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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12.
PACTIV CORPORATION
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(Name of Registrant as Specified in Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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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.
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[ ] 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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000 [PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
April 2, 2001
To the Shareholders of Pactiv Corporation:
The Annual Meeting of Shareholders of Pactiv Corporation will be held
Thursday, May 17, 2001, at 10:30 a.m. at the Sheraton North Shore Hotel, 933
Skokie Blvd., Northbrook, Illinois 60062. A notice of the meeting, a proxy card,
a proxy statement containing information about the matters to be acted upon at
the meeting, and a copy of the Company's Annual Report are enclosed.
Holders of common stock are entitled to vote at the Annual Meeting on the
basis of one vote for each share held.
A record of the Company's activities for the year 2000 is contained in the
Annual Report to Shareholders accompanying these materials. I urge each
shareholder who cannot attend the Annual Meeting to please assist us in
preparing for the meeting by either completing, executing, and returning your
proxy card promptly or using our telephone or internet voting procedures.
Very truly yours,
/s/ Richard L. Wambold
RICHARD L. WAMBOLD
Chairman and Chief
Executive Officer
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PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000 [PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 2001
The Annual Meeting of Shareholders of Pactiv Corporation will be held at
the Sheraton North Shore Hotel, 933 Skokie Blvd., Northbrook, Illinois 60062,
Thursday, May 17, 2001, at 10:30 a.m., local time.
The purposes of the meeting are:
1. To elect directors for a term to expire at the 2002 Annual Meeting of
Shareholders;
2. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the year 2001; and
3. To act upon such other matters as may be properly brought before the
meeting or any adjournment or postponement thereof.
The Board of Directors knows of no other matters at this time that may be
brought before the meeting. Holders of common stock of record at the close of
business on March 21, 2001, are entitled to vote at the meeting. A list of these
shareholders will be available for inspection for 10 days preceding the meeting
at the corporate headquarters of the Company, 1900 West Field Court, Lake
Forest, Illinois, 60045, and at the Sheraton North Shore Hotel, and will also be
available for inspection at the Annual Meeting of Shareholders.
Each shareholder who does not expect to attend the meeting is urged to
either complete, date, and sign the enclosed proxy card and return it to the
Company in the enclosed envelope, which requires no postage if mailed in the
United States, or use our telephone or internet voting procedures.
By Order of the Board of Directors
KARL A. STEWART
Secretary
April 2, 2001
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PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000 [PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
April 2, 2001
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation on
behalf of the Board of Directors of Pactiv Corporation, a Delaware corporation
(the "Company"), of proxies to be voted at the Company's Annual Meeting of
Shareholders on May 17, 2001, or any adjournment or postponement thereof, for
the purposes set forth in the accompanying notice of the meeting. Holders of
common stock of record at the close of business on March 21, 2001, will be
entitled to vote at the Annual Meeting. Each share is entitled to one vote.
Shares represented by proxies will be voted at the Annual Meeting. At March 21,
2001, there were 161,707,842 shares of common stock outstanding and entitled to
vote (of which 158,507,842 are shares outstanding for financial reporting
purposes and 3,200,000 are shares not considered outstanding for financial
reporting purposes because they are held in a grantor trust to ensure payments
under the Company's Supplemental Executive Retirement Plan and Deferred
Compensation Plan). This proxy statement, the accompanying notice of Annual
Meeting of Shareholders, and the proxy card are first being mailed or delivered
to shareholders on or about April 2, 2001.
The Company was formerly known as Tenneco Packaging Inc., and was a
wholly-owned subsidiary of Tenneco Inc. that was spun-off to the shareholders of
Tenneco Inc. on November 4, 1999. Unless the context otherwise requires,
references to or information regarding the "Company," for periods prior to the
spin-off, refer to the packaging businesses of Tenneco Inc., and for periods
after the spin-off refer to Pactiv Corporation.
ELECTION OF DIRECTORS
(ITEM 1)
The following nominees, each of whom currently serves as a director of the
Company, are proposed to be elected at this Annual Meeting to serve for an
annual term that will expire at the 2002 Annual Meeting of Shareholders and
until their successors are elected and qualified. Mr. Mark Andrews is not
standing for re-election since he has reached the mandatory retirement age
provided in the Company's By-Laws. The Company thanks Mr. Andrews for his 14
years of advice and service to the Company and its predecessors.
The persons named as proxy voters in the accompanying proxy, or their
substitutes, will vote for these nominees for directors, each of whom has been
designated as such by the Board of Directors. If, for any reason not presently
known, any of the nominees is not available for election, another person or
other persons who may be nominated by the Board of Directors will be voted for
at the discretion of the proxy voters. Provided a quorum is present in person or
by proxy, directors are elected by a vote of a plurality of the shares voted.
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YOU MAY VOTE FOR OR WITHHOLD YOUR VOTE FROM THE DIRECTOR NOMINEES. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE NOMINEES LISTED
BELOW.
Brief statements setting forth the age (at April 1, 2001), the principal
occupation, employment during the past five years, the year in which first
elected a director, and other information concerning each nominee appears below.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR TERM EXPIRING AT THE 2002 ANNUAL MEETING OF
SHAREHOLDERS
Larry D. Brady became Chief Executive Officer in September
[LARRY BRADY PHOTO] 2000, and since 1999 has been President and Chief Operating
Officer, and a director, of UNOVA, Inc., an industrial
technologies company. From 1993 to June 1999, Mr. Brady was
President of FMC Corporation, a producer of chemicals and
machinery for industry, agriculture, and government. Before
1993, Mr. Brady served in various executive capacities with
FMC Corporation for more than five years. Mr. Brady is 58
years old and has been a director of the Company since
November 1999. He is Chairman of the
Compensation/Nominating/ Governance Committee and a member
of the Three-year Independent Director Evaluation Committee.
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Robert J. Darnall is Chairman and Chief Executive Officer of
[ROBERT DARNALL PHOTO] Prime Advantage Corporation. He retired as President and
Chief Executive Officer of Ispat North America, Inc. in
January 2000, a position he had held since November 1998,
shortly after Ispat North America, Inc. had acquired Inland
Steel Company. Prior to such acquisition, Mr. Darnall held
various positions at Inland Steel Company over a 36-year
career, including serving as Chairman President and Chief
Executive Officer of Inland Steel Industries, Inc., from
1992 to 1998. He also currently serves as a director of
Household International, Inc., Cummins, Inc., Sunoco, Inc.
and the Federal Reserve Bank of Chicago. Mr. Darnall is 63
years old, has been a director since March 2000, and is a
member of the Compensation/Nominating/Governance Committee.
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[MARY HENDERSON PHOTO] Mary R. (Nina) Henderson, currently a director of the public
corporations listed below, was Corporate Vice President,
Global Core Business Development for Bestfoods, Inc. from
1999 until December 2000 following Unilever N.V.'s
acquisition of Bestfoods, Inc. She previously served as
President of Bestfoods Grocery from 1997 to 1999, and
President of Bestfoods Specialty Markets from 1993 to 1997.
Prior to that she held a number of general management,
international and marketing posts since joining Bestfoods'
predecessor, CPC International, in 1972. She currently
serves as a director of AXA Financial, Inc. (formerly, The
Equitable Companies Inc.), the Equitable Life Assurance
Society of the United States, and Hunt Corporation. Ms.
Henderson is 50 years old, has been a director of the
Company since January 2000 and is a member of the Audit
Committee.
