SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
PACTIV CORPORATION
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(Name of Registrant as Specified in Its Charter)
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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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(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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(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 4, 2005
Fellow Shareholders:
The Annual Meeting of Shareholders of Pactiv Corporation will be held
Friday, May 20, 2005, at 10:30 a.m., local time, at the Hilton Northbrook, 2855
N. Milwaukee Ave., 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.
Your vote is important. I urge all shareholders, even if they plan to
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 telephonic or Internet voting procedures, which are described on the proxy
card.
Very truly yours,
RICHARD L. WAMBOLD
Chairman and Chief
Executive Officer
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 20, 2005
The Annual Meeting of Shareholders of Pactiv Corporation will be held May
20, 2005, at 10:30 a.m., local time, at the Hilton Northbrook, 2855 N. Milwaukee
Ave., Northbrook, Illinois 60062, for the following purposes:
1. To elect seven directors for a term to expire at the 2006 Annual Meeting
of Shareholders;
2. To ratify the engagement of Ernst & Young LLP as the Company's
independent public accountants for the year 2005; and
3. To consider any 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. Shareholders of record at the close of business on
March 21, 2005, 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 Hilton Northbrook hotel, and will also be
available for inspection at the Annual Meeting of Shareholders.
If you plan to attend the Annual Meeting, please note that you will be
required to bring your admission ticket (attached to the proxy card) or a
brokerage statement showing your ownership, in accordance with the admission
policy described on page 23 of the proxy statement.
By Order of the Board of Directors
JAMES V. FAULKNER, JR.
Secretary
April 4, 2005
PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000
[PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
PROXY STATEMENT
The Board of Directors of Pactiv Corporation, a Delaware corporation (the
"Company"), is soliciting your proxy for use at the Company's Annual Meeting of
Shareholders to begin at 10:30 a.m., local time, on May 20, 2005, and at any
adjournment or postponement thereof (the "Annual Meeting"). This proxy
statement, the accompanying Notice of Annual Meeting of Shareholders, proxy card
and Annual Report, are first being sent or given to the Company's shareholders
entitled to vote at the Annual Meeting on or about April 4, 2005.
TABLE OF CONTENTS
<Table>
Proposals Submitted for Vote................................ 2
Re-Election of the Board of Directors of the Company
(Proposal 1).............................................. 3
Biographical Information.................................. 3
Stock Ownership of Management............................. 5
Corporate Governance...................................... 6
Board of Directors........................................ 6
Board Committees.......................................... 7
Other Governance Matters.................................. 9
Compensation of Directors................................. 9
Compensation Committee Interlocks and Insider
Participation.......................................... 10
Reports..................................................... 10
Audit Committee Report.................................... 10
Compensation/Nominating/Governance Committee Report on
Executive Compensation................................. 11
Performance Graph........................................... 15
Executive Compensation...................................... 16
Summary Compensation Table................................ 16
Options Granted in 2004................................... 17
Options at Year-End 2004 Values........................... 18
Long-Term Incentive Plans-Awards in 2004.................. 18
Pension Plan Table........................................ 19
Change-of-Control Agreements.............................. 19
Ratification of Ernst & Young LLP as Independent Public
Accountants for 2005 (Proposal 2)......................... 20
Other Information........................................... 21
Certain Beneficial Owners................................. 21
Section 16(a) Beneficial Ownership Reporting Compliance... 21
Shareholder Nominations and Other Proposals for 2006
Annual Meeting of Shareholders......................... 21
Annual Report on Form 10-K................................ 22
Questions and Answers Regarding Annual Meeting and Voting... 23
</Table>
1
PROPOSALS SUBMITTED FOR VOTE
PROPOSAL 1: RE-ELECTION OF DIRECTORS
NOMINEES. At the Annual Meeting, you will elect seven individuals to the
Board of Directors. Each director will hold office until the next annual meeting
and until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Nominees for re-election this year are Larry D.
Brady, K. Dane Brooksher, Robert J. Darnall, Mary R. (Nina) Henderson, Roger B.
Porter, Richard L. Wambold and Norman H. Wesley. For biographical information
about each nominee, see "Re-Election of the Board of Directors of the
Company -- Biographical Information."
FAILURE TO SERVE. In the event that any nominee for director withdraws or
for any reason is not able to serve as a director, your proxy will be voted at
the Annual Meeting for the remainder of those nominated for director (except as
otherwise indicated in your proxy) and for any replacement nominee designated by
the Board of Directors.
VOTE REQUIRED. You may vote for, or withhold your vote from, any of the
director nominees. Assuming a quorum is present, the seven director nominees
receiving a plurality of the votes cast at the Annual Meeting (in person or by
proxy) and entitled to vote will be elected as directors.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE
NOMINEES LISTED ABOVE.
PROPOSAL 2: RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
INDEPENDENT PUBLIC ACCOUNTANTS. The Audit Committee of the Board of
Directors has engaged Ernst & Young LLP as the Company's independent public
accountants for the year 2005. The Company is asking the shareholders to ratify
this engagement.
VOTE REQUIRED. You may vote for, vote against, or abstain from voting on
this proposal. Assuming a quorum is present, the vote of a majority of the
shares present at the Annual Meeting (in person or by proxy) and entitled to
vote will be required to ratify the engagement of Ernst & Young LLP as the
Company's independent public accountants for the year 2005.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE YEAR 2005.
2
RE-ELECTION OF THE BOARD OF DIRECTORS OF THE COMPANY
(PROPOSAL 1)
BIOGRAPHICAL INFORMATION
Below are the current members of the Company's Board of Directors, each of
whom is standing for re-election at the Annual Meeting.
<Table>
Larry D. Brady has been Chairman, Chief Executive Officer,
[LARRY BRADY PHOTO] President and Chief Operating Officer of UNOVA, Inc., an
industrial technologies company, since August 2001,
September 2000, August 1999, and September 1999,
respectively. From 1993 to June 1999, Mr. Brady was
President of FMC Corporation, a producer of chemicals and
machinery for industry, agriculture, and government. Mr.
Brady is also a director of UNOVA, Inc. and Baker Hughes
Incorporated. Mr. Brady is 62 years old, has been a director
of the Company since November 1999, and is a member of the
Audit Committee and the Three-Year Independent Director
Evaluation Committee.
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K. Dane Brooksher is Chairman of ProLogis, an operator of a
[K. DANE BROOKSHER PHOTO] global network of industrial distribution facilities. From
March 1999 to December 31, 2004, Mr. Brooksher served as
Chairman and CEO of ProLogis. Mr. Brooksher was Co-Chairman
and Chief Operating Officer of ProLogis from November 1993
to March 1999 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining
ProLogis, Mr. Brooksher was Area Managing Partner and
Chicago Office Managing Partner of KPMG Peat Marwick (now
KPMG LLP), independent public accountants, where he served
on the Board of Directors and Management Committee and as
International Development Partner for Belgium and the
Netherlands. Mr. Brooksher is a trustee of ProLogis and a
director of Qwest Communications International Inc., and he
serves as an Advisory Board Member of the J.L. Kellogg
Graduate School of Management of Northwestern University.
Mr. Brooksher is 66 years old, has been a director of the
Company since March 2003, and is Chairman of the Audit
Committee.
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Robert J. Darnall retired as Chairman of Prime Advantage
[ROBERT DARNALL PHOTO] Corporation, a supplier of strategic sourcing services and
logistics management for industrial manufacturers, in
January 2002, having held such position since early 2000.
Prior to that, Mr. Darnall was President and Chief Executive
Officer of Ispat North America, Inc., from 1998, when Ispat
North America, Inc. acquired Inland Steel Company from
Inland Steel Industries, Inc., until early 2000. Prior to
such acquisition, Mr. Darnall held various positions at
Inland Steel Company over a 36-year career, including
serving as Chairman and Chief Executive Officer of Inland
Steel Industries, Inc., from 1992 to 1998, and as President
and a director of Inland Steel Company from 1986 until 1998.
Mr. Darnall is also a director of Cummins, Inc., HSBC North
American Holdings, Inc., Sunoco, Inc., and United States
Steel Corporation. Mr. Darnall is 67 years old, has been a
director of the Company since March 2000, and is Chairman of
the Compensation/Nominating/Governance Committee and a
member of the Three-Year Independent Director Evaluation
Committee.
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</Table>
3
<Table>
Mary R. (Nina) Henderson is the founder of Henderson
[MARY HENDERSON PHOTO] Advisory, food industry consultants. Previously, Ms.
Henderson was Corporate Vice President, Global Core Business
Development for Bestfoods, Inc. from 1999 until December
2000, and President of Bestfoods Grocery from 1997 to 1999.
Ms. Henderson held numerous positions over a 30-year career
with Bestfoods, which was acquired by Unilever Group in
2000. She is a director of AXA Financial, Inc., Del Monte
Foods Company, and The "Shell" Transport and Trading
Company, p.l.c. and a trustee of Drexel University. Ms.
Henderson is 54 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 George H. 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. Mr. Porter is also a director of Extra Space Storage,
Inc., Tenneco Automotive Inc., and Zions Bancorporation. Mr.
Porter is 58 years old, has been a director of the Company
since November 1999, and is a member of the
Compensation/Nominating/ Governance Committee and the
Three-Year Independent Director Evaluation Committee.
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Richard L. Wambold has been Chairman of the Company since
[RICHARD WAMBOLD PHOTO] March 2000, and has been Chief Executive Officer and
President of the Company since its spin-off in November 1999
and since June 1999, respectively. From June 1997 to May
1999, Mr. Wambold was Executive Vice President and General
Manager of the Company's specialty packaging and consumer
products units. Mr. Wambold is also a director of Cooper
Tire and Rubber Company. Mr. Wambold is 53 years old and has
been a director of the Company since June 1999.
