ROCK-TENN COMPANY
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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December 21,
2006
To our
Shareholders:
It is our pleasure to invite you to attend our annual meeting of
shareholders, which is to be held on January 26, 2007, at
the Northeast Atlanta Hilton at Peachtree Corners, 5993
Peachtree Industrial Boulevard, Norcross, Georgia 30092. The
meeting will start at 9:00 a.m., local time.
The following Notice of Annual Meeting of Shareholders outlines
the business to be conducted at the meeting.
Please complete, sign and return your proxy in the enclosed
envelope or follow the other voting procedures described in the
proxy statement as soon as possible to ensure that your shares
will be represented and voted at the annual meeting. If you
attend the annual meeting, you may vote your shares in person
even though you have previously voted your proxy.
Very truly yours,
James A. Rubright
Chairman and
Chief Executive Officer
TABLE OF CONTENTS
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on January 26, 2007
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TIME:
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9:00 a.m., local time, on Friday, January 26, 2007
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PLACE:
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Northeast Atlanta Hilton at Peachtree Corners,
5993 Peachtree Industrial Boulevard, Norcross, Georgia 30092
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ITEMS OF BUSINESS:
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(1) To elect four directors.
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(2) To adopt and approve an amendment to the Rock-Tenn
Company 1993 Employee Stock Purchase Plan to increase by
1,000,000 the number of shares of our Class A Common Stock
available for purchase under the plan.
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(3) To adopt and approve an amendment to the Rock-Tenn
Company 2004 Incentive Stock Plan to increase by 900,000 the
number of shares of our Class A Common Stock available for
any type of award under the plan, including stock grants, to
remove the restriction that limits the number of shares
available under the plan for stock grants so that all shares
available for issuance under the plan will be available for any
type of award under the plan, including stock grants, and to
increase the annual limitation on stock grants to any employee
under the plan so that no employee will be permitted to receive
in any calendar year stock grants or stock unit grants under the
plan with a fair market value in excess of $5,000,000 at the
time of the grant.
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(4) To ratify the appointment of Ernst & Young LLP
to serve as the independent registered public accounting firm of
Rock-Tenn Company.
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(5) To transact any other business that properly comes
before the meeting or any adjournment of the annual meeting.
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WHO MAY VOTE:
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You can vote if you were a holder of Class A Common Stock
of record on November 30, 2006.
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ANNUAL REPORT:
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A copy of our Annual Report is enclosed.
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DATE OF NOTICE:
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December 21, 2006.
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DATE OF MAILING:
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This notice and the proxy statement are first being mailed to
shareholders on or about December 21, 2006.
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ROCK-TENN
COMPANY
504 Thrasher Street
Norcross, Georgia 30071
PROXY
STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 26, 2007
ABOUT THE
MEETING
Who is
furnishing this proxy statement?
This proxy statement is being furnished to our shareholders by
our board of directors in connection with the solicitation of
proxies by the board of directors. The proxies will be used at
our annual meeting of shareholders to be held on
January 26, 2007 (which we refer to as the annual
meeting).
What
am I voting on?
You will be voting on each of the following:
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To elect four directors.
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To adopt and approve an amendment to the Rock-Tenn Company 1993
Employee Stock Purchase Plan to increase by 1,000,000 the number
of shares of Class A Common Stock (which we refer to as
Common Stock) available for purchase under
the plan. We refer to the amendment to the Rock-Tenn Company
1993 Employee Stock Purchase Plan as the Purchase Plan
Amendment.
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To adopt and approve an amendment to the Rock-Tenn Company 2004
Incentive Stock Plan (which we refer to as the 2004
Incentive Stock Plan) to increase by 900,000 the
number of shares of our Common Stock available for any type of
award under the plan, including stock grants, to remove the
restriction that limits the number of shares available under the
plan for stock grants so that all shares available for issuance
under the plan will be available for any type of award under the
plan, including stock grants, and to increase the annual
limitation on stock grants to any employee under the plan so
that no employee will be permitted to receive in any calendar
year stock grants or stock unit grants under the plan with a
fair market value in excess of $5,000,000 at the time of the
grant. We refer to the amendment to the Rock-Tenn Company 2004
Incentive Stock Plan as the Stock Plan
Amendment.
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To ratify the appointment of Ernst & Young LLP to serve
as our independent registered public accounting firm. We refer
to the appointment of Ernst & Young LLP as our
independent registered public accounting firm as the
E&Y Appointment.
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To transact any other business that properly comes before the
annual meeting or any adjournment of the annual meeting.
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As of the date of this proxy statement, the board of directors
knows of no other matter that will be brought before the annual
meeting.
You may not cumulate your votes for any matter being voted on at
the annual meeting and you are not entitled to appraisal or
dissenters rights.
Who
can vote?
You may vote if you owned Class A Common Stock as of the
close of business on November 30, 2006, the record date for
the annual meeting. As of November 30, 2006, there were
38,697,370 shares of our Class A Common Stock
outstanding.
What
if my certificates represent Class B Common
Stock?
Each share of our Class B Common Stock was automatically
converted into one share of Class A Common Stock on
June 30, 2002. Each certificate that represented shares of
Class B Common Stock represents the same number of shares
of Class A Common Stock into which the Class B Common
Stock was converted.
How do
I vote?
You have four voting options. You may vote using one of the
following methods:
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Over the Internet at the address shown on your proxy card. If
you have access to the Internet, we encourage you to vote in
this manner.
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By telephone using the number shown on your proxy card.
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By completing, signing and returning the enclosed proxy.
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By attending the annual meeting and voting in person.
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Please follow the directions on your proxy card carefully. If
you hold your shares in the name of a bank or broker, the
availability of telephone and Internet voting depends on their
voting processes and you should contact your bank or broker for
more information.
Can I
vote at the annual meeting?
You may vote your shares at the annual meeting if you attend in
person. Even if you plan to be present at the annual meeting, we
encourage you to vote your shares by proxy. You may vote your
proxy via the Internet, by telephone or by mail.
What
if my shares are registered in more than one persons
name?
If you own shares that are registered in the name of more than
one person, each person must sign the enclosed proxy. If an
attorney, executor, administrator, trustee, guardian or any
other person signs the proxy in a representative capacity, the
full title of the person signing the proxy should be given and a
certificate should be furnished showing evidence of appointment.
What
does it mean if I receive more than one proxy?
It means you have multiple accounts with brokers
and/or our
transfer agent. Please vote all of these shares. We recommend
that you contact your broker
and/or our
transfer agent to consolidate as many accounts as possible under
the same name and address. Our transfer agent is Computershare,
250 Royall Street, Canton, MA 02021 and may be reached at
1-800-568-3476.
What
if I return my proxy but do not provide voting
instructions?
If you sign and return your proxy but do not include voting
instructions, your proxy will be voted FOR the election of the
four nominee directors named on page 5 of this proxy
statement, FOR the approval of the Purchase Plan Amendment, FOR
the approval of the Stock Plan Amendment and FOR the
ratification of the E&Y Appointment.
2
Can I
change my mind after I vote?
You may change your vote at any time before the polls close at
the annual meeting. You may do this by using one of the
following methods:
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Voting again by telephone or over the Internet prior to
2:00 a.m., E.T., on January 26, 2007.
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Giving written notice to the Corporate Secretary of our company.
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Delivering a later-dated proxy.
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Voting in person at the annual meeting.
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How
many votes am I entitled to?
You are entitled to one vote for each share of Common Stock you
own.
How
many votes must be present to hold the annual
meeting?
In order for us to conduct the annual meeting, the holders of a
majority of the votes of the Common Stock outstanding as of
November 30, 2006 must be present at the annual meeting.
This is referred to as a quorum. Your shares will be counted as
present at the annual meeting if you do one of the following:
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Vote via the Internet or by telephone.
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Return a properly executed proxy (even if you do not provide
voting instructions).
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Attend the annual meeting and vote in person.
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How
many votes are needed to elect directors?
The four nominees receiving the highest number of
yes votes will be elected directors. This number is
called a plurality.
How
many votes are needed to adopt and approve, the Purchase Plan
Amendment and the Stock Plan Amendment?
To approve and adopt the Purchase Plan Amendment, the
yes votes cast at the annual meeting must exceed the
no votes cast at the annual meeting, provided that
the total vote cast on the proposal represents over 50% of the
total number of shares entitled to vote on the proposal. If you
do not vote in person or vote via the Internet or by telephone,
or sign and return a proxy, your shares will not be counted as
yes votes or no votes at the annual
meeting.
To approve and adopt the Stock Plan Amendment, the
yes votes cast at the annual meeting must exceed the
no votes cast at the annual meeting, provided that
the total vote cast on the proposal represents over 50% of the
total number of shares entitled to vote on the proposal. If you
do not vote in person or vote via the Internet or by telephone,
or sign and return a proxy, your shares will not be counted as
yes votes or no votes at the annual
meeting.
How
many votes are needed to ratify the E&Y
Appointment?
To ratify the E&Y Appointment, the yes votes
cast in favor of the matter must exceed the no votes
cast against the matter.
How
many votes are needed for other matters?
To approve any other matter that properly comes before the
annual meeting, the yes votes cast in favor of the
matter must exceed the no votes cast against the
matter. The board of directors knows of no other matters that
will be brought before the annual meeting. If other matters are
properly introduced, the persons named in the enclosed proxy as
the proxy holders will vote on such matters in their discretion.
3
Will
my shares be voted if I do not provide my proxy?
Your shares may be voted under certain circumstances if they are
held in the name of a brokerage firm. Brokerage firms have the
authority under rules of the New York Stock Exchange (which we
refer to as the NYSE) to vote customers
unvoted shares on routine matters, which includes
the election of directors and ratification of the appointment of
our independent registered public accounting firm. Accordingly,
if a brokerage firm votes your shares on these matters in
accordance with these rules, your shares will count as present
at the annual meeting for purposes of establishing a quorum and
will count as yes votes or no votes, as
the case may be, with respect to all routine matters
voted on at the annual meeting. However, the adoption and
approval of the Purchase Plan Amendment and the Stock Plan
Amendment are not considered to be routine matters
under the NYSE rules. Accordingly, a brokerage firm may not vote
your shares on these maters without specific instructions from
you. If you hold your shares directly in your own name, they
will not be voted if you do not vote them or provide a proxy. If
a brokerage firm signs and returns a proxy on your behalf that
does not contain voting instructions, your shares will count as
present at the annual meeting for quorum purposes, but will not
count as yes votes or no votes on the
Purchase Plan Amendment or the Stock Plan Amendment. These are
referred to as broker non-votes.
ELECTION
OF DIRECTORS
ITEM 1
Board
of Directors
Our board of directors currently has 11 members. The directors
are divided into three classes with the directors in each class
serving a term of three years. Directors for each class are
elected at the annual meeting of shareholders held in the year
in which the term for their class expires. At the annual meeting
on January 26, 2007, four nominees for director are to be
elected to serve on our board of directors until the annual
meeting in 2010, or until their successors are qualified and
elected. Our board is authorized to increase the size of the
board and is authorized to fill the vacancies created by the
increase. Any directors elected by the board in this manner will
stand for re-election at the next annual meeting of shareholders
after their election even if that class of directors is not
subject to election in that year.
We do not believe that any of the nominees for director will be
unwilling or unable to serve as director. However, if at the
time of the annual meeting any of the nominees should be
unwilling or unable to serve, proxies will be voted as
recommended by the board of directors to do one of the following:
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To elect substitute nominees recommended by the board.
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To allow the vacancy created to remain open until filled by the
board.
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To reduce the number of directors for the ensuing year.
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In no event, however, can a proxy be voted to elect more than
four directors.
Recommendation
of the Board of Directors
The board of directors recommends a vote FOR Stephen
G. Anderson, Robert B. Currey, L.L. Gellerstedt, III and
John W. Spiegel to hold office until the annual meeting of
shareholders in 2010, or until each of their successors is
qualified and elected. Proxies returned without instructions
will be voted FOR these nominees.
4
Nominees
for Election Term Expiring 2010
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Director
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Name
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Age
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Since
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Positions Held
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Stephen G. Anderson
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68
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1977
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Dr. Anderson retired in June 2001
from his private practice in Winston-Salem, North Carolina,
where he had been a physician for more than five years.