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Roger B. Porter is the IBM Professor of Business and
[ROGER PORTER PHOTO] Government at Harvard University. Mr. Porter has served on
the faculty at Harvard University since 1977. Mr. Porter
also held senior economic policy positions in the Ford,
Reagan and Bush White Houses, serving as special assistant
to the President and executive secretary of the Economic
Policy Board from 1974 to 1977, as deputy assistant to the
President and director of the White House Office of Policy
Development from 1981 to 1985, and as assistant to the
President for economic and domestic policy from 1989 to
1993. He also currently serves as a director of RightCHOICE
Managed Care, Inc., National Life Insurance Company, Tenneco
Automotive Inc. and Zions Bancorporation. Mr. Porter is 54
years old and has been a director of the Company since
November 1999 and is Chairman of the Audit Committee and a
member of the Three-year Independent Director Evaluation
Committee.
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Paul T. Stecko is the Chief Executive Officer of Packaging
[PAUL STECKO PHOTO] Corporation of America, the corporation formed to acquire
the Company's containerboard business in April 1999. From
November 1998 to April 1999, Mr. Stecko served as President
and Chief Operating Officer of Tenneco Inc. From January
1997 to November 1998, Mr. Stecko served as Chief Operating
Officer of Tenneco Inc. From December 1993 through January
1997, Mr. Stecko served as Chief Executive Officer of the
Company. He also currently serves as a director of State
Farm Mutual Insurance Company, Tenneco Automotive Inc., and
the Chairman of the Board of Packaging Corporation of
America. Mr. Stecko is 56 years old and has been a director
of the Company since November 1999. He is a member of the
Audit Committee and the Compensation/Nominating/Governance
Committee, and is Chairman of the Three-year Independent
Director Evaluation Committee.
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Richard L. Wambold became the Chief Executive Officer of the
[RICHARD WAMBOLD PHOTO] Company upon the spin-off in November 1999, and has been
serving as its President since June 1999. He was appointed
to the additional position of Chairman in March 2000. From
June 1997 to May 1999, he served as Executive Vice President
and General Manager of the Company's specialty packaging and
consumer products units, and prior to June 1997, he served
as Vice President and General Manager of such units. Mr.
Wambold is 49 years old and has been a director of the
Company since June 1999.
THE BOARD OF DIRECTORS
Following Mr. Andrews' retirement, the Board of Directors of the Company
will consist of six members, five of whom are not officers of the Company (the
"Outside Directors") and one of whom is an officer of the Company (the "Inside
Director"). The Board of Directors believes that the Company's ratio of Outside
Directors to Inside Directors represents a commitment to the independence of the
Board of Directors, and a focus on matters of importance to its shareholders.
The three standing Committees of the Board of Directors are each comprised
solely of Outside Directors. In addition, on an ad hoc basis, the Board may
designate from time to time an Outside Director as the "lead" director with
respect to special matters or discussions affecting the Company.
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The Board of Directors held nine meetings in 2000. Each director attended
more than 75% of the aggregate of all meetings of the Board of Directors and all
meetings of the committees of the Board on which the director served.
The three standing committees of the Board of Directors have the following
described responsibilities and authority.
COMPENSATION/NOMINATING/GOVERNANCE COMMITTEE
The Compensation/Nominating/Governance Committee has significant corporate
governance and compensation responsibilities, among other things, to: (i)
establish the salary rate of officers and employees of the Company and its
subsidiaries; (ii) examine periodically the compensation structure of the
Company; (iii) supervise the welfare and pension plans and compensation plans of
the Company; (iv) review and determine the desirable balance of experience,
qualifications and expertise among members of the Board of Directors; (v) review
possible candidates for membership on the Board of Directors and recommend a
slate of nominees for election as directors at the Company's Annual Meeting of
Shareholders; (vi) review the function and composition of the other committees
of the Board of Directors and recommend membership on such committees; and (vii)
review the qualifications and recommend candidates for election as officers of
the Company. Six meetings of the Compensation/ Nominating/Governance Committee
were held in 2000.
A shareholder of the Company may nominate persons for election to the Board
of the Company by submitting such nomination, together with certain related
information required by the Company's By-Laws, in writing to the Secretary of
the Company at the Company's principal executive offices not less than 90 days
nor more than 120 days prior to the first anniversary of the preceding year's
Annual Meeting of Shareholders; provided, that if the date of the Annual Meeting
of Shareholders is more than 30 days before or more than 70 days after the date
of the first anniversary of the preceding year's Annual Meeting of Shareholders,
notice of the matter must be received not earlier than the close of business on
the 120th day prior to such Annual Meeting of Shareholders and not later than
the close of business on the later of the 90th day prior to such Annual Meeting
of Shareholders or the 10th day following the date of public disclosure of the
meeting date.
THREE-YEAR INDEPENDENT DIRECTOR EVALUATION COMMITTEE
The Three-year Independent Director Evaluation Committee has the
responsibility, among other things, to review the Company's Qualified Offer
Rights Plan (adopted in November 1999) at least every three years and, if it
deems it appropriate, recommend that the full Board modify or terminate such
Plan. No meetings of the Three-year Independent Director Evaluation Committee
were held in 2000.
AUDIT COMMITTEE
The Audit Committee has the responsibility, among other things, to: (i)
recommend the selection of the Company's independent public accountants; (ii)
review and approve the scope of the independent public accountants' audit
activity and extent of non-audit services; (iii) review with management and the
independent public accountants the adequacy of the Company's basic accounting
system and the effectiveness of the Company's internal audit plan and
activities; (iv) review with management and the independent public accountants
the Company's certified financial statements and exercise general oversight of
the Company's financial reporting process; and (v) review with the Company
litigation and other legal matters that may affect the Company's financial
condition and monitor compliance with the Company's business ethics and other
policies. Four meetings of the Audit Committee were held in 2000. The Audit
Committee's report is set forth below.
The Audit Committee operates under a written charter adopted by the Board,
a copy of which is attached as Appendix A to this proxy statement. The Audit
Committee is comprised solely of Outside Directors, each of whom meets the
independence standards established by the New York Stock Exchange, except for
Mr. Stecko, who is not deemed independent under such standards because within
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the last three years he was an executive officer of the Company and its former
parent, Tenneco Inc. The Board of Directors has determined that, notwithstanding
such fact, Mr. Stecko's participation in the Audit Committee is in the best
interests of the Company because of his depth of knowledge of the Company's
industry and business, and his overall financial acumen.
AUDIT COMMITTEE REPORT
In performing its duties, the Audit Committee reviewed and discussed the
audited financial statements contained in the 2000 Annual Report on Form 10-K
with the Company's management. The Audit Committee also met privately with the
Company's independent auditor, Arthur Andersen LLP, and discussed issues deemed
significant by Arthur Andersen LLP, including those matters required to be
discussed by Statements on Auditing Standard No. 61 (Codification of Statements
on Auditing Standards, AU sec. 380), as amended. In addition, the Audit
Committee discussed with Arthur Andersen LLP its independence from the Company
and its management, and has received the written disclosures and the letter from
Arthur Andersen LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees).
In reliance on the reviews and discussions outlined above, the Audit
Committee has recommended to the Board that the Company include the audited
financial statements in its Annual Report on Form 10-K for the year ended
December 31, 2000.
Respectfully submitted by the members of the Audit Committee of the Board:
Roger B. Porter, Committee Chairman
Mark Andrews
Mary R. Henderson
Paul T. Stecko
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STOCK OWNERSHIP
MANAGEMENT
The following table sets forth, at February 28, 2001, the number of shares
of common stock and Common Stock Equivalents of the Company beneficially owned
by: (i) each director or nominee for director; (ii) each of the executive
officers whose names are set forth on the Summary Compensation Table below; and
(iii) all executive officers, directors, and nominees for director as a group.