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Norman H. Wesley has been the Chairman and Chief Executive
[NORMAN WESLEY PHOTO] Officer of Fortune Brands, Inc., a consumer products
company, since December 1999. He was President and Chief
Operating Officer of Fortune Brands, Inc. during 1999, and
Chairman of the Board and Chief Executive Officer of Fortune
Brands Home & Office, Inc. (home and office products) from
1997 to 1999. Mr. Wesley is also a director of Fortune
Brands, Inc. and R.R. Donnelly & Sons Company. Mr. Wesley is
55 years old, has been a director of the Company since
December 2001, and is a member of the Audit Committee and
the Compensation/ Nominating/Governance Committee.
</Table>
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE
NOMINEES LISTED ABOVE.
4
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 28, 2005, the number of
shares of common stock and Common Stock Equivalents of the Company beneficially
owned (including shares which such persons have the right to acquire pursuant to
options exercisable as of February 28, 2005, or within 60 days thereafter) by:
(i) each director or nominee for director; (ii) each of the executive officers
named in the Summary Compensation Table below; and (iii) all executive officers,
directors, and nominees for director as a group.
<Table>
<Caption>
SHARES OF
COMMON COMMON TOTAL SHARES,
STOCK STOCK OPTIONS AND PERCENT OF
DIRECTORS OWNED(1) OPTIONS(2) EQUIVALENTS(3) EQUIVALENTS CLASS(4)
- --------- --------- ---------- -------------- ------------- ----------
Larry D. Brady................. 4,157 32,266 17,250 53,673 *
K. Dane Brooksher.............. 3,000 18,000 4,535 25,535 *
Robert J. Darnall.............. 5,000 30,000 12,266 47,266 *
Mary R. (Nina) Henderson....... 2,000 30,000 11,481 43,481 *
Roger B. Porter................ 4,147 31,132 17,408 52,687 *
Richard L. Wambold............. 174,550 1,623,002 93,518 1,891,070 1.2%
Norman H. Wesley............... 4,000 24,000 3,705 31,705 *
EXECUTIVE OFFICERS
------------------
Andrew A. Campbell............. 158,094 620,000 123,376 901,470 *
Peter J. Lazaredes............. 68,854 533,208 23,660 625,722 *
James D. Morris................ 36,688 562,288 79,383 678,359 *
John N. Schwab................. 35,876 437,251 53,053 526,180 *
All executive officers and
directors or nominees as a
group (13 individuals)....... 530,797 4,559,474 556,735 5,647,006 3.3%
</Table>
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* less than one percent
(1) Includes shares held in the Pactiv Corporation 401(k) Savings and Investment
Plan (the "401(k) Plan"). Each person listed has sole voting and investment
power over the shares set forth in this column, except shares held in the
401(k) Plan are held of record by the trustee of such plan, are voted by the
trustee in accordance with instructions received from plan participants, and
may be transferred by the beneficiary only in accordance with the terms of
the plan.
(2) Shares that are subject to options that are exercisable as of February 28,
2005, or within 60 days of such date. Such shares cannot be voted or
transferred until acquired.
(3) Common Stock Equivalents are amounts invested in the Pactiv Stock Index
Account under the Company's Deferred Compensation Plan (the "DCP") or its
Deferred Retirement Savings Plan (the "DRSP"). Amounts deferred pursuant to
the DCP that are invested in the Pactiv Stock Index Account (including any
premium received as described in note (7) to the Summary Compensation Table)
may be distributed in shares of common stock or cash, in either case in an
amount based on the performance of the Company's common stock over the
applicable period, after a director ceases to serve as a director of the
Company, upon the termination of an employee's employment with the Company,
or on the distribution date elected by the participant, all as provided
under the DCP. Amounts deferred pursuant to the DRSP, whether invested in
the Pactiv Stock Index Account or otherwise, are paid in cash, generally
upon separation of service from the Company, disability, or change in
control, although in-service withdrawals are permitted for unforeseen
emergencies, all as provided under the DRSP. Common Stock Equivalents do not
have voting rights. Common Stock
5
Equivalents do not include conditionally vested performance share units
described in the Summary Compensation Table.
(4) Assuming, for each person listed, his or her exercise of the options set
forth above, but excluding Common Stock Equivalents.
CORPORATE GOVERNANCE
The Company is committed to good business practices including
uncompromising integrity, transparency in financial reporting, and thoughtful
and effective corporate governance. To that end, the Board regularly reviews the
Company's corporate governance policies and practices in light of these
principles and the requirements of the Sarbanes-Oxley Act of 2002 and related
rules of the Securities and Exchange Commission (SEC) and the requirements of
the New York Stock Exchange (NYSE). Based on this review, the Board has
formalized certain procedures and standards as part of its corporate governance
structure. This section outlines the key components of the Company's corporate
governance structure.
BOARD OF DIRECTORS
The Board of Directors of the Company currently consists of seven members,
including six who are not officers or employees of the Company (the
"Non-Management Directors") and one (Mr. Wambold) who is the CEO of the Company.
All Non-Management Directors are "independent" under the rules of the SEC and
NYSE. In addition to meeting the specific standards of the SEC and the NYSE for
determining independence, the Board has affirmatively determined that no
Non-Management Director has any material relationship with the Company (either
directly or as a partner, shareholder, or officer of an organization that has a
relationship with the Company). In making this determination the Board
considered all relevant facts and circumstances that constituted each director's
relationship with the Company from the director's standpoint as well as from
that of the persons or organizations with which the director has such an
affiliation. The determination that each Non-Management Director is independent
and has no material relationship with the Company was made following reviews of
questionnaires completed by all directors, and an internal "cross-checking"
review by the Company to confirm whether the Company had any relationships with
companies with whom the Non-Management Directors are so affiliated.
Non-Management Directors meet in regularly scheduled executive sessions
without management. The role of presiding director at such sessions is rotated
among all the Non-Management Directors during the year.
Shareholders may communicate directly with the Board of Directors
(including with the Non-Management Directors only, or with any specific
director) in accordance with the following process. All communications should be
directed to the Company's Secretary at 1900 West Field Court, Lake Forest,
Illinois 60045 and should prominently indicate on the outside of the envelope
that it is intended for the full Board of Directors, for Non-Management
Directors only, or for any particular member of the Board. The Secretary will
review the communications and, pursuant to instructions from the Non-Management
Directors, remove any communications that are purely commercial in nature. All
other communications will be promptly forwarded to the specified director or
directors. The Non-Management Directors will be advised of any communication
excluded by the Secretary as being purely commercial in nature, and such
communication will be made available to any Non-Management Director who wishes
to review it.
The Board of Directors held ten meetings in 2004. Each director attended
more than 75% of the meetings of the Board and of the Board committees on which
he or she served. It is a policy of the Board that each Director is expected to
attend all Annual Meetings of Shareholders. All members of the Board attended
the Company's 2004 Annual Meeting of Shareholders.
6
BOARD COMMITTEES
The Board has three standing committees, each comprised solely of
Non-Management Directors, all of whom are independent under the rules of the SEC
and the NYSE and as determined by the Board of Directors. The committees on
which each director serves are listed in the Biographical Information above for
the directors. In addition, on an ad hoc basis, the Board may designate from
time to time a Non-Management Director as the "lead" director with respect to
special matters or discussions affecting the Company. The responsibilities and
authority of the standing committees are as follows:
COMPENSATION/NOMINATING/GOVERNANCE COMMITTEE. The
Compensation/Nominating/Governance Committee (the "C/N/G Committee") operates
under a written charter adopted by the Board of Directors, a copy of which is
posted on the Company's website (www.Pactiv.com) under the Investor Relations
link. In addition, the Company will provide a copy of the C/N/G Committee's
charter to any shareholder who requests it by writing to the Secretary of the
Company. The C/N/G Committee reviews and reassesses the adequacy of the
Committee's charter annually. The charter, which reflects the standards set
forth in the SEC and NYSE rules and regulations, identifies the C/N/G
Committee's primary duties and responsibilities as follows:
- Examine periodically the philosophy and structure of the Company's
compensation programs.
- Oversee and act on behalf of the Board of Directors with respect to the
benefit and compensation plans of the Company.
- Review and determine the desirable balance of experience, qualifications
and expertise among members of the Board of Directors.
- Review possible candidates for membership on the Board of Directors
(including nominations proposed by shareholders) and recommend a slate of
nominees for election as directors at the Company's Annual Meeting of
Shareholders.
- Review the function and composition of the other committees of the Board
of Directors and recommend membership on such committees.
- Review the qualifications and recommend candidates for election as
officers of the Company.
In performing its duties, the C/N/G Committee has the authority to take
such action as it deems appropriate to implement the purposes of the C/N/G
Committee. The Committee may retain legal, accounting or other consultants, and
meet in separate executive sessions with the Company's management, employees and
such other persons as the Committee sees fit.
All members of the C/N/G Committee are independent Non-Management
Directors. Mr. Darnall is Chairman of the C/N/G Committee. The C/N/G Committee
held five meetings in 2004.
