SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant
x
Filed by a
Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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x
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Rule 14a-12
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Caraustar
Industries, Inc.
(Name of
Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of transaction:
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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.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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April 20, 2009
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of Caraustar Industries, Inc. The meeting will be held on
Wednesday, May 20, 2009, at 10:00 A.M. at the corporate headquarters of Caraustar Industries, Inc., 5000 Austell-Powder Springs Road, Suite 300, Austell, Georgia.
The primary business of the meeting will be to elect directors, to ratify the selection of our independent registered public accountants and to take action upon any other business that may properly come before the
meeting or any adjournment or postponement thereof. The proposals are more fully explained in the enclosed proxy statement.
We hope to see you on
May 20, 2009.
Whether you plan to attend or not, as soon as possible please complete, sign, date and return the enclosed proxy card
in the postage-paid envelope provided, or vote your proxy over the telephone as described on the endorsed
proxy card. Your vote is important. We appreciate your continued interest in and support of Caraustar.
Sincerely yours,
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CARAUSTAR INDUSTRIES, INC.
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/s/ Daniel P. Casey
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/s/ Michael J. Keough
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Daniel P. Casey
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Michael J. Keough
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Chairman of the Board
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President and Chief Executive Officer
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PHONE 770
948
3101
P.O. BOX 115
AUSTELL, GA 30168-0115
5000 AUSTELL-POWDER SPRINGS ROAD, SUITE 300
AUSTELL, GA 30106-3227
www.caraustar.com
CARAUSTAR INDUSTRIES, INC.
NOTICE OF THE 30TH ANNUAL MEETING OF SHAREHOLDERS
OF CARAUSTAR INDUSTRIES,
INC.
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Date:
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Wednesday, May 20, 2009
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Time:
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10:00 a.m., Eastern Daylight Savings Time
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Place:
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5000 Austell-Powder Springs Road, Suite 300
Austell, Georgia 30106
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Purposes:
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1. To elect four Class II Directors to serve on the Board of Directors until the Annual Meeting in
2012;
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2. To ratify the appointment of the Companys independent registered public accounting firm for the year
ending December 31, 2009; and
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3. To transact such other business that may properly come before the Annual Meeting and any adjournment thereof.
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Who Can Vote:
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Shareholders at the close of the record date, March 9, 2009.
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How You Can Vote:
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You may vote your proxy by marking, signing and dating the enclosed proxy card and returning it as soon as possible using the enclosed envelope. Or, you can vote over the telephone as described
on the enclosed proxy card.
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Who May Attend:
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All shareholders are invited to attend the Annual Meeting in person.
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By Order of the Board of Directors
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/s/ Wilma Elizabeth Beaty
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Wilma Elizabeth Beaty
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VP, General Counsel and Secretary
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Your vote is important! Whether you own one share or many, your prompt cooperation in voting your proxy
is greatly appreciated.
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 20, 2009:
This proxy statement, along with our 2008 Annual Report to Shareholders are available at http://phx.corporate-ir.net/Phoenix.zhtml?c=110896&p=irol-ReportsAnnual.
PROXY STATEMENT
FOR THE
30th ANNUAL MEETING OF SHAREHOLDERS OF
CARAUSTAR INDUSTRIES, INC.
TO BE HELD WEDNESDAY MAY 20, 2009
This Proxy Statement, the accompanying proxy card and the Annual Report to Shareholders of Caraustar Industries, Inc. (the Company or
Caraustar) are being mailed on or about April 20, 2009. The Board of Directors (the Board) of the Company is soliciting your proxy to vote your shares at the 30th Annual Meeting of Shareholders (the Meeting).
The Board is soliciting your proxy to give all shareholders of record the opportunity to vote on matters that will be presented at the Meeting. This Proxy Statement provides you with information on these matters to assist you in voting your shares.
Who is the Proxy Committee?
The Proxy
Committee was appointed by the Board at their meeting held on February 18, 2009, and is comprised of Daniel P. Casey, James E. Rogers and Robert J. Clanin.
What is a proxy?
A proxy is your legal designation of another person (the proxy) to vote on your behalf. By
completing and returning the enclosed proxy card, you are giving the Proxy Committee appointed by the Board the authority to vote your shares in the manner you indicate on your proxy card.
Why did I receive more than one proxy card?
You may
receive multiple proxy cards if you hold your shares in different ways (
e.g.
, joint tenancy, trusts, custodial accounts) or in multiple accounts. If your shares are held by a broker (
i.e.
, in street name), you will receive
your proxy card or other voting information from your broker, and you will return your proxy card or cards to your broker. You should vote on and sign each proxy card you receive.
Voting Information
Who is qualified to vote?
You are qualified to receive notice of and to vote at the meeting if you owned shares of Common Stock of the Company at the close of business on our
record date of March 9, 2009.
How many shares of Common Stock may vote at the Meeting?
As of the record date, March 9, 2009, there were 30,041,079 shares of Common Stock outstanding and entitled to vote. Each share of Common Stock is
entitled to one vote on each matter presented.
What is the difference between a shareholder of record and a street name holder?
These terms describe how your shares are held. If your shares are registered directly in your name with BNY Mellon, the Companys
transfer agent, you are a shareholder of record. If your shares are held in the name of a brokerage, bank, trust or other nominee as custodian, you are a street name holder.
How do I vote my shares?
If you are a
shareholder of record, you have the following options. You can vote your proxy:
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By mailing in the enclosed proxy card; or
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Please refer to the
specific instructions set forth on the enclosed proxy card.
If you hold your shares in street name, your broker, bank,
trustee, or nominee will provide you with materials and instructions for voting your shares.
Can I vote my shares in person at the Meeting?
If you are a shareholder of record, you may vote your shares in person at the Meeting. If you hold your shares in
street name, you must obtain a proxy from your broker, bank, trustee, or nominee, giving you the right to vote the shares at the Meeting.
What are the Boards recommendations on how I should vote my shares?
The Board recommends that you vote your shares as
follows:
Proposal 1
FOR
the election of all four nominees for Class II Directors with terms expiring at the 2012 Annual Meeting
of Shareholders.
Proposal 2
FOR
the ratification of the appointment of Deloitte & Touch LLP as the Companys
independent registered public accounting firm for the fiscal year ending December 31, 2009.
What are my choices when voting?
Proposal 1You may cast your vote in favor of electing the nominees as Directors or withhold your vote on one or more nominees.
Proposal 2You may cast your vote in favor of or against each proposal, or you may elect to abstain from voting your shares.
How would my shares be voted if I do not specify how they should be voted?
If you sign and return your proxy card without indicating how you want your shares to be voted, the Proxy Committee appointed by the Board will vote your shares as follows:
Proposal 1
FOR
the election of all four nominees for Class II Directors with terms expiring at the 2012 Annual Meeting of Shareholders.
Proposal 2
FOR
the ratification of the appointment of Deloitte & Touche LLP as the Companys independent
registered public accounting firm for the fiscal year ending December 31, 2009.
2
How are votes, abstentions and broker non-votes treated?
Votes withheld and abstentions are deemed as present at the Meeting, are counted for quorum purposes and, other than for Proposal 1, will have
the same effect as a vote against the matter. Broker nonvotes, if any, while counted for general quorum purposes, are not deemed to be present with respect to any matter for which a broker does not have authority to vote.
Can I change my vote after I have mailed in my proxy card?
You may revoke your proxy by doing one of the following:
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By sending a written notice of revocation to the Secretary of the Company that is received prior to the Meeting, stating that you revoke your proxy;
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By signing a later-dated proxy card and submitting it so that it is received prior to the Meeting in accordance with the instructions included in the proxy card(s);
or
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By attending the Meeting as a shareholder of record and voting your shares in person.
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What vote is required to approve each proposal?
Proposal 1 requires a plurality of the votes cast to elect a director, meaning that the four nominees receiving the greatest number of votes cast will be elected.
Proposal 2 requires the affirmative vote of a majority of those shares present in person and represented by proxy and entitled to vote thereon at the
Meeting.
Who will count the votes?
Representatives from BNY Mellon, the Companys transfer agent, will count the votes and serve as the Inspector of Election. The Inspector of Election will be present at the Meeting.
Who pays the cost of this proxy solicitation?
The
Company will bear the entire cost of preparing this proxy statement and of soliciting the enclosed proxy appointment forms. In addition to the solicitation of the proxies by mail, the Company will request banks, brokers and other record holders to
send proxy appointment forms and proxy material to the beneficial owners of the Companys common stock and secure their voting instructions, if necessary. The Company will reimburse them for their reasonable expenses in so doing. If necessary,
the Company may use several of its regular employees, who will not be specially compensated, to solicit proxy appointment forms from shareholders, personally or by telephone, telegram or special letter.
Is this Proxy Statement the only way that proxies are being solicited?
No. As stated above, the Company may use several of its regular employees, who will not be specially compensated, to solicit proxy appointment forms from shareholders, personally or by telephone, telegram or special
letter.
If you have any further questions about voting your shares or attending the meeting please contact our Investor Relations Department at
770.745.3779 or
csarinvestor@caraustar.com
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April 20, 2009
3
PROPOSAL 1
Election of Class II Directors
Composition of the Board
Through 2008, the Board consisted of ten directors. Currently, the Board consists of nine directors. The reduction in the size of the Board is
attributable to the resignation of Mr. Zarnikow on April 3, 2009.
The full Board consists of nine Directors. The Board is divided
into three classes, with Class I having two directors, Class III having three Directors and Class II having four Directors. The Directors in each class serve a three-year term. The terms of each class expire at successive annual meetings so that the
shareholders elect one class of Directors at each annual meeting.
The current composition of the Board is:
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Class II Directors
(term expiring at this annual meeting)
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Ronald J. Domanico
Charles H. Greiner, Jr.
John T. Heald, Jr.
Michael J. Keough
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Class III Directors
(term expiring at the 2010 annual meeting)
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Daniel P. Casey
Robert J. Clanin
James E. Rogers
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Class I Directors
(term expiring at the 2011 annual meeting)
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L. Celeste Bottorff
Dennis M. Love
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The election of four, Class II Directors will take place at the Meeting. At its February 18,
2009 meeting, the Board approved the recommendation of the Nominating and Governance Committee that all four incumbent Class II Directors be nominated for another three-year term.
If elected, each of the four, Class II Director nominees will serve on the Board until the 2012 annual meeting, or until their successors are duly
elected and qualified in accordance with the Companys bylaws. If any of the four nominees should become unable to serve for any reason, the persons named on the proxy card as proxies may vote for other person(s) selected by the Nominating and
Corporate Governance Committee. Management has no reason to believe that any of the four nominees for elections named below will be unable to serve.
Your Board Recommends That Shareholders
Vote
FOR
All Four Nominees Listed Below
CLASS II DIRECTORS
(Nominees for
election to serve until the 2012 Annual Meeting)
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RONALD J. DOMANICO
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Age:
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50
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Director Since:
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2006
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Principal Occupation:
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Senior Vice President and Chief Financial Officer, Caraustar Industries, Inc.
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Mr. Domanico has been employed by the Company since October 2002.
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Other Public
Directorships:
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None.
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CHARLES H. GREINER, JR.
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Age:
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61
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Director Since:
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2004
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Principal Occupation:
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Senior Vice President (Retired), International Paper Company, a global paper and paper distribution, packaging and forest products company.
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Mr. Greiner served as Senior Vice President Commercial Development, Printing Papers of International Paper from 2003 until his retirement in June 2004 and as Senior Vice President,
Printing and Communications Papers of International Paper Company from 1999 to 2003.
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Other Public
Directorships:
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None.
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JOHN T. HEALD JR.
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Age:
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63
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Director Since:
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2006
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Principal Occupation:
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President (Retired), John H. Harland Company/Harland Printed Products, Decatur, Georgia.
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Prior to his retirement Mr. Heald served as President of Harland Printed Products for three years. From 2001 until 2002, Mr. Heald was President and Chief Executive Officer of
Baldwin Technology Company.
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Other Public
Directorships:
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None.
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MICHAEL J. KEOUGH
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Age:
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57
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Director Since:
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2002
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Principal Occupation:
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President and Chief Executive Officer, Caraustar Industries, Inc.
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Mr. Keough has been employed by the Company since March 4, 2002, initially serving as its Senior Vice President and Chief Operating Officer from March 4, 2002 through
December 31, 2004, and as President and Chief Executive Officer since January 1, 2005.
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Other Public
Directorships:
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None.
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CLASS III DIRECTORS
(Incumbents to serve until 2010 Annual Meeting)
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DANIEL P. CASEY
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Age:
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66
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Director Since:
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2003
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Principal Occupation:
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Vice Chairman and Chief Financial Officer
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(Retired), Gaylord Container Corporation, a major integrated producer of brown paper packaging products. Mr. Casey served as Vice Chairman of the Board of Directors and Chief Financial
Officer of Gaylord Container Corporation from 2000 until his retirement in 2002.
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Other Public
Directorships:
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Mr. Casey also serves as a Director of Amcol International (currently serving on its audit, compensation and executive
committees).
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ROBERT J. CLANIN
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Age:
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65
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Director Since:
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2001
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Principal Occupation:
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Senior Vice President and Chief Financial Officer
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(Retired), United Parcel Service. Mr. Clanin served as Senior Vice President and Chief Financial Officer of United Parcel Service from 1994 until his retirement on January 1, 2001
after 31 years of service. Mr. Clanin also served as a director of United Parcel Service between 1996 and 2000.
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Other Public Directorships:
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Mr. Clanin currently serves as a director of JetBlue Airways Corporation (currently serving on its audit committee).
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JAMES E. ROGERS
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Age:
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63
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Director Since:
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1993
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Principal Occupation:
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President, SCI Investors Inc., a private equity investment firm. Mr. Rogers has been President of SCI Investors Inc. since April 1993. From 1993 to 1996, Mr. Rogers also served as
Chairman of Custom Papers Group, Inc., a paper manufacturing company.
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Other Public
Directorships:
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Mr. Rogers also serves as a director of Owens & Minor, Inc. (currently serving as its lead director), and New Market Corporation
(currently serving as the chair of its compensation committee and on its nominating and governance committee).
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CLASS I DIRECTORS
(Incumbents to serve until the 2011 Annual Meeting)
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L. CELESTE BOTTORFF
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Age:
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55
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Director Since:
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2003
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Principal Occupation:
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Vice President, Living Well Sparkling Beverages, Coca-Cola Company North America, Atlanta, Georgia.
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Ms. Bottorff was promoted to the position of Vice President, Living Well of the Sparkling Beverages Division of Coca-Cola North America in 2007. She had previously been Group Marketing
Director, Foodservice Division of The Coca-Cola Company and has over 30 years of experience in industrial management, marketing and strategy. Prior to her tenure at The Coca-Cola Company, she was Senior Vice President/Marketing & Strategy
for AHL Services, Inc., a leading provider of marketing fulfillment, customer service and merchandising services to Fortune 500 companies.
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Other Public
Directorships:
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None.
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DENNIS M. LOVE
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Age:
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53
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Director Since:
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1999
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Principal Occupation:
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President and Chief Executive Officer, Printpack Inc., Atlanta, Georgia, a manufacturer and converter of flexible packaging materials.
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Other Public
Directorships:
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Mr. Love also serves as a director of AGL Resources Inc. (currently serving on its audit and nominating and governance
committees).