SHARES
OF COMMON COMMON STOCK
STOCK OWNED EQUIVALENTS TOTAL SHARES AND
DIRECTORS (1)(2) (3) EQUIVALENTS
--------- ----------- ------------ ----------------
Larry D. Brady.................................... 9,423 7,513 16,936
Robert J. Darnall................................. 8,000 5,492 13,492
Mary R. (Nina) Henderson.......................... 3,000 5,305 8,305
Roger B. Porter................................... 8,279 7,513 15,792
Paul T. Stecko.................................... 28,623 5,527 34,150
Richard L. Wambold................................ 268,616 64,994 333,610
EXECUTIVE OFFICERS
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Andrew A. Campbell................................ 129,729 29,500 159,229
James V. Faulkner, Jr............................. 56,749 32,306 89,055
Peter J. Lazaredes................................ 71,794 9,400 81,194
James D. Morris................................... 70,425 64,739 135,164
All executive officers and directors or nominees
as a group(4)(5)................................ 654,638 232,289 886,927
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(1) Each director or nominee and executive officer has sole voting and
investment power over the shares beneficially owned (or has the right to
acquire shares as set forth in note (2) below) as set forth in this column,
except for (i) restricted shares that are held for each executive officer
under the Company's Stock Ownership Plan, and (ii) shares that such persons
have the right to acquire pursuant to the Company's Stock Ownership Plan.
(2) Includes (i) 30,238 restricted shares held by Mr. Wambold under the
Company's Stock Ownership Plan, and (ii) shares that are subject to options
which are exercisable at February 28, 2001, or within 60 days of said date,
as follows: Mr. Brady (5,266); Mr. Darnall (3,000); Ms. Henderson (3,000);
Mr. Porter (4,132); Mr. Stecko (3,000); Mr. Wambold (121,626); Mr. Faulkner
(42,300); Mr. Lazaredes (16,881); and Mr. Morris (47,187).
(3) Common Stock Equivalents are rights to shares of common stock that are
distributed in shares of common stock of the Company or cash payments in an
amount based on the performance of the Company's common stock over the
applicable period. Common Stock Equivalents include (i) the portion of a
director's retainer that is paid in the form of stock-settled Common Stock
Equivalents, and (ii) compensation held under the Company's Deferred
Compensation Plan which the director or officer directs be used to purchase
Common Stock Equivalents under such plan. The shares or cash amounts are
distributed after a director ceases to serve as a director of the Company,
upon the termination of an officer's employment with the Company, or on the
distribution date elected under the Deferred Compensation Plan.
(4) Less than one percent of the outstanding shares of the Company's common
stock.
(5) Includes 246,392 shares that are subject to options exercisable within 60
days of February 28, 2001, by all executive officers and directors of the
Company as a group, and 30,238 restricted shares that are held under the
Company's Stock Ownership Plan, for all executive officers and directors and
nominees as a group.
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CERTAIN SHAREHOLDERS
The following table sets forth, as of February 28, 2001, the name, address,
and common stock ownership for each person known by the Company to be the
beneficial owner of more than five percent of the Company's outstanding common
stock (the only class of voting securities of the Company outstanding).
NAME AND ADDRESS SHARES OF COMMON PERCENT OF COMMON
OF BENEFICIAL OWNERS(1) STOCK OWNED STOCK OWNED(1)
----------------------- ---------------- -----------------
Highfields Capital Management L.P. ..................... 14,869,600 9.4%
Highfields GP LLC
Jonathon S. Jacobson
Richard L. Grubman
c/o Highfields Capital Management
200 Clarendon Street
Boston, Massachusetts 02117
Highfields Capital Ltd.(2).............................. 11,540,499 7.3%
c/o Goldman Sachs (Cayman) Trust, Limited
Harbour Centre, North Church Street
P.O. Box 896
George Town, Grand Cayman
Cayman Islands
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(1) The foregoing information is based on information contained in filings made
with the Securities and Exchange Commission. Except where otherwise
indicated, the identified beneficial owner has indicated that it has sole
voting and sole dispositive power over the identified shares.
(2) The beneficial owners have filed with respect to common stock of the Company
directly owned by Highfields Capital I LP, Highfields Capital II LP and
Highfields Capital Ltd., which together directly own all of the listed
shares. Each beneficial owner individually has the power to direct the
dividends from or the proceeds of the sale of the shares owned by the direct
owners. Messrs. Jacobson and Grubman are each a Managing Member of
Highfields GP LLC, which is the General Partner of Highfields Management LP.
Highfields Management LP is the investment manager for each of the direct
owners. Neither Highfields Capital I LP nor Highfields Capital II LP
reported separate ownership of more than 5% of the Company's outstanding
common stock. Highfields Capital Ltd. by itself reported ownership over
11,540,499 shares of the Company's common stock, constituting 7.3% of the
Company's common stock outstanding, which are included in the 14,869,000
shares reflected above.
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EXECUTIVE COMPENSATION
The following table sets forth the remuneration paid by the Company: (i) to
the Chief Executive Officer; and (ii) to each of the four most highly
compensated key executive officers of the Company, other than the Chief
Executive Officer.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- ------------------------------------
AWARDS PAYOUTS
----------------------- ----------
OTHER LONG-TERM
ANNUAL RESTRICTED INCENTIVE ALL OTHER
COMPEN- STOCK PLAN COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS SATION(2) AWARDS(3) OPTIONS(4) PAYOUTS(5) SATION(6)
- --------------------------- ---- --------- ----- --------- ---------- ---------- ---------- ---------
Richard L. Wambold........... 2000 $637,500 $725,000 $ 40,000 -- 250,000 -- $116,625
Chairman, President and 1999 $452,501 $350,000 $ 65,450 $397,025 700,000 $295,405 $ 11,386
Chief Executive Officer 1998 $355,472 $220,000 $152,685 $187,800 45,000 -- $ 11,643
Andrew A. Campbell (7)....... 2000 $325,008 $295,000 $ 30,000 -- 100,000 -- $ 61,260
Senior Vice President and 1999 $ 81,252 $100,000 $ 30,000 -- 300,000 -- --
Chief Financial Officer 1998 -- -- -- -- -- -- --
James V. Faulkner, Jr........ 2000 $291,900 $205,000 $ 30,000 -- 75,000 -- $ 60,804
Vice President and 1999 $291,016 $200,000 $ 26,570 -- 200,000 $105,193 $ 18,120
General Counsel 1998 $266,568 $ 82,000 $ 25,760 -- 10,000 -- $ 17,674
Peter J. Lazaredes........... 2000 $309,901 $235,000 $ 30,000 -- 85,000 -- $ 32,806
Senior Vice President and 1999 $232,164 $126,000 $ 23,015 -- 200,000 $ 36,025 $ 12,364
General Manager, 1998 $182,773 $ 73,000 $ 30,730 $177,800 20,000 -- $ 12,704
Foodservice, Supermarket
and Institutional Packaging
James D. Morris.............. 2000 $309,901 $205,000 $ 30,000 -- 85,000 -- $ 54,719
Senior Vice President and 1999 $237,426 $126,000 $ 25,400 -- 200,000 $129,690 $ 13,594
General Manager, Protective 1998 $206,004 $115,000 $ 29,405 $187,800 20,000 -- $ 14,139
and Flexible Packaging
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(1) Includes base salary plus amounts paid in lieu of matching contributions to
the Thrift Plan.
