nominated for election to fill such vacancy.
Pursuant to the terms of the Stockholders Agreement, in the event that one
or more Holders (other than the management investors) (each, a "Controlling
Stockholder") sell a majority of the shares of Common Stock subject to the
Stockholders Agreement to a third party, certain other Holders have the right
to elect to sell on the same terms the same percentage of such other Holder's
shares to the third party as the Controlling Stockholder is selling of its
shares of Common Stock. In addition, if a Controlling Stockholder sells all of
its shares of Common Stock to a third party, the Controlling Stockholder has
the right to require that certain remaining Holders sell all of their shares
to the third party on the same terms.
Pursuant to the terms of the Stockholders Agreement, Holders of specified
percentages of Common Stock are entitled to certain demand registration rights
("Demand Rights") with respect to shares of Common Stock held by them;
provided, however, that the Company (or purchasers designated by the Company)
shall have the right to purchase at fair market value the shares which are the
subject of Demand Rights in lieu of registering such shares of Common Stock.
In addition to the Demand Rights, Holders are, subject to certain limitations,
entitled to register shares of Common Stock in connection with a registration
statement prepared by the Company to register its equity securities. The
Stockholders Agreement contains customary terms and provisions with respect
to, among other things, registration procedures and certain rights to
indemnification granted by parties thereunder in connection with the
registration of Common Stock subject to such agreement.
Other transactions
MS&Co served as lead underwriter of the primary and secondary offering of
the Company's Common Stock in May 1996 for which it received underwriting fees
of approximately $3 million. MS&Co also periodically provides financial
advisory services for the Company for which it receives customary fees.
Mr. Godfrey is a principal in the law firm of Godfrey & Kahn S.C., which
provided legal services to the Company during 1996 and received fees from the
Company in an immaterial amount.
COMPENSATION AND NOMINATING COMMITTEE REPORT
ON EXECUTIVE OFFICER COMPENSATION
The Compensation and Nominating Committee is responsible for oversight and
administration of executive compensation. The Company's compensation and
benefit programs are designed to:
.Tie executive pay to shareholder value creation through the use of equity-
based incentives;
.Link pay to performance by placing a significant portion of compensation
at risk;
.Align the Company's compensation plans to its business objectives and to
the business environment;
9
.Measure executives' success in attaining those business objectives; and
.Attract, retain, and motivate key executives of the Company.
As a newly public Company in 1995, the Compensation and Nominating Committee
recognized that a transition period was necessary to fully achieve the
objectives it had established. In 1996, the Compensation and Nominating
Committee more fully developed its objectives to consider a number of factors
with respect to executive compensation. These factors are discussed in more
detail in this Report. The Compensation and Nominating Committee believes that
the actions taken in 1996 with respect to the executive compensation program
are consistent with its objectives.
COMPONENTS OF COMPENSATION
With respect to each component of compensation, the Compensation and
Nominating Committee considers a number of factors in determining the
appropriate level, mix, and form of compensation for its executive officers.
One such factor is a reference to the total compensation levels paid to
similarly situated executives of a peer group of companies (the "Peer Group")
with which the Company competes for executive talent. The Compensation and
Nominating Committee does not have an objective of targeting either total
compensation or each component of compensation at a specified level. Rather,
the Compensation and Nominating Committee utilizes compensation survey
information as a general framework for comparison.
The companies comprising the Peer Group consist of similarly sized
diversified paper, consumer packaged goods and manufacturing companies, and
companies with similar capital structures. Some of these companies are also
included in the industry indices set forth in the Performance Graph on page
13.
The compensation package is designed so that annual and long-term incentives
constitute a majority of the total compensation package.
BASE SALARIES
Executive officer base salaries generally will be reviewed on a 12-month
cycle. Base salary increases will be based on a qualitative evaluation of the
following factors: level of responsibility, time in position, prior
experience, individual performance, internal equity, and a comparison of
salaries paid within the Peer Group. There is no specified weighting of the
factors considered.
ANNUAL INCENTIVES
The Company's MIP is structured to reinforce and reward participants for
achieving exceptional performance which the Compensation and Nominating
Committee believes is critical as a newly public company. Thus, annual
incentive awards with respect to the executive officers may be above the
median of the Peer Group if target levels of performance based on a
predetermined formula are achieved or exceeded. Awards are reduced
significantly if target levels of performance are not achieved.
Key employees, including all executive officers, participate in the MIP.