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6
CORPORATE GOVERNANCE
Corporate Governance Guidelines
The Company and the Board of Directors have adopted corporate
governance guidelines, which were most recently ratified on February 18, 2009, and which are available at
www.caraustar.com
by first clicking Investor Relations then Governance and then Governance
Guidelines. The Corporate Governance Guidelines are also available in print to any shareholder upon request. These guidelines were adopted by the Board to best ensure that the Board is independent from management, that the Board adequately
performs its oversight function and to ensure that the interests of the Board and management align with shareholders interest.
Annually, each Director and executive officer completes a Director and Officer Questionnaire, which requires disclosure of any transactions with the Company in which the Director or executive officer, or any member of his or her immediate
family, have a direct or indirect material interest. The Director and Officer Questionnaires were distributed most recently on January 16, 2009.
Director Independence
The Board has determined that none of the Companys directors or nominees, other than Messrs.
Keough and Domanico who are both employees of the Company has any relationship that, in the Boards opinion, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and that
each of these individuals is independent under the standards of independence established by the NASDAQ Stock Market and adopted by the Company.
All of the members of our Audit Committee, Compensation and Employee Benefits Committee and Nominating and Corporate Governance Committee are independent directors under these standards. In addition, the Board has
determined that the members of the Audit Committee meet the heightened standards of independence established under the Securities Exchange Act of 1934 for members of a public company audit committee.
Nominations for Directors
The principal
responsibilities of the Nominating and Corporate Governance Committee (the Governance Committee) are to help determine the appropriate composition of the Board and to assist the Board in identifying qualified candidates to become Board
members. The Governance Committee discharges these responsibilities by making recommendations to the Board regarding the size and composition of the Board and the criteria for selecting Board candidates. The Governance Committee is also charged with
overseeing the search for qualified Board candidates (including the evaluation of candidates suggested by shareholders or otherwise) and recommending to the Board the director nominees to be presented for shareholder approval at each annual meeting
of shareholders and any candidates to fill Board vacancies that may arise between annual meetings. Its other material functions are outlined in a written charter adopted by the Board, which was most recently amended in February 2009 and is available
at
www.caraustar.com
by first clicking Investor Relations then Governance and then Nominating and Corporate Governance Committee under the sub-heading Committee Charters.
New Board candidates are typically examined by a screening and interview process that includes meetings with senior management and independent directors,
as representatives of the Governance Committee or the Board. Although the Governance Committee is not obligated to consider, or give particular weight to, any minimum criteria when considering potential director candidates, the Governance Committee
generally considers a number of factors, such as the candidates relevant training and business experience, the candidates independence from management, the candidates integrity, character, and capacity for exercising leadership and
mature judgment, the candidates potential fit with the size and composition criteria established for the Board, and the nature of the candidates other commitments. When current Board members are considered for re-nomination, they are not
required to re-interview, but the Governance Committee considers the prior
7
contribution of each of those directors and whether their re-election would be consistent with the Governance Committees recommendations regarding the
size and composition of the Board and its committees and with applicable NASDAQ and SEC regulatory requirements.
Article III,
Section 3 of the Companys bylaws sets forth the process by which shareholders may submit nominations of director candidates for consideration at the Companys annual meeting. See Proposals for 2010 Annual Meeting of
Shareholders below for more information regarding this process. Any shareholder who wishes to have the Governance Committee and the Board consider nominating a particular individual as a director should follow this same process. Any
shareholder candidates suggested for nomination in accordance with this process will be considered and evaluated by the Governance Committee in accordance with the Governance Committees charter and the process described above for all new Board
candidates.
With respect to the directors standing for election at this Annual Meeting, all are incumbents standing for re-election.
Communications with the Board
Any
shareholder who wishes to communicate with our Board of Directors, or one or more individual directors, can write to them at this address:
Caraustar Industries, Inc.
Board of Directors Communications
c/o Director of Internal Audit, Jon M. Steadman
5000 Austell-Powder Springs Road, Suite
300
Austell, Georgia 30106-3227
Your letter should indicate that you are a shareholder. The Board has instructed the Director of Internal Audit to promptly forward all communications so received to the full Board or any individual Board member or members to whom the
communications are addressed.
Code of Ethics
The Companys Standards of Business Conduct, which is the Companys code of ethics applicable to all Directors, managers and employees companywide, embodies the Companys principles and practices relating to the ethical
conduct of the Companys business and its commitment to honesty, integrity, fair dealing and full compliance with all laws affecting the Companys business. The Standards of Business Conduct is available at
www.caraustar.com
by
first clicking on Investor Relations, then Governance and then Standards of Business Conduct. The Standards of Business Conduct is also available in print to any shareholder who requests it.
The Company has established a means for employees, customers, suppliers, shareholders and other interested parties to submit confidential and anonymous
reports of suspected or actual violations of the Companys Standards of Business Conduct relating to, among other things:
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Accounting practices, internal accounting controls, or auditing matters and procedures;
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Theft or fraud of any amount;
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Performance and execution of contracts;
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Conflicts of interest; and
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Violations of securities and antitrust laws.
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Any employee, shareholder or other interested party can call the following toll-free number to submit a report. This number is operational 24 hours a day, seven days a week:
1-866-834-1825
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8
MEETINGS AND COMMITTEES OF THE BOARD
The Board
Both the Board and management at the Company highly value strong and accountable corporate
governance and believe that an attentive, performing Board is a tangible competitive advantage. Members of the Board are kept informed of the Companys business through discussions with management, by reviewing materials regularly provided to
them, and by participating in meetings of the Board and its committees. All directors attended at least 75% of the aggregate total number of meetings of the Board and the Board Committees on which they serve, except for: Ms. Bottorff, who was
unable to attend one of the meetings of the Governance Committee; and Mr. Clanin, who was unable to attend three Audit Committee meetings. The Board typically schedules a meeting in conjunction with the Companys annual meeting of
Shareholders and expects that all directors will attend the annual meeting absent a schedule conflict. All of our directors attended the 2008 annual meeting.
The Companys independent directors meet in regularly scheduled executive sessions without management present. In 2008, Mr. Casey, presided over these sessions as chair of the Board.
Committees of the Board
The Board currently has four
standing committees: an Audit Committee, a Compensation and Employee Benefits Committee, a Nominating and Corporate Governance Committee and an Executive Committee. In 2008, all of these committees, other than the Executive Committee, were comprised
solely of independent directors, under the standards of independence established by the NASDAQ Stock Market and adopted by the Company. The charters for all committees are posted on the Companys website,
www.caraustar.com
and are
available by clicking Investor Relations and then Governance.
Ms. Bottorff, Mr. Casey and
Mr. Clanin (interim chair) currently serve on the Audit Committee. The Audit Committee reviews the results and scope of the annual audit of the Companys financial statements and the services provided by the Companys independent
registered public accounting firm, and oversees on behalf of the Board of Directors the Companys accounting, auditing and financial reporting processes, its systems of internal controls, compliance with legal and regulatory requirements and
the independent auditors qualifications and independence. The Audit Committee met nine times in 2008. Additional information regarding the Audit Committee is set forth below under Report of the Audit Committee.
Ms. Bottorff, Mr. Greiner (chair), Mr. Heald and Mr. Love currently serve on the Compensation and Employee Benefits Committee (the
Compensation Committee). The Compensation Committee establishes and reviews executive compensation criteria and administers the Companys equity compensation plans. The Compensation Committee met five times in 2008. Additional
information regarding the Compensation Committee is set forth below under Executive Compensation; Compensation Discussion and Analysis.
The Compensation Committee has retained Mercer (US) Inc. (Mercer) to provide information, analyses, and advice regarding executive and director compensation, as described below. The Mercer consultants who perform these services
report directly to the Committee chair. The Company also retains Mercer and its related entities to perform other services.
At the
Compensation Committees direction, Mercer provided the following services for the Committee related to fiscal year 2008:
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Evaluated the competitive positioning of Companys officers, including its named executive officers, base salaries, annual incentive and long-term
incentive compensation relative to its peer group.
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Advised the Committee on Chief Executive Officer and other named executive officer target award levels within the annual and long-term incentive program and, as
needed, on actual compensation actions.
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Assessed the alignment of Company compensation levels relative to the Companys articulated compensation philosophy;
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Provided ongoing advice as needed on the design of Companys annual and long-term incentive plans;
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Briefed the Committee on executive compensation trends among Companys peers and broader industry;
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Advised the Committee as requested on the performance measures and performance targets for the annual and long-term programs;
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Evaluated the impact of Companys equity programs on annual share use, run rate and total dilution;
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Reviewed tally sheets of total compensation developed internally by the Company; and
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Assisted with the preparation of the Compensation Discussion and Analysis for this proxy statement.
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In the course of conducting its activities, Mercer attended all three in-person meetings of the Committee and presented its findings and recommendations
for discussion.
Mr. Greiner, Mr. Heald and Mr. Rogers (chair) currently serve on the Nominating and Corporate Governance
Committee (the Governance Committee). The Governance Committee recommends nominees for election to the Board of Directors and advises on other matters of organizational structure and corporate governance. The Governance Committee met two
times in 2008. Additional information regarding the Governance Committee is set forth above under Director Nominations.
Mr. Casey (chair), Mr. Clanin, Mr. Keough and Mr. Rogers currently serve on the Executive Committee. The Executive Committee generally has the power and authority of the Board, to be exercised between meetings of the
Board of Directors or in emergencies, except that the Executive Committee does not have power and authority that is specifically delegated to another committee of the Board of Directors established by resolution or the Companys bylaws or to
take actions that may not by law be delegated by the Board of Directors to a committee. The Executive Committee did not meet in 2008.
Compensation
Committee Interlocks and Insider Participation
During 2008, no member of the Compensation Committee was an employee or officer of any
company that had an officer of the Company as a director. The members of the Compensation Committee meet in regularly scheduled executive sessions without management present. Messrs. Love and Greiner, respectively presided over these sessions,
commensurate with their respective chair of the committee.
TRANSACTIONS WITH RELATED PERSONS
Mr. Love, a director of the Company since 1999, is the President and Chief Executive Officer of Printpack, Inc., a customer of the Company. The
Company sold tubes and cores to Printpack, Inc. in the amounts of $5.7 million, $5.5 million and $5.5 million for the years ended December 31, 2008, 2007 and 2006, respectively.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The general economic downturn adversely impacted the Companys primary businesses, and managements ability to achieve certain objectives.
The Companys business generally follows trends in the housing and durable goods sectors, both of which experienced dramatic reversals commencing in the third quarter of 2008. The Compensation Committee worked with management, but did not
revise outstanding awards or plans because of the economic downturn.
10
The Compensation Committee did, however, in light of the issues presented by the economic downturn
consider the increased challenge of achieving the overall financial target and the individual objectives set by each senior manager. Even in the midst of these challenging circumstances the Company continued to make progress with its strategic
transformation plan by: refocusing on its core businesses through appropriate facility consolidation and capital investment in new and upgraded production technology, significantly reducing the Companys overall cost structure by eliminating
organizational layers and related support personnel as well as other overhead costs, improving the liquidity of the Company and making efforts to address the repayment or refinancing of the Companys Senior Notes. In this difficult environment,
the Company managed to significantly improve its financial performance.
The Compensation Committee also worked with management on certain
initiatives, including selling, general and administrative reductions, which impacted 49 employees at the Companys corporate office including two named executive officers (Mr. Dawson, formerly VP Mill Group and Mr. Foster, formerly VP
Sales and Marketing), both of whom were involuntarily retired as of December 31, 2008.
Compensation Philosophy and Objectives
In general, our compensation philosophy is to align the interests of our executives directly with the interests of our shareholders. The specific
objectives of the Companys executive compensation programs are to: increase shareholder value by improving Company performance; align management incentives with the performance of the business units directly affected by the executives
leadership; and attract and retain high quality executive talent. These objectives are embodied in the following Philosophy and Principles for Executive Compensation adopted by the Compensation and Employee Benefits Committee of the Board (the
Committee).
Philosophy and Principles for Executive Compensation
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Incentive compensation plans must be supported by business rationale related to specific financial performance targets and personal performance objectives and will
be reasonable and appropriate for the circumstances.
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Equity participation is a key component of our executives total compensation. Such plans will incentivize executives to act in the best interest of
shareholders to promote enhanced compensation opportunities for performance that increases shareholder value.
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Total compensation for executives must be competitive with similarly situated positions, as established by national and industry peer group survey data.
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Total compensation programs for executives will be evaluated regularly for internal equity.
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Equity ownership for executives will be emphasized through share ownership and retention guidelines established by the Committee.
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All executive compensation programs must be constructed and administered in a manner that is fully compliant with all legal, regulatory, and stock exchange listing
requirements. They will be transparent to shareholders and fully disclosed, and consistent with the principles of good corporate governance. Beginning in 2009, the Committee will regularly evaluate its executive compensation programs to ensure that,
on balance, the compensation program will not encourage executives to take unnecessary or excessive risks that could threaten the value of the Company.
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The Committee is responsible for designing the Companys executive compensation and benefit programs to achieve the Companys objectives and adhere to these principles. The Committee, with input from the
Governance Committee, is also responsible for conducting the annual performance review of the Companys CEO and other executives, approving any adjustment in individual executives base salary and determining the incentive payment, if any,
awarded to each executive.
11
The Committee engaged Mercer to assist the Committee in fulfilling its responsibilities by providing
information, analyses, and advice regarding executive compensation. Mercer was originally retained by the Committee in 2006, and subsequent to its engagement, Mercer has regularly participated in Committee meetings, including executive sessions with
the Committee in which the members of management do not participate. The Committee directs Mercers work, although Mercer works effectively with management to understand the historical aspects of the Companys pay practices, compensation
and benefit plan design and specific economic, industry or other factors that may be important to fulfilling the Committees stated principles. All of the decisions with respect to determining the amount or form of compensation for the
Companys executive officers are made by the Committee and may reflect factors and considerations other than the information and advice provided by Mercer.
Benchmarking
With Mercers assistance, the Committee has established an industry peer group currently consisting of
eighteen companies in the paper packaging/products, container or other industries. The Committee annually, reviews the composition of the peer group and makes suggestions for additions and deletions as appropriate. The peer group currently consists
of the following companies (1):
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AEP Industries Inc.
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Glatfelter
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Rock-Tenn Co.
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American Woodmark Corp.
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Interface, Inc.
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Schweitzer-Mauduit Intl Inc.
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Bway Holding Co.
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Kapstone Paper & Packaging
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Spartech Corp
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Buckeye Technologies, Inc.
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Myers Industries
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Tredegar Corp
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Clearwater Paper Corp. (2)
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Neenah Paper, Inc.
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Verso Paper Corp
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Eagle Materials Inc.
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Packaging Corp. of America
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Wausau Paper Corp
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(1)
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The peer group was adjusted to remove companies that were acquired or liquidated (Chesapeake Corp.; Pope & Talbot and Wellman, Inc.); and, to ensure that the Company would
be compared to a peer group that is appropriately scaled in terms of revenue, which the Committee notes is the factor which has the highest degree of correlation for executive compensation. The Committee approved the following deletions to the Peer
Group: Aptar Group, Cenveo Corp., Graphic Packaging Holding, Greif, Inc., and Silgan Holdings. The Committee approved the following additions to the Peer Group: Bway Holding Company; Clearwater Paper Corp.; Eagle Materials; Kapstone Papers and
Packaging; Myers Industries, Tredegar Corp.; and Verso Paper Corp.
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(2)
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This Company was spun-off from Potlatch Corporation in December 2008.
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The Committee approved significant changes to the Peer Group, noting that the Companys strategic initiatives had included a number of divestitures that had increased the Companys profitability, but also
had reduced its revenue. Certain peers that had reported revenue two or three times that of the Companys were removed and replaced with peers with less revenue. This ensured that the Peer Group remained of sufficient size to make appropriate
comparisons and made the relevant scale of the Peer Group more applicable to the Company.