(2) Includes amounts attributable to: (i) the value of personal benefits
provided by the Company to its executive officers, which have an aggregate
value in excess of the lesser of $50,000 and 10% of the executive's salary
and bonus for the year, such as the personal use of Company-owned property,
membership dues, assistance provided to such persons with regard to
financial, tax and estate planning, and relocation expenses; (ii)
reimbursement for taxes; and (iii) amounts paid as dividend equivalents on
performance share equivalent units on Tenneco Inc. common stock ("Dividend
Equivalents"). Dividend Equivalents were earned at the same rate as
dividends on Tenneco Inc. common stock. The Company does not pay Dividend
Equivalents with respect to its Common Stock Equivalents. The amount of each
such personal benefit that exceeds 25% of the estimated value of the total
personal benefits provided by the Company, reimbursement for taxes, and
amounts paid as Dividend Equivalents to the listed individuals was as
follows: During 2000: perquisite allowances of $40,000 for Mr. Wambold and
$30,000 for each of Messrs. Campbell, Faulkner, Lazaredes, and Morris.
During 1999: $47,000 perquisite allowance and $18,450 in Dividend
Equivalents for Mr. Wambold; $30,000 perquisite allowance for Mr. Campbell;
$20,000 perquisite allowance and $6,570 in Dividend Equivalents for Mr.
Faulkner; $20,000 perquisite allowance and $5,400 in Dividend Equivalents
for Mr. Morris; $12,000 perquisite allowance and $2,250 in Dividend
Equivalents for Mr. Lazaredes. During 1998: $58,908 for relocation expenses,
$47,171 for reimbursement of taxes, $15,600 Dividend Equivalents and $30,000
perquisite allowance for Mr. Wambold; $5,760 in Dividend Equivalents and
$20,000 perquisite allowance for Mr. Faulkner; $6,600 Dividend Equivalents
and $20,000 perquisite allowance for Mr. Morris; and $17,530 in relocation
expenses, $1,200 in Dividend Equivalents and $12,000 perquisite allowance
for Mr. Lazaredes.
(Notes continued on following page)
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(3) Includes the dollar value of grants of restricted stock made pursuant to the
Company's Stock Ownership Plan based on the price of the Company's common
stock on the date of grant. At December 31, 2000, only Mr. Wambold held
restricted shares under such plan. The values of the restricted shares shown
on the Summary Compensation Table are calculated by multiplying the closing
market price of the Company's unrestricted common stock on the date of the
grant by the number of shares awarded. Restricted shares issued in 1998 or
earlier all vested in connection with the spin-off.
(4) For 1999, the number of options does not include options previously granted
by Tenneco Inc. (the former parent of the Company) to the named individuals.
Such options were replaced at the spin-off by options to purchase shares of
the Company's common stock.
(5) For 1999, the amounts attributed to long-term incentive plan payouts
represent the value of Common Stock Equivalents for Tenneco Inc. that were
vested and distributed as shares of Tenneco Inc. common stock on October 28,
1999, pursuant to the spin-off. The value stated is the average of the high
and low trading prices of a share of Tenneco Inc. common stock on October
28, 1999, the date the performance restrictions were removed. Messrs.
Wambold, Faulkner, Lazaredes and Morris received 20,500, 7,300, 2,500, and
9,000 shares of Tenneco Inc. common stock, respectively (of such amount,
certain shares were retained in satisfaction of tax obligations and the
remainder of such shares were issued to the named individual).
(6) Includes amounts attributable during 2000 to benefit plans of the Company as
follows:
(a) The Company contributed $10,500 to the accounts of each of Messrs.
Wambold, Faulkner, Lazaredes and Morris pursuant to the Thrift Plan.
(b) The dollar values paid by the Company for insurance premiums under the
Company's group life insurance plan for Messrs. Wambold, Campbell,
Faulkner, Lazaredes and Morris, were $1,125, $2,260, $9,304, $3,506 and
$3,219, respectively.
(c) Under the Pactiv Corporation Deferred Compensation Plan, participants
who elect to invest in the Pactiv Common Stock Index Account receive a
premium of one additional Common Stock Equivalent for each five Common
Stock Equivalents purchased. The value of such additional Common Stock
Equivalents for Messrs. Wambold, Campbell, Faulkner, Lazaredes, and
Morris were $105,000, $59,000, $41,000, $18,800 and $41,000,
respectively.
(7) Mr. Campbell joined the Company in October 1999.
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OPTIONS GRANTED IN 2000
The following table shows the number of options to purchase common stock
that were granted by the Company during 2000 to the persons named in the Summary
Compensation Table above.
PERCENT OF
SHARES OF TOTAL OPTIONS
COMMON STOCK GRANTED TO GRANT DATE
UNDERLYING OPTIONS EMPLOYEES EXERCISE EXPIRATION PRESENT
GRANTED(#) IN 2000(%) PRICE($)(1) DATE VALUE(2)
------------------ ------------- ----------- ---------- ----------
Mr. Wambold................ 250,000 8.9 11.72 10/11/10 $1,235,000
Mr. Campbell............... 100,000 3.6 11.72 10/11/10 $ 494,000
Mr. Faulkner............... 75,000 2.7 11.72 10/11/10 $ 370,500
Mr. Morris................. 85,000 3.0 11.72 10/11/10 $ 419,900
Mr. Lazaredes.............. 85,000 3.0 11.72 10/11/10 $ 419,900
- ------------
(1) All options were granted with exercise prices equal to 100% of the fair
market value of a share of Company common stock on the date of grant.
(2) Reflects Black-Scholes valuation that was performed using the following
assumptions: 36.77% volatility, 5.82% risk free interest rate, 0% expected
dividend rate and 5 year option life.
OPTIONS AT YEAR-END 2000 VALUES
The following table sets forth the number of stock options held at December
31, 2000 by the persons named in the Summary Compensation Table. No options to
acquire shares of the Company's common stock were exercised during 2000.
TOTAL NO. OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS AT
DECEMBER 31, 2000 DECEMBER 31, 2000
------------------------------ ---------------------------------
EXERCISABLE NON-EXERCISABLE EXERCISABLE/NON-EXERCISABLE
----------- --------------- ---------------------------
Richard L. Wambold................. 121,626 983,374 0/$235,000
Andrew A. Campbell................. 0 400,000 0/$ 94,000
James V. Faulkner, Jr. ............ 42,300 284,288 0/$ 70,500
Peter J. Lazaredes................. 16,881 296,327 0/$ 79,900
James D. Morris.................... 47,187 300,101 0/$ 79,900
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PENSION PLAN TABLE
The following table sets forth the aggregate estimated annual benefits
payable upon normal retirement pursuant to the Company's Retirement Plan and
Supplemental Executive Retirement Plan to persons in specified remuneration and
years-of-credited-participation classifications.