Awards under the MIP are based on overall corporate performance; however,
except for the Chief Executive Officer's award, the Chief Executive Officer,
in his sole discretion, may adjust an award plus or minus 20% based on a
subjective assessment of individual performance. The Compensation and
Nominating Committee reserves the right to adjust the Chief Executive
Officer's award based on its subjective assessment of the Chief Executive
Officer's individual performance.
For 1996, each MIP participant was assigned an annual incentive target award
based on the achievement of an established operating income goal. Target
awards ranged from 20% to 75% of base salary. The Compensation and Nominating
Committee considered the following factors in determining the size of the
target awards: importance of achieving critical financial performance in the
short-term within a highly leveraged environment,
10
the risk/reward structure that is necessary to achieve the Compensation and
Nominating Committee's objectives, balance of short and long-term incentives,
internal equity, position of the participant, and a reference to the size of
awards in the Peer Group. There is no quantitative or specified weighting of
the factors considered.
For 1996, the Compensation and Nominating Committee established a target
corporate performance goal that was ambitious and represented a significant
increase in operating income over the prior year. The Compensation and
Nominating Committee believed it was important for the incentive plan goals to
focus executives' attention on the leverage inherent in the financial
structure of the Company. Accordingly, the Compensation and Nominating
Committee determined that it was critical to achieve the target performance
goal. Performance at 95% of target would result in a significant reduction in
the MIP award for the executive officers. Performance above target would
result in an increased award, but the amount of the award would be subject to
an overall limitation specified by the Compensation and Nominating Committee,
regardless of the extent to which maximum performance was exceeded.
Amounts awarded were based upon the Company exceeding its maximum operating
income goal. Although the MIP permits the awards to be adjusted as described
above based on a subjective assessment of individual performance, no such
adjustments to the executive officer awards were made for 1996.
LONG-TERM INCENTIVES
The Stock Incentive Plan provides that stock options, stock appreciation
rights, restricted stock, performance shares, stock equivalents, and dividend
equivalents may be granted to key individuals who are in a position to
contribute to the future success of the Company. Long-term incentives are
intended to reward executives for past performance and to motivate them in the
future by providing executives with an incentive to increase shareholder
value, thereby aligning pay to shareholder interests.
To advance its objective of retaining key employees, stock option grants
vest on a pro rata basis over a five-year period from the date of grant.
Options also have an exercise price equal to the fair market value of the
stock on the date of grant.
In determining the stock option award size for the executive officers, the
Compensation and Nominating Committee considered the outstanding overall
corporate performance of the Company in 1996, the importance of focusing
executives on the future growth of the Company and increasing shareholder
value, and a comparison to annual award sizes of the Peer Group. No specified
weighting was assigned to the factors considered. The Compensation and
Nominating Committee also considered the recommendation of the Chief Executive
Officer with respect to stock option awards based on the Chief Executive
Officer's evaluation of internal equity and retention issues, and his
subjective assessment of individual performance and potential.
COMPENSATION OF THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Mr. DeMeuse retired as Chief Executive Officer effective October 1, 1996 and
as Chairman of the Board effective March 1, 1997. Mr. Riordan was named Chief
Executive Officer effective October 1, 1996 and Chairman of the Board
effective March 1, 1997.
COMPENSATION FOR MR. DEMEUSE
Mr. DeMeuse had an employment agreement with the Company which took effect
in 1993. Mr. DeMeuse's employment agreement provided for a minimum base annual
salary and participation with respect to incentive awards.
Based on a comparison to the Peer Group, the Compensation and Nominating
Committee did not adjust Mr. DeMeuse's base salary in 1996. Relative to the
Peer Group, his base salary was in the upper quartile. In addition to base
salary, Mr. DeMeuse earned a bonus for 1996 under the MIP based on the Company
exceeding its maximum operating income goal. No stock options were granted to
Mr. DeMeuse in 1996. Based on the results of the analysis comparing 1995
actual compensation levels within the Peer Group, Mr. DeMeuse's total
11
compensation approximated the 75th percentile of other chairmen of the board
and chief executive officers of the Peer Group.
COMPENSATION FOR MR. RIORDAN
Upon being named Chief Executive Officer, the Compensation and Nominating
Committee took two actions to provide Mr. Riordan with compensation
commensurate with his responsibilities as Chief Executive Officer. First, Mr.
Riordan's base salary was increased from $425,000 to $550,000. The
Compensation and Nominating Committee deemed it necessary to move Mr.
Riordan's salary to a level that is more consistent with base salaries of
chief executive officers in the Peer Group. After the salary increase, Mr.