Periodically, the Company, with Mercers
assistance, uses industry peer group data, along with published surveys of executive compensation for comparably-sized companies within the broader market, to conduct a competitive pay analysis for the senior executive positions, including all the
named executive officers reported in the Summary Compensation Table below. This analysis was last conducted by Mercer in 2007. This analysis covers base salary, total cash compensation (salary plus annual incentives) and total direct compensation
(salary plus annual incentives plus long-term incentives). Composite market values for our named executive officers were developed with these values reported at the twenty-fifth, fiftieth (or median) and seventy-fifth percentiles of the
competitive pay analysis. This study compares incumbent pay for each executive against
12
composite market values to gauge pay competitiveness. The analysis found that, as a group, our executives base salaries rank slightly below the market
median in the aggregate which is consistent with the Companys compensation strategy to target executive salaries at the market fiftieth percentile. This analysis also further demonstrated that as a group, our executives actual total cash
compensation is equivalent to approximately 60% of the median and aggregate actual total direct compensation is equivalent to approximately 55% of the median.
Mercer also uses the industry peer group to review the design of all compensation plans, including the structure of the annual incentive plan and target award opportunities. Mercers 2007 analysis confirmed that
target award opportunities under the Companys annual incentive plan were above general industry market median levels for all executives other than the CEO (whose target was equal to the market median). However, actual incentive awards earned
by executives in the preceding five years 2003 through 2007 were significantly less than target levels and well below market median levels for all executives.
The Companys Human Resources Department also supports the Committee by compiling and presenting other executive compensation benchmarking analyses
from relevant sources, including industry and trade association survey data and survey information available through nationally recognized, human resource organizations and subscription services.
Components of the 2008 Executive Compensation Program
To fulfill the objectives of our compensation philosophy and principles within a performance driven environment, we utilize five key components of compensation:
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Annual Cash Incentive Awards
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Long-Term Equity Incentive Grants
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Health and Welfare Benefits
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We regard base
salary as a primary component of the Companys compensation package, and the most readily comparable. Base salary for each executive is tied to the individual executives skills and experience as well as compensation levels for similar
positions at comparable companies. The maintenance of competitive compensation salary levels, which provide a consistent income stream, allows the executives to focus on the matters that contribute to the long-term success of the Company. Subsequent
increases to base salary are based on the executives performance, value, and contribution to the Company. Annual cash incentives allow executives to earn additional compensation tied to the executives individual performance and the
Companys financial performance. Long-term equity incentive awards are used by the Company to link a meaningful portion of executive pay to longer-term financial performance success and shareholder value creation and to provide executives with
an equity stake to further align their interests with those of our shareholders. Company sponsored health and welfare benefit and retirement plans are comparable to benefits offered by other medium-size companies and are regarded as a basic and
critical element of the executives employment relationship with the Company. We believe that these components provide the right blend of retention and performance, in terms of positioning the Company for positive financial results. We believe
that using these components, with emphasis on maintaining a competitive base salary, allows the Company to attract and retain executives with the commitment to execute a longer-term agenda. The Company believes that this longer-term view is critical
for achieving significant business changes that will allow for sustainable and disciplined financial improvement.
The Company may also
provide significant post-termination compensation in certain specified cases. This compensation includes change of control related severance payments and benefits continuation for the purpose of
13
insuring the retention of key executives and to minimize business disruption in the face of a change of control event. The Company does not provide any
vehicle for the deferral of any compensation except for the qualified defined contribution (401(k) savings) plan, which is available to substantially all of the Companys employees. The Company also may provide limited perquisites and
other benefit payments to executives as described in the accompanying tables and narrative information below.
Base Salaries
The base salaries of our executives take into account the executives position, scope of responsibilities, experience and individual performance. The
base salaries of our named executive officers are reviewed on an annual basis, based on an assessment of individual performance, including factors such as leadership, execution against the Companys strategic plan, and people development, and
competitive market conditions, with any adjustments typically becoming effective as of March 1. The Committee uses broader market and industry specific survey data to ascertain the competitiveness of each executives base salary (see the
section on Benchmarking). In aggregate, the salaries of the officers, including the named executive officers, are slightly below the median based on industry survey data. The Committee has determined that base salaries for our executives should be
positioned at the median of the industry peer group for positions with similar responsibilities as the individual executive.
In February,
2008, the Committee completed its annual review of relevant compensation data and each executives individual performance. The Committee noted the Companys financial condition and the fact that the executive group, as a whole, had
achieved the majority of their individual performance objectives. The Committee determined that since no salary increases had been awarded to executives in 2007, it was appropriate to award modest increases to certain executives based on
performance. Three named executives, Messrs. Kelchen, Foster and Nix, were awarded salary increases each at 3.0% of base salary and Mr. Cottrell was awarded a salary increase of 4.0% of base salary. On February 17, 2009, the Committee
again completed its annual review of relevant data regarding the compensation of executives. While it was acknowledged that the executive group had achieved at a high level and had managed the Companys businesses well despite extremely
challenging industry and broader economic conditions, those economic conditions led the Committee to determine that it was appropriate to accept managements recommendation to maintain most executive salaries at 2008 levels. The Committee
considered and approved a base salary increase of 5% for Mr. Kelchen attributable to Mr. Kelchens promotion and his acceptance of increased operational responsibilities in assuming oversight for the Companys Mill Group.
Annual Cash Incentives
The annual
incentive plan was established to meet and reward our executives and other key managers for their contributions in achieving a specific Company financial objective and assigned personal performance objectives. Approximately 42 employees, including
all senior executives and all of the named executive officers, participated in the 2008 Incentive Plan. There are two components to the Incentive Plan: a financial component and an individual performance component. Under the financial component,
certain named executive officers have a target payout opportunity equal to 60% (which target applies to Messrs. Keough, Cottrell, Domanico and Kelchen) or 45% (which target applies to Mr. Nix) of base salary for achieving 100% of the EBITDA
(Earnings Before Interest, Tax, Depreciation and Amortization) financial target. For purposes of the annual incentive plan, EBITDA includes consolidated results for the Company plus its proportionate ownership share of joint venture EBITDA
(Bonus Defined EBITDA). Under the individual performance component, executives can earn up to an additional 15% of base salary for achieving 100% of pre-established individual personal performance objectives. Accordingly, the combined
target of the financial component plus the individual performance component could result in a total target award equal to 75% or 60% of the executives base salary, with maximum payouts capped at 100% of base salary if actual EBITDA exceeds the
target level.
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For 2008, the Committee established financial targets, expressed as a range of EBITDA for the annual
incentive program. In doing so, the Committees intent was to continue to base any incentive payout on a challenging financial target that was a stretch for management to achieve. If the minimum threshold was achieved, then participants could
earn 25% of the target award opportunity associated with the financial component under the plan based upon the Companys 2008 financial performance. The Committee determined in February, 2009 that the Company had achieved a Bonus Defined EBITDA
that was between the threshold and target performance levels. As a result, named executive officers earned approximately 40% of the target award opportunity associated with the financial performance component for named executive officers. In
addition, named executive officers earned additional awards, ranging from approximately 12% to 14% of base salary, to the extent to which the Committee determined these executives achieved their respective individual performance objectives.
In awarding these payments, the Committee recognized that each executive had contributed significantly to the Companys success in
overcoming very difficult industry and economic conditions despite significant increases in manufacturing costs (
e.g.,
waste paper and energy) and excess industry production capacity. As a group, the executives took aggressive action over the
plan year to restructure and consolidate facilities, monetize suitable operations, improve liquidity, implement major capital projects, create new product offerings, expand customer relationships, complete multiple initiatives to reduce SG&A and
other overhead costs and address the repayment or refinancing of the Companys Senior Notes upon maturity. The total amounts of payments awarded to the named executive officers under the financial and individual components of the 2008 incentive
plan were:
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Michael J. Keough
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$
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234,375
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38% of Base Salary
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Ronald J. Domanico
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$
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158,130
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38% of Base Salary
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Steven L. Kelchen
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$
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134,723
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37% of Base Salary
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Gregory B. Cottrell (1)
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$
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91,010
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38% of Base Salary
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William A. Nix, III
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$
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75,876
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31% of Base Salary
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Thomas C. Dawson, Jr.
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$
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118,440
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36% of Base Salary
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John R. Foster
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$
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108,394
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37% of Base Salary
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(1)
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Mr. Cottrell was also awarded a payment of $50,000 in recognition of the work associated with the previously contemplated sale of the Companys Recovered Fiber Group, Inc.
Inclusive of this additional award, Mr. Cottrells payments represents 58% of his base salary.
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Long-Term Incentive Plan
In May of 2003, our shareholders approved the adoption of the 2003 Long-Term Equity Incentive Plan (LTEIP). The plan is
intended to improve the alignment of the interests of executive and other management participants in the plan with the interests of our shareholders by rewarding employees for improving our financial performance in a manner that enhances shareholder
value. The plan provides for grants of various types of equity-based awards, including stock options and restricted stock. Approximately 42 key managers, including our named executive officers, participate in this plan. Other managers may also be
considered for equity-based awards based upon extraordinary contributions to the business. The Committee maintains the discretion to grant equity to executives and other participants at reasonable time intervals based upon the Companys overall
financial performance, achievement of strategic initiatives and the individual performance of the executive. Prior to 2007, no specific performance targets were established for the awarding of equity grants. The Committee previously authorized
grants under the plan in August 2003, December 2004, and March 2006. Historically, these grants have been in the form of an equal allocation of stock options and performance accelerated restricted stock (PARS) to each participant
with the number of shares awarded to the participant determined by a target, usually 40% 50% of the current salary divided by the share price. The Committee believes that stock options are an effective vehicle for aligning executive and
shareholder interests since grants will only have value if our stock price appreciates between the time of grant and the time of exercise. Stock options are issued with an exercise price not less than 100% of the fair market value of the common
stock, defined as the closing price of
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the common stock on the date preceding the grant date. PARS were granted to enhance key employee retention and to provide an ownership stake to executives
and other plan participants. PARS generally vest after a seven year period based on continued service, however, vesting may be accelerated if, after the first year, the price of our common stock reaches a pre-determined level and maintains that
level for a period of twenty consecutive trading days.
In 2007, the Committee, with Mercers assistance, conducted an analysis of the
industry peer group and other companies equity compensation plan designs and practices with the goal of evaluating the competitiveness of the Companys current equity plan design and practices. The Committees intent was to provide
even greater alignment of executive compensation and financial performance over a longer term. Following discussion and evaluation of this data, the Committee determined that it would adopt a portfolio approach to equity compensation,
which would include the following types of awards:
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Performance contingent restricted stock awards (Performance Shares) to promote pay for performance tied to the achievement of cumulative three year
financial objectives;
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Traditional stock option grants which vest based on continued service over a 3-year period and will only have value if our stock price appreciates between the time
of grant and the time of exercise; however, due to the introduction of Performance Shares and to help control equity plan dilution, stock options as a component of this portfolio approach would have lesser emphasis than the Company had historically
afforded to options; and
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Service-based restricted stock awards, designed to enhance key employee retention and to provide an immediate ownership stake, which vest based on continued service
over a 3-year period.
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The Committee determined that target long-term incentive award opportunities for executives would
be based upon market median levels for industry peer group executives. Target awards are tied to a percentage of base salary 100% for the CEO and 75% for all other named executive officers.
After adoption of this portfolio approach, the Committee determined that 50% of target long-term awards for grants made in September, 2007 would be
provided in the form of Performance Shares, to strengthen the link between pay and performance. The Committee also allowed executives to choose among the following two pre-specified alternatives with regard to the remaining half of target long-term
incentive awards: (A) 50% options and 0% restricted stock; or (B) 25% options and 25% restricted stock. Four of the five alternative named executive officers elected (A) above and one executive elected alternative (B).
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In order to determine the number of shares to grant to each executive, the Company divided the
target award value associated with each applicable long-term incentive award vehicle by corresponding valuation assumptions. The Company calculated the present value of these stock options using a Black-Scholes valuation method and assumed a
valuation for Performance Shares equal to 100% of the current stock price (which at the time was $7.00 per share). This valuation led to a relative equivalency value of 1 Performance Share for every
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2 stock options. In determining service-based grants (when applicable), the Company used a risk-adjusted equivalency value of 1 share of service-based
restricted stock for every 3 stock options. The target award for each executive was based upon the assigned percent of salary noted previously using a reference price of $7.00 per share to determine specific share amounts.
Our CEO and our executives did not make recommendations to the Committee on the timing of the 2007 equity plan awards. Following Committee approval, our
Corporate Human Resource Department administered the grants in accordance with the provisions of the LTEIP and Committee direction.
The
Committee established the following vesting schedule for each type of award: Performance Shares would vest based upon the achievement of financial targets based on cumulative EBITDA over a three year (2007-2009) performance period. The actual number
of Performance Shares earned can range from 50% (at a threshold performance level) to 150% (at a superior performance level) of the target award, with no shares earned if cumulative EBITDA is below the threshold performance level. The Committee
established the cumulative EBITDA target at an aggressive level in order to incent a high level of performance. Stock options and restricted stock vest based on continued service over three years, using the following schedule: 50% of the award vests
at the two year anniversary of the grant date; and 100% of the award vests at the three year anniversary of the grant date.
Early in 2008,
the Committee established the vesting schedule for prospective Performance Share awards, if any, granted in 2008 based upon cumulative EBITDA over a three year (2008-2010) performance period. In July 2008, the Committee, due to the sale of the
Companys interest in its Premier Boxboard Limited
LLC
(the PBL joint venture), revised the previously established cumulative EBITDA targets for Performance Shares for both the 2007-2009 and 2008-2010 periods. The
revisions made by the Committee revised the cumulative EBITDA targets only to the extent that these targets included projections for distributions from the PBL joint venture, to which the Company would no longer be entitled by virtue of this sale.
In December 2008, the Committee approved Restricted Share grants to the Companys Key Leadership Group (who are managers who directly
report to one of the Companys officers). Named executive officers and other officers were not included in the December 2008 Restricted Share grants as the trading window was not open to officers at that time and because of concern to preserve
the shares in the Long Term Equity Incentive Plan. Additionally, on December 15, 2008, all the executives of the Company, including the named executive officers, voluntarily forfeited all non-qualified stock options granted to them in 2003,
2004 and 2006. The officers decision to forfeit those shares was based on their desire to contribute those forfeited shares back to the Long Term Equity Incentive Plan to further preserve the life of that plan, particularly in light of the
significant decline in the Companys share price that substantially increased the run rate, and to support a Restricted Share Grant to the Key Leadership Group. In exchange for these forfeitures the executives received consideration of $1.00.
In total, approximately 256,000 non-qualified stock options were forfeited.