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Robert B. Currey
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66
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1989
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Mr. Currey founded
Currey & Company, Inc., a producer of consumer lighting
products, and has served as chairman and chief executive officer
of that business for more than five years. Mr. Currey is
the uncle of Russell M. Currey, a director and a division
executive of our company.
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L. L. Gellerstedt, III
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50
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1998
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Mr. Gellerstedt has served as the
president of the office/multi-family division of Cousins
Properties, Inc., a real estate development company, since June
2005. Mr. Gellerstedt served as the chairman and chief
executive officer of The Gellerstedt Group, a real estate
development company, from June 2003 until June 2005.
Mr. Gellerstedt served as the president and chief operating
officer of The Integral Group, a real estate development
company, from January 2001 until June 2003. Mr. Gellerstedt
is a director of SunTrust Bank, Atlanta, a subsidiary of
SunTrust Banks, Inc., a commercial bank, and Alltel Corporation,
a nationwide telecommunications services company.
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John W. Spiegel
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65
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1989
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Mr. Spiegel has served as
non-executive chairman of S1 Corporation, a provider of
integrated applications for financial institutions, since
October, 2006. Mr. Spiegel is a director of Bentley
Pharmaceuticals, Inc., a specialty pharmaceutical company, a
member of the board of trustees of Colonial Properties Trust, a
real estate investment trust, a director of HomeBanc Corp., the
parent company of HomeBanc Mortgage Corp., a mortgage banking
company, and a director of S1 Corporation. Mr. Spiegel
served as executive vice president and chief financial officer
of SunTrust Banks, Inc., a bank holding company, until August
2000, when he became vice chairman and chief financial officer.
He retired from these positions in August 2004. He continued to
serve as a non-executive vice chairman of SunTrust Banks Holding
Company, a wholly-owned subsidiary of SunTrust Banks, Inc.,
through March 31, 2005.
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Incumbent
Directors Term Expiring 2008
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Director
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Name
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Since
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Positions Held
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J. Hyatt Brown
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69
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1971
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Mr. Brown has served as chairman
and chief executive officer of Brown & Brown, Inc., an
insurance services company, for more than five years.
Mr. Brown is also a director of SunTrust Banks, Inc., a
bank holding company, BellSouth Corporation, a telephone
communications company, FPL Group, Inc., an electric utility
company, International Speedway Corp., a motor sports company
and Brown & Brown, Inc.
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Russell M. Currey
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45
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2003
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Mr. Currey has served as executive
vice president and general manager of our corrugated packaging
division for more than five years. Mr. Currey joined our
company in July 1983. Mr. Currey is the nephew of Robert
B. Currey, a director of our company.
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5
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Director
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Since
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Positions Held
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G. Stephen Felker
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55
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2001
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Mr. Felker has served as chairman
of the board of Avondale Incorporated, a former textile
manufacturer, since 1992, president and chief executive officer
of Avondale since 1980, and in various other capacities at
Avondale since 1974. He is also a director and executive officer
of Avondale Mills, Inc., a former textile manufacturer and
wholly-owned subsidiary of Avondale Incorporated. Avondale has
ceased its textile operations following a train derailment that
destroyed its manufacturing facilities, is selling all of its
assets and is pursuing claims against Norfolk Southern
Corporation relating to the derailment. Mr. Felker is also
a director of American Fibers and Yarns Company, a yarn
manufacturer, and USPA Properties, Inc., an apparel brand
licensing company.
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Incumbent
Directors Term Expiring 2009
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Director
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Positions Held
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John D. Hopkins
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68
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1989
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Mr. Hopkins has served as counsel
with Womble Carlyle Sandridge & Rice, PLLC, a
full-service law firm, since October 2003. Mr. Hopkins
served as executive vice president and general counsel of
Jefferson-Pilot Corporation, a holding company with insurance
and broadcasting subsidiaries, from April 1993 until he retired
in May 2003.
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James W. Johnson
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65
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1984
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Mr. Johnson has served as
president and chief executive officer of McCranie Tractor
Company, a John Deere and Case tractor dealership, for more than
five years. Mr. Johnson has served on the board of Taylor
Regional Hospital for over 20 years.
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James A. Rubright
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60
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1999
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Mr. Rubright has served as our
chief executive officer since October 1999 and chairman of the
board since January 2000. Mr. Rubright is also a director
of AGL Resources Inc., an energy company, Oxford Industries,
Inc., a manufacturer and seller of branded and private label
apparel, and Avondale Incorporated, a former textile
manufacturer.
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James E. Young
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57
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2003
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Mr. Young has served as president
and chief executive officer of CitizensTrustBank, a commercial
bank, since 1998. He is also a member of the board of directors
of Citizens Trust Bank and CitizensBancshares Corporation, a
bank holding company.
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Corporate
Governance
Corporate Governance Guidelines. We have
posted our Corporate Governance Guidelines on our Internet
website at www.rocktenn.com. Copies of our Corporate
Governance Guidelines are available, without charge, at the
written request of any shareholder of record. Requests for
copies should be mailed to: Rock-Tenn Company, 504 Thrasher
Street, Norcross, GA 30071, Attention: Corporate Secretary.
Director Independence. Our board of directors
annually conducts an assessment of the independence of each
director in accordance with our Corporate Governance Guidelines,
applicable rules and regulations of the Securities and Exchange
Commission (which we refer to as the SEC),
and the corporate governance standards of the NYSE. The board
assesses each directors independence by reviewing any
potential conflicts of interest and significant outside
relationships. In determining each directors independence,
the board broadly considers all relevant facts and
circumstances, including specific criteria included in the
NYSEs corporate governance standards. For these purposes,
the NYSE requires the board to consider certain relationships
that existed during a three-year look-back period. The board
considers the issue not merely from the standpoint of a
director, but also from the standpoint of persons or
organizations with which the director has an affiliation.
6
An independent director is free of any relationship with our
company or our management that impairs the directors
ability to make independent judgments.
The board of directors conducted an assessment of the
independence of each director at its last regularly scheduled
meeting. Based on this assessment, the board affirmatively
determined that the following directors were independent:
Dr. Anderson and Messrs. Brown, Robert Currey, Felker,
Gellerstedt, Hopkins, Johnson, Spiegel and Young. The board of
directors determined that each of these directors had no
material relationship with our company (either directly or as a
partner, shareholder or officer of an organization that has a
material relationship with our company). The board determined
that neither of Messrs. Russell Currey and Rubright is
independent because each is an employee of our company. The
board determined that each of Dr. Anderson and
Messrs. Hopkins, Johnson and Young is independent because
he had no significant relationship with our company (other than
as a director and shareholder). The board determined that no
relationship that each of Messrs. Brown, Robert Currey,
Felker, Gellerstedt and Spiegel has with our company was
material for purposes of determining his independence. In making
that determination, the board considered the following
relationships that each of Messrs. Brown, Robert Currey,
Felker, Gellerstedt and Spiegel had with our company (some of
which are also are described under the heading
Certain Transactions elsewhere in this
proxy statement):
Messrs. Brown, Gellerstedt, and
Spiegel: Mr. Brown serves on the board of
directors of SunTrust Banks, Inc. Mr. Gellerstedt serves on
the board of directors of SunTrust Bank, Atlanta, a subsidiary
of SunTrust Banks, Inc. Mr. Spiegel served as vice chairman
and chief financial officer of SunTrust Banks, Inc. during
fiscal 2004 through August 2004, when he retired.
Mr. Spiegel continued to serve as a non-executive Vice
Chairman of SunTrust Bank Holding Company, a subsidiary of
SunTrust Banks, Inc. (a non-executive position) through
March 31, 2005. Our company made payments to SunTrust
Banks, Inc. and its subsidiaries during fiscal 2006, 2005 and
2004 for various banking and financial consulting services,
including for certain services related to our credit facility
and our letter of credit facility during fiscal 2006, 2005 and
2004 and for our asset securitization facility during fiscal
2006. The aggregate of these payments did not exceed 1% of our
gross revenues during fiscal 2006 or 1% of SunTrust Banks
gross revenues during its fiscal year ended December 31,
2005. The board determined that these payments and relationships
were not material for these purposes.
J. Hyatt Brown: Mr. Brown is an
executive officer of Brown & Brown, Inc. Our company
made payments to Brown & Brown, Inc. for
insurance services during fiscal 2006 as described below under
the heading Certain Transactions. Our
board also considered similar payments made during fiscal 2005
and 2004. The board determined that these payments and
relationships were not material for these purposes.
Robert B. Currey: Mr. Currey is an owner
and executive officer of Currey & Company, which
purchased products from our company during fiscal 2006 as
described below under the heading Certain
Transactions. Our board also considered similar
payments made during fiscal 2005 and 2004. The board determined
that these payments and relationships were not material for
these purposes.
G. Stephen Felker: Mr. Rubright
serves on the board of directors of Avondale Incorporated, of
which Mr. Felker is a director, an executive officer and a
substantial shareholder. The board determined that this
relationship was not material for these purposes.
Our company purchases products and services in the normal course
of business from many suppliers and sells products and services
to many customers. In some instances, these transactions occur
with companies with which members of our board of directors have
relationships as directors or executive officers. Further,
members of the board have relationships as directors or
executive officers with certain companies that hold or held our
debt and equity securities. For purposes of our boards
affirmative determinations of director independence, none of
these relationships was considered significant, either
individually or collectively, except as described above or under
the heading Certain Transactions
elsewhere in this proxy statement. For these purposes,
the board determined that these relationships were not material
either individually or collectively.
Audit Committee Membership Criteria. The NYSE
requires that if listed companies do not limit the number of
audit committees on which its audit committee members may serve
to three or less, then in the
7
event that a director simultaneously serves on the audit
committees of more than three public companies, the board must
determine that such simultaneous service would not impair the
ability of that member to effectively serve on the
companys audit committee and disclose that determination.
Our company has not adopted any specific requirements limiting
the number of audit committees on which board members may serve.
Since retiring as an executive officer of SunTrust Banks, Inc.,
Mr. Spiegel advised our board in August 2004 and September
2005 that he had been nominated to join the audit committee of
S1 Corporation and HomeBanc Corp., respectively, both of which
are publicly held companies. In each case, this would result in
Mr. Spiegel serving on the audit committees of more than
three public companies. In both instances, the board determined
that serving on an additional audit committee would not impair
Mr. Spiegels ability to effectively serve on our
audit committee. Mr. Spiegel currently serves on five audit
committees.
Director Self-Evaluation. Our board of
directors conducts an annual self-evaluation of the board, its
committees and its individual members pursuant to our Corporate
Governance Guidelines. The nominating and corporate governance
committee is responsible for overseeing the self-evaluation
process and making a report to the board of directors pursuant
to our Corporate Governance Guidelines.
Meetings of Non-Management Directors. Our
non-management directors generally meet separately from the
other directors in executive session after board meetings and
board committee meetings. Pursuant to our Corporate Governance
Guidelines, our non-management directors will meet in regularly
scheduled executive sessions after board meetings and at such
other times as may be scheduled by our chairman of the board or
by our presiding independent director. The NYSE corporate
governance standards define non-management directors to include
any directors who are not executive officers of our company,
including any directors who are not independent by virtue of a
material relationship, former status or family relationship, or
for any other reason.
Presiding Independent Director. Mr. Brown
is currently serving as the presiding independent director, in
accordance with our Corporate Governance Guidelines.
Director Education. Our board of directors has
adopted a director education policy under which we will
reimburse directors for tuition and all customary and reasonable
expenses incurred in connection with attending a director
education seminar once every two years. In addition, any
director desiring to be reimbursed for additional programs may
be reimbursed upon approval of the chairman of the nominating
and corporate governance committee.
Communicating with Our Directors. So that
shareholders and other interested parties may make their
concerns known, we have established a method for communicating
with our directors, including our presiding independent director
and other non-management directors. There are two ways to
communicate with our directors:
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By mail: Rock-Tenn Company, 504 Thrasher Street, Norcross,
Georgia 30071.
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By facsimile:
(770) 248-4402.
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Communications that are intended specifically for our presiding
independent director or other non-management directors should be
marked Attention: Independent Director
Communications. All other director communications
should be marked Attention: Director
Communications. Our companys legal
department will facilitate all of these communications. We have
posted a summary of this method for communicating with our
directors on our Internet website at www.rocktenn.com.