Riordan's base salary ranks below the median of the base salaries of the chief
executive officers in the Peer Group.
Second, Mr. Riordan was awarded 12,000 shares of restricted stock and 8,000
restricted stock equivalents. In addition to recognizing Mr. Riordan's
additional responsibilities as Chief Executive Officer, the Compensation and
Nominating Committee also wanted to increase Mr. Riordan's direct stock
ownership in the company to more closely align his compensation to the
interests of shareholders. The restricted stock and restricted stock
equivalents vest at the rate of 20% per year.
In addition to base salary, Mr. Riordan earned a bonus for 1996 under the
MIP based on the Company exceeding its maximum operating income goal.
Consistent with the criteria for determining the size of the stock option
awards for all participants, the Compensation and Nominating Committee awarded
Mr. Riordan a stock option for 125,000 shares.
The compensation analysis comparing 1995 compensation levels within the Peer
Group was conducted when Mr. Riordan held the position of President and Chief
Operating Officer. Based on this analysis, Mr. Riordan's total compensation
ranked above the median relative to other president and chief operating
officers of the Peer Group.
Mr. Riordan has an employment agreement which was amended and restated in
December 1996. The terms of the employment agreement are summarized on page
16.
POLICY WITH RESPECT TO QUALIFYING COMPENSATION FOR DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code generally limits to $1,000,000
the tax deductible compensation paid for a particular year to the Chief
Executive Officer and to each of the four highest-paid executive officers who
are employed as executive officers on the last day of such year (the "Covered
Executive Officers"). Presently, because of the application of certain
transition rules, the Company does not expect any of the Covered Executive
Officers' compensation to be subject to the deductibility limit. While it is
the Compensation and Nominating Committee's intention to maximize the
deductibility of compensation paid to executive officers to the extent the
Compensation and Nominating Committee deems appropriate, the Compensation and
Nominating Committee may, from time to time, reevaluate its policy with
respect to Section 162(m).
COMPENSATION AND NOMINATING COMMITTEE
Donald Patrick Brennan, Chairman
David I. Margolis
Robert H. Niehaus
12
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return for the
period from March 9, 1995 (the date the Company became a public company)
through December 31, 1996 to the cumulative total returns for the S&P 500
Composite Index ("S&P 500 Index") and the S&P 500 Household Products and the
S&P 500 Paper and Forest Products Group Indices combined and weighted equally
("Household Products/Paper and Forest Products Combined Indices"). The graph
assumes an investment of $100 in the Common Stock of the Company and in each
index as of March 9, 1995, and the reinvestment of all dividends. The line
graph is not intended to be indicative of future stock performance.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
FROM MARCH 9, 1995 THROUGH DECEMBER 31, 1996 AMONG
FORT HOWARD CORPORATION, S&P 500 INDEX AND
HOUSEHOLD PRODUCTS/PAPER AND FOREST PRODUCTS COMBINED INDICES
[GRAPH APPEARS HERE]
HOUSEHOLD PRODUCTS/
PAPER AND FOREST
S&P 500 PRODUCTS COMBINED
DATE FORT HOWARD INDEX INDICES
---- ----------- ------- -------------------
March 9, 1995.......................... $100.00 $100.00 $100.00
December 31, 1995...................... $187.50 $129.83 $119.05
December 31, 1996...................... $230.73 $159.57 $141.78
13
EXECUTIVE COMPENSATION
The following table presents information concerning compensation paid for
services to the Company during 1996 and the two prior fiscal years to the
current and former Chief Executive Officer, the four other most highly
compensated executive officers and one other former executive officer (the
"Named Executive Officers") of the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS
------------------------------ -------------------------
NUMBER OF
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(a) AWARDS OPTIONS/SARS SATION(b)
- --------------------------- ---- -------- -------- ------------ ---------- ------------ ---------
Donald H. DeMeuse....... 1996 $750,000 $825,000 $1,963 0 0 $85,824
Chairman (through 1995 750,000 973,125 2,648 0 100,000 70,687
February 28, 1997) and 1994 750,000 307,500 7,802 0 0 69,366
Chief Executive Officer
(through September 30,
1996)
Michael T. Riordan...... 1996 $458,654 $467,500 $1,676 $490,000(c) 125,000 $32,029
Chairman (as of March 1995 378,846 486,563 1,641 0 100,000 22,088
1, 1997), Chief 1994 375,000 153,750 4,671 0 0 21,400
Executive Officer (as
of October 1, 1996) and
President
Kathleen J. Hempel...... 1996 $480,000 $528,000 $ 359 0 50,000 $33,640
Vice Chairman and Chief 1995 480,000 622,800 289 0 50,000 27,891
Financial Officer 1994 480,000 196,800 1,036 0 0 27,311
John F. Rowley.......... 1996 $251,539 $275,000 $ 134 0 25,000 $17,828
Executive Vice 1995 250,000 324,375 103 0 20,000 14,688
President 1994 237,885 96,350 338 0 0 13,676
Daniel J. Platkowski.... 1996 $235,385 $258,500 $ 119 0 22,000 $17,251
Senior Vice President 1995 221,154 285,450 70 0 15,000 13,490
1994 210,769 77,900 405 0 0 12,607
James W. Nellen II...... 1996 $220,769 $242,000 $ 252 0 22,000 $15,866
Vice President, General 1995 220,000 285,450 77 0 15,000 13,097
Counsel and Secretary 1994 205,577 84,050 63 0 0 11,998
Andrew W. Donnelly(d)... 1996 $330,000 $363,000 $ 214 0 0 $22,951
Former Executive Vice 1995 330,000 428,175 880 0 20,000 19,026
President 1994 330,000 135,300 162 0 0 18,603
- --------
(a) Consists of amounts reimbursed for the payment of taxes.