YEARS OF CREDITED PARTICIPATION
ANNUAL ---------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30
- ------------ -------- -- -- -- -- --
$ 500,000 $ 39,285 $ 78,571 $117,857 $157,142 $196,428 $235,714
$ 550,000 $ 43,214 $ 86,428 $129,642 $172,857 $216,071 $259,285
$ 600,000 $ 47,142 $ 94,285 $141,428 $188,571 $235,714 $282,857
$ 650,000 $ 51,071 $102,142 $153,214 $204,285 $255,357 $306,428
$ 700,000 $ 55,000 $110,000 $165,000 $220,000 $275,000 $330,000
$ 750,000 $ 58,928 $117,857 $176,785 $235,714 $294,642 $353,571
$ 800,000 $ 62,857 $125,714 $188,571 $251,428 $314,285 $377,142
$ 850,000 $ 66,785 $133,571 $200,357 $267,142 $333,928 $400,714
$ 900,000 $ 70,714 $141,428 $212,142 $282,857 $353,571 $424,285
$ 950,000 $ 74,642 $149,285 $223,928 $298,571 $373,214 $447,857
$1,000,000 $ 78,571 $157,142 $235,714 $314,285 $392,857 $471,428
$1,050,000 $ 82,500 $165,000 $247,500 $330,000 $412,500 $495,000
$1,100,000 $ 86,428 $172,857 $259,285 $345,714 $432,142 $518,571
$1,150,000 $ 90,357 $180,714 $271,071 $361,428 $451,785 $542,142
$1,200,000 $ 94,285 $188,571 $282,857 $377,142 $471,428 $565,714
$1,250,000 $ 98,214 $196,428 $294,642 $392,857 $491,071 $589,285
$1,300,000 $102,142 $204,285 $306,428 $408,571 $510,714 $612,857
$1,350,000 $106,071 $212,142 $318,214 $424,285 $530,357 $636,428
$1,400,000 $110,000 $220,000 $330,000 $440,000 $550,000 $660,000
$1,450,000 $113,928 $227,857 $341,785 $455,714 $569,642 $683,571
$1,500,000 $117,857 $235,714 $353,571 $471,428 $589,285 $707,142
$1,550,000 $121,785 $243,571 $365,357 $487,142 $608,928 $730,714
$1,600,000 $125,714 $251,428 $377,142 $502,857 $628,571 $754,285
$1,650,000 $129,642 $259,285 $388,928 $518,571 $648,214 $777,857
- ------------
Notes:
1. The benefits shown above are computed as a straight-life annuity and are
based on years of credited participation and the employee's average
compensation (salary and bonus). The benefits are not subject to any
deduction for Social Security or other offset amounts. The years of credited
participation for Messrs. Wambold, Campbell, Faulkner, Lazaredes and Morris
are 22, 1, 6, 19 and 25, respectively. See the Summary Compensation Table
above for salary and bonus information for these individuals.
2. If Mr. Wambold completes five years of service in the period commencing
January 1, 1997, he will be entitled to benefits commencing at age 55
determined by multiplying his average salary plus bonus, determined over a
three-year period, by 25% plus 2.5% for each year service in the period
commencing January 1, 1997 up to a maximum of 50%. Mr. Faulkner is entitled
to special early retirement benefits and, if he remains with the Company
through December 31, 2002, his benefit will be determined by adding three
years of participation and age to his actual participation and age.
COMPENSATION OF DIRECTORS
FEE STRUCTURE. Each Outside Director is paid a retainer fee of $35,000 per
year (except that the payment in 2000 also covered the stub period of 1999
following the spin-off in November) for service on the Board of Directors, of
which a minimum of 60% ($21,000) is paid in the form of stock-settled Common
Stock Equivalents, as described below, and a maximum of 40% ($14,000) is paid in
cash or credited to a deferred account as described below. Outside Directors
receive $1,000 for each meeting of the Board of Directors attended, and each
Outside Director who serves as a Chairman of the Audit or
Compensation/Nominating/Governance Committees is paid a fee of $7,000 per
chairmanship. Outside
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Directors who serve as members of such committees are paid $4,000 per committee
membership. Members of the Three-year Independent Director Evaluation Committee
receive $1,000 for each meeting of that committee attended. Outside Directors
also receive reimbursement of their expenses for attending meetings of the Board
of Directors and Committee meetings.
COMMON STOCK EQUIVALENTS/OPTIONS. For the period following the spin-off in
November 1999 and 2000, in payment of 60% of the retainer fee, Outside Directors
received in total approximately 2,000 Common Stock Equivalents. Common Stock
Equivalents are payable in shares of the Company's common stock after an Outside
Director ceases to serve as a director of the Company. Final distribution of
such shares may be made either in a lump sum or in installments over a period of
years. The Common Stock Equivalents are issued at 100% of the fair market value
on the date of the grant. Each Outside Director also receives an annual grant of
options to purchase 3,000 shares of the Company's common stock as additional
incentive compensation for service on the Board of Directors. These options are
granted at 100% of fair market value on the day the option is granted with a
term of ten years and fully vest six months from the grant date. Once vested,
these options are exercisable at any time during the option term.
DIRECTORS' DEFERRED COMPENSATION PLAN. Outside Directors may also
participate in the Company's deferred compensation plan. Pursuant to the plan,
an Outside Director may elect, prior to the commencement of the next calendar
year, to have up to 40% ($14,000) of his or her retainer fee and all or a
portion of his or her meeting fees credited to a deferred compensation account,
which may include the purchase of Common Stock Equivalents. Payment of deferred
fees, together with interest and/or earnings, may be deferred until the earlier
of: (i) the year next following the date upon which he or she ceases to be a
director of the Company; or (ii) the year selected by the director for
commencement of payment of the deferred amount.
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The report of the Compensation/Nominating/Governance Committee and the
performance graph that appear immediately below are not deemed to be soliciting
material or deemed to be filed with the Securities and Exchange Commission under
the Securities Act of 1933 or the Securities Exchange Act of 1934 or
incorporated by reference in any document so filed.
PACTIV CORPORATION
COMPENSATION/NOMINATING/GOVERNANCE COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The executive compensation philosophy, policies, plans, and programs of the
Company are under the supervision of the Compensation/Nominating/Governance
Committee (the "Committee"), which is composed of the directors named below,
none of whom is an officer or employee of the Company. The Committee has
furnished the following report on executive compensation.
COMPENSATION PHILOSOPHY
The basic philosophy underlying the Company's executive compensation
policies, plans and programs is that executive and shareholder financial
interests should be aligned as closely as possible, and the compensation package
should be based on delivering pay in line with performance.
Accordingly, the executive compensation program for the Company's Chief
Executive Officer ("CEO") and the other executives named in this Proxy Statement
("Named Executives"), as well as other executives of the Company, has been
structured to:
- Align the interests of the Company's executives and shareholders by
accelerating the acquisition and retention of Company shares by senior
executives.
- Reinforce a results-oriented management culture with executive pay that
varies according to overall Company and individual performance against
aggressive business goals and core behavioral standards.
- Provide an executive compensation package that attracts, retains, and
motivates key executives.
- Place greater emphasis and leverage on variable performance-based "at
risk" (versus fixed) compensation as executives assume increased
responsibility.
Based on these objectives, the executive compensation program has been
designed to provide compensation opportunities from base salaries, annual cash
incentive awards, stock ownership opportunities, and other benefits typically
offered to executives by major corporations that are similar in scope or
directly compete with Pactiv in the marketplace. The Company's policy is to
provide total compensation to its executives based on performance that is
competitive and at market levels, for comparable companies, when financial and
qualitative targets are met. In determining competitive compensation for each of
the components of executive compensation described below, the Company analyzes
data from several independent compensation surveys. The competitive market data
used by the Committee includes several of the companies comprising the Industry
Peer Group on the Performance Graph, which follows this report. However, their
inclusion in the data is a function of their participation in the various
nationally recognized compensation surveys in which the Company participates,
rather than an alignment of companies in similar industry groups. Salary levels
are structured within a range of reputable survey data for comparable companies
without regard to the performance of the companies surveyed. The Company's
compensation plans provide that as an executive's level of responsibility
increases, (i) a greater portion of his/her potential total compensation is
based on performance (both corporate and individual), and a lesser portion is
comprised of salary, causing potentially greater variability in the individual's
total compensation from year-to-year, and (ii) the mix of compensation for that
executive shifts to a greater portion being derived from compensation plans that
result in stock ownership.
In designing and administering the components of the executive compensation
program, the Committee strives to balance short- and long-term incentive
objectives and to employ prudent judgment
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when establishing performance criteria, evaluating performance, and determining
actual incentive payments.
Total executive compensation has two major components: annual cash
compensation comprised primarily of base salary and bonus, and long-term
incentives comprised of performance shares and stock options. The following is a
description of each of the components of the executive compensation program
along with a discussion of the decisions and action taken by the Committee with
regard to 2000 compensation. There also follows a specific discussion regarding
the CEO's compensation.