Clawback Provisions
In 2007, the Committee approved the amendment of the Change of Control Agreement, Restoration Plan and the individual letter employment agreements (as
discussed below under the subheading Employment Agreements) to incorporate so-called claw-back language. The claw-back language provides a mechanism for the Company to recoup certain unpaid plan benefits, or to require the executive to
pay back to the Company any plan benefits that have already been paid to the executive if the executive engages in any act or omission constituting misconduct. Misconduct is defined in each of these agreements as: (i) the requirement that the
Company prepare an accounting restatement due to material noncompliance, where that material noncompliance was due at least in part to the executives acts or omissions; (ii) the executive discloses to others, or uses for his or her own
purpose, any proprietary information or intellectual property that the Company expects or intends to be kept secret, or which disclosure breached any agreement that executive has entered into with the Company; (iii) the executives,
without the Companys consent, employment or rendering of services to any business in competition with the Company at any time during the twelve (12) months following the executives termination;
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(iv) the executives inducement or attempt to induce any of the companys customers, employees, etc. to terminate their employment or
engagement with the company; (v) the executives failure to promptly return all documents; the executives commission of an act of embezzlement, fraud or theft; (vi) or the executives, by affirmative act or omission,
dishonesty, intentional breach of fiduciary obligation or intentional wrongdoing, which act or omission results in substantial harm to the business. Additionally, and pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, if we are required
to restate our financials because of material non-compliance with any financial reporting requirement due to misconduct, the CEO and Chief Financial Officers must reimburse the Company for:
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Any bonus or other incentive-based or yearly-based compensation received during the 12 months following the first public issuance of the non-complying document; and
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Any profits realized from the sale of our securities during those 12 months.
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The Committee believes that these claw-back provisions that extend the statutory requirements to all executives not just the CEO and CFO
are a good corporate governance practice and provide shareholders with additional protections against any actions that constitute any undue risk to the business being taken by the executives.
Stock Ownership Guidelines
In keeping with the
Committees position that significant share ownership by executives aligns the interests of the executives with the interests of the shareholders, in July 2005, the Board, acting upon the recommendation of the Committee, approved and adopted
share ownership guidelines for executives and other managers eligible to participate in the LTEIP. In October 2007, these guidelines were amended by the Committee to reduce the share reference price from $20/share to $10/share to better reflect the
then current price of the Companys stock price. All of the officers holdings, including restricted shares, options, shares and other security holdings, are used to calculate each officers progress against these guidelines. The
Committee monitors each executives progress against these guidelines on an annual basis. Executives are expected to achieve the recommended ownership level, which is expressed as a multiple of annual salary and then converted into a number of
shares based on the $10/share reference price, within five years from the anniversary date of the October 2007 amendment to these guidelines.
The specific ownership guidelines for the named executives are:
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Michael J. Keough
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5X
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Ronald J. Domanico
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3X
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Steven L. Kelchen
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1X
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Gregory B. Cottrell
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1X
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William A. Nix, III
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1X
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All of the named executive officers have made significant progress in achieving the ownership
required by these guidelines. Executives are encouraged to retain their shares and are prohibited by the Companys Insider Trading Policy from engaging in certain activities regarding the Companys securities, including short sales, the
purchase or sale of a put or call option, or any other derivative or hedging transaction. The Committee did take note that progress against these guidelines was made more challenging in 2008 because of the fact that the trading window was closed to
officers, including the named executive officers.
Health and Welfare Benefits
The Company provides the following health and welfare benefits to all named executive officers generally on the same basis as these benefits are provided
to all salaried employees:
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Medical, Dental and Prescription Drug Coverage
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Basic and Accidental Death Benefit Life Insurance
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Short Term Income Protection and Long-Term Disability Insurance
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Defined Contribution (401(k)) Savings Plan
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We believe that the Company sponsored health and welfare benefit and retirement plans are comparable to other medium-size companies and the failure to provide such benefits would put us at a competitive disadvantage
in attracting and retaining the most talented executives, and employees generally.
Perquisites
The Company is conservative in providing perquisites to executives. We also provide certain other benefits and perquisites to the named executives as
identified above in the All Other Compensation table and its accompanying footnotes. The perquisites that the Company provides are limited, and with the exceptions of Messrs. Keough, Cottrell and Domanico, their aggregate value for
officers, including named executive officers is less than $10,000.
The Company provides reimbursement to Messrs. Keough and Domanico for
financial and/or tax planning. These services are provided to allow the executive to stay focused and minimize distractions caused by personal financial planning and to encourage executives to use the services of professionals to ensure that tax
filings are accurate, particularly given the complexities of accounting for equity based compensation awards. This benefit is only available as a reimbursement.
The Company also provides reimbursement to Messrs. Keough, Cottrell, Domanico and Nix, and in 2008 provided reimbursement to Mr. Foster, for certain club fees or dues. The Company believes it is necessary for
these executives to have access to meeting locations other than the Companys offices to meet and/or entertain the Companys customers and others who provide benefit to the Company. This benefit is only available on a reimbursement basis.
The Company provided Mr. Cottrell with a leased automobile because of the nature of Mr. Cottrells job. The operational
facilities Mr. Cottrell oversees are, in large part, within driving distance, and he is expected to make frequent trips to these facilities by car (as contrasted with air travel). In order to promote such visits, Mr. Cottrell was enrolled
in the leased car program, which is offered to other Company employees.
For more detailed information regarding these perquisites and
their valuation, see the All Other Compensation table below.
Retirement and Other Post-Termination Compensation
We believe that having plans which provide for retirement compensation is an essential component of an overall program of competitive executive
compensation. These programs support executive recruitment and retention by providing long-term benefits to executives who remain in the employment of the Company and attain certain eligibility requirements relating to minimum age and length of
service.
Through December 31, 2004, substantially all of the Companys then current employees participated in a non-contributory
defined benefit pension plan. The pension plan provided for retirement, disability and death benefits. Under the plan, employees who retire at the normal retirement age of 65 and receive their benefits as a single life annuity are entitled to annual
pension benefits generally equal to 0.75% of average annual compensation, multiplied by their number of years of credited service. Average annual compensation is the highest average compensation received by an employee for any consecutive five-year
period during the last ten consecutive plan years of an employees participation in the plan. Average annual compensation is defined as an
19
employees gross wages, excluding fringe benefits (the sum of the amounts in the salary and bonus columns for a named executive officer as shown in the
Summary Compensation table).
Prior to April 1, 2000, when the annual benefit formula was changed to the formula described above, the
annual benefit was calculated as follows: 1.35% times average annual compensation, multiplied by the number of years of credited service (not greater than 33 years), less 0.65% of final average annual compensation (defined as average annual
compensation for the last three consecutive calendar years preceding retirement, up to the taxable wage base as established by the Social Security Administration) for each year of credited service at normal retirement date (not greater than 33
years). The new formula removed the offset to social security and the 33-year service cap for all salaried and hourly, non-union employees covered in the plan. Benefit accruals under the old formula through March 31, 2000 were frozen and
participants age 50 with ten or more years of service became entitled to receive the greater of the benefit provided under the old formula or the new formula.
Effective December 31, 2004, we suspended further pension benefits for certain employees covered by the defined benefit pension plan. The suspension froze the accrued pension benefits for all salaried and
non-union hourly employees who did not then qualify for continued benefits based on a specific combined years of service and age requirement. Of the named executive officers, only Mr. Dawson was grandfathered as a result of age and service and
was unaffected by this action and therefore continued to accrue additional benefits and years of service under the plan through December 31, 2008.
All the Companys salaried and non-union hourly employees, except those employees grandfathered in the defined benefit pension plan, participate in a defined contribution pension plan established on January 1, 2005, whereby we
make an additional annual contribution to our 401(k) retirement savings plan for each eligible salaried and non-union hourly employee based upon the employees years of service. The amount of this additional contribution will range from 1% of
base salary for employees with less than five years of service up to 4% of base salary for employees with twenty-five or more years of service.
The following named executive officers received the following percentage contributions in this plan for 2008 service:
|
|
|
|
Michael J. Keough
|
|
2.0
|
%
|
Ronald J. Domanico
|
|
2.0
|
%
|
Steven L. Kelchen
|
|
1.0
|
%
|
Gregory B. Cottrell
|
|
2.5
|
%
|
William A. Nix, III
|
|
3.0
|
%
|
John R. Foster
|
|
2.5
|
%
|
We also maintain a restoration plan (SERP) which supplements our other retirement
benefits by providing our executives additional retirement benefits to which they otherwise would be entitled under our pension plan in the absence of certain limitations imposed by the Internal Revenue Code. On November 7, 2005,
December 29, 2006 and April 8, 2008, we amended the restoration plan in connection with the Committees annual review of certain agreements, including the SERP and the Companys Change in Control Severance Agreements. These
amendments reduce risk for executives subject to the restoration plan by providing optional forms of payment, subject to Board approval, and clarifying certain provisions to conform to procedures and calculations under our defined contribution plan.
The benefits payable under the restoration plan are based on the pension plan formula as in effect prior to April 1, 2000, but without regard to the taxable wage base established by the Social Security Administration or the 33-year maximum
limit on credited years of service. Each participants final benefit under the restoration plan is determined by calculating this pre-2000 pension plan benefit and subtracting from it the benefit payable to the participant under the pension
plan. The plan also contains offset provisions for any benefit received by the named executive officer under our defined contribution retirement plan. The SERP was most recently amended on April 8, 2008. The amendments included certain IRC 409A
compliance requirements, the incorporation claw-back provisions and miscellaneous, non-substantive corrections to the document.
20
Severance Policy Payments
If a Named Executive Officer is terminated without cause and in the absence of a change of control event, the executive would receive severance pay and benefits coverage under our severance policy. This policy applies
to all salaried employees in the event of a termination other than for cause. This plan provides for the payment of severance equal to the greater of one week of base salary per year of service or one week of base salary per $10,000 of salary, with
the maximum payment not to exceed 26 weeks. Specified employee benefits coverage is also provided for a period following separation. Certain named executive officers are covered by employment agreements (discussed below) that entitle them to a
guaranteed level of severance pay and benefits coverage beyond that of the severance policy.
|
|
|
|
|
|
|
Severance Pay
|
|
Benefits Continuation
|
Michael J. Keough (1)
|
|
24 months
|
|
24 months
|
Ronald J. Domanico (1)
|
|
12 months
|
|
12 months
|
Steven L. Kelchen (1)
|
|
6 months
|
|
6 months
|
(1)
|
Provided pursuant to Employment Agreements with such officers, which Employment Agreements were most recently restated and amended as of April 8, 2008.
|
Employment Agreements
Mr. Keough.
Mr. Keough was recruited to join the Company as part of its succession planning. Mr. Keough had considerable industry experience and was selected by the Board of Directors as a candidate to succeed Thomas
V. Brown, who in 2002 was the Companys then President and Chief Executive Officer. Mr. Keough joined the Company as Senior Vice President and Chief Operating Officer. In order to recruit and subsequently to retain
Mr. Keough, the company agreed to certain conditions of employment. Accordingly, on February 13, 2002, we entered into a letter agreement with Michael J. Keough setting forth certain terms and conditions of his employment. The letter
agreement, which was amended and restated in July 2004, January 2005 and April 8, 2008 as described below, established Mr. Keoughs initial annual base salary at $450,000 and provided that subsequent increases in his base salary
were to be determined by the Board or an authorized Committee of the Board. It also provided for an annual bonus for 2002 and 2003 at least equal to 10% and 20%, respectively, of Mr. Keoughs base salary. Pursuant to the letter agreement,
we provided Mr. Keough with $1,000,000 in term life insurance, the initiation fee and monthly dues for a local country club, relocation expenses, an annual allowance for financial planning services, and 25 years of industry service credit for
purposes of accruing benefits under the Companys short-term disability plan and the restoration plan. Under both plans, Mr. Keough was allowed to immediately participate (the total benefit payable under the restoration plan is offset by
payments from qualified plans of prior employers and payments from the Companys defined contribution retirement plan benefit). We also agreed in the letter agreement to nominate Mr. Keough to the Board and to make certain initial grants
of stock options, which are among those listed in the table Outstanding Equity Awards at Fiscal Year End below.
The term of
Mr. Keoughs employment under the letter agreement is indefinite. If his employment had been terminated other than upon his death or disability or for cause, as defined in the agreement, or upon a change in control of the Company, the
agreement provided that he would have been entitled to a severance benefit equal to at least 12 months base salary and benefits.
On
July 15, 2004, we amended and restated this letter agreement in connection with Mr. Keoughs anticipated promotion to Chief Executive Officer on January 1, 2005. The amended and restated letter agreement established
Mr. Keoughs initial annual base salary as Chief Executive Officer at $550,000, with subsequent increases in base salary to be determined by the Board or an authorized Committee of the Board. In addition, it states that we will continue to
provide Mr. Keough with $1,000,000 in life insurance, a supplemental long-term disability benefit to ensure the replacement of at least 75% of his base salary in the event of a qualifying disability, dues for a local country club, an annual
allowance for financial planning services, and 25 years of credit for service in the industry for purposes of our short-term disability plan and the restoration plan (with the
21
total benefit payable under the restoration plan to be offset by payments from qualified plans of prior employers). We also agreed in the letter agreement to
continue to nominate Mr. Keough to the Board. In addition, pursuant to this amended and restated letter agreement, on December 1, 2004, Mr. Keough received one-time grants of 3,500 restricted shares of common stock that will vest on
the six month anniversary of the grant date, options to purchase 25,000 shares of common stock and 25,000 PARS that will vest after seven years or earlier if, at any time after the first anniversary of the date of grant, the closing price of the
shares of common stock is at or above $18.00 per share for 20 consecutive trading days.
Mr. Keoughs employment under the
amended and restated letter agreement runs for an indefinite term. If his employment is terminated other than upon his death or disability or for cause, as defined in the agreement, or upon a change in control of the Company, the agreement provides
that he will be entitled to a severance benefit equal to at least 24 months base salary and benefits.
Mr. Domanico.
Mr. Domanico was recruited to join the Company to replace the recently vacated CFO position. Mr. Domanico had considerable finance experience and in order to recruit and retain Mr. Domanico, the Company agreed to provide certain
conditions of employment. Accordingly, on October 1, 2002, we entered into a letter agreement with Ronald J. Domanico setting forth certain terms and conditions of his employment. The letter agreement establishes Mr. Domanicos
initial annual base salary at $340,000 and provides that subsequent increases in his base salary are to be determined by the Board or an authorized Committee of the Board. Pursuant to the letter agreement, we have provided Mr. Domanico with
membership in a country club (with annual expenses capped at $10,000), a relocation allowance of $40,000, an annual allowance for financial planning services, immediate participation in the restoration plan (with the total benefit payable under the
restoration plan to be offset by payments from the Companys defined contribution retirement plan benefit), a supplemental long-term disability plan to ensure the replacement of at least 75% of his salary in the event of a qualifying
disability, and 10 years of service credit for purposes of our short-term disability plan.
Mr. Domanicos employment under the
letter agreement runs for an indefinite term. If his employment is terminated other than upon his death or disability or for cause, as defined in the agreement, the agreement provides that he will be entitled to a severance benefit equal to at least
12 months base salary and benefits.
Mr. Kelchen.
Mr. Kelchen was recruited by the Company to fill a recently vacated
position. The Company believed that Mr. Kelchens operational experience and industry reputation would be beneficial to streamlining the Companys custom packaging segment. In order to recruit and subsequently retain
Mr. Kelchens expertise, the company agreed to certain conditions of employment. Accordingly, on August 31, 2004, we entered into a letter agreement with Steven L. Kelchen setting forth certain terms and conditions of his employment.