(b) Consists of Company contributions to the Company's profit sharing plan and
supplemental retirement plan.
(c) Consists of a grant of Restricted Stock and Stock Equivalents pursuant to,
and as defined in, the Stock Incentive Plan. The Restricted Stock granted
to Mr. Riordan, subject to certain exceptions, will vest and the
restrictions thereon will lapse on a pro rata basis on each of the first
five anniversaries of the date of grant. Mr. Riordan has the right to
receive cash dividends (if any) on the Restricted Stock, however, stock
dividends (if any) will be treated as additional shares under his award
and will be subject to the same restrictions and other terms and
conditions that apply to the Restricted Stock with respect to which such
dividends are issued. The Stock Equivalents granted to Mr. Riordan will
also, subject to certain exceptions, vest on a pro rata basis on each of
the first five anniversaries of the date of grant. Each such Stock
Equivalent entitles Mr. Riordan to a cash payment equal to the fair market
value of a share of Common Stock on the applicable vesting date as
promptly as practicable following such date.
(d) Mr. Donnelly's status as an executive officer terminated on October 18,
1996. For a description of his resignation agreement, see "Employment and
Related Agreements."
14
The following table presents information concerning grants of stock options
pursuant to the Stock Incentive Plan made during the 1996 fiscal year to each
of the Named Executive Officers. No stock appreciation rights were granted
under the Stock Incentive Plan during 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE GRANT DATE
NAME GRANTED(a) 1996 PRICE($/SH) EXPIRATION DATE PRESENT VALUE(b)
- ---- ------------ ------------ ----------- --------------- ----------------
Donald H. DeMeuse....... 0 -- -- -- --
Michael T. Riordan...... 125,000 16.7% $27.75 12/09/06 $1,087,500
Kathleen J. Hempel...... 50,000 6.7 27.75 12/09/06 $ 435,000
John F. Rowley.......... 25,000 3.3 27.75 12/09/06 $ 217,500
Daniel J. Platkowski.... 22,000 2.9 27.75 12/09/06 $ 191,400
James W. Nellen II...... 22,000 2.9 27.75 12/09/06 $ 191,400
Andrew W. Donnelly...... 0 -- -- -- --
- --------
(a) All grants consisted of nonqualified stock options with a term of 10 years
granted pursuant to the Stock Incentive Plan. Subject to certain
conditions, the options vest and become exercisable as to 20% of such
options on each of the first five anniversaries of the date of grant.
Exercisability of the options is accelerated in the event of a Named
Executive Officer's death, disability, termination by the Company without
"cause" (as defined for purposes of the Stock Incentive Plan) or, unless
otherwise determined by the Compensation and Nominating Committee, upon a
"change in control" (as defined below under "1995 Stock Incentive Plan").
Notwithstanding the foregoing, no option may be exercised within the first
six months following the date of grant. The Compensation and Nominating
Committee has the discretion to accelerate the exercisability of any
options granted under the Stock Incentive Plan.