ANNUAL CASH COMPENSATION PROGRAM
An executive's annual cash compensation consists of a base salary plus
amounts paid in lieu of Company matching contributions to the Thrift Plan and
bonuses under the Company's Executive Incentive Compensation Plan. Each year the
Committee evaluates executive officers' base salaries by reviewing competitive
market practices and assessing Company and individual performance. Base
compensation is adjusted periodically to be consistent with the Company's
compensation strategy with respect to competitive market position.
The Executive Incentive Compensation Plan is the short-term cash incentive
component of the executive compensation program. This plan is designed to
provide an added incentive to participants to align each executive's efforts to
the Company's business objectives. Annual performance goals are established at
the beginning of each year for purposes of determining incentive awards for that
year. At the conclusion of each year, the Committee approves incentive award
payments to executives based on the degree of achievement of the goals
established and judgments of individual performance. Using earnings per share
and cash flow objectives and other performance factors including return on
capital employed, working capital, quality of earnings, innovation, customer
satisfaction, quality, health and safety, environmental, effective leadership,
and workforce diversity, the Committee establishes a target incentive
compensation fund. The Committee approves individual awards based upon
management's evaluation of the individual's contribution to the overall
performance of the business. Eligibility is determined by salary grade and
compensation survey data. A target award is assigned to each executive salary
grade, and participants may earn awards ranging from 0 to 200 percent of target
based upon performance against plan.
The 2000 Executive Incentive Compensation Plan payouts were calculated at
an average of 113% of the target amount.
LONG-TERM INCENTIVES -- STOCK AWARDS
The Company's long-term stock incentive plan (the Stock Ownership Plan) is
designed to align a significant portion of executive compensation with
shareholder interests. This plan permits the granting of a variety of long-term
awards, including stock options, restricted stock, and performance shares.
Shares of stock are awarded based on an analysis of competitive levels of stock
awards and an assessment of individual performance. Awards of performance shares
are granted annually, earned over three years and pay out between 0% and 200% of
each year's target based upon the Company's performance against a value model
(established each year by the Committee) which requires improvement in both the
Company's earnings per share and its return on capital employed. As an
individual's level of responsibility increases, a greater portion of variable
performance-related compensation is in the form of stock.
In 2000, the Company granted the stock options to the persons identified in
the Summary Compensation Table.
CEO COMPENSATION
As reported in the Summary Compensation Table in this proxy statement, Mr.
Wambold's base salary in 2000 was $600,000. Mr. Wambold's base salary has not
changed since he was elected to the position of President and CEO on November 5,
1999. In accordance with the performance criteria
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identified in the Executive Incentive Compensation Plan, the Committee approved
a 2000 annual incentive award of $725,000 for Mr. Wambold. In 2000, the
Committee granted Mr. Wambold an option to purchase 250,000 shares of common
stock.
$1 MILLION TAX LIMITATION
The Internal Revenue Code of 1986, as amended, imposes a $1 million limit
on the amount that a publicly-traded corporation may deduct for compensation
paid to the CEO or a Named Executive who is employed on the last day of the
year, provided, however, "performance-based compensation" is excluded from this
$1 million limitation. The Stock Ownership Plan incorporates the applicable
requirements for "performance-based compensation" with respect to certain types
of awards. The Committee will continue to employ compensation programs which
provide tax savings for the Company but, when appropriate, the Committee will
utilize components of certain executive compensation programs which may not be
tax deductible to the Company.
COMPENSATION NOMINATING GOVERNANCE COMMITTEE
Larry D. Brady, Chairman
Mark Andrews
Robert J. Darnall
Paul T. Stecko
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PERFORMANCE GRAPH
The following performance graph compares the cumulative total return on the
Company's common stock from October 27, 1999 (the first day on which the
Company's common stock began trading on a "when issued" basis on the New York
Stock Exchange), through December 31, 2000, with the cumulative total return of:
(i) the Standard & Poor's 500 Stock Index; (ii) Standard & Poor's Containers and
Packaging (Paper) Index; and (iii) an industry peer group selected by the
Company that includes representative companies with which the Company competes.
Based upon an initial investment of $100 on October 27, 1999, with dividends, if
any, reinvested.
[PERFORMANCE GRAPH]
CUMULATIVE TOTAL RETURN
27-OCT-99 31-DEC-99 31-MAR-00 30-JUN-00 30-SEP-00 31-DEC-00
----------------------------------------------------------------------------------------------
PACTIV CORP. $100 $ 87 $ 71 $ 65 $ 92 $102
----------------------------------------------------------------------------------------------
S&P CONTAINERS &
PACKAGING (PAPER) $100 $102 $ 87 $ 77 $ 81 $ 97
----------------------------------------------------------------------------------------------
S&P 500 $100 $114 $116 $113 $112 $103
----------------------------------------------------------------------------------------------
CUSTOM COMPOSITE INDEX
(6 STOCKS) $100 $ 97 $ 94 $ 90 $ 77 $ 70
----------------------------------------------------------------------------------------------
- ------------
1. The Custom Composite Index is comprised of the following companies:
AptarGroup Inc., Bemis Co., Crown Cork & Seal Co. Inc., Ivex Packaging Corp.,
Sealed Air Corp., and Sonoco Products Co. The Company selected this group of
companies in good faith based on similarities in the nature of such
companies' businesses to the Company's business.
2. The stock performance shown in this graph is not necessarily indicative of
future performance of the Company's common stock.
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EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company maintains a key executive change-in-control severance benefit
plan designed to enable the Company to continue to attract, retain and motivate
highly qualified employees by eliminating, to the maximum practicable extent,
any concern on the part of those employees that their job or benefit
entitlements will be terminated as a result of a "change-in-control" of the
Company, as that term is defined in the plan. The plan provides for severance
payments that are calculated on the basis of the executive's annual base salary
in effect at the date of termination of employment and the average amount of
incentive compensation received by the executive over the preceding three years.
Under the plan, Messrs. Wambold, Campbell, Faulkner, Lazaredes and Morris would
have been entitled to receive payments in the amount of $3,525,000, $1,695,024,
$1,395,000, $1,440,000, and $1,440,000, respectively, if their positions had
been terminated on December 31, 2000 following a change-in-control, based on
their then-in effect-base salaries and average incentive compensation over the
preceding three years. In addition, restricted shares held in the name of those
individuals under the restricted stock plan would automatically become payable
to those individuals based on the fair market value of the shares, all of their
performance share equivalent units would become fully vested and payable, and
all of their stock options would become fully vested.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Brady, Darnall, and Stecko are members of the
Compensation/Nominating/ Governance Committee of the Board of Directors (the
"Committee"). All three members of the Committee are Outside Directors, none of
whom has any direct or indirect material interest in, or relationship with, the
Company or any of its subsidiaries, other than stock ownership, as discussed
above, and as relates to his position as a director. Mr. Stecko was formerly an
executive officer of the Company. During 2000, none of the executive officers of
the Company served on the board of directors or compensation committee of any
entity whose officers served either on the Board of Directors of the Company or
on the Committee.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2)
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL.
Financial statements of the Company and its consolidated subsidiaries are
included in the Company's Annual Report furnished to all shareholders. Upon
recommendation of the Audit Committee, the Board of Directors has appointed
Arthur Andersen LLP as independent public accountants for the Company to examine
its consolidated financial statements for the year ending December 31, 2001, and
has determined that it would be desirable to request that the shareholders
approve the appointment. The vote of a majority of the shares, present in person
or by proxy, constituting a quorum at the meeting is required to ratify the
appointment. If the shareholders should not ratify the appointment, the Audit
Committee and the Board would reconsider the appointment. Arthur Andersen LLP
also acted as the Company's independent public accountants for the fiscal year
ended December 31, 2000. Representatives of Arthur Andersen LLP will be present
at the Annual Meeting, and will have the opportunity to make a statement if they
desire to do so, and will be available to respond to shareholders' questions.