The letter agreement established Mr. Kelchens initial annual base salary at $300,000 and provides that subsequent increases in his base salary are to be determined by the Board or an authorized Committee of the Board. It also provided for
an annual incentive payment and grant under the terms of our 2003 Long-Term Equity Incentive Plan, at our discretion, with a guaranteed incentive payment for plan year 2004 of not less than $20,000 and for plan year 2005 of not less than 25% of his
base salary earned during that plan year. Pursuant to the letter agreement, Mr. Kelchen received one-time grants under the 2003 Long Term Equity Incentive Plan of 15,000 non-qualified stock options, which vest in 25 percent increments over four
years; 7,500 shares of restricted stock, which vest after one year of employment, and 10,000 shares of PARS with a target vesting price of $20.00 per share subject to a one-year blackout period. The letter agreement also provided for full relocation
services, membership in a country club with an allowance of up to $300 per month for monthly dues and a one-time reimbursement of up to $10,000 in initiation fees; 15 years of credit for service in the industry for purposes of our short-term
disability plan and the restoration plan with the total benefit payable under the restoration plan to be offset by any vested benefit payments from qualified plans of his former employer and payments from the Companys defined contribution
retirement plan benefit.
The term of Mr. Kelchens employment under the letter agreement is indefinite. In the event his
employment is terminated other than because of death or disability (as defined in the agreement), by him for any
22
reason, for cause (as defined in the agreement), or upon a change in control of the Company, the agreement provides him a severance benefit equal to at least
six months continuation of his then current base salary and benefits coverage in place at the time of termination.
Amendments.
On December 29, 2006, Messrs. Keoughs, Domanicos and Kelchens letter agreements were amended and restated for compliance with Section 409A of the Internal Revenue Code. The amendments include: specifying a fixed date
upon which payments would begin; providing that payments would be delayed for six months if the executive is a specified employee as defined by the Internal Revenue Code, and specifying a date for identifying specified employees. On
April 8, 2008, Messrs. Keoughs, Domanicos and Kelchens letter agreements were further amended and restated for compliance with Section 409A of the Internal Revenue Code and to incorporate claw-back provisions, which
provide a mechanism for the Company to recoup certain payments upon a Committee determination that the executive has engaged in an act of embezzlement, fraud, or breach of fiduciary duty that contributed to an obligation to restate our financial
statements.
Change in Control Severance Agreements
We have change in control severance agreements with each of our executives in order to ensure their continued service in the event of a change in control of the Company. Each of the agreements provides that the
individual will receive a severance benefit upon termination of employment by the Company without cause, or voluntary termination of employment for good reason, within two years after a change in control. The severance benefit is equal to the lesser
of (1) two years base salary or (2) the highest amount that would not result in any excess parachute payment under federal tax laws. The individual will also receive the amount of any compensation he or she has previously
earned, including compensation that has been deferred pursuant to a non-tax-qualified plan. On November 7, 2005, December 29, 2006 and April 8, 2008, the agreements were amended to additionally require the Company to:
(i) issue cash payments to the executives for projected incentive plan payments equal to the average annual incentive bonus paid to the executive in the last two years preceding the year in which a change in control occurs; (ii) allow, for
up to eighteen months, the continuance of health and welfare benefits and two years for all other benefits to the executives and the executives dependents on substantially the same basis as the benefits offered to the executive immediately
before termination; and (iii) pay all tax liability for any excise taxes incurred under Sections 280G and 4999 of the Internal Revenue Code attributable to the benefits provided under (i) and (ii) to the extent those tax liabilities
are equal to 110% or more of the Safe Harbor limit. The company believes it is beneficial to provide this conditional tax gross up as a mechanism for harmonizing the compensation of executives who may be affected differently by tax regulations.
Payments made under the change in control agreements are subject to the requirement of Section 409A of the Internal Revenue Code. Additionally, the change in control agreements are also subject to clawback provisions that provide for the
adjustment or recovery of awards in the event the Company is required to restate its financial performance or for other related actions that occur as the result of inappropriate behavior by executives.
In exchange for these benefits, each of the executives has agreed not to voluntarily terminate employment between the date on which a change in control
is announced and the date on which it is either completed or abandoned. The executives have also executed non-compete agreements agreeing not to compete in any manner against the successor Company for twelve months following the completion of such a
transaction.
Our stock options and restricted stock vest upon a change in control event. In adopting the so-called single
trigger treatment for equity compensation, we were guided by two principles:
|
|
|
Keep employees relatively whole for a reasonable period, but avoid creating a windfall.
|
|
¡
|
|
Single trigger
vesting ensures that ongoing employees are treated the same as terminated employees with respect to outstanding equity grants.
|
|
¡
|
|
Single trigger
vesting provides employees with the same opportunities as shareholders, who are free to sell their equity at the time of the change in control event and thereby realize the value created at the time of the deal.
|
23
|
¡
|
|
The Company that
made the original equity grant may no longer exist after a change in control and employees should not be required to have the fate of their outstanding equity tied to the new companys future success.
|
|
¡
|
|
Single trigger
vesting on performance-contingent equity, in particular, is appropriate given the difficulty of replicating the underlying performance goals.
|
|
|
|
Support the compelling business need to retain key employees during uncertain times.
|
|
¡
|
|
A single trigger on
equity vesting can be a powerful retention device during change in control discussions, especially for more senior executives where equity represents a significant portion of their total pay package.
|
|
¡
|
|
A double trigger on
equity provides no certainty of what will happen when the transaction closes.
|
In conjunction with corporate selling,
general and administrative expense reductions, the positions of two named executive officers, Messrs, Dawson and Foster were eliminated as of December 31, 2008. On December 15, 2008, the Company entered into Separation and Retirement
Agreements with Mr. Dawson and Mr. Foster. The form of those Separation and Retirement Agreements had previously been reviewed and approved by the Committee. Pursuant to those Separation and Retirement Agreements, Messrs. Dawson and Foster
will be entitled to receive their annual base salaries during the Severance Period, which period commences on January 1, 2009 and terminates on or before December 31, 2009. During the Severance Period, Messrs. Dawson and Foster and their
covered dependents will be entitled to participate in all health and welfare and pension benefit plans sponsored or provided by the Company to the same extent as the Companys other executive officers, with certain exceptions. Messrs. Dawson
and Foster continued to be eligible to participate in the 2008 Incentive Plan (the Incentive Plan), subject to the discretion of the Committee. In conjunction with the Messrs. Dawsons and Fosters resignation, the Company also
entered into an Extended Change in Control Severance Agreement (the Extended CIC Agreement), which would allow the executives to receive certain payments upon a change in control, should a change in control occur during the Severance
Period.
Tax Considerations
The
Committee believes it is appropriate to take into account the tax consequences of employee benefits and the award of executive compensation as a way of balancing the interests of the Company with those of participants in the Companys plans.
With regard to executive compensation, Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to the chief executive officer or any of the three most
highly compensated named executive officers (other than the CFO). Certain compensation is specifically exempt from the deduction limit to the extent that it does not exceed $1 million during any fiscal year or is performance based as
defined in Section 162(m). Although the current cash compensation levels of our executives generally remain well below the $1 million limit, the Committee believes that it is generally desirable to comply with Section 162(m) when
applicable. The Committee also believes, however, that it is appropriate to take into account considerations other than tax treatment, such that compensation actions may not always qualify for tax deductibility under Section 162(m) or other
favorable tax treatment to the Company.
24
COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE REPORT
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
|
|
|
T
HE
C
OMPENSATION
C
OMMITTEE
|
|
Charles H. Greiner, Jr., Chair
|
L. Celeste Bottorff
|
John T. Heald
|
Dennis R. Love
|
25
2008 SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation paid or earned by each of the named executive officers for the fiscal years ended December 31,
2008, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
principle position (1)
|
|
Year
|
|
Salary
(1)
($)
|
|
Bonus
($)
|
|
Stock
awards
(2)
($)
|
|
Option
awards
(2)
($)
|
|
Non-equity
incentive
plan
compensation
(3)
($)
|
|
Change in
pension value
and
nonqualified
deferred
compensation
earnings (4)
($)
|
|
All other
compensation
(5)
($)
|
|
Total ($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Michael J. Keough,
President and Chief
Executive Officer
|
|
2008
2007
2006
|
|
$
$
$
|
625,000
625,000
616,667
|
|
|
|
$
$
|
201,550
200,613
|
|
$
$
|
43,531
104,514
|
|
$
$
$
|
234,375
90,625
154,167
|
|
$
$
$
|
203,295
207,476
200,452
|
|
$
$
$
|
38,437
35,405
33,181
|
|
$
$
$
|
1,101,107
1,203,587
1,309,594
|
|
|
|
|
|
|
|
|
|
|
Ronald J. Domanico,
Senior Vice President and
Chief Financial Officer
|
|
2008
2007
2006
|
|
$
$
$
|
420,000
420,000
416,667
|
|
|
|
$
$
|
71,842
70,426
|
|
$
$
|
27,892
38,842
|
|
$
$
$
|
158,130
57,960
104,167
|
|
$
$
$
|
35,283
28,663
27,032
|
|
$
$
$
|
19,706
16,412
16,215
|
|
$
$
$
|
633,119
622,769
673,349
|
|
|
|
|
|
|
|
|
|
|
Steven L. Kelchen,
Vice President,
Converted Products Group
|
|
2008
2007
2006
|
|
$
$
$
|
361,015
350,500
339,583
|
|
|
|
$
$
|
49,795
45,725
|
|
$
$
|
21,929
11,175
|
|
$
$
$
|
134,723
49,420
84,896
|
|
$
$
$
|
22,506
46,671
61,533
|
|
$
$
$
|
14,702
19,686
10,761
|
|
$
$
$
|
532,946
537,501
553,673
|
|
|
|
|
|
|
|
|
|
|
William A. Nix, III
Vice President,
Chief Accounting Officer
|
|
2008
|
|
$
|
242,050
|
|
|
|
|
|
|
|
|
|
$
|
75,876
|
|
$
|
45,898
|
|
$
|
17,883
|
|
$
|
381,707
|
|
|
|
|
|
|
|
|
|
|
Gregory B. Cottrell
Vice President,
Recovered Fiber Group
|
|
2008
|
|
$
|
242,320
|
|
|
|
|
|
|
|
|
|
$
|
141,010
|
|
$
|
32,036
|
|
$
|
35,075
|
|
$
|
450,441
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Dawson, Jr.
Vice President,
Mill Group (Retired)
|
|
2008
2007
2006
|
|
$
$
$
|
329,000
329,000
327,167
|
|
|
|
$
$
|
29,425
23,054
|
|
$
$
|
4,615
53,685
|
|
$
$
$
|
118,440
35,532
81,792
|
|
$
$
$
|
143,991
175,939
146,328
|
|
$
$
$
|
13,774
13,774
13,555
|
|
$
$
$
|
605,205
588,285
645,581
|
|
|
|
|
|
|
|
|
|
|
John R. Foster,
Vice President, Sales and Marketing (Retired)
|
|
2008
2007
2006
|
|
$
$
$
|
290,460
282,000
280,167
|
|
|
|
$
$
|
39,590
26,679
|
|
$
$
|
7,919
41,899
|
|
$
$
$
|
108,394
39,480
70,042
|
|
$
$
$
|
99,583
132,853
100,325
|
|
$
$
$
|
20,904
33,259
20,294
|
|
$
$
$
|
519,341
535,101
539,406
|
(1)
|
The amount shown represents the dollar value of base salary paid or earned during 2008, 2007 and 2006 periods. The current base salary amounts of the named executives are as
follows:
|
|
|
|
|
Michael J. Keough
|
|
$
|
625,000
|
Ronald J. Domanico
|
|
$
|
420,000
|
Steven L. Kelchen
|
|
$
|
380,000
|
Gregory B. Cottrell
|
|
$
|
242,320
|
William A. Nix, III
|
|
$
|
242,050
|
Thomas C. Dawson, Jr. (Retired) .
|
|
$
|
329,000
|
John R. Foster (Retired)
|
|
$
|
290,460
|
(2)
|
The amounts included in these columns are the dollar amounts recognized by the Company in 2008 for financial statement reporting purposes in accordance with FAS
123R, and accordingly include award amounts granted prior to 2008. No equity grants were made to named executive officers in 2008. Information on individual stock awards granted to named executive officers is set forth in the table entitled
Grants of Plan Based Awards below. Assumptions used in the calculation of these award amounts are included in Note 10 to the Companys Consolidated Financial Statements entitled Stock Based Compensation included in the
Companys 2008 Annual Report on Form 10-K for each of the applicable years of the grants included.
|
26
(3)
|
The amounts shown represent the cash incentive payments to the named executive officers paid in 2009, 2008 and 2007 but earned in 2008, 2007 and 2006, respectively, for performance
under the incentive compensation plan discussed under Annual Cash Incentives in the Compensation Discussion and Analysis section above.
|
(4)
|
The amounts included reflect the actuarial increase in the value of the named executives benefits under all pension plans of the Company during 2008, 2007 and 2006, were
determined using interest rate and mortality rate assumptions consistent with those used in the Companys financial statements, and include amounts which the named executive may not currently be entitled to receive because such amounts are not
vested.
|
(5)
|
The amounts represent the total value received from perquisites and other personal benefits to the respective named executive officer, insurance premiums paid by the Company,
Company contributions to retirement plans and payments under termination plans earned or paid in 2008, 2007 and 2006, or attributable to 2008, 2007 and 2006, as described more fully below in the All Other Compensation table.
|
(6)
|
Messrs. Dawson and Foster involuntarily retired from the Company on December 31, 2008.
|
2008 ALL OTHER COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principle Position
|
|
Perquisites
and Other
Personal
Benefits
|
|
|
Insurance
Premiums
(4)
|
|
Company
Contributions
to Retirement
and 401(k)
Plans (5)
|
|
Payment
on
Severance
Plans
|
|
Total
|
Michael J. Keough,
President and Chief Executive Officer
|
|
$
|
14,345
|
(1)
|
|
$
|
10,292
|
|
$
|
13,800
|
|
|
|
$
|
38,437
|
|
|
|
|
|
|
Ronald J. Domanico,
Senior Vice President and Chief
Financial Officer
|
|
$
|
11,654
|
(2)
|
|
$
|
5,907
|
|
$
|
13,800
|
|
|
|
$
|
31,361
|
|
|
|
|
|
|
Steven L. Kelchen,
Vice President, Converted Products Group
|
|
|
*
|
|
|
$
|
3,202
|
|
$
|
11,500
|
|
|
|
$
|
14,702
|
|
|
|
|
|
|
Gregory B. Cottrell,
Vice President, Recovered Fiber Group
|
|
$
|
18,553
|
(3)
|
|
$
|
1,815
|
|
$
|
16,100
|
|
|
|
$
|
86,468
|
|
|
|
|
|
|
William A. Nix, III,
Vice President, Finance and Chief Accounting
Officer
|
|
|
*
|
|
|
$
|
2,933
|
|
$
|
14,950
|
|
|
|
$
|
17,883
|
|
|
|
|
|
|
Thomas C. Dawson, Jr.,
Vice President, Mill Group (Retired) (6)
|
|
|
*
|
|
|
$
|
4,644
|
|
$
|
9,200
|
|
|
|
$
|
13,844
|
|
|
|
|
|
|
John R. Foster,
Vice President, Sales and Marketing (Retired) (6)
|
|
|
*
|
|
|
$
|
5,955
|
|
$
|
14,950
|
|
|
|
$
|
20,905
|
*
|
Represents total perquisites under $10,000 in aggregate per person.
|
(1)
|
Perquisites for Michael J. Keough include financial planning and tax preparation ($8,687), annual club dues ($5,028) and ($630) for executive physical.
|
(2)
|
Perquisites for Mr. Domanico included tax review ($2,830), annual club dues ($1,680), executive physical ($630) and frequent flyer program ($6,514).
|
(3)
|
Perquisites for Greg B. Cottrell include lease car use ($8,830), annual club dues ($4,800), executive physical ($630) and frequent flyer program ($4,293).
|
(4)
|
Includes Company paid premiums for excess basic life insurance and supplemental long-term disability coverage.
|
(5)
|
Includes Company match to 401(k) plan and annual defined retirement contribution plan.
|
(6)
|
Messrs Dawson and Foster involuntarily retired from the company on December 31, 2008. No severance benefits are included in this table. Pursuant to their respective Separation
Agreements, Messrs. Dawson and Foster start receiving severance (paid as salary continuation) on January 1, 2009.
|
27
2008 GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
date
|
|
Grant
Approval
Date
|
|
Estimated future payouts
under Non-equity incentive
plan awards (1)
|
|
Estimated future payouts
under equity incentive
plan awards
|
|
All
other
stock
awards:
number
of
shares
of stock
or units
|
|
All other
option
awards:
number
of
securities
under-
lying
options
|
|
Exercise
or base
price of
option
awards
($/Sh)
|
|
Grant
date
fair
value
of
stock
and
option
awards
(2)
|
|
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(c)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
(k)
|
|
(l)
|
|
(m)
|
Michael J. Keough,
President and Chief
Executive Officer
|
|
|
|
|
|
156,250
|
|
468,750
|
|
625,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald J. Domanico,
Senior Vice
President and Chief
Financial Officer
|
|
|
|
|
|
105,000
|
|
315,000
|
|
420,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven L. Kelchen,
Vice President,
Converted
Products Group
|
|
|
|
|
|
90,254
|
|
270,761
|
|
361,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory B. Cottrell,
Vice President,
Recovered Fiber
Group
|
|
|
|
|
|
60,580
|
|
181,740
|
|
242,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William A. Nix, III,
Vice President,
Finance and
Chief Accounting
Officer
|
|
|
|
|
|
60,513
|
|
145,230
|
|
242,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Dawson, Jr.