(b) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the
value of the options reflected in the above table include the following:
(i) an option exercise price of $27.75, equal to the fair market value of
the underlying stock on the date of grant; (ii) an expected weighted
average option life equal to five years; (iii) an interest rate of 6.07%
that represents the interest rate on a U.S. Treasury security on the date
of grant with a maturity date corresponding to that of the expected
weighted average option life; and (iv) volatility of 19.26% calculated
using daily stock prices of the companies comprising the Household
Products/Paper and Forest Products Combined Indices in the five year
period preceding 1997. The ultimate values of the options will depend on
the future market price of the Company's stock, which cannot be forecasted
with reasonable accuracy. The actual value, if any, an optionee will
realize upon exercise of an option will depend on the excess of the market
value of the Company's Common Stock over the exercise price on the date
the option is exercised. There is no assurance that the value realized by
an optionee will be at or near the value estimated by the Black-Scholes
model or any other model applied to value the options.
15
The following table presents information concerning unexercised stock
options for the Named Executive Officers. No stock options were exercised by
the Named Executive Officers during 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
HELD AT DECEMBER 31, 1996 OPTIONS HELD AT DECEMBER 31, 1996(a)
-------------------------------- ----------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------- --------------- ------------------- -------------------
Donald H. DeMeuse....... 643,237 0 $ 7,139,299 0
Michael T. Riordan...... 193,608 205,000 2,005,140 $ 635,000
Kathleen J. Hempel...... 585,347 90,000 7,060,358 317,500
John F. Rowley.......... 121,923 41,000 1,342,947 127,000
Daniel J. Platkowski.... 127,858 34,000 1,420,362 95,250
James W. Nellen II...... 121,989 34,000 1,348,130 95,250
Andrew W. Donnelly...... 178,827 0 1,953,353 0
- --------
(a) The value of unexercised in-the-money options represents the positive
spread between the December 31, 1996 closing price of the Common Stock of
$27.6875 per share as reported on the Nasdaq National Market System and
the exercise price of unexercised options. The actual amount, if any,
realized upon exercise of options will depend upon the market price of the
Common Stock relative to the per share exercise price at the time the
option is exercised. There is no assurance that the values of unexercised
in-the-money options reflected in this table will be realized.
EMPLOYMENT AND RELATED AGREEMENTS
The Named Executive Officers (other than Messrs. DeMeuse and Donnelly) are
parties to employment agreements with the Company (the "Employment
Agreements") which were amended and restated on December 13, 1996. The
Employment Agreements contain customary employment terms, have an initial term
that expires on December 31, 1999 (December 31, 2001, in the case of Mr.
Riordan), provide for automatic one-year extensions (unless notice not to
extend is given by either party at least six months prior to the end of the
effective term), and provide for base annual salaries in an amount at least
equal to such Named Executive Officer's base salary on December 13, 1996 and
participation in certain annual incentive bonus arrangements. Prior to the
date hereof, such annual incentive bonuses have been provided for under the
MIP. In the event of the termination of the employment of a Named Executive
Officer by the Company without "cause" (other than by reason of death or
disability) or by such Named Executive Officer for "good reason" (as such
terms are defined in the Employment Agreements), the Employment Agreements
provide that such Named Executive Officer would receive his or her full base
salary for a period (in each case, the "Severance Period") of three years, in
the case of Mr. Riordan and Ms. Hempel, and one year in the case of the other
Named Executive Officers (two years if such termination follows a "change in
control" of the Company (as defined below under "1995 Stock Incentive Plan")).
In addition, during the Severance Period, such Named Executive Officer would
continue to receive bonus payments for three years, in the case of Mr. Riordan
and Ms. Hempel, and for one year in the case of the other Named Executive
Officers (two years if such termination follows a "change in control" of the
Company), the amount of which is based on the average of the bonuses paid
under the MIP for the three-year period prior to the date of termination.
During the Severance Period, such Named Executive Officer would also continue
to participate in all other compensation and benefit plans of the Company and
would be entitled to outplacement assistance. Each of the Employment
Agreements also includes noncompetition and confidentiality provisions.
The Company formerly maintained employment agreements with each of Messrs.
DeMeuse and Donnelly. Mr. DeMeuse retired as an executive officer and employee
of the Company effective March 1, 1997. In connection with his retirement, the
Company has agreed to provide Mr. DeMeuse and his spouse with medical and
dental coverage for the remainder of their respective lifetimes. The
employment agreement with Mr. Donnelly has been superseded by the Resignation
Agreement discussed below.
16
Andrew W. Donnelly, formerly an Executive Vice President of the Company,
resigned as an executive officer of the Company effective as of October 18,
1996 and as an employee of the Company effective as of December 31, 1996.
Under a letter agreement with the Company (the "Resignation Agreement"), Mr.