AUDIT FEES
The aggregate fees billed to the Company by Arthur Andersen LLP for
professional services rendered for the audit of the Company's annual financial
statements and review of the financial statements included in the Company's
quarterly reports for the fiscal year 2000 were $1,449,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
No fees were billed to the Company by Arthur Andersen LLP for fiscal year
2000 for financial information system design and implementation, such as (i)
operating, or supervising the operation of, the
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Company's information systems or managing the Company's computer network, and
(ii) designing or implementing financial data hardware or software systems or
data management systems significant to the Company's financial statements taken
as a whole.
ALL OTHER FEES
The aggregate fees billed for services rendered to the Company by Arthur
Andersen LLP (other than those set forth above) for fiscal year 2000 were
$4,204,000.
All audit and non-audit services provided by Arthur Andersen have been
approved by the Audit Committee, which considered whether the provision of
non-audit services was compatible with maintaining the auditor's independence.
OTHER MATTERS
The Board of Directors is not aware of any other matters that may properly
come before the Annual Meeting. However, should any such matters come before the
Annual Meeting, it is the intention of the persons named in the enclosed form of
proxy to vote all proxies (unless otherwise directed by shareholders) in
accordance with their judgment on such matters.
EFFECT OF ABSTENTIONS AND BROKER NON-VOTE
The Company's By-Laws require a majority of the shares authorized to vote
at the Annual Meeting of Shareholders be present, in person or by proxy, to
establish a quorum. Shares abstaining with regard to a matter to be presented to
the shareholders and shares for which voting power has been withheld, such as
broker non-votes, constitute part of the quorum present with respect to such
matter. Assuming a quorum is present, the affirmative vote of (i) a plurality of
the votes cast at the Annual Meeting (in person or by proxy) is required for the
election of directors, and (ii) a majority of the shares present and entitled to
vote is required to ratify Arthur Andersen LLP as the Company's independent
public accountants and to approve any other matters that may properly come
before the meeting.
Because the election of directors is determined on the basis of a plurality
of the votes cast, abstentions and broker non-votes have no effect on the
election of directors. Because the vote required for the ratification of Arthur
Andersen LLP and any other matters that may properly come before the meeting is
a majority of shares present and entitled to vote, abstentions have the effect
of a vote against, and broker non-votes, because they are not "entitled to
vote," have no effect on, the proposal.
SOLICITATION OF PROXIES AND VOTING
Shareholders may specify their choices by marking the appropriate boxes on
the proxy card. Shares will be voted in accordance with such instructions.
However, it is not necessary to mark any boxes to vote in accordance with the
Board of Directors' recommendations; merely sign, date and return the proxy card
in the envelope provided.
Alternatively, in lieu of returning signed proxy cards, shareholders can
vote their shares over the internet or by calling a specially designated
telephone number which appears on the proxy cards. Internet and telephone voting
procedures are designed to authenticate shareholders' identities, allow
shareholders to provide their voting instructions and confirm the proper
recording of such instructions. Specific instructions for shareholders who wish
to use the internet or telephone voting procedures are set forth on the enclosed
proxy card.
All properly completed, unrevoked proxies that are received prior to the
close of voting at the Annual Meeting will be voted in accordance with
shareholders' instructions. If a properly executed, unrevoked written proxy card
does not specifically direct the voting of shares covered, the proxy will be
voted (i) for the election of all nominees for election as director described in
this proxy statement, (ii) for the
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ratification of the appointment of Arthur Andersen LLP, and (iii) in accordance
with the judgement of the persons named in the proxy as to such other matters as
may properly come before the Annual Meeting.
A proxy may be revoked at any time prior to the voting at the meeting by
submitting a later dated proxy (including a proxy via the internet or telephone)
or by giving timely written notice of such revocation to the Secretary of the
Company.
If you submit a properly completed proxy or if you appear at the Annual
Meeting to vote in person, your shares of Common stock will be considered part
of the quorum. Directions to withhold authority to vote for any director,
abstentions, and broker non-votes (described above) will be counted to determine
if a quorum for the transaction of business is present. Once a quorum is
present, voting on specific proposals may proceed.
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers, and
employees, personally or by telephone, telecopy, or telegram. Proxy cards and
material also will be distributed to beneficial owners of stock through brokers,
custodians, nominees, and other like parties, and the Company expects to
reimburse such parties for their charges and expenses. Georgeson & Co. Inc., New
York, New York, has been retained to assist the Company in the solicitation of
proxies at a fee estimated not to exceed $25,000.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholder Proposals -- Inclusion in Company Proxy Statement
For a shareholder proposal to be considered by the Company for inclusion in
the Company's proxy statement and form of proxy relating to the 2002 Annual
Meeting of Shareholders, the proposal must be received by the Company at its
principal executive offices by December 3, 2001.
Other Shareholder Proposals -- Discretionary Voting Authority and By-Law
Requirements
With respect to shareholder proposals not included in the Company's proxy
statement and form of proxy, the Company may utilize discretionary authority
conferred by proxy in voting on any such proposals if, among other situations,
the shareholder does not give timely notice of the matter to the Company by the
date determined under the Company's By-Laws for the submission of business by
shareholders. This notice requirement and deadline are independent of the notice
requirement and deadline described above for a shareholder proposal to be
considered for inclusion in the Company's proxy statement and form of proxy. The
Company's By-Laws state that to be timely, notice and certain related
information must be received at the principal executive offices not less than 90
and no more than 120 days prior to the first anniversary of the preceding year's
Annual Meeting of Shareholders; provided, however, that if the date of the
annual meeting is more than 30 days before or 70 days after such anniversary
date, notice of the matter must be received not earlier than the close of
business on the 120th day prior to the annual meeting and not later than the
close of business on the 90th day prior to such meeting or the 10th day
following the date of public disclosure of the meeting date, whichever occurs
first. Therefore, to be timely under the Company's By-Laws, a proposal not
included by or at the direction of the Board of Directors must be received not
earlier than January 17, 2002, nor later than February 16, 2002.
KARL A. STEWART
Secretary
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------------------------------
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE DIRECTED TO
JAMES V. FAULKNER, JR., VICE PRESIDENT AND GENERAL COUNSEL, PACTIV CORPORATION,
1900 WEST FIELD COURT, LAKE FOREST, ILLINOIS 60045.
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APPENDIX A
AUDIT COMMITTEE CHARTER
I. AUDIT COMMITTEE PURPOSE
The Audit Committee (Committee) is appointed by the Board of Directors
(Board) to assist the Board in fulfilling its oversight responsibilities. The
Committee's primary duties and responsibilities are to:
- - Monitor the integrity of Pactiv's financial reporting processes and systems of
internal controls related to finance, accounting, adherence to the corporate
code of conduct, and legal and regulatory compliance.
- - Monitor the independence and performance of Pactiv's independent auditors and
internal auditing department.
- - Provide an avenue of communication among the independent auditors, management,
the internal auditors, and the Board.
The Committee has the authority to conduct any investigation in fulfilling
its responsibilities, and it has direct access to the independent auditors as
well as anyone in the organization. The Committee has the ability to retain, at
Pactiv's expense, special legal, accounting or other consultants or experts it
deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Committee members shall meet the requirements of the New York Stock
Exchange (NYSE). The Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent, non-executive
directors, free of any relationship that could interfere with the exercise of
his or her independent judgement, except as permitted by the NYSE. All members
of the Committee shall have a basic understanding of finance and accounting and
be able to read and understand fundamental financial statements, and at least
one member of the Committee shall have accounting or related financial
management expertise.