SHAREHOLDER NOMINATIONS. The Board has adopted a policy with respect to
nominations by shareholders of candidates to the Board of Directors; the C/N/G
Committee is responsible for the implementation of this policy. Under this
policy, to submit a candidate for consideration by the C/N/G Committee a
shareholder must notify the Company's Secretary at least 90 but not more than
120 days prior to the first anniversary of the date of the prior year's annual
meeting (subject to change if the date of the annual meeting is more than 30
days before or 70 days after the anniversary date of the prior year's annual
meeting). The notice must meet all of the requirements contained in the
Company's Bylaws and must set forth (i) the name, age, business address and
residence address of the proposed nominee; (ii) the principal occupation or
employment of the proposed nominee; (iii) any other information relating to the
shareholder or proposed nominee that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder; (iv) any other information the shareholder believes is
relevant concerning the proposed nominee; (v) a written consent of the proposed
nominee(s) to being named in the proxy statement as a nominee and to serve as a
director if elected; (vi) the name and record address
7
of the shareholder submitting the notice; (vii) the number of shares of voting
stock of the Company which are owned of record or beneficially by the
shareholder submitting the notice; (viii) a representation of whether, if the
proposed nominee is not nominated by the Board of Directors, the shareholder
intends to appear in person or by proxy at the annual meeting to nominate the
proposed nominee named in the notice; (ix) a representation of whether the
shareholder intends or is part of a group which intends (a) to deliver a proxy
statement and/or form of proxy to the Company's shareholders, or (b) otherwise
to solicit proxies from shareholders in support of such nomination; and (x) a
description of all arrangements or understanding between the shareholder
submitting the notice and any other person (naming such person) pursuant to
which the nomination is being made by the shareholder submitting the notice.
The C/N/G Committee will consider all proposed nominees for the Board of
Directors, including those put forward by shareholders, in accordance with the
charter of the C/N/G Committee and the Company's Corporate Governance Guidelines
to determine whether they might make good candidates for consideration for
membership on the Board of Directors. This will include a review of the person's
judgment, experience, independence, understanding of the Company's business or
other related industries, and such other factors as the C/N/G Committee
determines are relevant in light of the needs of the Board of Directors and the
Company. There are no specific minimum qualifications that the C/N/G Committee
believes must be met by a nominee. The Board of Directors believes that its
nominees should reflect a diversity of experience at a policy-making level in
businesses and in areas relevant to the Company's activities. The Board shall
not discriminate among qualified candidates based on gender, race, ethnicity or
age. The C/N/G Committee will select qualified candidates and review its
recommendations with the Board of Directors, which will decide whether to invite
the candidate to be a nominee for election to the Board of Directors.
THREE-YEAR INDEPENDENT DIRECTOR EVALUATION COMMITTEE. The Three-Year
Independent Director Evaluation Committee (the "TIDE Committee") has the
responsibility, among other things, to review the Company's Qualified Offer Plan
Rights Agreement (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. The TIDE Committee held no meetings in 2004.
AUDIT COMMITTEE. The Audit Committee operates under a written charter
adopted by the Board of Directors, a copy of which is posted on the Company's
website (www.Pactiv.com) under the Investor Relations link. In addition, the
Company will provide a copy of the Audit Committee's charter to any shareholder
who requests it by writing to the Secretary of the Company. The Audit Committee
reviews and reassesses the adequacy of the Audit Committee charter annually. The
charter, which reflects the standards set forth in the SEC and NYSE rules and
regulations, identifies the Audit Committee's primary duties and
responsibilities as follows:
- Appointment, compensation and oversight over the work of the Company's
public accountants.
- Monitoring the integrity of the Company's financial statements.
- Monitoring the Company's compliance with its corporate code of conduct
and legal and regulatory requirements.
- Monitoring the Company's public accountants' qualifications and
independence.
- Monitoring the performance of the Company's internal audit function and
public accountants.
- Providing an avenue of communication among the independent auditors,
management, internal auditors and the Board of Directors.
In performing its duties, the Audit Committee has the authority to take
such actions as it deems appropriate to implement the purposes of the Audit
Committee. The Committee may retain special legal, accounting, or other
consultants, and meet in separate executive sessions with the Company's public
accountants, its internal auditors, employees, management, and such other
persons as the Committee sees fit.
8
All members of the Audit Committee are independent Non-Management Directors
and are financially literate. Mr. Brooksher, the Committee's Chairman, is the
Company's "Audit Committee Financial Expert." The Audit Committee held twelve
meetings in 2004.
OTHER GOVERNANCE MATTERS
The Board has adopted three other policies related to corporate governance,
which are summarized below. All of these policies are posted on the Company's
website (www.Pactiv.com) under the Investor Relations link. In addition, the
Company will provide a copy of the policies to any shareholder who requests them
by writing to the Secretary of the Company.
CODE OF BUSINESS CONDUCT AND ETHICS. The Company has adopted a Code of
Ethics and Business Conduct that requires all employees, officers and directors
of the Company to respect and comply with all applicable laws, rules and
regulations, and, beyond that, to act with honesty, integrity, and in the best
interests of the Company. The Code of Business Conduct and Ethics outlines the
key principles of expected behavior for Pactiv employees, officers and
directors, including matters relating to conflicts of interest, confidentiality,
fair dealing, and accounting complaints and procedures for reporting illegal or
unethical behavior as well as the expected ethical behavior in many other
business areas.
CODE OF ETHICAL CONDUCT FOR FINANCIAL MANAGERS. The Company has adopted a
Code of Ethical Conduct for Financial Managers that (in addition to the Code of
Business Conduct and Ethics) is applicable to the Company's Chief Executive
Officer, Chief Financial Officer, Controller, Treasurer, Tax Director, Audit
Director, Assistant Controller, Assistant Treasurer and managers reporting to
each of these positions who are responsible for accounting and financial
reporting, and any other persons performing similar functions, and the
Controllers of business units and all managers reporting to them. This Code
covers a range of financial and non-financial business practices and procedures,
requiring Financial Managers to act with honesty and integrity, including the
ethical handling of actual or apparent conflicts of interest between personal
and professional relationships, to fully and fairly disclose appropriate
information in a timely and understandable manner, and otherwise to act in good
faith, responsibly, with due care, competence and diligence, without
misrepresenting material facts or allowing their independent judgment to be
subordinated. Any waiver of the Code of Ethical Conduct for Financial Managers
may be made only by the Audit Committee and will be promptly disclosed as
required by law or the NYSE rules.
CORPORATE GOVERNANCE GUIDELINES. The Company has adopted Corporate
Governance Guidelines that set forth certain standards for the Company's Board
of Directors and management. These include director qualification standards,
director responsibilities, and other matters relating to the functions of the
Board of Directors, its interaction with management and with the Company's
advisors, and other matters.
COMPENSATION OF DIRECTORS
The Company's philosophy for compensation of its Non-Management Directors
(directors who are employed by the Company receive no compensation for serving
on the Board or any committees of the Board) is to provide compensation
comparable to that paid to directors at similarly-sized companies, and to link a
portion of director compensation with shareholder returns. The compensation paid
to Non-Management Directors for 2004 was as follows:
RETAINERS AND MEETING FEES. The Company pays each Non-Management Director
an annual retainer of $35,000, of which a minimum of 60% ($21,000) is paid in
the form of stock-settled Common Stock Equivalents, as described below, with the
balance paid in cash or, at the election of the director, deferred under the
Deferred Compensation Plan. The Company also pays Non-Management Directors
$1,000 for each meeting of the Board of Directors attended. The Chairman of the
Audit Committee and the Chairman of the C/N/G Committee are each paid an annual
fee of $9,000, and Non-Management Directors who serve on such committees are
paid an annual fee of $6,000 per committee membership. Members of the TIDE
Committee receive $1,000 for each meeting of that committee attended. Non-
9
Management Directors also receive reimbursement of their expenses for attending
meetings of the Board of Directors and Committee meetings.
OPTIONS. Each Non-Management Director also receives an annual grant of
options to purchase 6,000 shares of Common Stock. 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.
DEFERRED COMPENSATION PLAN. In payment of 60% of the retainer for 2004,
each Non-Management Director received 897 Common Stock Equivalents. Such Common
Stock Equivalents are held under the Deferred Compensation Plan and are payable
in shares of the Company's Common Stock after a Non-Management 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. Each Common
Stock Equivalent is issued at 100% of the fair market value of a share of Common
Stock on the date of grant.
Pursuant to the Company's Deferred Compensation Plan, a Non-Management
Director may elect to have up to 40% of his or her retainer fee and all or a
portion of his or her meeting fees deferred under the Deferred Compensation
Plan. Such Plan provides Non-Management Directors with various investment
options, including the Pactiv Stock Index Fund, in which case such deferred
amounts are Common Stock Equivalents. Payment of such optionally deferred
amounts, 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 in accordance with the Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Darnall, Porter and Wesley are the current members of the C/N/G
Committee of the Board of Directors, none of whom is an officer or employee of
the Company. During 2004, 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 C/N/G Committee
of the Board.
REPORTS
The following Audit Committee Report and Compensation/Nominating/Governance
Committee Report on Executive Compensation shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement or any portion hereof into any filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall
not otherwise be deemed filed under such acts.
AUDIT COMMITTEE REPORT
In performing its duties, the Audit Committee reviewed and discussed the
audited financial statements (including reviewing the Company's specific
disclosures under "Management's Discussion and Analysis of Financial Conditions
and Results of Operations") contained in the 2004 Annual Report on Form 10-K
with the Company's management. The Audit Committee also met privately with the
Company's independent auditor for the year 2004, Ernst & Young LLP, and
discussed issues deemed significant by Ernst & Young 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 may be
modified or supplemented. In addition, the Audit Committee discussed with Ernst
& Young LLP its independence from the Company and its management, and has
received the written disclosures and the letter from Ernst & Young LLP required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) as may be modified or supplemented and its Report on the
Company's assessment of its internal controls over financial reporting.