Our directors are encouraged to attend and participate in the
annual meeting. Except for Messrs. Gellerstedt and Spiegel,
all of our directors attended the annual meeting of shareholders
held on January 27, 2006.
Codes
of Business Conduct and Ethics
Employee Code of Business Conduct. Our board
of directors has adopted a code of business conduct for our
employees. Failure to comply with this code of business conduct
is a serious offense and will result in appropriate disciplinary
action. We will disclose, to the extent and in the manner
required by any applicable
8
law or NYSE corporate governance standard, any waiver of any
provision of this code of business conduct for executive
officers of the company.
Code of Business Conduct and Ethics for Board of
Directors. Our board of directors has also
adopted a code of business conduct and ethics for our board of
directors. Failure to comply with this code of business conduct
and ethics is a serious offense and will result in appropriate
disciplinary action. We will disclose, to the extent and in the
manner required by any applicable law or NYSE corporate
governance standard, any waiver of any provision of this code of
business conduct and ethics.
Code of Ethical Conduct for Chief Executive Officer and
Senior Financial Officers. Our board of directors
has also adopted a code of ethical conduct for our principal
executive officer (our chief executive officer), our principal
financial officer (our chief financial officer) and our
principal accounting officer (our chief accounting officer).
These officers are expected to adhere at all times to this code
of ethical conduct. Failure to comply with this code of ethical
conduct for our chief executive officer and senior financial
officers is a serious offense and will result in appropriate
disciplinary action. Our board of directors and our audit
committee each has the authority to independently approve, in
their sole discretion, any such disciplinary action as well as
any amendment to and any waiver or material departure from a
provision of this code of ethical conduct. We will disclose on
our Internet website at www.rocktenn.com, to the extent
and in the manner permitted by Item 5.05 of
Form 8-K
under the Securities Exchange Act of 1934, as amended (which we
refer to as the Exchange Act), the nature of
any amendment to this code of ethical conduct (other than
technical, administrative, or other non-substantive amendments),
our approval of any material departure from a provision of this
code of ethical conduct, and our failure to take action within a
reasonable period of time regarding any material departure from
a provision of this code of ethical conduct that has been made
known to any of our executive officers.
Copies. We have posted copies of each of these
codes of business conduct and ethics on our Internet website at
www.rocktenn.com. Copies of these codes of business
conduct and ethics are also available, without charge, at the
written request of any shareholder of record. Requests for
copies should be mailed to: Rock-Tenn Company, 504 Thrasher
Street, Norcross, GA 30071, Attention: Corporate Secretary.
Director
Nominations
As provided in its charter, our nominating and corporate
governance committee is responsible for evaluating and
recommending candidates for the board of directors, including
incumbent directors whose terms are expiring and potential new
directors. The committee utilizes a variety of methods for
identifying and evaluating nominees for director. The committee
periodically assesses the appropriate size of the board, and
whether any vacancies on the board are expected due to
retirement or otherwise. If no vacancies are anticipated, the
committee considers the current qualifications of incumbent
directors whose terms are expiring. If vacancies arise or the
committee anticipates vacancies, the committee considers various
potential candidates for director. Candidates may come to the
attention of the committee through current board members,
professional search firms the committee may seek to engage or
other persons. Our board of directors does not currently expect
any board vacancies to arise due to retirement or otherwise. The
four nominees that the board has recommended for election by the
shareholders, as described above under the heading
Election of Directors Recommendation of
the Board of Directors are incumbent directors
whose terms are expiring.
The nominating and corporate governance committee will also
consider and evaluate candidates properly submitted for
nomination by shareholders in accordance with the procedures set
forth in our bylaws, which are described below under the heading
Additional Information
Shareholder Nominations for Election of Directors.
Following verification of the shareholder status of
persons proposing candidates, the committee will aggregate and
consider qualifying nominations. If a shareholder provides
materials in connection with the nomination of a director
candidate, our Corporate Secretary will forward the materials to
the committee. Based on its evaluation of any director
candidates nominated by shareholders, the nominating and
corporate governance committee will determine whether to include
the candidate in its recommended slate of director nominees.
9
When the nominating and corporate governance committee reviews a
potential new candidate, consistent with our Corporate
Governance Guidelines, the committee will apply the criteria it
considers appropriate. The committee generally considers the
candidates qualifications in light of the needs of the
board and our company at that time given the current mix of
director attributes. Our Corporate Governance Guidelines contain
specific criteria for board and board committee membership. In
accordance with our Corporate Governance Guidelines, the board
of directors will strive to select as candidates for board
membership a mix of individuals who represent diverse experience
at policy-making levels in business, government, education and
technology, and in areas that are relevant to our companys
activities as well as other characteristics that will contribute
to the overall ability of the board to perform its duties and
meet changing conditions. Our Corporate Governance Guidelines
also provided that each director must meet the following
criteria:
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Be free of conflicts of interest and other legal and ethical
issues that would interfere with the proper performance of the
responsibilities of a director (recognizing that some directors
may also be executive officers of our company).
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Be committed to discharging the duties of a director in
accordance with the Corporate Governance Guidelines and
applicable law.
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Be willing and able to devote sufficient time and energy to
carrying out his or her duties effectively and be committed to
serve on the board for an extended period of time.
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Have sufficient experience to enable the director to
meaningfully participate in deliberations of the board and one
or more of its committees and to otherwise fulfill his or her
duties.
|
Our bylaws also provide that directors must retire when they
reach the age of 72, although they may continue to serve until
the next annual or special meeting of shareholders at which
directors are to be elected. The Corporate Governance Guidelines
also provide that any director who has a significant change in
his or her full time job responsibilities must give prompt
written notice to the board of directors, specifying the
details, and must submit to the board of directors a letter of
resignation from the board of directors and from each committee
of the board of directors on which the director serves.
Submission of a letter of resignation provides the board of
directors the opportunity to review the continued
appropriateness of the directors membership on the board
of directors and committees of the board of directors under the
circumstances. The board of directors may reject or accept the
letter of resignation as it deems to be appropriate.
The nominating and corporate governance committee also considers
the candidates independence, as defined in the Corporate
Governance Guidelines and in the corporate governance standards
of the NYSE, as described above under the heading
Election of Directors Corporate
Governance Director Independence.
The committee expects a high level of commitment from
our directors and considers a candidates service on other
boards and board committees to ensure that the candidate has
sufficient time to effectively serve our company. Different
requirements apply with respect to submitting shareholder
proposals for inclusion in the proxy statement and with respect
to other proposals to be considered at an annual meeting of our
shareholders, as described under the heading
Additional Information
Shareholder Proposals.
Meetings
of the Board of Directors
Our board of directors held five meetings during fiscal 2006.
Each director attended at least 75% of all meetings of the board
and committees combined on which they served in fiscal 2006.
Committees
of the Board of Directors
The board of directors has an executive committee, an audit
committee, a compensation committee, and a nominating and
corporate governance committee.
10
Executive Committee. Messrs. Brown,
Hopkins, Rubright and Spiegel are members of the executive
committee. Mr. Brown is chairman of the committee.
The executive committee is authorized to exercise the authority
of the full board in managing the business and affairs of our
company. However, the executive committee does not have the
power to do any of the following: (1) approve or propose to
shareholders action that Georgia law requires to be approved by
shareholders; (2) fill vacancies on the board or any of its
committees; (3) amend our charter; (4) adopt, amend or
repeal our bylaws; or (5) approve a plan of merger not
requiring shareholder approval.
The executive committee held one meeting during fiscal 2006.
Audit Committee. Dr. Anderson and
Messrs. Robert Currey, Spiegel and Young are members of the
audit committee. Mr. Spiegel is chairman of the committee.
The board of directors has determined that Mr. Spiegel is
an audit committee financial expert as that term is
defined in Item 401(h)(1) of
Regulation S-K
under the Securities Act of 1933, as amended (which we refer to
as the Securities Act), and the Exchange Act.
The board of directors has also determined that all members of
the committee are independent. See Election of
Directors Corporate
Governance Director Independence
above.
The board of directors established the audit committee to assist
the board of directors in fulfilling its responsibilities with
respect to the oversight of the following: (1) the
integrity of our financial statements; (2) our system of
internal control over financial reporting; (3) the
performance of our internal audit function; (4) the
independence, qualifications and performance of our independent
auditor; and (5) our system of compliance with legal and
regulatory requirements. The principal duties and
responsibilities of the audit committee are set forth in its
charter, which was adopted by the board of directors. The audit
committee may exercise additional authority prescribed from time
to time by the board of directors.
The audit committee held seven meetings during fiscal 2006,
including meetings to review and discuss with the independent
auditor and management our quarterly earnings releases as well
as the financial statements and the disclosure under the heading
Managements Discussion and Analysis of Financial
Condition and Results of Operations included in our
quarterly reports on
Form 10-Q
and in our annual report on
Form 10-K.
Compensation Committee. Messrs. Felker,
Gellerstedt, and Spiegel are members of the compensation
committee. The board of directors has determined that all
members of the committee are independent. See
Election of Directors Corporate
Governance Director Independence
above. Mr. Gellerstedt is chairman of the committee.
The purpose of the compensation committee is to assist the board
of directors in fulfilling its responsibilities with respect to
compensation of our executives and non-employee directors. The
committees principal duties and responsibilities are to do
the following:
(1) except to the extent that the committee elects to seek
the approval of the board of directors with respect thereto,
(a) review and approve corporate goals and objectives
relating to compensation of our chief executive officer
(CEO);
(b) evaluate the CEOs performance in light of any
these goals and objectives; and
(c) determine and approve the CEOs compensation level
based on any such evaluation;
(2) except to the extent that the committee delegates the
responsibility to the CEO or elects to seek the approval of the
board of directors with respect thereto,
(a) review and approve goals, objectives and
recommendations relating to compensation of senior executives
(other than the CEO) submitted to the committee by the
CEO; and
(b) approve the compensation for senior executives (other
than the CEO);
11
(3) adopt, amend and administer our equity plans,
cash-based long-term incentive compensation plans and
non-qualified deferred compensation plans, except as otherwise
provided in those plans;
(4) make recommendations to the board of directors with
respect to compensation of our non-employee directors; and
(5) prepare the report from the committee required by
applicable law to be included in our annual proxy statement.
The compensation committee held five meetings during fiscal 2006.
Nominating and Corporate Governance
Committee. Dr. Anderson and
Messrs. Brown, Hopkins and Johnson are members of the
nominating and corporate governance committee. Mr. Hopkins
is chairman of the committee. The board of directors has
determined that all members of the committee are independent.
See Election of Directors
Corporate Governance Director
Independence above.
The purpose of the nominating and corporate governance committee
is to serve as the primary resource for the board of directors
in fulfilling its corporate governance responsibilities
including, without limitation, with respect to identifying and
recommending qualified candidates for our board of directors and
its committees; overseeing the evaluation of the effectiveness
of the board of directors and its committees; and developing and
recommending corporate governance guidelines. The
committees principal duties and responsibilities are to do
the following:
(1) develop and recommend corporate governance guidelines
and any changes to any corporate governance guidelines;
(2) review and make recommendations regarding corporate
governance proposals by shareholders;
(3) lead the search for potential director candidates;
(4) evaluate and recommend candidates for our board of
directors, including incumbent directors whose terms are
expiring and potential new directors;
(5) assist in the process of attracting qualified director
nominees;
(6) evaluate and recommend changes to the size, composition
and structure of the board of directors and its committees;
(7) evaluate and recommend changes to the membership
criteria for the board of directors and its committees;
(8) develop and recommend to the board of directors and,
when approved by the board of directors, oversee an annual
self-evaluation process for the board of directors and its
committees in accordance with the Corporate Governance
Guidelines and recommend to the board of directors any changes
to the process that the committee considers appropriate;
(9) consult with the compensation committee regarding
non-employee director compensation, as requested, in accordance
with the Corporate Governance Guidelines; and
(10) recommend orientation and education procedures for
directors as the committee considers appropriate.
The nominating and corporate governance committee will also
consider and evaluate candidates properly submitted for
nomination by shareholders in accordance with the procedures set
forth in our bylaws, which are described below under the heading
Additional Information
Shareholder Nominations for Election of Directors.
See also Election of
Directors Director Nominations
above.
The nominating and corporate governance committee held three
meetings during fiscal 2006.