Vice President,
Mill Group (Retired)
|
|
|
|
|
|
82,250
|
|
246,750
|
|
329,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Foster,
Vice President,
Sales and Marketing
(Retired)
|
|
|
|
|
|
72,615
|
|
217,845
|
|
290,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Pursuant to the 2008 incentive compensation plan for executives, the named executive officers were eligible to earn an annual cash incentive payment at the lowest threshold level of
the plan which is equal to 25% of base salary if the Company met the threshold amount of the EBITDA financial objective. If 100% of the plan financial objective is achieved, a target incentive payment equal to 60% of salary is paid for all named
executive officers, other than Mr. Nixwhose target incentive payment is equal to 45%. Also, the executive could have received an additional award of up to 15% of salary if the executive achieves his or her personal objectives. In the
event of achievement over the plan financial objective, the plan limits the maximum incentive payment to 100% of total salary.
|
(2)
|
The amounts shown are the grant date fair market value of each individual equity award computed in accordance with FAS 123R. No equity grants were awarded to officers, including the
named executive officers in 2008.
|
28
2008 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
securities
underlying
unexercised
options (#)
exercisable
|
|
Number of
securities
underlying
unexercised
options (#)
unexercisable
|
|
Equity
incentive
plan
awards
number of
securities
underlying
unexercised
unearned
options
(#)
|
|
Option
exercise
price ($)
|
|
Option
expiration
date
|
|
Number
of shares
or units
of stock
that
have not
vested
(#)
|
|
Market
value
of shares
or units
of stock
that
have not
vested
($)
|
|
Equity
incentive plan
awards:
number
of
unearned
shares, units or
other rights
that have
not vested (#)
|
|
Equity
incentive plan
awards:
market or
payout value
of
unearned
shares,
units or other
rights that have
not vested ($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Michael J. Keough,
President and Chief
Executive Officer
|
|
60,000
|
|
0
|
|
|
|
8.65
|
|
03/04/2012
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
8.17
|
|
08/14/2013
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
17.05
|
|
12/01/2014
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
17.05
|
|
12/01/2014
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
10.59
|
|
03/02/2016
|
|
|
|
|
|
|
|
|
|
|
|
89,300
|
|
|
|
4.03
|
|
09/07/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
18,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
11,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
16,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,640
|
|
20,534
|
|
|
|
|
Ronald J. Domanico,
Senior Vice President and
Chief Financial Officer
|
|
50,000
|
|
0
|
|
|
|
8.40
|
|
10/11/2012
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
8.17
|
|
08/14/2013
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
17.05
|
|
12/01/2014
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
10.59
|
|
03/02/2016
|
|
|
|
|
|
|
|
|
|
0
|
|
45,000
|
|
|
|
4.03
|
|
09/07/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
8,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,000
|
|
10,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
10,350
|
|
|
|
|
Steven L. Kelchen,
Vice President,
Converted Products Group
|
|
0
|
|
0
|
|
|
|
15.87
|
|
08/31/2014
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
17.05
|
|
12/01/2014
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
10.59
|
|
03/02/2016
|
|
|
|
|
|
|
|
|
|
0
|
|
37,600
|
|
|
|
4.03
|
|
09/07/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
4,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
2,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
4,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,780
|
|
8,639
|
|
|
|
|
Gregory B. Cottrell,
Vice President,
Recovered Fiber Group
|
|
2,435
|
|
0
|
|
|
|
25.75
|
|
02/04/2009
|
|
|
|
|
|
|
|
|
|
1,461
|
|
0
|
|
|
|
30.90
|
|
02/04/2009
|
|
|
|
|
|
|
|
|
|
2,376
|
|
0
|
|
|
|
25.75
|
|
02/04/2009
|
|
|
|
|
|
|
|
|
|
3,230
|
|
0
|
|
|
|
17.94
|
|
02/09/2010
|
|
|
|
|
|
|
|
|
|
|
3,166
|
|
0
|
|
|
|
21.53
|
|
02/09/2010
|
|
|
|
|
|
|
|
|
|
|
0
|
|
25,000
|
|
|
|
4.03
|
|
09/07/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
2,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
2,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,480
|
|
5,741
|
|
|
|
|
William A. Nix, III,
Vice President,
Finance and
Chief Accounting Officer
|
|
2,000
|
|
0
|
|
|
|
9.38
|
|
12/29/2010
|
|
|
|
|
|
|
|
|
|
2,000
|
|
0
|
|
|
|
9.38
|
|
12/29/2010
|
|
|
|
|
|
|
|
|
|
1,000
|
|
0
|
|
|
|
10.38
|
|
02/07/2011
|
|
|
|
|
|
|
|
|
|
7,000
|
|
0
|
|
|
|
7.05
|
|
02/09/2012
|
|
|
|
|
|
|
|
|
|
0
|
|
16,800
|
|
|
|
4.03
|
|
09/07/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
2,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
5,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,390
|
|
3,859
|
|
|
|
|
Thomas C. Dawson, Jr.
Vice President,
Mill Group (Retired)
|
|
2,313
|
|
0
|
|
|
|
30.90
|
|
02/04/2009
|
|
|
|
|
|
|
|
|
|
3,208
|
|
0
|
|
|
|
25.75
|
|
02/04/2009
|
|
|
|
|
|
|
|
|
|
648
|
|
0
|
|
|
|
25.75
|
|
02/04/2009
|
|
|
|
|
|
|
|
|
|
4,393
|
|
0
|
|
|
|
21.53
|
|
02/09/2010
|
|
|
|
|
|
|
|
|
|
4,482
|
|
0
|
|
|
|
17.94
|
|
02/09/2010
|
|
|
|
|
|
|
|
|
|
3,365
|
|
0
|
|
|
|
9.38
|
|
12/07/2010
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
7.05
|
|
08/14/2013
|
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
8.17
|
|
08/14/2013
|
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
17.05
|
|
12/01/2015
|
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
10.59
|
|
03/02/2016
|
|
|
|
|
|
|
|
|
|
|
0
|
|
17,600
|
|
|
|
4.03
|
|
09/07/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
2,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
4,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,510
|
|
10,815
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
securities
underlying
unexercised
options (#)
exercisable
|
|
Number of
securities
underlying
unexercised
options (#)
unexercisable
|
|
Equity
incentive
plan
awards
number of
securities
underlying
unexercised
unearned
options
(#)
|
|
Option
exercise
price ($)
|
|
Option
expiration
date
|
|
Number
of shares
or units
of stock
that
have not
vested
(#)
|
|
Market
value
of shares
or units
of stock
that
have not
vested
($)
|
|
Equity
incentive plan
awards:
number
of
unearned
shares, units or
other rights
that have
not vested (#)
|
|
Equity
incentive plan
awards:
market or
payout value
of
unearned
shares,
units or other
rights that have
not vested ($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
John R. Foster,
Vice President, Sales and
Marketing (Retired)
|
|
4,159
|
|
0
|
|
|
|
25.75
|
|
02/04/2009
|
|
|
|
|
|
|
|
|
|
2,495
|
|
0
|
|
|
|
30.90
|
|
02/04/2009
|
|
|
|
|
|
|
|
|
|
2,376
|
|
0
|
|
|
|
25.75
|
|
02/04/2009
|
|
|
|
|
|
|
|
|
|
4,873
|
|
0
|
|
|
|
17.94
|
|
02/09/2010
|
|
|
|
|
|
|
|
|
|
4,777
|
|
0
|
|
|
|
21.53
|
|
02/09/2010
|
|
|
|
|
|
|
|
|
|
3,340
|
|
0
|
|
|
|
10.38
|
|
02/07/2011
|
|
|
|
|
|
|
|
|
|
7,000
|
|
0
|
|
|
|
7.05
|
|
02/09/2012
|
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
8.17
|
|
08/14/2013
|
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
17.05
|
|
12/01/2014
|
|
|
|
|
|
|
|
|
|
|
0
|
|
0
|
|
|
|
10.59
|
|
03/02/2016
|
|
|
|
|
|
|
|
|
|
|
0
|
|
30,200
|
|
|
|
4.03
|
|
09/07/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
2,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
5,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,110
|
|
6,951
|
|
|
|
|
As discussed above in the Compensation Discussion and Analysis section, PARS awards vest seven
years from date of grant or vest when a specified share performance price threshold is achieved.
The market value of the restricted shares
shown was determined using $0.46, the per share closing price of the Companys common stock as of December 31, 2008.
The options
held by officers, including the named executive officers, decreased from December 31, 2007 pursuant to the officers determination to forfeit certain awards of nonqualified options to replenish shares in the plan.
OPTION EXERCISES AND STOCK VESTED
None of the Companys named executive officers exercised any stock options or acquired restricted stock upon vesting during the fiscal year ended December 31, 2008.
30
2008 PENSION BENEFITS
The table below shows the present value of accumulated benefits payable to each of the named executive officers, including the number of years of service
credited to each such named executive officer, under each of the Retirement Plan and the Restoration Plan (Supplemental Executive Retirement Plan) determined using interest and mortality rate assumptions consistent with those used in the
Companys financial statements. Information regarding the Retirement Plan and the Supplemental Executive Restoration Plan can be found above under the subheading Retirement and Other Post-Termination Compensation in the Compensation
Discussion and Analysis section.
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Number
of years
credited
service
(#) (1) (2)
|
|
Present
value of
accumulated
benefit ($)
(3) (4)
|
|
Payments
during
last fiscal
year ($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
Michael J. Keough,
President and Chief Executive Officer
|
|
Qualified Pension Plan
Restoration (SERP) Plan
|
|
3
32
|
|
$
$
|
29,816
1,627,194
|
|
|
|
|
|
|
|
Ronald J. Domanico,
Senior Vice President and Chief
Executive Officer
|
|
Qualified Pension Plan
Restoration (SERP) Plan
|
|
2
6
|
|
$
$
|
13,546
137,250
|
|
|
|
|
|
|
|
Steven L. Kelchen,
Vice President, Converted Products Group
|
|
Qualified Pension Plan
Restoration (SERP) Plan
|
|
19
|
|
$
|
276,183
|
|
|
|
|
|
|
|
Gregory B. Cottrell.
Vice President, Recovered Fiber Group
|
|
Qualified Pension Plan
Restoration (SERP) Plan
|
|
11
15
|
|
$
$
|
71,496
133,763
|
|
|
|
|
|
|
|
William A. Nix, III,
Vice President, Finance and
Chief Accounting Officer
|
|
Qualified Pension Plan
Restoration (SERP) Plan
|
|
9
13
|
|
$
$
|
70,576
188,530
|
|
|
|
|
|
|
|
Thomas C. Dawson, Jr.
Vice President, Mill Group (Retired)
|
|
Qualified Pension Plan
Restoration (SERP) Plan
|
|
36
36
|
|
$
$
|
325,271
807,621
|
|
|
|
|
|
|
|
John R. Foster,
Vice President, Sales and Marketing (Retired)
|
|
Qualified Pension Plan
Restoration (SERP) Plan
|
|
8
22
|
|
$
$
|
116,219
727,608
|
|
|
(1)
|
For Messrs. Keough, Domanico, Kelchen, Foster, Cottrell and Nix the Qualified Plan Service represents credited service in the Caraustar Defined Benefit Pension Plan from date of
hire to the suspension of this plan as of December 31, 2004 as discussed in the Compensation Discussion and Analysis section above. Mr. Dawson has met the age and service threshold for continued accrual of credited service in the qualified
plan.
|
(2)
|
The Restoration (SERP) Plan service for all named executives represents the total credited service with the Company with the exception of Mr. Keough (25 years),
Mr. Kelchen (15 years) and Mr. Foster (10 years) who were granted additional Restoration (SERP) Plan service for prior industry related service under the terms of their respective letter agreement or offer letter.
|
(3)
|
These amounts represent the actuarial present value of the Named Executives Officers accumulated benefits under the defined benefit and Restoration (SERP) Plans computed as of
the same pension plan measurement date used for financial statement reporting purposes with respect to the Companys financial statements for the year ended December 31, 2008. In calculating these values the Company used the same
assumptions used for financial reporting purposes under generally accepted accounting principles, except that retirement age was assumed to be the normal retirement age as defined in the plansage 65 in each instance. The estimated net
Restoration (SERP) Plan benefits, which benefits are offset by payments from qualified plans of prior employers if applicable and payments from the Companys defined contribution retirement plan benefit for each executive are:
|
31
|
|
|
|
Michael J. Keough
|
|
$
|
249,589
|
Ronald J. Domanico
|
|
$
|
31,698
|
Steven L. Kelchen
|
|
$
|
60,906
|
Gregory B. Cottrell
|
|
$
|
29,302
|
William A. Nix, III
|
|
$
|
28,584
|
Thomas C. Dawson, Jr. (Retired)
|
|
$
|
121,986
|
John R. Foster (Retired)
|
|
$
|
76,926
|
The incremental values of the Restoration (SERP) Plan benefits resulting from the augmentation of
additional service granted to Mr. Keough, Mr. Kelchen and Mr. Foster at time of hire are:
|
|
|
|
Michael J. Keough
|
|
$
|
192,661
|
Steven L. Kelchen
|
|
$
|
42,374
|
John R. Foster (Retired)
|
|
$
|
41,642
|
(4)
|
Only Messrs. Dawson, Foster and Nix are currently eligible for early retirement under the provisions of the Restoration (SERP) Plan. The values of the annuity benefit payable
upon early retirement are:
|
|
|
|
|
Thomas C. Dawson, Jr. (Retired)
|
|
$
|
71,935
|
John R. Foster (Retired)
|
|
$
|
66,079
|
William A. Nix, III
|
|
$
|
16,856
|
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Under the Companys compensation and benefits plans and related agreements applicable to the named executive officers, such executives may be
entitled to specific payments in the event of the termination of their employment under a variety of circumstances. The payment amounts shown in the table below are estimates of these payments assuming the termination occurred as of
December 31, 2008. The exact determination of these payments can only be made at the time of the executives actual separation.