10
Taking all of these reviews and discussions into account, the Audit
Committee has recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2004, for filing with the Securities and Exchange Commission.
Respectfully submitted by the members of the Audit Committee:
K. Dane Brooksher, Chairman
Larry D. Brady
Mary R. (Nina) Henderson
Norman H. Wesley
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 C/N/G Committee, which is composed of
the Non-Management Directors named below, each of whom has been determined by
the Board of Directors to be independent under the applicable rules of the SEC
and the NYSE. The C/N/G 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 commensurate with performance. Accordingly,
the executive compensation program for the Company's Chief Executive Officer
("CEO") and the other executive officers named in this proxy statement
(collectively, the "Named Executives"), as well as the other officers of the
Company, has been structured to:
- Provide an executive compensation package that attracts, retains, and
motivates key executives.
- Reinforce a results-oriented management culture with executive pay that
varies according to overall Company and individual performance against
business goals and core behavioral standards.
- Place more emphasis and leverage on variable performance-based "at risk"
(versus fixed) compensation commensurate with an executive's increasing
responsibilities.
- Align the interests of the Company's executives and shareholders by
implementing and maintaining compensation programs that provide for the
acquisition and retention of significant equity interests in the Company
by senior executives.
Based on these objectives, the executive compensation program has been
designed to assist the Company in attracting, motivating and retaining
executives to help the Company achieve its performance goals. The program is
structured to provide the Company's executives with base salaries, annual cash
incentive awards, long-term incentive awards, stock ownership opportunities, and
other benefits at "market"; that is, that are comparable to the compensation
opportunities typically offered to executives at major corporations that are
similar in scope and size to the Company or that compete with the Company for
executive talent. Generally, it is the Company's intent to pay base compensation
near the 50th percentile of the comparator group and incentive compensation
above or below the 50th percentile commensurate with actual performance against
performance goals.
In determining competitive compensation for each of the components of
executive compensation described below and in evaluating the total compensation
package for each Named Executive, the C/N/ G Committee analyzes data from
several independent compensation surveys and solicits information and advice
from its nationally recognized independent compensation consultants. The
competitive market data used by the C/N/G Committee includes the data of
approximately 15 companies similar in size and
11
scope to the Company including several of the companies comprising the Industry
Peer Group on the Performance Graph that follows this report. Salary levels are
structured within a range of reputable survey data for comparable positions and
companies without regard to the performance of the companies surveyed.
Eligibility for both the annual cash compensation program and long-term
incentive awards is determined by salary grade and compensation survey data.
Once eligible, participation in the Plan (described below) requires C/N/G
Committee approval. The Company's compensation plans provide that as an
executive's level of responsibility increases, (i) a greater portion of his or
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
proportion being equity-based compensation.
In designing and administering the components of the executive compensation
program, the C/N/G Committee strives to balance short- and long-term incentive
objectives and to employ prudent judgment 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
incentive compensation comprised of stock options and performance shares. The
framework for the components of the annual incentive bonus awards and the
long-term incentives is set forth in the Pactiv Corporation 2002 Incentive
Compensation Plan (the "Plan"), which was approved by the Company's shareholders
at the 2002 shareholders' meeting. The following is a description of the major
components of the executive compensation program along with a discussion of the
decisions and actions taken by the C/N/G Committee with regard to 2004
compensation. Also included is a specific discussion regarding the CEO's
compensation.
ANNUAL CASH COMPENSATION PROGRAM -- BASE SALARIES AND BONUS
An executive's annual cash compensation consists primarily of a base salary
and bonus. Each year the C/N/G Committee evaluates executive officers' base
salaries by reviewing competitive market practices, assessing Company and
individual performance, and considering other factors impacting the Company's
business. In 2004, considering rising raw material costs and other conditions
adversely affecting the Company's business, the C/N/G Committee decided not to
increase the base salaries for executive officers, which remained at 2003
levels.
The annual bonus plan is designed to provide to executives an added
incentive tied to specified Company business objectives. A target award is
assigned to each executive salary grade, and participants may earn awards
ranging from 0% to 200% of target based upon the Company's performance against
its approved operating plan and individual performance against established
objectives. For the Named Executives, the Plan creates a pool equal to 2.5% of
operating earnings, less Extraordinary Items as defined in the Plan, out of
which cash bonuses can be paid, and the amount of the bonus paid to a Named
Executive cannot exceed his or her allocable portion (as determined by the C/N/
G Committee) of such pool.
Annual performance goals are established by the C/N/G Committee at the
beginning of each year for the purpose of determining incentive awards for that
year. The performance goals for 2004 were earnings per share and free cash flow.
In addition, the Committee considers other performance factors listed in the
Plan. At the conclusion of each year, the C/N/G Committee approves incentive
award payments to the Named Executives and certain other executive officers
based on the degree of achievement of the goals established and the Committee's
judgment of the Company and individual performance. This occurs after reviewing
management's evaluation of the individual's contribution to the overall
performance of the business, subject, in the case of a Named Executive, to the
cap created by his or her allocable portion of the pool, described above. In
2004, the C/N/G Committee, after considering
12
such factors, determined the appropriate annual bonus payments to executive
officers to be 60% of such officers' target amounts.
LONG-TERM INCENTIVES -- STOCK OPTIONS AND PERFORMANCE SHARES
The Plan permits the granting of a variety of long-term incentive awards,
and the C/N/G Committee selects which to use to best implement its compensation
philosophy discussed above, including aligning a significant portion of an
executive's compensation package with shareholder interests. The C/N/G Committee
has chosen to use stock options and performance shares, each of which is
equity-based, as the primary vehicles for providing long-term incentive
compensation. While the Committee believes both stock options and performance
shares serve valuable functions as part of the Company's long-term incentive
compensation program, it has decided, after considering the advice of its
compensation consultants, to reduce the ratio of the value of stock options to
performance shares. Therefore, in 2004, the Committee revised the ratio of the
value of stock options and performance shares granted each year to 60:40,
respectively, from the ratio used in past years of 65:35.
In 2004, the C/N/G Committee granted stock options and performance shares:
- Stock option grants were approved based upon the C/N/G Committee's
evaluation of the Company's overall performance, its performance in
relation to its peer group and the market in general, and the competitive
pay practices of comparable companies. The grants have an exercise price
equal to the average of the high and low price of the Company's common
stock as of the grant date and vest over three years. Thus, executives
only benefit from the grant of stock options if the stock price increases
and shareholders also benefit.
- Performance share awards are target amounts of shares that a participant
may earn, from 0% to 200% of target, over a three-year performance period
based on the Company's performance against specific performance measures
selected by the C/N/G Committee from the list of performance measures
identified in the Plan. For 2004, the C/N/G Committee granted performance
share awards to the executive officers for the three-year performance
cycle beginning January 1, 2004, and also evaluated the 2004 performance
against the performance measures for prior performance share awards that
included 2004 in the performance period. The 2004-06 grants were based
upon the C/N/G Committee's analysis of competitive levels of stock awards
by other companies and an assessment of individual performance. The
performance measures for 2004 were earnings per share and return on
capital employed, in each case adjusted to reflect Extraordinary Items
(as defined in the Plan). The amounts that would be earned based on
performance against the targets established for that year are called
"Conditionally Vested Units." These Conditionally Vested Units are
contingent upon continued employment with the Company through the end of
the three-year performance cycle and, because they are subject to change
by the C/N/G Committee based on its evaluation of performance over the
entire three-year period, are interim indicators of performance rather
than actual amounts earned. Conditionally Vested Units do not have voting
rights, but, in the Committee's sole discretion, may be entitled to
receive dividends if declared and paid on the Company's common stock, in
which, payment can be made in cash or stock or a combination of cash and
stock at the time of payout. At the end of the three-year performance
period, the amount paid is a function of the Company's stock price,
performance against established interim annual quantitative performance
targets, and the Committee's assessment of performance over the entire
three-year period. Thus, performance share awards serve to retain key
executives and focus them on internal financial goals.
- In accordance with the Plan, the C/N/G Committee approved the percentage
payout of the 2002-04 performance grant based on the Company's earnings
per share and return on capital employed, as described above, and the
C/N/G Committee's assessment of performance over the entire three-year
period. Performance goals were exceeded for the period and accordingly,
the performance grant for the 2002-04 performance period was paid out at
121% of target levels in cash.
13
STOCK OWNERSHIP REQUIREMENTS
In line with the philosophy that the interests of the executives should be
aligned with those of the shareholders, the Company requires that the executives
attain and retain certain specified levels of stock ownership. To assist
executives in achieving their stock ownership goals, executives may choose to
defer all or a portion of annual cash incentives in a Pactiv stock index
account. In addition, employees who defer such amounts into the Pactiv stock
index fund receive a 20% premium provided such funds are kept in such account
for a minimum of three years. Each year the C/N/G Committee reviews the
executives' ownership levels including shares held in 401(k) plans and deferred
compensation plans to insure compliance with these requirements. All of the
Named Executives have exceeded their stock ownership requirements which range
from 3.5 to 5 times the midpoint of their salary range.
Recently, the Board of Directors increased its stock ownership requirements
for directors from 5,000 shares to 10,000 shares, to be achieved annually on a
pro rata basis within five years of election as a director.