Copies of Committee Charters. The audit
committee charter is attached to this proxy statement as
Appendix A. We have posted on our Internet website
at www.rocktenn.com copies of the charters of each of the
audit committee, the compensation committee and the nominating
and corporate governance committee.
12
Copies of these charters are also available, without charge, at
the written request of any shareholder of record. Requests for
copies should be mailed to: Rock-Tenn Company, 504 Thrasher
Street, Norcross, GA 30071, Attention: Corporate Secretary.
Compensation
of Directors
For fiscal 2006, directors who are not employees of our company
received $32,500 plus $2,000 for each board and committee
meeting attended in person and $1,000 for each meeting attended
via conference call. Each director who chairs a committee and is
not an employee of our company received an additional $5,000. In
addition, each non-employee director received, on
January 27, 2006, pursuant to our 2004 Incentive Stock
Plan, a grant of 2,000 shares of our Common Stock that will
vest on January 27, 2007.
13
COMMON
STOCK OWNERSHIP BY MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The table below shows, as of November 30, 2006, how many
shares of our Common Stock each of the following beneficially
owned: our directors, named executive officers (as defined below
under Executive Compensation Summary
Compensation Table), owners of 5% or more of our
Common Stock and our directors and executive officers as a
group. Under the rules of the SEC, a person beneficially
owns securities if that person has or shares the power to
vote or dispose of the securities. The person also
beneficially owns securities that the person has the
right to purchase within 60 days. Under these rules, more
than one person may be deemed to beneficially own the same
securities, and a person may be deemed to beneficially own
securities in which he or she has no financial interest. Except
as shown in the footnotes to the table, the shareholders named
below have the sole power to vote or dispose of the shares shown
as beneficially owned by them.
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Beneficial Ownership of Class A Common Stock
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Number of
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Percent of
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Directors and Named Executive Officers
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Shares(1)
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Class(2)
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James A. Rubright(3)
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1,145,174
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2.90
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%
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David E. Dreibelbis(4)
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534,761
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1.37
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%
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Steven C. Voorhees(5)
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383,346
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*
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Robert B. McIntosh(6)
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161,204
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*
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|
Michael E. Kiepura(7)
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105,492
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|
|
|
*
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|
Stephen G. Anderson(8)
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463,859
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|
1.20
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%
|
J. Hyatt Brown(9)
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|
2,443,937
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|
6.31
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%
|
Robert B. Currey(10)
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|
158,650
|
|
|
|
*
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|
Russell M. Currey(11)
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|
1,170,405
|
|
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|
3.01
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%
|
G. Stephen Felker(12)
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|
25,667
|
|
|
|
*
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|
L. L. Gellerstedt, III(13)
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17,667
|
|
|
|
*
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|
John D. Hopkins(14)
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|
119,131
|
|
|
|
*
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|
James W. Johnson(15)
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|
168,197
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|
*
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|
John W. Spiegel(16)
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|
|
64,069
|
|
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|
*
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|
James E. Young(17)
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9,667
|
|
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|
*
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|
All directors and executive
officers as a group (17 persons)(18)
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7,146,270
|
|
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|
17.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Shareholders
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|
|
|
|
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|
Dimensional Fund Advisors
Inc.(19)
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|
3,178,813
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|
|
|
8.21
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%
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|
|
|
* |
|
Less than 1%. |
|
(1) |
|
These shares include certain restricted stock awards that were
granted to our executive officers on May 10, 2002,
May 15, 2003, May 4, 2004, May 9, 2005, and
May 8, 2006, some of which had not vested as of
November 30, 2006. These persons have the power to vote and
receive dividends on these shares, but do not have the power to
dispose of, or to direct the disposition of, the shares until
the shares are vested pursuant to the terms of the restricted
stock grants. |
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(2) |
|
Based on an aggregate of shares of Common Stock issued and
outstanding as of November 30, 2006 plus, for each
individual, the number of shares of Common Stock issuable upon
exercise of outstanding stock options that are or will become
exercisable prior to January 29, 2007. |
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(3) |
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Share balance includes: |
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770,000 shares issuable upon exercise of stock
options beneficially owned by Mr. Rubright, and
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266,500 shares of restricted stock granted to
Mr. Rubright.
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(4) |
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Share balance includes: |
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233,000 shares issuable upon exercise of stock
options beneficially owned by Mr. Dreibelbis, and
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14
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75,083 shares of restricted stock granted to
Mr. Dreibelbis.
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(5) |
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Share balance includes: |
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|
220,000 shares issuable upon exercise of stock
options beneficially owned by Mr. Voorhees,
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75,083 shares of restricted stock granted to
Mr. Voorhees, and
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2,000 shares beneficially owned by
Mr. Voorhees as custodian for two investment accounts for
the benefit of his children.
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|
(6) |
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Share balance includes: |
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|
92,600 shares issuable upon exercise of stock
options beneficially owned by Mr. McIntosh, and
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49,266 shares of restricted stock granted to
Mr. McIntosh. |
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(7) |
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Share balance includes: |
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|
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|
51,000 shares issuable upon exercise of stock
options beneficially owned by Mr. Kiepura, and
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51,916 shares of restricted stock granted to
Mr. Kiepura.
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(8) |
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Share balance includes: |
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|
|
|
|
12,667 shares issuable upon exercise of stock
options beneficially owned by Dr. Anderson,
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|
2,000 shares of restricted stock beneficially
owned by Dr. Anderson,
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|
|
|
196,496 shares deemed beneficially owned by
Dr. Anderson as trustee of a trust for which he is the
trustee, grantor and beneficiary, and
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|
252,196 shares deemed beneficially owned by
Dr. Andersons spouse as trustee for a trust for which
she is the trustee, grantor and beneficiary.
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|
(9) |
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Mr. Browns address is P.O. Drawer 2412, Daytona
Beach, Florida 32115. Share balance includes: |
|
|
|
|
|
12,667 shares issuable upon exercise of stock
options beneficially owned by Mr. Brown, |
|
|
|
2,000 shares of restricted stock beneficially
owned by Mr. Brown,
|
|
|
|
1,762,200 shares beneficially owned by Ormond
Riverside, Limited Partnership, for which Mr. Brown serves
as president of the sole general partner,
|
|
|
|
559,970 shares held indirectly by
Brown & Brown, Inc., of which Mr. Brown serves as
chairman and chief executive officer, and
|
|
|
|
106,100 shares owned by Mr. Lloyd Moody
that Mr. Brown has a durable
power-of-attorney
for disposition.
|
|
|
|
(10) |
|
Share balance includes: |
|
|
|
|
|
12,667 shares issuable upon exercise of stock
options beneficially owned by Mr. Robert Currey,
|
|
|
|
2,000 shares of restricted stock beneficially
owned by Mr. Robert Currey, and
|
|
|
|
142,363 shares held in joint tenancy with
Mr. Robert Curreys spouse.
|
|
|
|
(11) |
|
Share balance includes: |
|
|
|
|
|
147,000 shares issuable upon exercise of stock
options beneficially owned by Mr. Russell Currey,
|
|
|
|
30,466 shares of restricted stock granted to
Mr. Russell Currey,
|
|
|
|
516,343 shares deemed beneficially owned by
Mr. Russell Currey as trustee of a trust for the benefit of
his mother,
|
|
|
|
2,468 shares held by Mr. Russell
Curreys spouse, and
|
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|
|
331,373 shares owned by Mr. Brad Currey
for which Mr. Russell Currey is the proxy agent.
|
|
|
|
(12) |
|
Share balance includes: |
|
|
|
|
|
12,667 shares issuable upon exercise of stock
options beneficially owned by Mr. Felker, and
|
|
|
|
2,000 shares of restricted stock granted to
Mr. Felker.
|
|
|
|
(13) |
|
Share balance includes: |
|
|
|
|
|
12,667 shares issuable upon exercise of stock
options beneficially owned by Mr. Gellerstedt,
|
15
|
|
|
|
|
2,000 shares of restricted stock granted to
Mr. Gellerstedt, and
|
|
|
|
73 shares held by Mr. Gellerstedts
daughter.
|
|
|
|
(14) |
|
Share balance includes: |
|
|
|
|
|
12,667 shares issuable upon exercise of stock
options beneficially owned by Mr. Hopkins,
|
|
|
|
2,000 shares of restricted stock granted to
Mr. Hopkins,
|
|
|
|
100 shares held by Mr. Hopkins
spouse, and
|
|
|
|
10,000 shares deemed beneficially owned by
Mr. Hopkins as trustee of a trust for which he is the
trustee, grantor and beneficiary.
|
|
|
|
(15) |
|
Share balance includes: |
|
|
|
|
|
12,667 shares issuable upon exercise of stock
options beneficially owned by Mr. Johnson,
|
|
|
|
2,000 shares of restricted stock granted to
Mr. Johnson,
|
|
|
|
32,418 shares held by Mr. Johnsons
spouse, and
|
|
|
|
8,600 shares deemed beneficially owned by
Mr. Johnson as trustee of a trust for the benefit of the
McCranie Companies Profit Sharing Plan.
|
|
|
|
(16) |
|
Share balance includes: |
|
|
|
|
|
12,667 shares issuable upon exercise of stock
options beneficially owned by Mr. Spiegel, and
|
|
|
|
2,000 shares of restricted stock granted to
Mr. Spiegel.
|
|
|
|
(17) |
|
Share balance includes: |
|
|
|
|
|
6,667 shares issuable upon exercise of stock
options beneficially owned by Mr. Young, and
|
|
|
|
2,000 shares of restricted stock granted to
Mr. Young.
|
|
|
|
(18) |
|
Share balance includes: |
|
|
|
|
|
1,691,603 shares issuable upon exercise of
stock options beneficially owned by our directors and executive
officers, and
|
|
|
|
641,247 shares of restricted stock beneficially
owned by our directors and executive officers.
|
|
|
|
(19) |
|
According to its Schedule 13G filed with the SEC on
February 6, 2006, Dimensional Fund Advisors Inc.,
1299 Ocean Avenue, 11th Floor, Santa Monica,
California, 90401, serves as an investment advisor with sole
dispositive power and sole voting power for all these shares.
For purposes of the Exchange Act, Dimensional
Fund Advisors, Inc. is deemed to be the beneficial owner of
these securities; however, Dimensional Fund Advisors Inc.
expressly disclaims that it is, in fact, the beneficial owner of
such securities. Number of shares stated in this table obtained
from Schedule 13F filed with the SEC on October 30, 2006. |
EXECUTIVE
OFFICERS
Identification
of Executive Officers
The executive officers of our company are as follows as of
November 30, 2006:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position Held
|
|
James A. Rubright
|
|
|
60
|
|
|
Chairman of the Board and Chief
Executive Officer
|
David E. Dreibelbis
|
|
|
54
|
|
|
Executive Vice President; General
Manager Paperboard Division
|
James L. Einstein
|
|
|
61
|
|
|
Executive Vice President; General
Manager Alliance Division
|
Michael E. Kiepura
|
|
|
50
|
|
|
Executive Vice President; General
Manager Folding Carton Division
|
Steven C. Voorhees
|
|
|
52
|
|
|
Executive Vice President and Chief
Financial Officer
|
Robert B. Mclntosh
|
|
|
49
|
|
|
Senior Vice President, General
Counsel and Secretary
|
A. Stephen Meadows
|
|
|
56
|
|
|
Chief Accounting Officer
|
James A. Rubright has served as our CEO since October 1999 and
chairman of the board since January 2000. Mr. Rubright is
also a director of AGL Resources Inc., an energy company, Oxford
Industries, Inc., a
16
manufacturer and seller of branded and private label apparel,
and Avondale Incorporated, a former textile manufacturer.
David E. Dreibelbis has served as executive vice president and
general manager of our paperboard division since November 2000.
From September 1992 to October 2000, Mr. Dreibelbis was the
executive vice president and general manager of our mill group.
Mr. Dreibelbis joined our company in April 1979.
James L. Einstein has served as executive vice president and
general manager of our Alliance division since November 2000.
From January 1995 until October 2000, Mr. Einstein served
as vice president and general manager of our display operations.
Michael E. Kiepura has served as executive vice president of our
folding carton division since June 2005. From August 2001 to
June 2005, Mr. Kiepura was the senior vice president of
sales in the folding carton division. From November 1999 to July
2001, Mr. Kiepura was senior vice president, eastern
region, folding carton division.
Steven C. Voorhees has served as our executive vice president
and chief financial officer since September 2000.