Donnelly will continue to receive his base salary until October 18, 1998, and
will receive a cash bonus for 1997 in lieu of participation for such year in
the MIP. Mr. Donnelly will receive an additional amount for 1997 in lieu of
any benefits that he would have received for such year under the Company's
retirement plans. The Resignation Agreement also provides for Mr. Donnelly's
continued participation in the Company's group health plan until the earlier
of October 18, 1998 or the date on which he obtains other coverage, as well as
the continuation of his group life insurance coverage until October 18, 1998.
Mr. Donnelly has agreed to serve as a consultant to the Company until December
31, 1998. The Resignation Agreement also includes noncompetition and
confidentiality restrictive covenants.
MANAGEMENT INCENTIVE PLAN
Participation in the MIP is based upon individual selection by the
Compensation and Nominating Committee from among the full-time salaried
employees who, in the judgment of the Chief Executive Officer, serve in key
executive, administrative, professional or technical capacities. Awards are
based upon the extent to which the Company's financial performance during the
year has met or exceeded certain performance goals specified by the
Compensation and Nominating Committee. The Compensation and Nominating
Committee may alternatively grant a discretionary bonus. A participant must be
employed by the Company on the last day of the year in order to receive a
bonus for such year, except in the case of death, disability or retirement
after age 55, in which case such participant would receive a pro rata bonus.
In the event of termination of a participant's employment without "cause" (as
defined in the MIP) within two years following a "change in control" (as
defined below under "1995 Stock Incentive Plan"), participants would receive a
pro rata bonus for such year equal to the maximum award amount for which such
participant was eligible.
1995 STOCK INCENTIVE PLAN
The Stock Incentive Plan provides for the granting of incentive and
nonqualified stock options, stock appreciation rights, restricted stock,
performance shares, stock equivalents and dividend equivalents (individually,
an "Award" or collectively, "Awards"). Employees who are eligible to receive
Awards are those officers or other key employees with potential to contribute
to the future success of the Company or its subsidiaries. A total of 3,359,662
shares of Common Stock may be issued pursuant to Awards under the Stock
Incentive Plan, subject to adjustment in accordance with the terms of the
Stock Incentive Plan.
The only Awards that have been granted to date under the Stock Incentive
Plan are nonqualified stock options and a grant of restricted stock and stock
equivalents to Michael T. Riordan in September 1996. In the event of a change
in control and except as the Compensation and Nominating Committee (as
constituted prior to such change in control) may expressly provide otherwise,
all stock options then outstanding will become fully exercisable, all
restrictions on the restricted stock then outstanding will lapse and will be
fully vested and all stock equivalents then outstanding will be fully vested
(except for any stock options, restricted stock or stock equivalents granted
within six months of the Change in Control). For purposes of the Stock
Incentive Plan, a "change in control" shall have occurred when (A) any person
(other than (x) the Company, any subsidiary of the Company, any employee
benefit plan of the Company or of any subsidiary of the Company, or any person
or entity organized, appointed or established by the Company or any subsidiary
of the Company for or pursuant to the terms of any such plans, (y) Morgan
Stanley Group, MSLEF II, Fort Howard Equity Investors, L.P., Fort Howard
Equity Investors II, L.P., or any of their respective affiliates or (z) any
general or limited partner of MSLEF II, Fort Howard Equity Investors, L.P. or
Fort Howard Equity Investors II, L.P.), alone or together with its affiliates
and associates (collectively, an "Acquiring Person"), shall become the
beneficial owner of 20% or more of the then outstanding shares of Common Stock
or the combined voting power of the Company's then outstanding voting
securities (except pursuant to an offer for all outstanding shares of Common
Stock at a price and upon such terms and conditions as a majority of the
Continuing Directors (as defined below) determine to
17
be in the best interests of the Company and its stockholders (other than an
Acquiring Person on whose behalf the offer is being made)), or (B) during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors and any new director (other than a
director who is a representative or nominee of an Acquiring Person) whose
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors
then still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved
(collectively, the "Continuing Directors"), no longer constitute a majority of
the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Nominating Committee are Donald Patrick
Brennan, Robert H. Niehaus and David I. Margolis. Mr. Brennan and Mr. Niehaus
are employed by MS&Co as an Advisory Director and a Managing Director,
respectively. See "Committees of the Board of Directors--The Compensation and
Nominating Committee."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than
10% of the Company's Common Stock to report their ownership and changes in
their ownership of the Company's Common Stock to the Securities and Exchange
Commission. Directors, officers and greater than 10% stockholders also are
required to furnish the Company with copies of all Section 16(a) forms they
file. Specific due dates for these reports have been established by the
Securities and Exchange Commission and the Company is required to report in
this proxy statement any failure of its directors, executive officers and
greater than 10% stockholders to file by these dates.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no other reports
were required, the Company believes that all such filing requirements were
satisfied by its officers, directors and greater than 10% stockholders, except
that one report was filed late by each of Andrew W. Donnelly, Leeway & Co. and
Morgan Stanley Group.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP was the Company's independent public accountant for
1996. Arthur Andersen LLP is expected to have a representative at the Annual
Meeting. This representative will be available to respond to appropriate
questions at that time and will have an opportunity to make a statement, if he
or she so desires. The Board of Directors has selected Arthur Andersen LLP to
audit the Company's accounts for 1997.