CEO COMPENSATION
Mr. Wambold received no increase in base salary in 2004. The C/N/G
Committee approved a 2004 annual incentive award of $500,000 for Mr. Wambold in
accordance with the established performance criteria. In addition to considering
the quantitative financial goals, the C/N/G Committee also considered the
performance of the Company relative to its competitors and cumulative total
shareholder return. In 2004, the C/N/G Committee granted 230,000 stock options
to Mr. Wambold. In determining the size of his option grant, the C/N/G Committee
considered competitive market practice, the Company's performance, and Mr.
Wambold's leadership. The C/N/G Committee also approved a performance share
grant of 52,000 units to Mr. Wambold, which will be earned based on performance
over the three-year period beginning January 1, 2004. Mr. Wambold's performance
share award earnout for 2002-2004 was based upon the Company's performance
against the performance goals (discussed above) over the three-year period. Mr.
Wambold's annual incentive award and performance share payout were at the same
percentage of target amounts as the other participants.
$1 MILLION TAX LIMITATION
The Internal Revenue Code imposes a $1 million limit on the amount that a
publicly-traded corporation may deduct for compensation paid to a Named
Executive who is employed on the last day of the year. "Performance-based
compensation" is excluded from this $1 million limitation. Awards granted under
the Plan are intended to qualify as performance-based compensation, allowing the
Company to deduct such amounts for tax purposes. However, when appropriate, the
Committee may utilize components of certain executive compensation programs
which may not be tax deductible to the Company if it believes such compensation
is in the best interest of the Company and its shareholders.
Respectfully submitted by the members of the Compensation/Nominating/Governance
Committee:
Robert J. Darnall, Chairman
Roger B. Porter
Norman H. Wesley
14
PERFORMANCE GRAPH
The following performance graph compares the cumulative total return on the
Company's common stock for the period December 31, 1999, through December 31,
2004, with the cumulative total return of: (i) the Standard & Poor's 500 Stock
Index; and (ii) a Custom Composite Index comprised of an industry peer group
selected by the Company that includes representative companies with which the
Company competes.
(GRAPH)
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------
31-DEC-99 31-DEC-00 31-DEC-01 31-DEC-02 31-DEC-03 31-DEC-04
- ------------------------------------------------------------------------------------------------------
Pactiv Corp. $100 $116 $167 $206 $225 $238
- ------------------------------------------------------------------------------------------------------
S&P 500(R) $100 $91 $80 $62 $80 $89
- ------------------------------------------------------------------------------------------------------
Custom Composite Index
(6 Stocks) $100 $72 $90 $93 $113 $134
- ------------------------------------------------------------------------------------------------------
</Table>
- ---------------
1. The stock performance shown in this graph is not necessarily indicative of
future performance of the Company's common stock.
2. The Custom Composite Index is comprised of the following companies: Aptar
Group Inc., Bemis Co., Crown Holdings, Inc., Ivex Packaging Corporation
(through the second quarter of 2002, until its acquisition by Alcoa Inc.),
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.
15
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
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.
<Table>
<Caption>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ---------------------------------
AWARDS
-------------------- PAYOUTS
RESTRICTED ----------
OTHER ANNUAL STOCK LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) AWARDS(4) OPTIONS PAYOUTS(4) COMPENSATION(7)
- --------------------------- ---- --------- -------- --------------- ---------- ------- ---------- ---------------
Richard L. Wambold......... 2004 $883,404 $ 500,000 $40,000 -- 230,000 $618,096(5) $16,301
Chairman and Chief 2003 $878,104 $ 900,000 $40,000 -- 250,000 $298,559(6) $15,264
Executive Officer 2002 $847,600 $1,557,000 $40,000 $1,238,174 250,000 -- $13,762
Andrew A. Campbell......... 2004 $379,000 $ 144,000 $30,000 -- 118,000 $274,709(5) $37,653
Senior Vice President and 2003 $375,218 $ 260,000 $30,000 -- 120,000 $134,345(6) $59,411
Chief Financial Officer 2002 $364,625 $ 558,500 $30,000 $ 553,526 105,000 -- $75,038
Peter J. Lazaredes......... 2004 $394,133 $ 210,000 $30,000 -- 140,000 $164,826(5) $15,461
Senior Vice President and 2003 $370,080 $ 260,000 $30,000 -- 120,000 $ 89,563(6) $15,282
General Manager -- 2002 $347,760 $ 485,696 $30,000 $ 349,600 105,000 -- $14,058
Food/Foodservice
James D. Morris............ 2004 $357,442 $ 155,000 $30,000 -- 118,000 $123,619(5) $19,020
Senior Vice President and 2003 $356,721 $ 200,000 $30,000 -- 105,000 $ 89,563(6) $16,240
General Manager -- 2002 $342,817 $ 395,696 $30,000 $ 305,900 105,000 -- $64,744
Protective & Flexible
Packaging
John N. Schwab............. 2004 $338,002 $ 125,000 $30,000 -- 108,000 $164,826(5) $42,800
Senior Vice President and 2003 $332,782 $ 240,000 $30,000 -- 120,000 $ 74,651(6) $61,864
General Manager -- 2002 $320,147 $ 351,996 $30,000 $ 320,474 105,000 -- $12,914
Hefty Consumer Products
</Table>
- ---------------
(1) Includes base salary plus amounts paid in lieu of matching contributions to
the 401(k) Plan.
(2) For 2002, the amount shown includes the dollar value of performance share
units earned under the grant for the three-year period of 2000-02, which was
paid in January 2003, less the amounts earned under such grant that were
previously reflected as restricted stock awards in the Summary Compensation
Tables in the Company's proxy statements. Bonus payments are reported for
the fiscal year in which the related services were rendered, although the
actual payments may have been made in the succeeding year.
(3) Cash perquisites allowances paid. No other perquisites paid.
(4) The Company has a Performance Share Program under which key executives can
earn awards based on the Company's performance over a three-year period.
These awards are granted at a "target amount" for each three-year period,
and the participants can earn between 0% and 200% of the target amount based
upon the Company's performance against performance measures selected by the
C/N/G Committee each year (subject to change by the C/N/G Committee based on
other qualitative and quantitative factors related to the Company's
performance over the three-year period of the award). The awards vest three
years from the date of the grant, and can be paid in stock or cash or a
combination thereof.
The grants covering the three-year periods 2000-02, 2001-03 and 2002-04 are
reflected in this table as follows:
2002: The amounts listed under the restricted stock award column for
2002 represent the value (based on the closing price of the Company's
common stock on December 31, 2002) of the portion of the 2001-03 and
2002-04 grants that were tentatively earned (conditionally vested) by a
named individual in 2002 based on the Company's performance against the
interim annual
16
targets during 2002. The 2000-02 grant was paid out in January 2003, and
the total amount of such grant earned, less the amounts previously
reflected as restricted stock in 2000 and 2001, is included in the named
individual's bonus for 2002.
2003: The 2001-03 grant was paid out in January 2004, and the total
amount of such grant earned, less the amounts previously reflected as
restricted stock in 2001 and 2002, is included in the named individual's
LTIP Payout in 2003.
2004: The 2002-04 grant was paid out on January 2005, and the total
amount of such grant earned, less amounts previously reflected as
restricted stock in 2002, is included in the named individual's LTIP
Payout in 2004.
(5) Represents amounts paid, excluding amounts previously reported, with respect
to the Company's Performance Share Program for the three-year period of
2002-2004. Certain amounts related to such 2002-04 grant were reported as
"restricted stock awards" for 2002 in the Summary Compensation Table in the
Company's proxy statements and are not included in the LTIP Payout amounts
shown above. All amounts earned under the 2002-04 grant were paid out in
cash on January 31, 2005.
(6) Represents amounts paid, excluding amounts previously reported, with respect
to the Company's Performance Share Program for the three-year period of
2001-2003. Certain amounts related to such 2001-03 grant were reported as
"restricted stock awards" for 2001 and 2002 in the Summary Compensation
Table in the Company's proxy statements and are not included in the LTIP
Payout amounts shown above. All amounts earned under the 2001-03 grant were
paid out in cash on January 30, 2004.
(7) Includes amounts attributable during 2004 to benefit plans of the Company as
follows:
<Table>
<Caption>
WAMBOLD CAMPBELL LAZAREDES SCHWAB MORRIS
------- -------- --------- ------- -------
401(k) Plan Contributions....... $13,000 $ 6,263 $13,000 $13,000 $13,000
Group Life Insurance
(Premiums).................... $ 3,301 $ 2,590 $ 2,641 $ 4,800 $ 6,020
Deferred Compensation
Premiums(a)................... 0 $28,900 0 $25,000 0
</Table>
--------------------
(a) Under the Deferred Compensation Plan, participants who elect to invest
a portion of their annual cash incentive bonuses in the Pactiv Common
Stock Index Account receive a premium of one additional Common Stock
Equivalent for each five Common Stock Equivalents purchased, provided
such Common Stock Equivalents are retained for at least three years.
OPTIONS GRANTED IN 2004
The following table shows the number of options to purchase common stock
that were granted by the Company during 2004 to the persons named in the Summary
Compensation Table above.
<Table>
<Caption>
PERCENT OF
SHARES OF TOTAL OPTIONS
COMMON STOCK GRANTED TO GRANT DATE
UNDERLYING OPTIONS EMPLOYEES EXERCISE EXPIRATION PRESENT
GRANTED (#) IN 2004 (%) PRICE(1) DATE VALUE(2)
------------------ ------------- -------- ---------- ----------
Richard L. Wambold.......... 230,000 11.7 $23.98 9/14/14 $1,964,200
Andrew A. Campbell.......... 118,000 6.0 $23.98 9/14/14 $1,007,720
Peter J. Lazaredes.......... 140,000 7.1 $23.98 9/14/14 $1,195,600
James D. Morris............. 118,000 6.0 $23.98 9/14/14 $1,007,720
John N. Schwab.............. 108,000 5.5 $23.98 9/14/14 $ 922,320
</Table>
- ---------------
(1) All options were granted with exercise prices equal to 100% of the fair
market value (the average of the high and the low trading price) of a share
of Company common stock on the date of grant.