Robert B. Mclntosh has served as our senior vice president,
general counsel and secretary since August 2000.
A. Stephen Meadows joined our company in July 2006 and was
elected as our chief accounting officer in November 2006. From
March 2005 to March 2006, Mr. Meadows was chief accounting
officer at Drummond Company, Inc., which is principally engaged
in the business of mining, purchasing, processing and selling of
coal and coal derivatives. From May 2002 to January 2005,
Mr. Meadows was vice president finance and risk management
at Progress Energy, a diversified energy company. From April
2000 to May 2002, Mr. Meadows was chief financial officer
of the law firm Sirote & Permutt, P.C.
All our executive officers are elected annually by and serve at
the discretion of either the board of directors or the chairman
of the board.
17
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The table below shows the compensation earned during fiscal
2006, 2005 and 2004 by our CEO and by our four other most highly
compensated executive officers who were serving at the end of
the fiscal 2006. These individuals are called the named
executive officers.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Awards
|
|
|
|
|
|
|
Annual Compensation
|
|
|
Restricted
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Annual
|
|
|
Stock
|
|
|
Underlying
|
|
|
All Other
|
|
|
|
Fiscal
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
Awards
|
|
|
Options/SARs
|
|
|
Compensation
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
(1)
|
|
|
(2)
|
|
|
(#)
|
|
|
(3)
|
|
|
James A. Rubright
|
|
|
2006
|
|
|
$
|
791,000
|
|
|
$
|
923,817
|
|
|
|
|
|
|
$
|
1,999,890
|
|
|
|
0
|
|
|
$
|
56,051
|
|
Chairman and Chief
|
|
|
2005
|
|
|
|
756,750
|
|
|
|
403,230
|
|
|
|
|
|
|
|
786,100
|
|
|
|
170,000
|
|
|
|
39,425
|
|
Executive Officer
|
|
|
2004
|
|
|
|
726,250
|
|
|
|
475,411
|
|
|
|
|
|
|
|
616,000
|
|
|
|
40,000
|
|
|
|
40,800
|
|
David E. Dreibelbis
|
|
|
2006
|
|
|
|
360,000
|
|
|
|
298,864
|
|
|
|
|
|
|
|
629,595
|
|
|
|
0
|
|
|
|
19,765
|
|
Executive Vice President
|
|
|
2005
|
|
|
|
358,750
|
|
|
|
169,233
|
|
|
|
|
|
|
|
168,450
|
|
|
|
40,000
|
|
|
|
16,087
|
|
General Manager,
|
|
|
2004
|
|
|
|
353,179
|
|
|
|
119,654
|
|
|
|
|
|
|
|
192,500
|
|
|
|
30,000
|
|
|
|
13,311
|
|
Paperboard Division
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven C. Voorhees
|
|
|
2006
|
|
|
|
342,500
|
|
|
|
309,621
|
|
|
|
|
|
|
|
629,595
|
|
|
|
0
|
|
|
|
23,178
|
|
Executive Vice President
|
|
|
2005
|
|
|
|
330,000
|
|
|
|
125,341
|
|
|
|
|
|
|
|
168,450
|
|
|
|
40,000
|
|
|
|
17,279
|
|
and Chief Financial Officer
|
|
|
2004
|
|
|
|
311,250
|
|
|
|
134,258
|
|
|
|
|
|
|
|
192,500
|
|
|
|
30,000
|
|
|
|
17,004
|
|
Michael E. Kiepura
|
|
|
2006
|
|
|
|
307,500
|
|
|
|
248,106
|
|
|
|
|
|
|
|
629,595
|
|
|
|
50,000
|
|
|
|
17,899
|
|
Executive Vice President
|
|
|
2005
|
|
|
|
257,310
|
|
|
|
48,532
|
|
|
|
|
|
|
|
56,150
|
|
|
|
9,000
|
|
|
|
8,549
|
|
General Manager,
|
|
|
2004
|
|
|
|
242,365
|
|
|
|
65,408
|
|
|
|
|
|
|
|
77,000
|
|
|
|
12,000
|
|
|
|
7,783
|
|
Folding Carton Division
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert B. McIntosh
|
|
|
2006
|
|
|
|
247,500
|
|
|
|
190,741
|
|
|
|
|
|
|
|
503,676
|
|
|
|
0
|
|
|
|
15,758
|
|
Senior Vice President,
|
|
|
2005
|
|
|
|
235,000
|
|
|
|
90,343
|
|
|
|
|
|
|
|
112,300
|
|
|
|
15,000
|
|
|
|
12,376
|
|
General Counsel
|
|
|
2004
|
|
|
|
216,600
|
|
|
|
95,063
|
|
|
|
|
|
|
|
77,000
|
|
|
|
12,500
|
|
|
|
11,986
|
|
and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Unless reported in this column, the aggregate amount of
perquisites and other personal benefits for any fiscal year did
not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported for a named executive officer. |
|
(2) |
|
Dollar amounts shown equal the number of shares of restricted
stock multiplied by the closing market price of our unrestricted
stock on the dates of grant (i.e., $16.46 on May 8, 2006,
$11.23 on May 9, 2005 and $15.40 on May 4, 2004). |
|
|
|
|
|
The shares of restricted stock granted in fiscal
2006 will not be deemed issued and will not have voting or
dividend rights until the relevant performance or market
conditions have been met. The performance condition and two of
the market conditions have been met as of September 30,
2006. Accordingly, a portion of the restricted stock granted in
fiscal 2006 has been issued and has voting and dividend rights.
Provided that the relevant performance or market conditions have
been met, unless forfeited (e.g., by termination of employment)
at an earlier date, these awards of restricted Common Stock will
vest in one-third increments on, and may not be transferred
before, the following dates: May 8, 2009, 2010 and 2011,
respectively.
|
|
|
|
Unless vested (pursuant to net income performance
criteria) or forfeited (e.g., by termination of employment) at
an earlier date, the awards of restricted Common Stock granted
in fiscal 2005 and 2004 will vest in one-third increments on,
and may not be transferred before, the following dates:
(a) for the restricted stock awards granted in 2005,
May 9, 2008, 2009, and 2010, respectively, and (b) for
the restricted stock awards granted in 2004, May 4, 2007,
2008, and 2009, respectively.
|
18
|
|
|
|
|
The restricted stock awards granted in fiscal 2005
are also subject to earlier vesting upon satisfaction of
specified performance criteria. The shares subject to these
restricted stock awards will vest early as follows:
(1) one-third on March 31, 2006, for net income growth
as compared to the base period (the 12 months ended
March 31, 2005) of at least 20% during the
12 months ending March 31, 2006 (including excess
amounts from subsequent periods); (2) another one-third on
March 31, 2007, for net income growth as compared to the
base period of at least 32% during the 12 months ending on
March 31, 2007 (including excess amounts from prior or
subsequent periods); and (3) the final one-third on
March 31, 2008, for net income growth as compared to the
base period of at least 45.2% during the 12 months ending
on March 31, 2008 (including excess amounts from prior
periods).
|
|
|
|
The restricted stock awards granted in fiscal 2004
are also subject to earlier vesting upon satisfaction of
specified performance criteria. The shares subject to these
restricted stock awards will vest early as follows:
(1) one-third on March 31, 2005, for net income growth
as compared to the base period (the 12 months ended
March 31, 2004) of at least 10% during the
12 months ending March 31, 2005 (including excess
amounts from subsequent periods); (2) another one-third on
March 31, 2006, for net income growth as compared to the
base period of at least 21% during the 12 months ending on
March 31, 2006 (including excess amounts from prior or
subsequent periods); and (3) the final one-third on
March 31, 2007, for net income growth as compared to the
base period of at least 33.1% during the 12 months ending
on March 31, 2007 (including excess amounts from prior
periods).
|
|
|
|
The early vesting provisions related to fiscal 2006
for the restricted stock awards granted in fiscal 2005 have not
yet been satisfied.
|
|
|
|
The early vesting provisions related to fiscal 2006
and 2005 for the restricted stock awards granted in fiscal 2004
have not yet been satisfied.
|
|
|
|
The number and value of the aggregate restricted
stock holdings at the end of fiscal 2006 based on the closing
market price of our unrestricted stock on September 30,
2006 of $19.80, as reported on the NYSE, were as follows:
Mr. Rubright, 266,500 shares ($5,276,700),
Messrs. Dreibelbis and Voorhees, 75,083 shares each
($1,486,643), Mr. Kiepura, 51,916 shares ($1,027,937)
and Mr. McIntosh, 49,266 shares ($975,467).
|
|
|
|
Dividends are paid on all issued shares of
restricted stock at the same rate as on unrestricted shares.
|
|
|
|
(3) |
|
Except as otherwise noted below, all amounts are for fiscal
2006, 2005 and 2004, respectively: |
|
|
|
|
|
For Mr. Rubright: $6,600, $6,300 and $6,150
contributed to the Rock-Tenn Company 401(k) Retirement Savings
Plan for Salaried and Non-Union Hourly Employees (which we refer
to as the 401(k) Plan), $44,445,
$28,114 and $29,619 under the Rock-Tenn Company Supplemental
Retirement Savings Plan (which we refer to as the
Supplemental Plan), and $5,006, $5,011 and
$5,031 paid for life insurance premiums. |
|
|
|
For Mr. Dreibelbis: $4,500, $4,950 and $6,150
contributed to the 401(k) Plan; $12,116, $7,983 and $3,986 under
the Supplemental Plan; and $3,149, $3,154 and $3,178 paid for
life insurance premiums.
|
|
|
|
For Mr. Voorhees: $4,313, $4,606 and $5,906
contributed to the 401(k) Plan, $15,251, $9,054 and $7,459 under
the Supplemental Plan, and $3,614, $3,619 and $3,639 paid for
life insurance premiums.
|
|
|
|
For Mr. Kiepura: $5,802, $6,674 and $6,060 to
the 401(k) Plan, $9,018, $0 and $0 under the Supplemental Plan,
and $3,079, $1,875 and $1,723 for life insurance premiums.
|
|
|
|
For Mr. McIntosh: $4,688, $5,650 and $4,950
contributed to the 401(k) Plan, $8,460, $4,110 and $4,400 under
the Supplemental Plan, and $2,610, $2,615 and $2,636 paid for
life insurance premiums.
|
|
|
|
The 401(k) Plan and the Supplemental Plan are
described below under the heading Executive
Compensation Retirement Benefit Plans.
|
19
Option
Grants Table
The table below shows information relating to the options
granted during fiscal 2006 to each named executive officer:
Options/SAR
Grants in Last Fiscal Year(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential Realizable Value at Assumed
|
|
|
|
|
|
|
|
|
|
Annual Rates of Stock
|
|
|
|
|
|
|
|
|
|
Price Appreciation
|
|
|
|
Individual Grants
|
|
|
Option Term
|
|
|
for Option Term
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Options/SARs
|
|
|
Exercise or
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Granted to
|
|
|
Base Price
|
|
|
|
|
|
|
|
|
|
|
|
|
Options/SARs
|
|
|
Employees in
|
|
|
Per Share
|
|
|
Expiration
|
|
|
|
|
|
|
|
Name
|
|
Granted(#)(l)
|
|
|
Fiscal Year
|
|
|
($/Sh)(2)
|
|
|
Date
|
|
|
5%($)
|
|
|
10%($)
|
|
|
James A. Rubright
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David E. Dreibelbis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven C. Voorhees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Kiepura
|
|
|
50,000
|
|
|
|
100
|
%
|
|
$
|
16.46
|
|
|
|
5/8/2016
|
|
|
|
517,580
|
|
|
|
1,311,650
|
|
Robert B. McIntosh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The options shown in the table are options to purchase Common
Stock. The options will vest in one-third increments on
May 8, 2007, 2008 and 2009, respectively. The option price
can be paid in cash or shares of Common Stock that have been
held for at least six months and have a fair market value at
least equal to the option exercise price. |
|
(2) |
|
The exercise price for the options shown in the table is equal
to the closing price per share of Common Stock on May 8,
2006, as reported on the NYSE. |
Aggregated
Options Table
The table below shows information with respect to options
exercised during fiscal 2006 and options held at the end of
fiscal 2006 by each named executive officer. All options are
options to purchase Common Stock:
Aggregated
Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
Value of Unexercised
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised
|
|
|
In-the-Money
|
|
|
|
Shares
|
|
|
|
|
|
Options/SARs at Fiscal
|
|
|
Options/SARs at
|
|
|
|
Acquired on
|
|
|
Value
|
|
|
Year-End(#)
|
|
|
Fiscal Year-End($)(1)
|
|
Name
|
|
Exercise(#)
|
|
|
Realized($)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
James A. Rubright
|
|
|
|
|
|
$
|
|
|
|
|
870,000
|
|
|
|
0
|
|
|
$
|
5,833,300
|
|
|
|
0
|
|
David E. Dreibelbis
|
|
|
|
|
|
|
|
|
|
|
316,600
|
|
|
|
0
|
|
|
|
1,916,992
|
|
|
|
0
|
|
Steven C. Voorhees
|
|
|
|
|
|
|
|
|
|
|
230,000
|
|
|
|
0
|
|
|
|
1,574,200
|
|
|
|
0
|
|
Robert B. McIntosh
|
|
|
11,000
|
|
|
|
23,425.50
|
|
|
|
98,500
|
|
|
|
0
|
|
|
|
534,963
|
|
|
|
0
|
|
Michael E. Kiepura
|
|
|
1,100
|
|
|
|
1,896.95
|
|
|
|
67,000
|
|
|
|
50,000
|
|
|
|
368,840
|
|
|
|
167,000
|
|
|
|
|
(1) |
|
These amounts reflect the difference between: |
|
|
|
|
|
the fair market value of the shares of Common Stock
underlying the options held by each named executive officer
based on the last reported closing price per share of Common
Stock of $19.80 on September 30, 2006, as reported on the
NYSE, and
|
|
|
|
the aggregate exercise price of such options.