Committee members shall be appointed by the Board. If the Committee Chair
is not designated or present, the members of the Committee may designate a Chair
by majority vote of the Committee membership.
The Committee shall hold regular meetings, but at least two times per year.
The Committee Chair shall approve an agenda in advance of each meeting. The
Committee shall meet privately in executive session at least annually with
management, the internal auditors, the independent auditors, and as a Committee
to discuss any matters that it considers appropriate.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Committee responsibilities and duties are as follows:
Review Procedures
1. Review and assess the adequacy of the Charter at least annually. Submit the
Charter, and any proposed amendments thereto, to the Board for adoption and
approval and have the document published at least every three years in
accordance with Security and Exchange Commission (SEC) regulations.
2. Review with management and the independent auditors Pactiv's quarterly and
audited annual financial statements prior to filing or distribution. Review
should include discussion of significant issues regarding accounting
principles, practices, and judgements, and any other items that are required
by the American Institute of Certified Public Accountants' and Statement of
Auditing
21
25
Standard 61 to be communicated to the Committee by the independent auditors.
The Chair of the Committee may represent the entire Committee for purposes
of the quarterly reviews.
3. In consultation with management, the independent auditors and the internal
auditors, consider the appropriateness of Pactiv's financial reporting
processes and controls.
Independent Auditors
4. The independent auditors are ultimately accountable to the Committee and the
Board of Directors. The Committee shall review the independence and
performance of the independent auditors, and annually recommend to the Board
the appointment or discharge of the independent auditors.
5. Approve the audit fees and other significant amounts paid to the independent
auditors.
6. On an annual basis, the Committee shall ensure that the independent auditors
submit a formal written statement delineating all relationships between
their firm and Pactiv, and shall review and discuss all significant
relationships that could impair the auditors' independence. The Committee
shall recommend to the Board that it take appropriate action in response to
the independent auditors' report to ensure the auditors' independence.
7. Review the independent auditors' audit plan, including discussion of audit
scope and approach, staffing, locations to be visited, reliance upon
management, and coordination with the internal auditors.
8. Consider the independent auditors' judgements about the quality and
acceptability of Pactiv's accounting principles.
Internal Audit Department and Legal Compliance
9. Review the plan, changes to the plan, activities, organizational structure
and qualifications of the internal audit department, as needed.
10. Review the adequacy of the system of internal controls, including
information system controls and security, and compliance therewith.
11. Review significant reports prepared by the internal audit department
together with management's response and follow-up on such reports.
12. On at least an annual basis, review with Pactiv's general counsel company
compliance with laws and regulations, material inquiries, if any, from
regulators or governmental agencies, and any other legal matters that could
have a significant impact on the company's financial statements.
13. Review and concur in the appointment or dismissal of the internal audit
director and any third-party internal audit firm.
Other Audit Committee Responsibilities
14. Annually prepare a Committee report to be included in the company's proxy
statement.
15. Review the annual report filed with the NYSE regarding Committee matters.
16. Review and assess conflicts of interest and related party transactions.
17. Monitor compliance with Pactiv's corporate code of conduct and perform any
other reviews related to the Charter, Pactiv's by-laws, and governing law
that the Committee or the Board deems necessary or appropriate.
18. Maintain minutes of Committee meetings and report to the Board on
significant results of such meetings.
22
26
PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000 [PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
April 2, 2001
Dear Benefit Plan Participant:
The Annual Meeting of Shareholders of Pactiv Corporation is scheduled to be
held at the Sheraton North Shore Hotel, 933 Skokie Blvd., Northbrook, Illinois
60062, at 10:30 a.m., on Thursday, May 17, 2001. A copy of the notice and proxy
statement, which is being sent to all registered shareholders in connection with
the Annual Meeting is enclosed for your information.
Also enclosed with this letter is a form of proxy card, which designates
the number of shares held in your benefit plan account. By executing this proxy
card you instruct the benefit plan trustee (the "Trustee") how to vote the
shares (eligible to vote) of Pactiv Corporation stock held in your account. The
Trustee will vote all shares eligible to be voted by benefit plan participants
in accordance with their respective instructions.
If you return your form of proxy executed but without furnishing voting
instructions, the eligible shares in your account will be voted by the Trustee,
as holder of record of the shares in your account, FOR the election of the
nominees for Directors named in the Proxy Statement, FOR the ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the year 2001, and as recommended by Management on all other
matters to be considered at the Annual Meeting.
If you do not return your executed form of proxy to the Trustee, then your
shares can be voted by the Trustee only in accordance with the requirements of
your benefit plan, which may or may not reflect your views.
Your vote is important. Please send your executed form of proxy card with
your voting instructions at your earliest opportunity. For your convenience, a
return envelope is enclosed.
YOUR BENEFITS COMMITTEE
27
[PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
ANNUAL MEETING OF SHAREHOLDERS MAY 17, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned does hereby appoint Richard L. Wambold, Roger B. Porter and
Karl A. Stewart, and any of them, with full power of substitution, as Proxies
to vote, as directed on the reverse side of this card, or, if not so directed,
in accordance with the Board of Directors' recommendations, all shares of
Pactiv Corporation held of record by the undersigned at the close of business
on March 21, 2001, and entitled to vote at the Annual Meeting of Shareholders
of Pactiv Corporation to be held at 10:30 a.m., May 17, 2001, at the Sheraton
North Shore Hotel, 933 Skokie Blvd., Northbrook, Illinois 60062, or at any
adjournment thereof, and to vote, in their discretion, upon such other matters
as may properly come before the Annual Meeting.
1. Election of Directors--Nominees:
01 Larry D. Brady 04 Roger B. Porter
02 Robert J. Darnall 05 Paul T. Stecko
03 Mary R. (Nina) Henderson 06 Richard L. Wambold
2. Ratification of Arthur Andersen LLP as Independent Public Accountants for
2001.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies cannot
vote your shares unless you sign and return this card.
- -------------------------------------------------------------------------------
/\FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL/\
[PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 2001
10:30 A.M.
SHERATON NORTH SHORE HOTEL,
933 SKOKIE BLVD., NORTHBROOK
ILLINOIS, 60062
28
[X] Please mark your 5260
votes as in this
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEMS 1 AND 2.
- -----------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
- ------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Ratification [ ] [ ] [ ] 3. In the discretion of the Proxies named herein,
Directors of Independent the Proxies are authorized to vote upon other
(see Reverse). Accountants for matters as may properly come before the
year 2001 meeting.
For, except vote withheld from the following nominee(s):
- ------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
The signer hereby revokes all proxies heretofore given
by the signer to vote at said meeting or any adjournments
thereof.
NOTE: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney
executor, administrator, trustee, or guardian,
please give full title as such.
______________________________________________
______________________________________________
SIGNATURE DATE
- -----------------------------------------------------------------------------------------------------------------------------------
/\FOLD AND DETACH HERE IF YOUR ARE RETURNING YOUR VOTED PROXY CARD BY MAIL/\
[PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
Dear Shareholder:
Pactiv Corporation encourages you to take advantage of new and convenient ways
by which you can vote your shares. You can vote your shares electronically
through the Internet or the telephone. This eliminates the need to return the
proxy card.
To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. TO VOTE OVER THE INTERNET:
- Log on to the Internet and go to the Web site
http://www.eproxyvote.com/ptv
2. TO VOTE OVER THE TELEPHONE:
- On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683) 24
hours a day, 7 days a week
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is not need to mail back
your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.