(2) Reflects Black-Scholes valuation that was performed using the following
assumptions: 34.0% volatility, 3.3% risk-free interest rate, 0% expected
dividend rate, and 5.0-year option life.
17
OPTIONS AT YEAR-END 2004 VALUES
The following table sets forth the number of stock options held at December
31, 2004 by the persons named in the Summary Compensation Table. No options to
acquire shares of the Company's common stock were exercised by such persons
during 2004.
<Table>
<Caption>
TOTAL NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2004 DECEMBER 31, 2004
----------------------------- -----------------------------
EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
----------- --------------- ----------- ---------------
Richard L. Wambold......... 1,623,002 480,000 $15,831,165 $1,782,135
Andrew A. Campbell......... 620,000 233,000 $ 6,628,700 $ 826,930
Peter J. Lazaredes......... 533,208 255,000 $ 5,240,150 $ 855,750
James D. Morris............ 562,288 223,000 $ 5,214,950 $ 776,530
John N. Schwab............. 437,251 223,000 $ 4,156,450 $ 813,830
</Table>
LONG-TERM INCENTIVE PLANS -- AWARDS IN 2004
This table shows performance share units awarded under the Company's
Performance Share Plan for the three-year term 2004-2006 (the "2004-06 Grant")
to the persons named in the Summary Compensation Table. Each award will be
earned in an amount between 0% and 200% of the target amount, based on (i) the
Company's performance against performance measures selected annually by the
C/N/G Committee, with (ii) the amounts so determined subject to adjustment by
the C/N/G Committee based on other factors related to the Company's performance,
measured both quantitatively and qualitatively, over the three-year period.
Performance share units may be paid in cash, common stock, or a combination
thereof, as determined by the C/N/G Committee.
<Table>
<Caption>
PERFORMANCE OR
NUMBER OF SHARES, OTHER PERIOD UNTIL ESTIMATED FUTURE PAYOUTS
UNITS OR OTHER MATURATION OR ----------------------------
NAME RIGHTS PAYOUT THRESHOLD TARGET MAXIMUM
- ---- ----------------- ------------------ --------- ------ -------
Richard L. Wambold............ 52,000 3 years 0 100% 200%
Andrew A. Campbell............ 22,000 3 years 0 100% 200%
Peter J. Lazaredes............ 20,000 3 years 0 100% 200%
James D. Morris............... 19,000 3 years 0 100% 200%
John N. Schwab................ 19,000 3 years 0 100% 200%
</Table>
18
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 (together, the "Pension Plan") to persons
in specified remuneration and years-of-credited-participation classifications.
<Table>
<Caption>
YEARS OF CREDITED PARTICIPATION
ANNUAL -----------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30
- ------------ - -- -- -- -- --
$ 600,000 $ 47,142 $ 94,285 $141,428 $188,571 $235,714 $ 282,857
$ 700,000 $ 55,000 $110,000 $165,000 $220,000 $275,000 $ 330,000
$ 800,000 $ 62,857 $125,714 $188,571 $251,428 $314,285 $ 377,142
$ 900,000 $ 70,714 $141,428 $212,142 $282,857 $353,571 $ 424,285
$1,000,000 $ 78,571 $157,142 $235,714 $314,285 $392,857 $ 471,428
$1,100,000 $ 86,428 $172,857 $259,285 $345,714 $432,142 $ 518,571
$1,200,000 $ 94,285 $188,571 $282,857 $377,142 $471,428 $ 565,714
$1,300,000 $102,142 $204,285 $306,428 $408,571 $510,714 $ 612,857
$1,400,000 $110,000 $220,000 $330,000 $440,000 $550,000 $ 660,000
$1,500,000 $117,857 $235,714 $353,571 $471,428 $589,285 $ 707,142
$1,600,000 $125,714 $251,428 $377,142 $502,857 $628,571 $ 754,285
$1,700,000 $133,571 $267,142 $400,714 $534,285 $667,857 $ 801,428
$1,800,000 $141,428 $282,857 $424,285 $565,714 $707,142 $ 848,571
$1,900,000 $149,285 $298,571 $447,857 $597,142 $746,428 $ 895,714
$2,000,000 $157,143 $314,286 $471,429 $628,571 $785,714 $ 942,857
$2,100,000 $165,000 $330,000 $495,000 $660,000 $825,000 $ 990,000
$2,200,000 $172,857 $345,714 $518,571 $691,428 $864,285 $1,037,142
</Table>
- ---------------
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), determined over a three-year period. The
benefits are not subject to any deduction for Social Security or other offset
amounts. The estimated credited years of service for Messrs. Wambold,
Campbell, Lazaredes, Morris and Schwab are 26, 4, 23, 29 and 8, respectively.
See the Summary Compensation Table above for salary and bonus information for
these individuals.
2. Commencing at age 55 or at his separation from the Company, whichever is
later, Mr. Wambold's benefits, at a minimum, shall be determined by
multiplying his average total base compensation plus bonus, determined over
the three-year period immediately preceding his separation from service, by
25% plus 2.5% for each year service in the period commencing January 1, 1997
up to a maximum of 50%. Until he is age 55, Mr. Lazaredes' eligibility and
benefits (including years of credit participation) shall be computed as
though he were age 55.
CHANGE-OF-CONTROL AGREEMENTS
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 equal to two to three times the sum of the executive's annual
base salary in effect at the date of termination of employment and the greater
of the average amount of incentive compensation received by the executive over
the preceding three years or the targeted annual awards under such plans. Under
the plan, Messrs. Wambold, Campbell, Lazaredes, Morris, and Schwab would have
been entitled to receive payments in the amount
19
of $5,010,012, $1,846,500, $2,250,000, $1,749,006, and $1,605,006, respectively,
if their positions had been terminated on December 31, 2004, following a
"change-in-control." In addition, any restricted shares held in the name of
those individuals would automatically become unrestricted, all of their
performance share units would become fully vested and payable, each would be
credited with an additional three years of service under the Pension Plan, and
all of their stock options would become fully vested.
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR 2005
(PROPOSAL 2)
Financial statements of the Company and its consolidated subsidiaries as of
and for the year ended December 31, 2004, are included in the Company's Annual
Report furnished to all shareholders. These financial statements were audited by
Ernst & Young LLP. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting, will have the opportunity to make a statement if
they desire to do so, and are expected to be available to respond to appropriate
questions.
The Audit Committee has selected Ernst & Young LLP as the Company's
independent public accountants for the year 2005. The Board is seeking
shareholder ratification of this selection. If the shareholders should not
ratify the appointment of Ernst & Young LLP as the Company's independent public
accountants for the year 2005 the Audit Committee would reconsider the
appointment.
AUDIT AND NON-AUDIT FEES
The following presents fees for professional audit services rendered by
Ernst & Young LLP for the audit of the Company's annual consolidated financial
statements for 2004 and 2003, and fees for other services rendered by Ernst &
Young LLP for 2004 and 2003.
<Table>
<Caption>
TYPE OF FEE 2004 2003
- ----------- ---------- ----------
Audit Fees(1).............................................. $3,288,000 $1,540,980
Audit-Related Fees(2)...................................... $1,214,000 $ 174,690
Tax Fees................................................... 0 $ 9,800
All Other Fees............................................. 0 0
</Table>
- ---------------
(1) Including professional services in connection with their audit of the
Company's annual consolidated financial statements, reviews of the
consolidated financial statements included in the Company's quarterly
reports on Forms 10-Q, and assessment of the Company's internal controls and
management's report on such controls.
(2) Including benefit plan audits and due diligence related to acquisitions and
dispositions.
All audit and non-audit services rendered by Ernst & Young LLP were
approved by the Audit Committee, which considered whether the provision of
non-audit services was compatible with maintaining Ernst & Young LLP's
independence.
The Audit Committee has adopted a policy with respect to pre-approval of
certain types of audit and non-audit related services specifically described by
the Audit Committee on an annual basis. In general, the Audit Committee has
pre-approved the provision of certain audit services and audit-related services,
in each case up to an annual amount which varies by the type of services.
Individual engagements anticipated to exceed such pre-established thresholds
must be separately approved. This policy also sets forth certain services which
the Company's independent public accountant is prohibited from providing to the
Company. The policy authorizes the Audit Committee to delegate to one or more of
its members pre-approval authority with respect to permitted services. In 2004,
approximately 7.2% of the non-audit services that were approved by the Audit
Committee were approved pursuant to its pre-approval policies and procedures.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE YEAR 2005.
20
OTHER INFORMATION
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information of each person that, as
of December 31, 2004, reported beneficial ownership of more than 5% of the
Company's common stock. This information is based solely on such person's
filings on Schedule 13G under the Securities Exchange Act of 1934.