EXPENSES OF SOLICITATION
All expenses incurred in connection with the solicitation of proxies will be
borne by the Company. The Company has engaged ChaseMellon Shareholder
Services, L.L.C. to assist with the solicitation of proxies for an estimated
fee of $4,250, plus expenses. The Company will request brokerage houses,
custodians, fiduciaries and nominees to forward proxy materials to their
principals and will reimburse them for their reasonable expenses in doing so.
Solicitation may also be undertaken by mail, telephone and personal contact by
directors, officers and employees of the Company without additional
compensation.
ChaseMellon Shareholder Services, L.L.C., the Company's transfer agent and
registrar, will receive and tabulate proxies and will provide representatives
to act as inspectors of election at the Annual Meeting.
STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company on or before November
26, 1997, to be eligible for inclusion in the Company's proxy
18
statement and proxy relating to that meeting. Proposals should be addressed to
James W. Nellen II, Secretary, Fort Howard Corporation, 1919 South Broadway,
Green Bay, Wisconsin 54304.
Under the Company's Certificate of Incorporation and By-Laws, stockholders
desiring to nominate persons for election as directors or bring other business
before the annual meeting must deliver or mail a notice to the Secretary that
must be received at the principal executive offices of the Company not less
than 60 days nor more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however, that
in the event that the annual meeting is called for a date that is not within
30 days before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth day following the day on which such notice of the date of the annual
meeting is mailed or such public disclosure of the date of the annual meeting
is made, whichever first occurs. Stockholders' notices must contain the
specific information set forth in the Certificate of Incorporation and the By-
Laws. Stockholders will be furnished a copy of the Company's Certificate of
Incorporation and By-Laws without charge upon written request to the Secretary
of the Company.
OTHER INFORMATION
As to any other matter or proposal that may properly come before the
meeting, including voting for the election of any person as a director in
place of a nominee named herein who becomes unable to serve or for good cause
will not serve, and voting on proposals omitted from the proxy statement
pursuant to the rules of the Securities and Exchange Commission, it is
intended that proxies received will be voted in accordance with the discretion
of the proxy holders.
The Annual Report to Stockholders of the Company for the fiscal year ended
December 31, 1996, which includes financial statements, is enclosed. The
Annual Report does not form any part of the material for the solicitation of
proxies.
ANY STOCKHOLDER WHO DESIRES A COPY OF THE COMPANY'S 1996 ANNUAL REPORT ON
FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY OBTAIN A COPY
(EXCLUDING EXHIBITS) WITHOUT CHARGE BY ADDRESSING A WRITTEN REQUEST TO THE
PUBLIC AFFAIRS DEPARTMENT, FORT HOWARD CORPORATION, P.O. BOX 19130, GREEN BAY,
WISCONSIN 54307-9130.
By Order of the Board of Directors
/s/ James W. Nellen II
James W. Nellen II
Vice President and Secretary
Green Bay, Wisconsin
March 26, 1997
19
FORT HOWARD CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 1997
The undersigned hereby appoints Michael T. Riordan, Kathleen J. Hempel and
James W. Nellen II, or any of them, proxies of the undersigned, with full
power of substitution, to vote all shares of Common Stock of Fort Howard
Corporation that the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held on Tuesday, May 13, 1997, at 10:00 a.m., local time, at
the Metropolitan Club, Sears Tower, 66th Floor, 233 South Wacker Drive, Chicago.