|
20
Equity
Compensation Plan Information
The table below shows information with respect to all of our
equity compensation plans as of September 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of Securities
|
|
|
|
|
|
Remaining Available for
|
|
|
|
to be issued
|
|
|
Weighted-Average
|
|
|
Future Issuance Under
|
|
|
|
Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Equity Compensation Plans
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
(Excluding Securities
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans
approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
1993 Stock Option Plan
|
|
|
1,660,869
|
|
|
$
|
13.76
|
|
|
|
|
|
2000 Incentive Stock Plan(1)
|
|
|
982,500
|
|
|
|
15.08
|
|
|
|
|
|
2004 Incentive Stock Plan(1)
|
|
|
568,000
|
|
|
|
11.86
|
|
|
|
1,006,666
|
|
1993 Employee Stock Purchase Plan
|
|
|
|
|
|
|
|
|
|
|
258,721
|
|
Equity compensation plans not
approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Under the 2004 Incentive Stock Plan, there are available for
awards granted during the term of the plan
(1) 2.0 million shares of Common Stock, plus
(2) 389,833 shares of Common Stock that remained
available for issuance under the Rock-Tenn Company 2000
Incentive Stock Plan (which we refer to as the 2000
Incentive Stock Plan), plus (3) the number of
shares of Common Stock subject to grants under the 2000
Incentive Stock Plan that were outstanding on the effective date
of the 2004 Incentive Stock Plan and that are subsequently
forfeited or expire. Under the 2004 Incentive Stock Plan, there
are available for restricted stock awards granted during the
term of the plan no more than 1.0 million shares of Common
Stock. As of September 30, 2006, 201,500 shares remain
available for the issuance of restricted stock grants. We may
grant no new awards under the 2000 Incentive Stock Plan or the
Rock-Tenn Company 1993 Stock Option Plan (which we refer to as
the 1993 Stock Option Plan). See
Adoption and Approval of Amendment to 1993 Employee Stock
Purchase Plan Item 2 and Adoption
and Approval of Amendment to 2004 Incentive Stock
Plan Item 3. |
Retirement
Benefit Plans
Pension Plan. Only covered employees are
eligible to participate in our companys defined benefit
plan for salaried and nonunion hourly employees (which we refer
to as our Pension Plan). A covered
employee is defined as one of our companys or
our participating subsidiaries salaried and nonunion
hourly employees who is not any of the following: (1) a
leased employee; (2) eligible to participate in any other
defined benefit plan maintained in whole or in part by
contributions from an Affiliate (as defined in the
Pension Plan); (3) a member of a collective bargaining unit
that has not reached an agreement with us to participate in the
Pension Plan, (4) an intern or other temporary employee,
and (5) an employee who has a date of employment beginning
on or after January 1, 2005.
Our Pension Plan was amended effective as of March 1, 2005,
to add a new benefit formula. For each calendar year after
February 28, 2005, the new benefit formula (which we refer
to as the 2005 benefit formula) equals 1% of
a participants compensation (as defined in the Pension
Plan). In connection with the amendment, covered employees who
were 35 years old or older or who had five years or more of
vested service on December 31, 2004, were required to elect
one of two options: (1) a reduced future pension accrual
based on the 2005 benefit formula and the then current match
under the applicable 401(k) plan or (2) no future pension
accrual and an enhanced match under the applicable 401(k) plan.
None of the named executive officers elected to cease future
pension accruals during the Pension Plans election periods
in December 2004 and January 2005. Covered employees who were
under 35 years of age and who had less than five years of
vested service on December 31, 2004 automatically ceased
accruals in the Pension Plan effective as of December 31,
2004 and became eligible for an enhanced match under the
applicable 401(k) plan. The 2005
21
benefit formula produces a benefit payable at a
participants normal retirement age as an annuity payable
only for the life of the participant. The amendment to our
Pension Plan also froze the benefit, if any, accrued for each
participant as of February 28, 2005, under prior benefit
formulas utilized under the Pension Plan. Thus, all participants
who are entitled to this benefit (except the grandfathered
participants and the participants who cease to be covered
employees described above) will receive a benefit at retirement
equal to the sum of (1) their benefit accrued as of
December 31, 1997, under the old four-part benefit formula
in effect on that date, (2) their benefit accrued after
that date and through February 28, 2005, under the benefit
formula in effect during that period, and (3) their benefit
accrued under the 2005 benefit formula on and after
March 1, 2005.
Our Pension Plan was again amended effective as of
January 1, 2006, to allow the remaining participants under
the Pension Plan to elect one of two options: (1) a reduced
future pension accrual based on the 2005 benefit formula and the
then current match under the applicable 401(k) plan or
(2) no future pension accrual and an enhanced match under
the applicable 401(k) plan. None of the named executive officers
elected to cease future pension accruals during the Pension
Plans election periods.
Under our Pension Plan, compensation for
salaried employees is defined as base pay. Therefore, it does
not include any bonuses, overtime, commissions, reimbursed
expenses of any kind, severance pay, income imputed from
insurance coverage or the like, or payments under the Pension
Plan or any other employee benefit plan or any income from a
stock option. No employees compensation for purposes of
the Pension Plan includes amounts in excess of the compensation
limit under the Internal Revenue Code of 1986, as amended (which
we refer to as the Code). This limit is
periodically adjusted for inflation by the Secretary of the
Treasury and this limit, as adjusted, was $210,000 for calendar
year 2005, $220,000 for calendar year 2006, and will be $225,000
for calendar year 2007.
A participating employees right to benefits under our
Pension Plan vests after five years of service or at normal
retirement age, whichever is earlier. The plan is a defined
benefit plan qualified under the Code and, as such, is subject
to a limitation under the Code on the amount of benefits that
may be paid to a participant each year under the plan.
SERP. The Rock-Tenn Company Supplemental
Executive Retirement Plan (which we refer to as the
SERP) is designed to supplement a
participants benefit under our Pension Plan for a
relatively small number of participants. The SERP provides
unfunded supplemental retirement benefits. The SERP benefit is
paid in an annuity form for participants whose employment
terminated before November 11, 2005 and a lump sum for
participants whose employment terminates on or after
November 11, 2005. All SERP benefits reflected in this
statement are shown in annuity form. Currently, there are 13
active employees who participate in the SERP. We are
administering the SERP in good faith compliance with
Section 409A of the Code, which impacts, among other
things, the timing of the payment of benefits.
Under the SERP there are four benefit levels (which we will
refer to as level 1,
level 2, level 3 and
level 4) but no benefit will be paid under
level 1, level 2 or level 3 to a participant if
the participant is not eligible for a vested benefit under our
Pension Plan. The compensation committee determines who will
participate in the SERP and the benefit level for such
participant. Benefit level 1 is based exclusively on a
participants base salary below a compensation cap and was
designed to make up for the loss in benefits a participant will
receive under our Pension Plan as a result of the reduction in
the Code compensation limit in 1994 from $235,840 to $150,000 as
indexed thereafter for inflation. Benefit level 2 is the
same as benefit level 1 except that the benefit a
participant earns will be based on all of the participants
base salary and bonus paid. Eight of our active employees,
including our named executive officers other than our CEO, will
participate in the SERP at benefit level 2.
Benefit level 3 will provide a benefit payable at
age 65 to a participant which, when added to the
participants other deferred compensation benefits from us,
will be equal to 3.5833% of a participants final average
pay for each year of benefit service, plus three years, up to a
maximum of 15 years of benefit service. A
participants final average pay will be the average of the
highest three years of the participants base salary and
bonus during the five year period immediately preceding the
participants termination of employment, and the benefit
under level 3 will take into account the participants
benefit payable under our Pension Plan, the
22
benefits attributable to our matching contributions under the
401(k) Plan and the Supplemental Plan and the participants
primary social security benefit. Currently only our CEO will
participate in the SERP at benefit level 3.
In the event of a change in control in our company, a
participant in the SERP at benefit level 3 will receive any
vested accrued benefit if the participant is under age 60.
If the benefit level 3 participant is age 60 or older
at the time of the change in control, the participant will be
deemed to have 15 years of benefit service such that the
participant will receive a vested accrued benefit payable at
age 65 equal to 53.75% of the participants final
average pay at the time of the change of control.
Benefit level 4 is a benefit provided to two executives
formerly employed by Gulf States Paper Corporation, neither of
whom are our named executive officers. Level 4 provides for
a benefit accrual equivalent to a percentage of the
executives frozen accrued benefit under certain previously
applicable Gulf States Paper Corporation plans.
Assuming level compensation, the estimated annual benefit
payable at the normal retirement age under our Pension Plan and
our SERP (benefit level 2) in a life only annuity for
Messrs. Dreibelbis, Voorhees, Kiepura and McIntosh is
$214,713, $119,633, $110,158 and $105,350, respectively. The
SERP portion of these benefits will be paid in a lump sum which
will be the actuarial equivalent (as defined in the SERP) of
such life only annuity amounts.
The table below shows the annual retirement benefits payable at
normal retirement age under our Pension Plan and the SERP
(benefit level 3) in a life only annuity for
Mr. Rubright. As of September 30, 2006,
Mr. Rubright had approximately seven years of actual
benefit service under our Pension Plan and our SERP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years of Actual Service
|
|
Final Average Earnings
|
|
7
|
|
|
9
|
|
|
11
|
|
|
12
|
|
|
$1,300,000
|
|
$
|
419,126
|
|
|
$
|
504,189
|
|
|
$
|
590,143
|
|
|
$
|
633,424
|
|
$1,400,000
|
|
$
|
454,619
|
|
|
$
|
546,225
|
|
|
$
|
638,791
|
|
|
$
|
685,400
|
|
$1,500,000
|
|
$
|
490,112
|
|
|
$
|
588,261
|
|
|
$
|
687,439
|
|
|
$
|
737,378
|
|
$1,600,000
|
|
$
|
525,605
|
|
|
$
|
630,298
|
|
|
$
|
736,087
|
|
|
$
|
789,355
|
|
$1,700,000
|
|
$
|
561,098
|
|
|
$
|
672,334
|
|
|
$
|
784,735
|
|
|
$
|
841,333
|
|
$1,800,000
|
|
$
|
596,591
|
|
|
$
|
714,371
|
|
|
$
|
833,384
|
|
|
$
|
893,310
|
|
Mr. Rubrights SERP benefit level 3 will be paid
in a lump sum. The lump sum will be calculated starting with
Mr. Rubrights annual benefit under the SERP payable
in life only annuity and then reducing such benefit by his
annual primary social security benefit and his annual Pension
Plan benefit. This amount is then converted to a lump sum amount
by using certain early retirement factors and conversion factors
as defined in the SERP. Finally, this lump sum amount is reduced
by Mr. Rubrights matching accounts under the 401(k)
Plan and the Supplemental Plan. For example, the SERP portion of
the $893,310 annuity benefit in the table payable after
12 years of actual service at age 65 in a life only
annuity would provide a $10,478,235 lump sum payment to
Mr. Rubright.