<Table>
<Caption>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
Barclays Global Investors................................ 8,309,702(1) 5.5%
45 Fremont Street
San Francisco, CA 94105
Lord, Abbett & Co. LLC................................... 13,592,327 9.1%
90 Hudson Street
Jersey City, NY 07302
Wellington Management Company, LLP....................... 12,676,679(2) 8.5%
75 State Street
Boston, MA 02109
</Table>
- ---------------
(1) Includes 7,471,813 shares over which Barclays Global Investors (or its
affiliates) have sole voting power. The shares shown are held by Barclays
Global Investors, NA, and certain other banks affiliated with Barclays
Global Investors, NA. Of such amount, 6,966,288 shares (6,175,694 shares
over which it has sole voting power) were reported as held of record by
Barclays Global Investors, NA. Such shares are held in trust accounts for
the economic benefit of the beneficiaries of those accounts.
(2) Includes 8,681,479 shares over which Wellington Management Company has
shared power to vote or direct the vote. The shares shown are owned of
record by clients of Wellington Management Company, an investment advisor.
Those clients have the right to receive, or the power to direct the receipt
of, dividends from, or the proceeds from the sale of, such shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who are beneficial owners of more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission and the New York Stock Exchange, and to furnish the Company
with copies of these forms. To the Company's knowledge, based solely on its
review of the copies of Forms 3, 4 and 5 filed on behalf of the directors and
executive officers, the Company believes that all officers and directors of the
Company complied with all filing requirements imposed by Section 16(a) of the
Exchange Act during 2004.
The Company does not know of any persons who hold more than 10% of the
common stock of the Company.
SHAREHOLDER NOMINATIONS AND OTHER PROPOSALS FOR 2006 ANNUAL MEETING OF
SHAREHOLDERS
NOMINATIONS FOR DIRECTORS. A shareholder of the Company may nominate
persons for election to the Company's Board of Directors 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, at the times set forth in the following paragraph regarding
notices for shareholder proposals. The Company's policy with respect to
nominations by shareholders of candidates to the Board of Directors is described
above in "Corporate Governance -- Board
Committees -- Compensation/Nominating/Governance Committee."
21
SHAREHOLDER PROPOSALS -- INCLUSION IN THE COMPANY'S 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 2006 Annual Meeting
of Shareholders, the proposal must be received by the Company at its principal
executive offices by December 5, 2005.
OTHER SHAREHOLDER PROPOSALS. 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 20, 2006, or later than February 19, 2006.
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.
ANNUAL REPORT ON FORM 10-K
THE ANNUAL REPORT, WHICH INCLUDES PORTIONS OF THE COMPANY'S FORM 10-K,
ACCOMPANIES THIS PROXY STATEMENT BUT IS NOT DEEMED A PART OF THE PROXY
SOLICITATION MATERIAL. THE COMPANY WILL FURNISH TO ANY SHAREHOLDER, WITHOUT
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2004, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. A COPY OF THIS
REPORT MAY BE OBTAINED UPON ORAL OR WRITTEN REQUEST TO JAMES V. FAULKNER, JR.,
SECRETARY, PACTIV CORPORATION, 1900 WEST FIELD COURT, LAKE FOREST, ILLINOIS
60045. THE COMPANY'S FORM 10-K AND OTHER PUBLIC FILINGS ARE ALSO AVAILABLE
THROUGH THE SECURITIES AND EXCHANGE COMMISSION'S INTERNET WEB SITE (WWW.SEC.GOV)
AND ON THE COMPANY'S WEBSITE (WWW.PACTIV.COM).
22
QUESTIONS AND ANSWERS REGARDING ANNUAL MEETING AND VOTING
WHO MAY VOTE AT THE ANNUAL MEETING? If you are a holder of common stock on
the record date (March 21, 2005), you will have one vote for each share of
common stock that you hold on each matter that is presented for action at the
Annual Meeting. If you have shares that are registered in the name of a broker,
your broker will forward your proxy materials to you and will vote your shares
as you indicate. You may receive more than one proxy card if your shares are
registered in different names or are held in more than one account.
WHO MAY ATTEND THE ANNUAL MEETING? Attendance at the Annual Meeting is
limited to shareholders as of the record date or their proxies.
- If your shares are registered in your name, an admission ticket is
attached to the proxy card sent with this proxy statement. Persons must
present admission tickets issued in their names and valid
government-issued photo identification, such as a driver's license or
passport. Shareholders who plan to attend the Annual Meeting should vote
by one of the methods described in this proxy statement but keep the
admission tickets and bring them to the Annual Meeting.
- If you hold stock in "street name" (a bank or broker holds your shares)
and you would like to attend the Annual Meeting, you may bring to the
meeting a copy of a brokerage statement showing ownership as of the
record date, March 21, 2005, and valid government-issued photo
identification, such as a driver's license or passport.
- Cameras, recording devices or other electronic devices, as well as large
bags, briefcases or packages, will not be allowed in the meeting.
- If you are an authorized proxy, you must present the executed proxy and
the photo identification as described above.
WHAT IS THE RECORD DATE? Your Board of Directors has selected the close of
business on March 21, 2005, as the record date for determining the shareholders
of record who are entitled to vote at the Annual Meeting. This means that all
shareholders of record at the close of business on March 21, 2005, may vote
their shares at the Annual Meeting. On the record date, the Company had issued
and outstanding 152,369,368 shares of its common stock (of which 149,169,368 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).
WHAT CONSTITUTES A QUORUM? The presence at the Annual Meeting, in person or
by proxy, of holders of a majority of the shares authorized to vote constitutes
a quorum for the transaction of business. If you submit a properly completed
proxy, vote by our telephone or Internet voting procedures, or if you attend the
Annual Meeting to vote in person, your shares will be considered present.
Directions to withhold authority to vote for any director, abstentions and
broker non-votes will be counted as present to determine if a quorum for the
transaction of business is present. Once a quorum is present, voting on specific
proposals may proceed. In the absence of a quorum, the Annual Meeting may be
adjourned.
ON WHAT WILL I BE VOTING? You are being asked to vote on the two matters
identified under the heading "Proposals Submitted for Vote." By executing the
proxy card, or submitting your proxy via the telephone or Internet, you will
also be granting to Richard L. Wambold, Robert J. Darnall, and James V.
Faulkner, Jr. discretionary authority to vote your shares on any other proposals
that may properly come before the Annual Meeting.
HOW DO I VOTE? You can vote four ways: (1) by signing and dating each proxy
card you receive and returning it in the included prepaid envelope; (2) by
following the instructions for telephonic voting on the proxy card; (3) by
following the instructions for Internet voting on the proxy card; or (4) by
attending the Annual Meeting and voting in person. Even if you are planning on
attending the Annual Meeting, we request that you vote by one of the other three
procedures -- should you wish to change
23
your vote at the Annual Meeting, you may do so, but voting by the other
procedures will help ensure our obtaining a quorum for the Annual Meeting.
If you vote by using the proxy card, you must sign, date and return the
proxy card in the envelope provided. You may specify your choices by marking the
appropriate boxes on the card.
In lieu of returning signed proxy cards, you can vote your shares over the
Internet or by calling a specially designated telephone number that appears on
the proxy cards. Internet and telephonic voting procedures are designed to
authenticate shareholders' identities, allow shareholders to provide their
voting instructions and confirm the proper recording of such instructions. If
you give your proxy instructions through the Internet or by telephone, please do
not return your proxy cards.
CAN I REVOKE MY PROXY? You have the right to revoke your proxy at any time
before it is voted at the Annual Meeting. To revoke your proxy, you may give
written notice of such revocation to the Secretary of the Company, deliver a
subsequent duly executed proxy to the Company in the same manner in which you
voted in the first instance, or vote in person at the Annual Meeting. Notice of
revocation or a subsequent proxy must be received by the Secretary of the
Company before the vote at the Annual Meeting.
HOW WILL MY SHARES BE VOTED? All properly completed and unrevoked proxies
that are received prior to the close of voting at the Annual Meeting (or, in the
case of shares held in the Pactiv Corporation 401(k) Plans, that are received by
May 18, 2005) will be voted in accordance with the your instructions. If a
properly executed, unrevoked written proxy card does not specifically direct the
voting of shares covered, the proxy will be voted:
(1) FOR the election of all nominees for election as directors
described in this proxy statement;
(2) FOR the ratification of Ernst & Young LLP as the Company's
independent public accountants for the year 2005; and
(3) in accordance with the judgment of the persons named in the proxy
as to such other matters as may properly come before the Annual Meeting.
If you hold shares through a broker and do not give specific voting
instructions to the broker on how you wish to vote on Proposals 1 and 2
described in this proxy statement, then the broker may vote your shares at the
broker's discretion.
If there are any shareholder proposals at the Annual Meeting that are not
included in the Company's proxy statement and form of proxy, the persons named
in the proxy may utilize discretionary authority conferred by proxy in voting on
any such proposals.
WHAT IS A BROKER NON-VOTE? Broker non-votes occur when nominees, such as
banks and brokers holding shares on behalf of beneficial owners, do not receive
voting instructions from the beneficial holders in accordance with the nominee's
instructions. If that happens, nominees may generally vote those shares only on
matters considered "routine" by the New York Stock Exchange, such as the
election of directors addressed by Proposal 1 and the ratification of the
Company's independent public accountants addressed in Proposal 2 in this proxy
statement. On non-routine matters, nominees do not have discretion to vote the
shares. If a nominee fails to exercise its discretion, or does not have
discretion, to vote the shares, a "broker non-vote" occurs.
HOW WILL WITHHOLDING AUTHORITY, ABSTENTIONS AND "BROKER NON-VOTES" AFFECT
VOTING RESULTS? With respect to Proposal 1 (the re-election of directors), the
individuals receiving a plurality of the votes cast at the Annual Meeting (in
person or by proxy) will be elected as directors. As a result, if you withhold
your authority to vote, or if there is a broker non-vote, for any director, your
vote and any broker non-vote will not count for or against such director.