Illinois, and at any adjournments thereof. The proxies have the authority to
vote such stock as directed on the reverse side hereof with respect to the
proposals set forth in the Proxy Statement with the same effect as though the
undersigned were present in person and voting such shares. The proxies are
further authorized in their direction to vote upon such other business as may
properly come before the Annual Meeting of Stockholders, and any adjournments
thereof. The undersigned hereby revokes all proxies heretofore given to vote at
the Annual Meeting of Stockholders and any adjournment thereof.
PLEASE INDICATE ON THE REVERSE SIDE OF THIS CARD HOW YOUR STOCK IS TO BE VOTED.
UNLESS YOU OTHERWISE INDICATE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
ALL NOMINEES FOR DIRECTOR AND "FOR" THE AMENDMENT TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 100 MILLION TO 200 MILLION SHARES IN THE
PROPOSALS SET FORTH ON THE REVERSE SIDE OF THIS CARD. YOUR SHARES CANNOT BE
VOTED UNLESS YOU SIGN THIS CARD.
(CONTINUED, AND TO BE SIGNED ON THE REVERSE SIDE)
FOLD AND DETACH HERE
QS
This proxy, when properly executed, will be voted as directed. If no direction
is given, shares of Common Stock will be voted "FOR" each of the proposals set
forth below.
The Board of Directors recommends a vote "FOR" each of the proposals
set forth below.
1. Election of Directors. The nominees are Dudley J. Godfrey, Jr., Michael T.
Riordan and Frank V. Sica.
FOR All Nominees WITHHOLD Authority To FOR except WITHHOLD authority to
Vote For All Nominees vote for the following nominees(s):
[_] [_]
-----------------------------------
2. Approval of the proposed Amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 100 million to 200 million shares.
FOR AGAINST ABSTAIN
[_] [_] [_]
Please indicate whether you will be attending the
annual meeting in person:
Will Attend Will Not Attend
[_] [_]
SIGNATURES(S)_________________________
______________________________________
DATED:___________________________, 1997
IMPORTANT: Please sign EXACTLY as
name(s) appear hereon. Joint Owners
should each sign. When signing as
executor, administrator, trustee,
guardian, attorney or corporate
officer, please give full title.
FOLD AND DETACH HERE
CONFIDENTIAL VOTING INSTRUCTIONS TO BANKERS TRUST COMPANY AS TRUSTEE OF THE
FORT HOWARD CORPORATION PROFIT SHARING RETIREMENT PLAN AND
THE HARMON ASSOC., CORP. PROFIT SHARING PLAN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FORT HOWARD
CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 1997
The undersigned, a participant in either the Fort Howard Corporation Profit
Sharing Retirement Plan or the Harmon Assoc., Corp. Profit Sharing Plan, hereby
appoints Bankers Trust Company, as Trustee, to vote, in person or by proxy, all
shares of Common Stock of Fort Howard Corporation that the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held on Tuesday,
May 13, 1997, at 10:00 a.m., local time, at the Metropolitan Club, Sears Tower,
66th Floor, 233 South Wacker Drive, Chicago, Illinois, and at any adjournments
thereof. The proxies have the authority to vote such stock as directed on the
reverse side hereof with respect to the proposals set forth in the Proxy
Statement with the same effect as though the undersigned were present in person
and voting such shares. The proxies are further authorized in their discretion
to vote upon such other business as may properly come before the Annual Meeting
of Stockholders, and any adjournments thereof. The undersigned hereby revokes
all proxies heretofore given to vote at the Annual Meeting of Stockholders and
any adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THE PARTICIPANT. IF
THE PARTICIPANT FAILS TO MARK OR SIGN AND RETURN THIS VOTING INSTRUCTION, THE
TRUSTEES WILL VOTE SUCH SHARES IN THE SAME PROPORTION AS THEY VOTE THE SHARES
HELD FOR OTHER PARTICIPANTS FOR WHICH THE TRUSTEES RECEIVE INSTRUCTIONS.
(CONTINUED, AND TO BE SIGNED ON THE REVERSE SIDE)
1. Election of Directors PLEASE MARK YOUR CHOICE LIKE THIS [X] IN
DARK INK AND SIGN AND DATE BELOW
[_] VOTE FOR ALL [_] WITHHOLD FROM
VOTING FOR ALL
[_] FOR, EXCEPT withhold authority
to vote for the following
nominees:
[_] Dudley J. Godfrey, Jr.
[_] Michael T. Riordan
[_] Frank V. Sica
2. Approval of the proposed Amendment FOR AGAINST ABSTAIN
to the Company's Certificate of
Incorporation to increase the number [_] [_] [_]
of authorized shares of Common Stock
from 100 million to 200 million
shares.
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SIGNATURE DATE