Severance payments and benefits coverage in the event of an involuntary termination without cause for named executive officers are determined by the Companys severance policy which generally applies to all salaried employees except
for Mr. Keough, Mr. Domanico, and Mr. Kelchen. The severance and benefits entitlements for theses named executives are determined by their Letter Agreements. Under these agreements the following is provided:
Mr. Keough 24 months of severance pay and benefits coverage
Mr. Domanico 12 months of severance pay and benefits coverage
Mr. Kelchen 6 months of severance pay and benefits coverage.
The Company has in effect Change in Control Agreements with all of the named executive officers. The purpose of these agreements is to encourage key
personnel to remain with the Company to ensure continuity of operations during any actual or potential change of control event. The terms of these agreements and other change of control arrangements are reviewed in detail in the Compensation
Discussion and Analysis section above.
Termination of employment due to death or disability entitles the named executive officers to
benefits under the Companys life insurance or disability plans, generally available to other salaried employees. In addition, and also applicable to other salaried employees who receive grants of restricted stock, upon termination due to death
or disability all restricted stock immediately vests. As of December 31, 2008 the value of the restricted stock for each of the named executive officers is:
Michael J. Keough $66,534
Ronald J. Domanico $28,750
Steven L. Kelchen $19,679
32
Thomas C. Dawson, Jr. $17,255
John R. Foster $14,771
Gregory B. Cottrell $10,801
William A. Nix, III $11,219
In the event of the death of Messrs. Keough, Dawson or Foster, respectively, his surviving spouse would also be entitled to a monthly annuity payment
from the Companys pension plans.
The Change in Control Agreements do not provide for any payment to the named executive officers in
the event of retirement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
Payment
|
|
Incentive
Plan
Payments
|
|
Pension
Benefit
(1)
|
|
Continuation
of Medical/
Welfare
Benefits
|
|
Acceleration
of Equity
Awards
|
|
Excise
Tax
Gross-up
|
|
Total
Termination
Benefits
|
Michael J. Keough
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
1,250,000
|
|
0
|
|
0
|
|
36,678
|
|
0
|
|
0
|
|
1,286,678
|
Voluntary Termination or Involuntary Termination with Cause
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Termination after Change In Control
|
|
1,250,000
|
|
122,396
|
|
2,048,261
|
|
48,717
|
|
66,534
|
|
0
|
|
3,535,908
|
|
|
|
|
|
|
|
|
Ronald J. Domanico
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
420,000
|
|
0
|
|
0
|
|
18,610
|
|
0
|
|
0
|
|
438,610
|
Voluntary Termination or Involuntary Termination with Cause
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Termination after Change In Control
|
|
840,000
|
|
81,063
|
|
191,027
|
|
44,181
|
|
28,750
|
|
0
|
|
1,185,021
|
|
|
|
|
|
|
|
|
Steven L. Kelchen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
180,508
|
|
0
|
|
0
|
|
10,027
|
|
0
|
|
0
|
|
190,535
|
Voluntary Termination or Involuntary Termination with Cause
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Termination after Change In Control
|
|
722,030
|
|
67,158
|
|
379,950
|
|
39,015
|
|
19,679
|
|
0
|
|
1,227,832
|
|
|
|
|
|
|
|
|
Gregory B. Cottrell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
121,160
|
|
|
|
|
|
8,727
|
|
|
|
|
|
129,887
|
Voluntary Termination or Involuntary Termination with Cause
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Termination after Change In Control
|
|
484,640
|
|
46,434
|
|
183,609
|
|
36,661
|
|
10,801
|
|
0
|
|
762,145
|
|
|
|
|
|
|
|
|
William A. Nix, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
121,025
|
|
|
|
|
|
7,110
|
|
|
|
|
|
128,135
|
Voluntary Termination or Involuntary Termination with Cause
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Termination after Change In Control
|
|
484,100
|
|
45,644
|
|
247,591
|
|
27,438
|
|
11,219
|
|
0
|
|
815,992
|
|
|
|
|
|
|
|
|
Thomas C. Dawson, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
329,000
|
|
0
|
|
0
|
|
12,624
|
|
0
|
|
0
|
|
341,624
|
Voluntary Termination or Involuntary Termination with Cause
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Termination after Change In Control
|
|
658,000
|
|
58,662
|
|
1,058,626
|
|
30,190
|
|
17,255
|
|
399,059
|
|
2,221,792
|
|
|
|
|
|
|
|
|
John R. Foster
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
290,460
|
|
0
|
|
0
|
|
12,714
|
|
0
|
|
0
|
|
303,174
|
Voluntary Termination or Involuntary Termination with Cause
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Termination after Change In Control
|
|
580,920
|
|
54,761
|
|
856,694
|
|
30,372
|
|
14,771
|
|
0
|
|
1,537,518
|
(1)
|
Represents the lump sum payable upon Change in Control under the agreements. The lump sum is based on qualified plan actuarial equivalency assuming an event date as of
December 31, 2008. The lump sum is the larger of the present value of the early retirement benefit (if early retirement eligible on event date) and the present value of the defined normal retirement benefit.
|
33
NON-EMPLOYEE DIRECTOR COMPENSATION
Compensation Paid to Board Members
The Governance Committee annually reviews director compensation.
The Governance Committee specifically reviews survey data from the National Association of Corporate Directors (NACD), Mercer as well as the director compensation levels of the industry peer group. In January 2005, based upon specific
recommendations from a comprehensive survey conducted by Pearl Meyer, the Board adopted the current Directors Compensation Plan. Since 2005, while the Governance Committee has annually reviewed director compensation and noted that the current
level of director compensation lags slightly behind the median level for similarly sized companies, as reported by NACD, the Committee has maintained director compensation at 2005 levels in part because of the Companys current financial
condition.
In 2008, each director who is not an employee of the Company has been paid an annual retainer of $50,000 for serving as a
director. One half of this annual retainer has been paid in Common Shares of the Company. The other half was paid in cash in quarterly installments. The Board Chair received an additional annual retainer of $25,000 (one half of which has previously
been paid in Common Shares), the chair of the Audit Committee received an additional annual retainer of $7,500 (one half of which has previously been paid in Common Shares) and the chairman of each other committee received an additional annual
retainer of $3,500 (one half of which has previously been paid in Common Shares). In November of 2008, the Governance Committee determined that commencing January 1, 2009 directors would only be paid the cash portion of their retainer and would
forego, until further notice, that portion of their retainer paid using the Companys shares. Additionally, the Governance Committee suspended the directors annual option grant, typically awarded in December. This decision had the impact
of prospectively reducing directors quarterly retainers by fifty percent. The directors made this determination in order to preserve shares for future grants to employees and also to prolong the life of the 2003 Long Term Equity Incentive
Plan.
Each non-employee director, other than Mr. Zarnikow, also received an annual grant of options to purchase 3,000 Common Shares.
In addition, all non-employee directors were paid a fee of $2,000 per meeting for attending in-person meetings of the Board of Directors, $1,000 for participation in telephonic Board meetings, $1,000 per in-person committee meeting attended and $500
per telephonic committee meeting. In December of 2007, Mr. Zarnikow accepted a position with the Federal Government. While Mr. Zarnikows position allowed him to continue his service on the Board, it precluded him from accepting
compensation for that service. Since December 2007, Mr. Zarnikow has not received compensation from the Company, including new stock option grants. All directors were reimbursed for ordinary and necessary out-of-pocket expenses incurred in
attending meetings of the Board.
2008 Director Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name (1)
|
|
Fees
earned
or paid
in cash
($)
|
|
Stock
awards
(2), (3)
($)
|
|
Option
awards
(2)
($)
|
|
Non-equity
incentive
plan
compensation
($)
|
|
Change in
pension value
and
nonqualified
deferred
compensation
earnings
|
|
All other
compensation
($)
|
|
Total ($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
Daniel P. Casey
|
|
78,494
|
|
39,244
|
|
0
|
|
|
|
|
|
|
|
$
|
117,738
|
Charles H. Greiner
|
|
52,038
|
|
26,017
|
|
0
|
|
|
|
|
|
|
|
$
|
78,055
|
L. Celeste Bottorff
|
|
49,994
|
|
24,994
|
|
0
|
|
|
|
|
|
|
|
$
|
74,988
|
John T. Heald, Jr.
|
|
49,994
|
|
24,994
|
|
0
|
|
|
|
|
|
|
|
$
|
74,988
|
James E. Rogers
|
|
53,497
|
|
26,747
|
|
0
|
|
|
|
|
|
|
|
$
|
80,244
|
Robert J. Clanin
|
|
49,994
|
|
24,994
|
|
0
|
|
|
|
|
|
|
|
$
|
74,988
|
Dennis M. Love
|
|
51,454
|
|
51,454
|
|
0
|
|
|
|
|
|
|
|
$
|
102,908
|
(1)
|
Mr. Michael J. Keough and Ronald J. Domanico, both directors of the Company, have been omitted from this table since they are employees and receive no
additional compensation for serving on the Board.
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34
(2)
|
Refer to the notes on the Consolidated Financial Statements included with the Annual Report on Form 10K filed on March 13, 2009 for the relevant assumptions used to determine
the valuation of the stock option awards to Directors.
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(3)
|
Amounts listed under column (c) Stock awards represent quarterly retainer fees that the Company pays to its directors in lieu of cash.
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The following are the aggregate numbers of vested stock option awards and shares issued as director compensation held as of December 31, 2008 by the
individuals that served as non-employee directors during some or all of 2008.
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|
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Name of Director
|
|
Full Value
Share Holdings
|
|
Stock
Options
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James E. Rogers
|
|
49,112
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|
13,930
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Dennis M. Love
|
|
47,173
|
|
14,930
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Robert J. Clanin
|
|
44,586
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|
12,930
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Daniel P. Casey
|
|
36,982
|
|
9,930
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Charles H. Greiner
|
|
26,821
|
|
9,000
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John T. Heald, Jr.
|
|
25,793
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|
6,000
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L. Celeste Bottorff
|
|
22,256
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|
9,930
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Eric R. Zarnikow (1)
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|
8,695
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|
6,000
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(1)
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Mr. Zarnikow resigned from the Board effective April 3, 2009
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SHARE OWNERSHIP
As of March 9, 2009, the only class of voting securities the Company had issued and outstanding was
its Common Shares. On that date there were 30,041,079 Common Shares outstanding. The following table sets forth the names of, and the numbers and percentages of Common Shares beneficially owned as of December 31, 2008 by each person known
to the Company to own beneficially 5% or more of the Companys outstanding Common Shares. Each of the individuals listed below possesses sole voting and investment power with respect to the Common Shares listed opposite his or her name unless
noted otherwise.
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Common Shares
Beneficially Owned
|
|
Name and Address of Beneficial Owner
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Number(1)
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Percent
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Southernsun Asset Management, Inc. (1)
6000 Poplar Avenue, Suite 220
Memphis, TN 38119
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|
4,670,893
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15.8
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%
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Bessemer Group, Inc., et al. (2)
100 Woodbridge Center Drive
Woodbridge, NJ 07095
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|
2,885,800
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|
9.8
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%
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Goldman Sachs Asset Management, L.P., et al (3)
32 Old Slip
New York, NY 10005
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|
2,758,892
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|
9.3
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%
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Dimensional Fund Advisors, Inc. (4)
Palisades West, Building One
6300 Bee Cave Road
Austin, TX 78746
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|
2,080,157
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|
7.0
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%
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F&C Asset Management plc (5)
80 George Street
Edinburgh EH2 3BU, United Kingdom
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|
1,717,674
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5.8
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%
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|
Addresses are furnished for each person known to the Company to own beneficially 5% or more of the Companys outstanding Common Shares.
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35
(1)
|
The amount and nature of the shares beneficially owned are based on a Form Schedule 13G filed on or about January 12, 2009. Southernsun Asset Management, Inc. reports sole
voting and dispositive power over all of these shares.
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(2)
|
The amount and nature of the shares beneficially owned are based on an amended Schedule 13G filed on or about February 17, 2009. Of the shares reported, Bessemer Group, Inc.
reports sole voting and dispositive power over none of the shares.
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(3)
|
The amount and nature of the shares beneficially owned are based on an amended Schedule 13G filed on or about February 9, 2009. Of the shares reported, Goldman Sachs Asset
Management reports sole voting and dispositive power over none of the shares. Goldman Sachs Asset Management disclaims beneficial ownership of any securities managed on its behalf by third parties.
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(4)
|
The amount and nature of the shares beneficially owned are based on an amended Schedule 13G filed on or about February 9, 2009. Of the shares reported, Dimensional Fund
Advisors reports these shares based on its role as investment adviser or manager to certain investment companies, trusts and accounts. It reports sole voting and dispositive power over all these shares, but disclaims beneficial ownership of all such
shares.
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(5)
|
The amount and nature of the shares beneficially owned are based on a Form Schedule 13G filed on or about January 22, 2009. Of the shares reported, F&C Asset Management plc
reports sole voting and dispositive power over all 1,717,674 shares.
|
Security Ownership of Directors and Executive Officers
The following table sets forth as of March 9, 2009, certain information with respect to Common Shares beneficially owned by each
director of the Company, each nominee for election as director, the named executive officers included in the Summary Compensation Table set forth above and all directors and executive officers of the Company, as a group. The address of each officer
and director is c/o Caraustar Industries, Inc., 5000 Austell-Powder Springs Road, Suite 300, Austell, GA 30106-3227. Except as otherwise indicated, the individuals listed in the table have sole voting and investment powers with respect to the Common
Shares beneficially owned by them.
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Common Shares
Beneficially Owned
|
|
Name of Individual
|
|
Number(1)
|
|
Percent
|
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Ronald J. Domanico (2)
|
|
352,187
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1.2
|
|
Michael J. Keough (3)
|
|
347,135
|
|
1.2
|
|
Thomas C. Dawson, Jr., (Retired) (4)
|
|
137,170
|
|
*
|
|
John R. Foster, (Retired) (5)
|
|
127,168
|
|
*
|
|
Steven L. Kelchen (6)
|
|
102,165
|
|
*
|
|
Gregory B. Cottrell (7)
|
|
82,091
|
|
*
|
|
William A. Nix, III (8)
|
|
68,890
|
|
*
|
|
James E. Rogers
|
|
63,042
|
|
*
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|
Dennis M. Love
|
|
62,103
|
|
*
|
|
Barry A. Smedstad (9)
|
|
59,542
|
|
*
|
|
Robert J. Clanin
|
|
57,516
|
|
*
|
|
Daniel P. Casey (10)
|
|
46,912
|
|
*
|
|
Wilma E. Beaty (11)
|
|
36,395
|
|
*
|
|
Charles H. Greiner, Jr.
|
|
35,821
|
|
*
|
|
L. Celeste Bottorff
|
|
32,186
|
|
*
|
|
John T. Heald, Jr.
|
|
31,793
|
|
*
|
|
Eric R. Zarnikow (12)
|
|
14,695
|
|
*
|
|
Directors and executive officers as a group (17 persons)
|
|
1,656,811
|
|
5.3
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%
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(1)
|
Includes the following shares subject to stock options exercisable within 60 days after March 9, 2009: Mr. Domanico 95,000; Mr. Keough
149,300; Mr. Dawson 45,804; Mr. Foster 66,730; Mr. Kelchen 37,600; Mr. Cottrell 40,876; Mr. Nix 28,800; Mr. Rogers 13,930; Mr. Love 14,930;
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36
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Mr. Smedstad 31,325; Mr. Clanin 12,930; Mr. Casey 9,930; Ms. Beaty 16,800;
Mr. Greiner 9,000; Ms. Bottorff 9,930; Mr. Heald 6,000; Mr. Zarnikow 6,000; directors and executive officers as a group 840,759.