Approval of Proposal 2 (the ratification of the independent public accountants)
requires the vote of the majority of shares present (whether in person or by
proxy) and entitled to vote. Therefore, abstentions will have the effect of
votes against, and broker non-votes, because they are not "entitled to vote,"
will have no affect on, Proposal 2.
24
WHAT IF I AM A BENEFICIAL HOLDER RATHER THAN A HOLDER OF RECORD? If you
hold your shares through a broker, bank or other nominee you will receive
instructions from the nominee describing how to vote your shares.
WHO IS SOLICITING MY PROXY? The Board of Directors of the Company is
soliciting your proxy. Directors, officers and other employees of the Company
may solicit proxies by mail, telephone, or in person. In addition, Georgeson &
Co., Inc., New York, New York, has been retained to assist the Company in the
solicitation of proxies.
DOES THE COMPANY PAY ANYONE TO SOLICIT PROXIES? The Company will pay
Georgeson & Co., Inc. an amount not to exceed $25,000 for soliciting proxies for
the Annual Meeting and will reimburse brokerage firms, dealers, banks, voting
trustees, their nominees and other record holders for their out-of-pocket
expenses in forwarding proxy materials to the beneficial owners of the common
stock. Directors, officers and other employees who participate in soliciting
proxies will not receive any compensation from the Company for doing so, other
than their usual compensation.
CAN I RECEIVE FUTURE SHAREHOLDER COMMUNICATIONS OVER THE INTERNET? Yes. You
may consent to access future shareholder communications (e.g., annual reports,
proxy statements, and interim communications) from or on behalf of the Company
over the Internet instead of receiving those documents in the mail. Providing
such communications over the Internet will reduce the Company's printing and
postage costs and the number of paper documents you would otherwise receive. If
you give your consent, in the future, when, and if, material is available over
the Internet, you will receive notification which will contain the Internet
location of the material. There is no cost to you for this service other than
charges you may incur from your Internet provider, telephone and/or cable
company. Once you have given your consent, it will remain in effect until you
inform the Company otherwise. To give your consent, if your shares are
registered in your name, check the appropriate box on the proxy card or, if you
are voting over the Internet or by telephone, follow the prompts you will
receive when you vote. If your shares are registered in the name of a nominee,
follow the directions provided by such nominee if this option is available.
25
PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000 [PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
April 4, 2005
Dear Benefit Plan Participant:
The Annual Meeting of Shareholders of Pactiv Corporation is scheduled to be
held at the Hilton Northbrook, 2855 N. Milwaukee Ave., Northbrook, Illinois
60062, at 10:30 a.m. local time on Friday, May 20, 2005. 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"), as holder of record
of the shares in your account, how to vote the shares of Pactiv Corporation
stock held in your account. In accordance with the plan, 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
FOR the election of the nominees for directors named in the Proxy Statement, FOR
the ratification of the appointment of Ernst & Young LLP as the Company's
independent public accountants for the year 2005, and as recommended by
management on all other matters to be considered at the Annual Meeting.
You can also vote using our telephonic or Internet voting procedures, as
described on the enclosed proxy card.
If you do not return your executed form of proxy to the Trustee or vote
using our telephonic or Internet voting procedures, then your shares cannot be
used to establish a quorum for the Annual Meeting or be voted by the Trustee.
Your vote is important. Please vote using our telephonic or Internet voting
procedures or send your executed form of proxy card with your voting
instructions at your earliest opportunity, but in any case so that it can be
received no later than May 18, 2005, so that it will reach the Transfer Agent in
time to be counted and voted. For your convenience, a return envelope is
enclosed.
YOUR BENEFITS COMMITTEE
----------------------------------------
(PACTIV LOGO) VOTE BY TELEPHONE
Advanced Packaging Solutions ----------------------------------------
Have your proxy card available when you
call the TOLL-FREE NUMBER 1-800-542-1160
C/O NATIONAL CITY BANK using a Touch-Tone phone and follow the
CORPORATE TRUST OPERATIONS simple instructions to record your vote.
LOCATOR 5352 ----------------------------------------
P. O. BOX 94990 VOTE BY INTERNET
CLEVELAND, OH 44101-4301 ----------------------------------------
Have your proxy card available when you
access the website
HTTP://WWW.VOTEFAST.COM and follow the
simple instructions to record your vote.
----------------------------------------
VOTE BY MAIL
----------------------------------------
Please mark, sign and date your proxy
card and return it in the POSTAGE-PAID
ENVELOPE provided or return it to:
National City Bank, P.O. Box 565800,
Pittsburgh, PA 15253.
- ----------------------- ------------------------ ------------------
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEBSITE and Return your proxy
Touch-Tone phone: cast your vote: in the POSTAGE-PAID
1-800-542-1160 HTTP://WWW.VOTEFAST.COM envelope provided
- ----------------------- ------------------------ ------------------
VOTE 24 HOURS A DAY, 7 DAYS A WEEK!
YOUR TELEPHONE OR INTERNET VOTE MUST BE RECEIVED BY 11:59 P.M. EASTERN TIME ON
THURSDAY, MAY 19, 2005 TO BE COUNTED IN THE FINAL TABULATION.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT SEND YOUR PROXY BY MAIL.
=========================
-->
========================
PROXY MUST BE SIGNED AND DATED BELOW.
o PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. o
- --------------------------------------------------------------------------------
PACTIV CORPORATION PROXY/CONFIDENTIAL VOTING INSTRUCTIONS
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS ON MAY 20, 2005. The undersigned does hereby appoint
Richard L. Wambold, Robert J. Darnall and James V. Faulkner, Jr., 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, 2005, and entitled to
vote at the Annual Meeting of Shareholders of Pactiv Corporation to be held at
10:30 a.m., May 20, 2005, or at any adjournment thereof, and to vote, in their
discretion, upon such other matters as may properly come before the Annual
Meeting.
BENEFIT PLAN PARTICIPANTS:
This card also serves as voting instructions to the Trustees of the various
Plans. By signing below, you are instructing the Trustees of the plans to vote
all shares of Common Stock of Pactiv Corporation represented by your
proportionate interest in the Trusts at the Annual Meeting of Shareholders to be
held on May 20, 2005, and at all adjournments thereof, upon the matters set
forth on the reverse side hereof and upon such other matters as may properly
come before the Annual Meeting. Only the Trustees can vote your shares. Your
shares cannot be voted in person at the Annual Meeting. How you vote these
shares is confidential. The Trustees will not disclose how you have instructed
the Trustees to vote. If the Trustees do not receive your voting instructions by
May 18, 2005, either by telephone, Internet or receipt of this signed voting
instruction card, the shares credited to your account will not be voted at the
Annual Meeting.
--------------------------------------------
Signature
--------------------------------------------
Signature
Date:
---------------------------------------
INSTRUCTIONS: Please sign exactly as shown
hereon. Joint owners should each sign.
When signing as a fiduciary, attorney,
executor, administrator, trustee or
guardian, or on behalf of a corporation,
bank, trust company, or other similar
entity, your title or capacity should be
shown.
<Table>
NON TRANSFERABLE ADMISSION TICKET NON TRANSFERABLE
Please bring this ticket if you attend the Annual Meeting.
It will expedite your admittance when presented upon arrival.
PACTIV CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
Friday, May 20, 2005
10:30 a.m.
Hilton Northbrook
2855 N. Milwaukee Avenue
Northbrook, Illinois 60062
PLEASE NOTE: ATTENDANCE AT THE ANNUAL MEETING WILL BE LIMITED TO SHAREHOLDERS OF PACTIV
AS OF THE RECORD DATE OR THEIR PROXY HOLDER. GUESTS ARE NOT PERMITTED AT THE MEETING.
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o PLEASE FOLD AND DETACH CARD AT PERFORATION. o
ELECTRONIC ACCESS TO FUTURE DOCUMENTS NOW AVAILABLE
You have the option to access our future shareholder communications (e.g.,
annual reports, proxy statements, related proxy materials) over the Internet
instead of receiving those documents in print. Participation is completely
voluntary. If you give your consent, in the future, when our material is
available over the Internet, you will receive notification which will contain
the Internet location where the material is available. Our material will be
presented in PDF format. There is no cost to you for this service other than any
charges you may incur from your Internet provider, telephone and/or cable
company. Once you give your consent, it will remain in effect until you inform
us otherwise. You may revoke your consent at any time after you give it by
notifying the Company's transfer agent, National City Bank, Post Office Box
92301 Cleveland, Ohio 44193-0900, or the Company in writing.
To give your consent, follow the prompts when you vote by telephone or over the
Internet or check the appropriate box located at the bottom of the attached
proxy card when you vote by mail.
PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
o PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. o
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PACTIV CORPORATION PROXY/CONFIDENTIAL VOTING INSTRUCTIONS
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Please indicate how you wish your shares to be voted. Unless otherwise
indicated, the proxies will vote "FOR" all proposals.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ALL PROPOSALS.
1. ELECTION OF DIRECTORS
Nominees:
(01) Larry D. Brady (02) K. Dane Brooksher (03) Robert J. Darnall (04) Mary R. (Nina) Henderson
(05) Roger B. Porter (06) Richard L. Wambold (07) Norman H. Wesley
[ ] FOR all nominees listed above. [ ] WITHHOLD AUTHORITY
(except as listed to the contrary below) to vote for all nominees listed above.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME OR NUMBER BELOW:
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2. RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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[ ] Please check this box if you consent to access future Annual Reports and Proxy Statements via the Internet.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
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