Supplemental Retirement Savings Plan. The
Supplemental Plan is a non-qualified, unfunded deferred
compensation plan sponsored and maintained by us and is intended
to provide participants with an opportunity to supplement their
retirement income through deferral of current compensation. The
Supplemental Plan is comprised of two parts, which we call the
Senior Executive plan and the Broadbased plan. We contribute an
amount to each participants account maintained under the
Senior Executive plan equal to 50% of the participants
contributions. Amounts deferred and payable under the
Supplemental Plan (which we refer to as the
Obligations) are our unsecured obligations,
and will rank equally with our other unsecured and
unsubordinated indebtedness outstanding from time to time. Each
participant in the Senior Executive plan elects the amount of
eligible base salary and eligible bonus to be deferred, up to
6%. Each Obligation will be payable on a date selected by us
pursuant to the terms of the Supplemental Plan. The Obligations
generally are payable after termination of the
participants employment or in certain emergency
situations. Each participants account will be adjusted for
investment gains and losses as if the credits to the
participants account had been invested in the benchmark
investment alternatives available under the Supplemental Plan in
23
accordance with the participants investment election or
elections (or default election or elections) as in effect from
time to time. All such adjustments will be made at the same time
and in accordance with the same procedures followed under the
401(k) Plan for crediting investment gains and losses to a
participants account under the 401(k) Plan. The
Obligations are denominated and payable in United States
dollars. The benchmark investment alternatives available under
the Supplemental Plan are the same as the investment
alternatives available under the 401(k) Plan or are in our view
comparable to the investment alternatives available under the
401(k) Plan. In 2006, we implemented a cap on deferral
contributions to the 401(k) Plan for certain highly compensated
employees in order to pass future required tests of the 401(k)
Plan. The Broadbased plan allows those highly compensated
employees to defer income in excess of the cap in the 401(k)
Plan up to a certain limit. We do not make any contributions in
connection with employees deferral of income under the
Broadbased plan. We are administering the Supplemental Plan in
good faith compliance with Section 409A of the Code, which
impacts, among other things, the timing of the payment of
benefits.
Employment
Agreement with James A. Rubright
On February 7, 2006, we entered into an employment
agreement with Mr. Rubright concerning his employment as
our CEO.
Pursuant to his employment agreement, Mr. Rubrights
base pay will continue as in effect as of February 6, 2006,
subject to annual review and periodic increases (but not
decreases) in accordance with our customary practices for our
senior executives. In addition, Mr. Rubright will continue
to participate in all bonus, option, stock, insurance and other
employee benefit and welfare plans, programs and policies
maintained by us and in which Mr. Rubright is eligible by
their terms to participate. Mr. Rubrights
participation relative to other senior officers as a class will
continue to be at a level that is commensurate with his position
as CEO and, to the extent that the level of participation is
measured by performance criteria, at such level as reflects both
Mr. Rubrights position and achievement of the
relevant performance criteria.
We may terminate Mr. Rubrights employment at any
time, and Mr. Rubright may resign at any time.
Mr. Rubright is entitled to certain rights and benefits
upon termination if:
|
|
|
|
|
we terminate his employment before his 65th birthday other
than for Cause (as defined below) or as a consequence of
Mr. Rubrights death or his becoming totally
disabled (within the meaning of our group long term
disability benefit);
|
|
|
|
Mr. Rubright resigns his employment after the occurrence of
one of the following, subject to notice by Mr. Rubright and
an ability to cure by us (an Adverse Change):
|
|
|
|
|
|
the assignment to him of any duties or responsibilities that are
inconsistent with his position as CEO;
|
|
|
|
our failure to provide Mr. Rubright his base pay or the
benefits described above; or
|
|
|
|
a reduction of his retirement program or benefit; or
|
|
|
|
Mr. Rubright resigns his employment upon the occurrence of
one of the following after a Change in Control (as defined in
the employment agreement) (any such occurrence after a Change in
Control or an Adverse Change, Good Reason):
|
|
|
|
|
|
we or our ultimate surviving parent either reduce
Mr. Rubrights salary, retirement program or benefit,
or fail to provide to Mr. Rubright a bonus or long-term
incentive compensation opportunity that is at least as favorable
to Mr. Rubright as the average of the three highest bonus
or long-term incentive compensation opportunities that were in
effect for Mr. Rubright for our five most recent fiscal
years before the fiscal year in which the Change in Control
occurs;
|
|
|
|
we or our ultimate surviving parent reduce or diminish
Mr. Rubrights duties, responsibilities, status, chain
of persons reporting to him, staff assistance or office space
from those that Mr. Rubright enjoys and define his position
as CEO immediately before the Change in Control;
|
24
|
|
|
|
|
we or our ultimate surviving parent transfer Mr. Rubright
to a location requiring a change in Mr. Rubrights
residence or a material increase in the amount of travel
normally required of Mr. Rubright in connection with his
employment;
|
|
|
|
we or our ultimate surviving parent fail to continue to provide
to Mr. Rubright health and welfare benefits, and deferred
compensation, that are in the aggregate comparable to those
provided to Mr. Rubright immediately before the Change in
Control; or
|
|
|
|
if the Change in Control results in us not being and thereafter
continuing as the ultimate surviving parent entity resulting
from the Change in Control transaction, the failure of
Mr. Rubright to be named as and become (upon or promptly
following the consummation of the transaction) the CEO of the
ultimate surviving parent with duties and responsibilities the
same as or substantially equivalent to those he enjoys and that
define his position and status with us immediately before the
Change in Control.
|
The rights and benefits upon termination, in connection with the
foregoing circumstances described in the immediately preceding
paragraph, will include (i) within 30 days of
termination, a lump sum payment in cash in the amount of three
times Executives Earnings (as defined in the employment
agreement and which include base pay, bonuses and the value of
stock options, restricted stock and other long-term incentive
compensation), except where Mr. Rubrights employment
is terminated less than 36 months before his
65th birthday, in which case the amount of the lump sum
will be reduced according to the months remaining before his
65th birthday, (ii) within 30 days of
termination, a retirement benefit in the form of cash lump sum
in an amount equal to the excess (A) of the amount that
would be required to be paid to Mr. Rubright under the SERP
benefit level 3, if the date of his termination was
Mr. Rubrights Employment Termination Date under the
SERP and a Change in Control had occurred under the SERP and the
date of such Change in Control was the date of
Mr. Rubrights termination, over (B) the amount
that is required to be paid to Mr. Rubright under the SERP
benefit level 3 as of Mr. Rubrights Termination
(capitalized terms are within the meaning of the SERP),
(iii) continued coverage for Mr. Rubright and his
eligible dependents in all employee health, medical and life
insurance plans of our company for 36 months following the
termination or until Mr. Rubrights
65th birthday, whichever is sooner, substantially
equivalent to those insurance benefits in effect before
termination, (iv) all of Mr. Rubrights then
unvested rights under the 2004 Incentive Stock Plan will vest,
and Mr. Rubright will continue to be treated as a
participant in the 2005 Shareholder Value Creation
Incentive Plan (as defined below) as though he remained an
employee, and he will receive on the first payment date payment
in full of all amounts payable to him under such plan, and
(v) continued participation in other benefit plans in which
Mr. Rubright currently participates or which are available
to executive personnel.
Pursuant to the employment agreement, we will have no obligation
to provide to Mr. Rubright the rights and benefits
described in the preceding paragraph after
Mr. Rubrights 65th birthday or upon the
occurrence of any of the following events: (i) we terminate
Mr. Rubrights employment for Cause, i.e.,
(x) conviction of a felony, (y) gross neglect by
Mr. Rubright of his duties as CEO that continues uncured
for 60 days after receipt of written notice thereof or
(z) willful gross misconduct by Mr. Rubright in the
performance of his duties as the CEO that remains uncured for
60 days after receipt of written notice thereof,
(ii) we terminate Mr. Rubrights employment
because he is totally disabled,
(iii) Mr. Rubright does not, promptly after
termination of his employment and upon receiving a written
request to do so, resign as a director
and/or
officer of our company and of each subsidiary and affiliate of
our company of which Mr. Rubright is then serving as a
director
and/or
officer or (iv) Mr. Rubright resigns his employment
without Good Reason.
Mr. Rubright also will be entitled to receive certain
additional
Gross-Up
Payments (as defined in the employment agreement) to cover any
excise tax imposed by Section 4999 of the Code on any
payment or benefit received or to be received by
Mr. Rubright.
In the employment agreement, Mr. Rubright has agreed that
during his employment and for three years following the date of
termination of his employment or his resignation for any reason,
he will not knowingly, without our prior written consent,
disclose to any person, firm or corporation any material
confidential information of our company or its subsidiaries that
is now known to Mr. Rubright or that hereafter may become
known to Mr. Rubright as a result of his employment or
association with our company and that would
25
be helpful to a competitor. Mr. Rubright has also agreed
that, for a period of three years following the date of
termination of his employment or his resignation for any reason,
he will not induce, either directly or indirectly, any salaried
employee of our company or any of its subsidiaries to terminate
his or her employment, and he will not call on or solicit for
the purpose of competing with our company or its subsidiaries
any customers of our company or its subsidiaries.
Mr. Rubright further has agreed that, for a period of three
years following the date of termination of his employment or his
resignation for any reason (or until his 65th birthday, if
shorter), (i) he will not assume or perform any
responsibilities and duties that are substantially the same as
those he performs for us for or on behalf of any other
corporation, partnership, venture or other business entity that
engages in our companys business in the United States and
(ii) he will furnish such information and render such
assistance and cooperation as reasonably may be requested in
connection with any litigation or legal proceedings concerning
our company or any of its subsidiaries (other than any legal
proceedings concerning Mr. Rubrights employment), in
connection with such cooperation, we will pay or reimburse
Mr. Rubright for reasonable expenses. In the event of a
breach by Mr. Rubright of these covenants, we will have the
right to an injunction or other equitable relief in any court of
competent jurisdiction enjoining any such breach, in addition to
pursuing any other rights and remedies at law or in equity that
we may have.
CERTAIN
TRANSACTIONS
J. Hyatt Brown, a director of our company, is chairman,
chief executive officer and a shareholder of Brown &
Brown, Inc., the insurance agency that brokers a portion of the
insurance for our company. During fiscal 2006, we paid
Brown & Brown, Inc. approximately $326,300 for property
and casualty insurance services provided by Brown &
Brown, Inc. and by other third parties. Third parties paid
Brown & Brown, Inc. approximately $183,615 for
commissions on premiums for insurance purchased by us. For the
fiscal year ending September 30, 2006, the payments to
Brown & Brown, Inc., inclusive of fees for services and
commissions paid, totaled approximately $509,915. Total payments
for insurance premiums and fees invoiced through
Brown & Brown, Inc. (including amounts not ultimately
retained by Brown & Brown, Inc.) were approximately
$4.7 million in fiscal 2006.
Robert B. Currey, a director of our company, is chief executive
officer of Currey & Company, Inc., which purchased
approximately $457,000 of corrugated boxes from us in fiscal
2006.
REPORT OF
THE AUDIT COMMITTEE
The audit committee, which operates under a written charter
adopted by our board of directors, is composed of independent
directors (as defined in the listing standards applicable to the
NYSE) and oversees on behalf of the board of directors our
companys financial reporting process and system of
internal control over financial reporting. A copy of the audit
committee charter is attached to this proxy statement as
Appendix A. Our management has the primary
responsibility for the financial statements and the reporting
process, including the system of internal control over financial
reporting. In fulfilling its oversight responsibilities, the
audit committee reviewed and discussed with management the
audited financial statements to be included in the annual report
on
Form 10-K
for the fiscal year ended September 30, 2006, including a
discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant
judgments and the clarity of disclosures in the financial
statements.
The committee discussed with the independent registered public
accounting firm, which is responsible for expressing an opinion
on the conformity of those audited financial statements with
generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of our companys
accounting principles and such other matters as are required to
be discussed with the audit committee under generally accepted
auditing standards (including Statement on Auditing Standards 61
(Communication with Audit Committees)) and applicable law.