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(2)
|
Includes 16,609 shares held in a 401(k).
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(3)
|
Includes 10,500 shares held in a family living trust with Mr. Keoughs wife.
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(4)
|
Includes 30,477 shares registered in the name of Mr. Dawsons wife.
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(5)
|
Includes 18,156 shares held in a 401(k).
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(6)
|
Includes 1,000 shares registered in the name of Mr. Kelchens wife.
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(7)
|
Includes 7,905 shares held in a 401(k).
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(8)
|
Includes 1,390 shares registered in the name of Mr. Nix wife and 2,500 shares held in an IRA.
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(9)
|
Includes 9,107 shares held in a 401(k).
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(10)
|
Includes 5,000 shares held in an IRA.
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(11)
|
Includes 1,205 shares held in a 401(k).
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(12)
|
Mr. Zarnikow resigned from the Board effective April 3, 2009.
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*
|
Denotes ownership of less than 1% of the Companys Common Shares.
|
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about the Companys
Common Shares that may be issued upon the exercise of stock options under all of the Companys existing equity compensation plans, including the Companys 2003 Long Term Equity Incentive Plan and the 1996 Directors Equity Plan and
1998 Long Term Equity Incentive Plan.
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
|
Number of
securities
remaining available for future
issuance under equity
compensation plans
(excluding securities reflected
in column (a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
2,737,847
|
(1)
|
|
$
|
9.61
|
|
1,207,572
|
(2)
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders (3)
|
|
110,000
|
|
|
$
|
8.54
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
2,847,847
|
|
|
$
|
9.57
|
|
1,207,572
|
|
|
|
|
|
|
|
|
|
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(1)
|
This amount represents (i) 35,440 Common Shares issuable upon exercise of options outstanding under our 1996 Directors Equity Plan, (ii) 676,310 Common Shares issuable
upon the exercise of options outstanding under our 1998 Key Incentive Compensation Plan and (iii) 819,731 Common Shares issuable upon the exercise of options outstanding under our 2003 Long-Term Equity Incentive Plan.
|
(2)
|
There are no securities available for future issuance under the 1998 Key Employee Incentive Compensation Plan, or the 1996 Directors Equity Plan.
|
(3)
|
This amount represents Common Shares issuable upon the exercise of options granted to Mr. Keough and Ronald J. Domanico in March 2002 and October 2002, respectively, in
connection with their hirings. These grants were issued outside of the 1998 Long-Term Equity Incentive Plan due to a limitation in the plan that allowed no more than 100,000 shares of common stock for which options could be granted to any
participant in any calendar year.
|
37
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys directors and executives, and persons who own more than 10% of a
registered class of the Companys equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Shares and other equity securities of the Company. Executives,
directors and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Companys knowledge, based solely on review of the copies of reports furnished to
the Company during the year ended December 31, 2008, all Section 16(a) filing requirements applicable to its executives and directors and any greater than 10% beneficial owners were complied with.
PROPOSAL 2
The Ratification of
Appointment of Deloitte & Touche LLP
as the Companys Independent Registered Public Accounting Firm (Independent
Auditors)
Selection of Independent Registered Public Accounting Firm
The Audit Committee has selected Deloitte & Touche as the independent registered public accounting firm to audit the books of the Company and its
subsidiaries for the current year and to report on the consolidated statement of financial position and related statement of operations of the Company and its subsidiaries. Representatives of Deloitte & Touche are expected to be present at
the 2009 Annual Meeting with the opportunity to make a statement if they so desire, and they are expected to be available to respond to questions.
Approval of the proposal to ratify the selection of the independent registered public accounting firm requires that the number of votes cast for the proposal exceed the number of votes cast against it. Should the shareholders vote
negatively, the Audit Committee will consider a change in independent registered public accounting firms for the 2009 fiscal year.
Your
Board Unanimously Recommends a Vote
FOR
Ratification of the Selection of Deloitte & Touche LLP
as the Independent Registered Public Accounting Firm to Audit the Books
of the Company and its Subsidiaries for the Current Year.
AUDIT COMMITTEE DISCLOSURE
Audit Committee Pre-approval Policy
As mandated by SEC regulations, the Audit Committee has a pre-approval policy that outlines procedures intended to ensure that all audit and permitted non-audit services provided to the Company by its independent auditors are approved
either directly by the Audit Committee in advance or pursuant to the detailed procedures reflected in the pre-approval policy. The policy provides that any proposed services will be classified into one of four possible service categories that the
Audit Committee generally believes is either required, or permissible, for the independent auditors to perform, and then submitted to the Audit Committee for pre-approval, along with specific information regarding the proposed services and fees. The
four general service categories are as follows: audit services, audit-related services, tax services, and other services for which use of the independent auditors would provide a synergistic benefit to the Company or from which the Company would
benefit by virtue of the independent auditors unique or superior qualifications. In addition, pursuant to the policy, the Audit Committee annually pre-approves the provision of certain specified audit, audit-related and tax services, subject
to specified quarterly budget restrictions that can be exceeded only if an additional approval is obtained from either the Audit Committee Chairman or the Committee as a whole.
38
Report of the Audit Committee
The Audit Committee reviews the Companys financial reporting process on behalf of the Board. Management has the primary responsibility for the
financial statements and the reporting process, including the systems of internal controls and disclosure controls. Its other material functions are outlined in a written charter adopted by the Board, which was most recently ratified in February
2009 and is available at
www.caraustar.com
by first clicking Investor Relations then Governance and then Audit Committee under the sub-heading Committee Charters. In this context, we have met
and held discussions with management and the independent auditors. Management represented to us that the Companys consolidated financial statements were prepared in accordance with generally accepted accounting principles, and we have reviewed
and discussed the audited financial statements and related disclosures with management and the independent auditors, including a review of the significant management judgments underlying the financial statements and disclosures.
The independent auditors report to us and to the Board. We have sole authority to appoint and to terminate the engagement of the independent auditors.
We have discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees), including the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements. In addition, we have
received the written disclosures and the letter from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors communications with the audit committee
concerning independence and have discussed with the independent auditors the auditors independence from the Company and its management. We have also considered whether the non-audit services provided by Deloitte & Touche LLP (as
described below) were compatible with their independence. Consistent with the requirements of the Sarbanes-Oxley Act of 2002, we have adopted additional policies directed at maintaining the independence of the independent auditors, such as prior
committee approval of non-audit services and required audit partner rotation.
We discussed with the Companys internal and
independent auditors the overall scope and plans for their respective audits including internal control testing under Section 404 of the Sarbanes-Oxley Act. We periodically meet with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, their evaluations of the Companys internal controls, and the overall quality of the Companys financial reporting. We also periodically meet in executive session.
In reliance on the reviews and discussions referred to above, we recommended to the Board that the audited financial statements be
included in the Companys annual report on Form 10-K for the year ended December 31, 2008, for filing with the Securities and Exchange Commission. We have also appointed the Companys independent auditors for 2009, and this
appointment is being submitted for shareholder ratification at the 2009 Annual Meeting.
A
UDIT
C
OMMITTEE
:
Robert J. Clanin, Interim Chair
L. Celeste Bottorff
Daniel P. Casey
39
The foregoing report shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed filed under such Acts.
Service Fees Paid to the Independent Registered Public Accounting Firm
The Audit Committee, with the ratification of the shareholders, engaged Deloitte & Touche LLP to perform an annual audit of the
Companys financial statements for the fiscal year ended December 31, 2008. The following is the breakdown of aggregate fees paid to the auditors for the Company for the last two fiscal years.
Audit Fees
Deloitte & Touche, LLP billed us
the following amounts in aggregate fees for fiscal year 2008 and 2007 audit services, the review of the financial statements included in quarterly reports on Form 10-Q during those years and the services that are normally provided by them in
connection with statutory and regulatory filings, as well as, beginning in fiscal year 2004, the attestation of managements assessment of internal control as required by section 404 of the Sarbanes-Oxley Act of 2002:
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2008 $1,217,924
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|
2007 $1,389,556
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Audit-Related Fees
Deloitte & Touche billed us the following amounts in aggregate fees for fiscal years 2008 and 2007 for assurance and related services, other than those described above under Audit Fees, that are
reasonably related to the performance of the audit or review of our financial statements:
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2008 $75,507
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|
2007 $65,978
|
In both 2008 and 2007, these fees were billed for employee benefit plan audit services.
Tax Fees
For 2008 and 2007,
Deloitte & Touche billed us the following amounts in aggregate fees for tax compliance, tax advice and tax planning services:
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|
2008 $89,859*
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2007 $68,132
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All Other Fees
Aggregate fees billed for all other audit-related services rendered by Deloitte & Touche for fiscal years 2008 and 2007 were:
*
|
This amount is estimated and includes $75,000, in projected fees that will be billed in connection with work to be completed for tax services attributable to the year ended
December 31, 2008.
|
Of all the fees reported above, none were approved pursuant to the de minimus exception to the audit
committee pre-approval requirements specified in Rule 2-01(c)(7)(i)(C) of Regulation S-X.
OTHER BUSINESS
The Companys management does not know of any other matter to be presented for action at the Annual Meeting. If any other matter should be properly
presented at the Annual Meeting, however, it is the intention of the persons named in the accompanying proxy to vote said proxy in accordance with their best judgment.
40
PROPOSALS FOR 2009 ANNUAL MEETING OF SHAREHOLDERS
Shareholders who intend to present proposals at next years annual meeting are advised that any such proposal must be received by the Secretary of
the Company no later than the close of business on December 18, 2009 in order to be considered for inclusion in the Companys proxy statement and proxy appointment forms relating to that meeting. Only persons who have held beneficially or
of record at least $2,000 in market value, or 1% of the outstanding Common Shares, for at least one year on the date the proposal is submitted and who continue in such capacity through the meeting date are eligible to submit proposals to be
considered for inclusion in the Companys proxy statement.
In addition, the Companys bylaws prescribe procedures a shareholder
must follow to make nominations for director candidates or propose any other business to be considered at an annual meeting. Shareholder nominations for director will be considered at an annual meeting or any other meeting at which an election is to
be held if the shareholder delivers to the Secretary of the Company, not later than the close of business on the fifth business day following the date on which notice is first given to shareholders of the meeting at which such election is to be
held, a notice setting forth the information specified in Section 3 of Article III of the Companys bylaws. Other shareholder proposals will be considered at an annual meeting if the shareholder delivers to the Secretary of the Company at
its principal executive office, no less than 60 nor more than 90 days prior to the meeting, a written notice setting forth the information specified in Section 15 of the Article III of the Companys bylaws. Notwithstanding the limitations
described in the preceding sentence, in the event the Companys annual meeting is held on a date other than the second Wednesday in May, and public disclosure of the date of the annual meeting is made less than 70 days prior to the meeting
date, a shareholders notice of proposed business will be considered timely if received by the Company no later than the tenth day following the date of public disclosure of the meeting date. Any shareholder desiring a copy of the
Companys bylaws will be furnished one without charge upon written request to the Secretary at 5000 Austell-Powder Springs Road, Suite 300, Austell, Georgia 30106.
WILMA ELIZABETH BEATY
Vice President, General Counsel and Secretary
Austell: April 20, 2009
You are cordially invited to
attend this years meeting. However, whether you plan to attend the meeting or not, you are respectfully urged to sign and return the enclosed proxy appointment form, which will, of course, be returned to you at the meeting if you are present
and so request.
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Daniel P. Casey
|
Chairman of the Board
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/s/ Michael J. Keough
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Michael J. Keough
|
President and Chief Executive Officer
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41
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Please mark
your votes as
indicated in
this example
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x
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS.
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FOR ALL
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WITHHOLD FOR ALL
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*EXCEPTIONS
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FOR
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AGAINST
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ABSTAIN
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1. ELECTION OF FOUR
CLASSII DIRECTORS.
Nominees:
01 Ronald J. Domanico
02 Charles H. Greiner, Jr.
03
John T. Heald, Jr.
04 Michael J. Keough
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¨
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¨
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¨
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2.
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PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.
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¨
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¨
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¨
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3.
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In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting
The undersigned acknowledges receipt of the accompanying Notice of Annual Meeting and Proxy Statement
and revokes all Appointments of Proxy heretofore given by the undersigned.
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(INSTRUCTIONS: To withhold authority to vote for
any individual nominee, mark the Exceptions box and write that nominees name in the space provided below.)
*Exceptions
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Please Mark, Sign, Date and Return this Proxy Promptly Using the
Enclosed Postage Prepaid Envelope.
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Mark Here for Address
Change or Comments
SEE REVERSE
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¨
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Signature
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Signature
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Date
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Please sign exactly as name appears on card. When shares are
held by joint tenants, both should sign. When signing as attorney, as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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FOLD AND DETACH HERE
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting
day.
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CARAUSTAR INDUSTRIES, INC.
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INTERNET
http://www.eproxy.com/csar
Use the Internet to vote your proxy. Have your proxy card in hand when you access the
web site.
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OR
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TELEPHONE
1-866-580-9477
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you
call.
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If you vote your proxy by Internet or by telephone, you do NOT need to mail
back your proxy card.
To vote by mail, mark, sign and date your proxy card and return
it in the enclosed postage-paid envelope.
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Important notice regarding the Internet
availability of proxy materials for the Annual Meeting of shareholders
The Proxy Statement and the 2008 Annual Report to Stockholders are available at:
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Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
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http://phx.corporate-ir.net/phoenix.zhtml?c=110896&p=irol-reportsAnnual
47613
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CARAUSTAR INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 20, 2009
THIS APPOINTMENT OF PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Daniel P. Casey, Robert J. Clanin and James E. Rogers as Proxies with full power of substitution to
act and vote for and on behalf of the undersigned, as designated below, all the shares of common stock of Caraustar Industries, Inc. (the Company) held of record by the undersigned on March 9, 2009, at the annual meeting of shareholders
to be held at the Companys corporate headquarters, 5000 Austell-Powder Springs Road, Threadmill Complex Suite 300, Austell, Georgia on May 20, 2009 or any adjournment thereof.
THE PROXIES WILL VOTE FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED HEREIN
AND FOR PROPOSAL 2 UNLESS THE SHAREHOLDER DIRECTS OTHERWISE, IN WHICH CASE THE PROXIES WILL VOTE AS DIRECTED.
(Continued and to be marked, dated and signed, on the other side)
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BNY MELLON SHAREOWNER SERVICES
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Address
Change/Comments
(Mark the corresponding box on the reverse side)
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P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
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p
FOLD AND DETACH HERE
p
You can now access your
BNY Mellon Shareowner Services
account online.
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Access your BNY Mellon Shareowner Services
shareholder/stockholder account online via Investor ServiceDirect
®
(ISD).
The
transfer agent for Caraustar Industries, Inc., now makes it easy and convenient to get current information on your shareholder account.
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View account status
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View payment history for dividends
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View certificate history
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Make address changes
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View book-entry information
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Obtain a duplicate 1099 tax form
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Establish/change your PIN
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Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
****TRY IT OUT****
www.bnymellon.com/shareowner/isd
Investor ServiceDirect
®
Available 24 hours per day, 7 days per week
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Choose
MLink
SM
for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to
Investor ServiceDirect
®
at
www.bnymellon.com/shareowner/isd
where step-by-step instructions will prompt you through enrollment.
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47613
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