In addition, the independent registered public accounting firm
provided to the audit committee the written disclosures and the
letter regarding its independence from management and our
company as required by
26
Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees). The audit committee
discussed this information with the independent registered
public accounting firm.
The audit committee discussed with our companys internal
auditors and independent registered public accounting firm the
overall scope and plans for their respective audits. The audit
committee meets with the internal auditors and independent
registered public accounting firm, with and without management
present, to discuss the results of their examinations, their
evaluations of our companys internal controls, and the
overall quality of our companys financial reporting. The
audit committee held seven meetings during fiscal 2006. The
audit committee was updated no less than quarterly on
managements process to assess the adequacy of our
companys system of internal control over financial
reporting, the framework used to make the assessment and
managements conclusions on the effectiveness of our
internal control over financial reporting. The audit committee
also discussed with the independent auditor our companys
internal control assessment process, managements
assessment with respect thereto and the independent
auditors evaluation of our system of internal control over
financial reporting.
In reliance on the reviews and discussions referred to above,
the audit committee recommended to the board of directors (and
the board approved) that the audited financial statements be
included in the annual report on
Form 10-K
for the fiscal year ended September 30, 2006, for filing
with the SEC.
John W. Spiegel, chairman, audit committee
Stephen G. Anderson, audit committee member
Robert B. Currey, audit committee member
James E. Young, audit committee member
The foregoing report should not be deemed incorporated by
reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act or
under the Exchange Act, except to the extent that we
specifically incorporate this information by reference, and
shall not otherwise be deemed to be soliciting material or to be
filed under such Acts.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Fees
The following table presents fees billed for professional
services rendered by our independent registered public
accounting firm, Ernst & Young LLP, and its affiliates
(which we refer to collectively as Ernst &
Young), for the fiscal years ended September 30,
2006, and September 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
2006(5)
|
|
|
2005(5)
|
|
|
Audit fees(l)
|
|
$
|
2,337,500
|
|
|
$
|
1,879,783
|
|
Audit-related fees(2)
|
|
$
|
83,000
|
|
|
$
|
210,991
|
|
Tax fees(3)
|
|
$
|
82,679
|
|
|
$
|
147,337
|
|
All other fees(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fees paid to auditor
|
|
$
|
,2,503,179
|
|
|
$
|
2,238,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees consist primarily of fees related to professional
services rendered for the audit of our annual financial
statements included in our
form 10-K
and the review of interim financial statements included in our
quarterly reports on
Form 10-Q,
accounting consultations to the extent necessary for
Ernst & Young to fulfill their responsibility under
generally accepted auditing standards, as well as services in
connection with other statutory and regulatory filings. |
|
(2) |
|
Audit-related fees consist of fees related to professional
services rendered for assurance and related services that are
reasonably related to the performance of the audit or review of
our annual financial statements that are not included in the
amounts disclosed as audit fees above. For fiscal 2006 and 2005,
these fees relate primarily to due diligence services with
respect to our acquisitions and potential acquisitions and
certain benefit plan audits. |
27
|
|
|
(3) |
|
Tax fees consist primarily of fees related to professional
services rendered for tax compliance, tax advice, and tax
planning. |
|
(4) |
|
All other fees, if any, consist primarily of fees related to
products and professional services that are not included in the
amounts disclosed in the three other categories above.
Ernst & Young did not perform any such services during
these periods. |
|
(5) |
|
The audit committee pre-approved 100% of such Audit fees,
Audit-related fees, and Tax fees that Ernst & Young
billed for professional services. |
Audit
Committee Pre-Approval of Services by the Independent Registered
Public Accounting Firm
In accordance with its pre-approval policy, its charter and
applicable rules and regulations adopted by the SEC, our audit
committee reviews and pre-approves the terms of all audit
services provided to us as well as all permissible audit-related
and non-audit services to be provided by our independent
registered public accounting firm. Unless a service to be
provided by our independent registered public accounting firm
has received general pre-approval under the pre-approval policy,
it requires specific pre-approval by our audit committee or the
chairman of our audit committee before the commencement of each
service. The term of any pre-approval is twelve months, unless
the audit committee specifically provides for a different period.
In determining whether to pre-approve services, the audit
committee is generally guided by the following principles. The
independent registered public accounting firm engaged to perform
audit work necessary for us to file required reports under the
Exchange Act may not perform a service that: (a) impairs
the independent registered public accounting firms
independence; (b) creates a mutual or conflicting interest
between the independent registered public accounting firm and
us; (c) places the independent registered public accounting
firm in the position of auditing its own work; or
(d) results in the independent registered public accounting
firm acting as management or an employee of our company.
The audit committee does not delegate its responsibilities to
pre-approve services performed by the independent registered
public accounting firm to our management. However, the audit
committee has appointed our chief accounting officer to assist
it in monitoring compliance with the pre-approval policy,
including ensuring whether the necessary pre-approvals from the
audit committee or the chairman of our audit committee have been
obtained and that the services carried out under the
pre-approval policy is appropriately reported periodically (but
not less than annually).
The audit committee will review and revise the pre-approval
policy on a periodic basis (not less than annually) and update
it as necessary based on subsequent determinations.
Engagements for our annual audit and quarterly reviews required
under the Exchange Act (including the audit of internal control
over financial reporting), and statutory or employee benefit
plan audits are reviewed and pre-approved annually by the audit
committee. The nature and dollar value of services provided
under these engagements are reviewed with the audit committee to
approve changes in terms, conditions and fees resulting from
changes in audit scope, our structure, or other items, if any.
The following services, consistent with the nature of services
previously provided to us, are pre-approved in the pre-approval
policy. All other audit, audit-related and non-audit services
must be specifically pre-approved by the audit committee or the
chairman of our audit committee prior to the commencement of
each service.
|
|
|
|
|
Any audit services associated with a change in the scope of the
annual audit engagement and additional audit procedures arising
out of our adoption of, or application of (1) new
accounting pronouncements, or (2) business transactions,
regulatory matters, or matters arising in the conduct of our
audit which were not reasonably anticipated in the annual audit
fees originally agreed upon;
|
|
|
|
Work associated with registration statements under the
Securities Act;
|
|
|
|
Statutory audits, employee benefit plan audits or other
financial audit work required for
non-U.S. subsidiaries
that are not required for the Exchange Act audit;
|
28
|
|
|
|
|
Due-diligence work for potential acquisitions or disposals,
which includes financial, accounting, and tax procedures
relating to the parties to the contemplated transaction and
performance of audit
and/or
review procedures as of the closing date of the transaction as
well as assistance and planning with the tax aspect of
transactions, but not including preparing valuations, financial
models, fairness opinions, actuarial reports or any
other services prohibited by rules or regulations;
|
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|
Attestation services;
|
|
|
|
Advice and consultation as to proposed or newly adopted
accounting and auditing standards and interpretations, and as to
financial accounting and disclosure requirements imposed by the
SEC and other regulatory agencies and professional standard
setting bodies;
|
|
|
|
Assistance and consultation as to questions from us, including
comments or inquiries made by the SEC or other regulatory
agencies;
|
|
|
|
Access to Ernst &Youngs internet-based accounting
and reporting resources;
|
|
|
|
Assistance to us with understanding our internal control review
and reporting obligations and, if requested, under the
supervision of our management assisting us in the documentation
of our internal controls and processes, not including the
performance of any management review, evaluation or testing of
internal controls for the purposes of managements
assertions about the effectiveness of internal controls;
|
|
|
|
Review of our information systems security and controls;
|
|
|
|
Preparation
and/or
review of tax returns (including amended returns and refund
claims) to be filed by us with federal, state, local or foreign
jurisdictions and related tax services, which includes
assistance with audits and notices, voluntary disclosure and
amnesty programs, estimated payment and extension calculations,
tax projections, allocations and analytical review calculations
and tax accounting method changes, statutory incentive credit
assistance, transfer pricing analysis, inventory related
calculations and assistance, fixed asset and depreciation
assistance and cost segregation studies (but in no circumstances
computing depreciation or maintaining our related records),
analysis of tax legislation, and pronouncements, expatriate tax
services and consultation and responses to questions from us
regarding the tax implications of various items;
|
|
|
|
International tax planning, including foreign tax credit and
cash repatriation planning; and
|
|
|
|
General federal, state, and international tax planning and
advice.
|
For the services receiving the general pre-approval under the
pre-approval policy that are listed above, any individual
engagement with an estimated cost of more than $37,500 must
nevertheless be specifically pre-approved by the audit committee
or its chairman before the commencement of the engagement. In
addition, further audit committee pre-approval is required if
the aggregate fees for such engagements would exceed $75,000.
The audit committee at its next regularly scheduled meeting will
review services performed pursuant to the general pre-approvals
granted under the pre-approval policy and services pre-approved
by the chairman of our audit committee. In addition, the nature
and dollar value of services performed under the general
pre-approval guidelines are reviewed with the audit committee on
an at least an annual basis.
Our independent registered public accounting firm may not
perform any service that is proscribed by law, regulation, the
NYSE or regulatory authorities or organizations charged with
oversight of the accounting and auditing profession.
Specifically, the following non-audit services are prohibited by
our pre-approval policy:
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|
Bookkeeping or other services related to our accounting records
or financial statements;
|
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|
Financial information systems design and implementation;
|
|
|
|
Appraisal or valuation services, fairness opinions or
contribution-in-kind
reports;
|
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|
|
Actuarial services;
|
|
|
|
Internal audit outsourcing services;
|
29
|
|
|
|
|
Management functions or human resources;
|
|
|
|
Broker-dealer, investment adviser or investment banking services;
|
|
|
|
Legal services and expert services unrelated to the
audit; and
|
|
|
|
Personal tax services for individuals in a financial reporting
oversight role.
|
The audit committee, based on the guiding principles set forth
above, may prohibit other services.
The fees charged by our independent registered public accounting
firm must be based on time and expense incurred to perform its
services, and in no event will fees be contingency
based.
REPORT ON
EXECUTIVE COMPENSATION
During fiscal 2006, the compensation committee consisted of
Messrs. Gellerstedt, Felker and Spiegel. The compensation
committee is responsible for the following:
(1) establishing salaries, bonuses and other compensation
for our CEO and our other senior executives (14 senior
executives in fiscal 2006, which include our 7 executive
officers); and (2) administering our equity incentive
plans, our ESPP (as defined below), our SERP, our Supplemental
Plan, our Annual Executive Bonus Program and our 2005
Incentive Plan (as defined below).
Mr. Rubright, our CEO, was responsible for establishing the
salaries and bonuses for all of the other officers.
Compensation Policy. Our executive
compensation policy is based on the belief that the compensation
of all of our employees, including our executive officers,
should be set at levels that allow us to attract and retain
employees who are committed to achieving high performance, and
who demonstrate the ability to do so. Therefore, in setting our
compensation levels we annually review the performance of our
businesses and the executives responsible for that performance,
recommendations of our CEO of compensation levels of our senior
executives designed to implement our compensation policy, and
data and recommendations of our independent compensation
consultant. This data includes market competitive compensation
data for companies with which we compete for executive talent,
and data regarding market competitive compensation data for
manufacturing executives generally and executives of comparably
sized public companies.
Base Salary. We believe that market
competitive base salaries should be an important part of each
executives total compensation. For fiscal 2006, each
executive officers base salary, including each named
executive officers base salary and the CEOs base
salary, was determined based upon a number of factors including
the executive officers responsibilities, contribution to
the achievement of our goals and objectives, demonstrated
leadership skills and overall effectiveness, and length of
service.
We believe that each executives compensation (including
our CEOs) should include a portion that is at risk to
achievement of pre-defined performance objectives. We believe
that a portion should consist of equity incentives that are
granted in anticipation of the future contribution of the
executive to the companys success and that further align
the interest of the executive with those of shareholders and
place a portion of the executives compensation at risk to
the performance of our Common Stock.
We believe that as the level of total compensation of an
executive increases and the breadth of the executives
responsibility and ability to impact the companys success
increases, the portion of the employees compensation that
is at risk to performance, through annual incentive awards and
equity incentives, should increase. We believe that for our most
highly compensated employees (including our CEO), the majority
of their compensation at targeted levels should be at risk to
performance.
Cash Bonuses. Each of our executive officers,
including our CEO, is eligible to receive an annual cash bonus.
Under our Annual Executive Bonus Program, in fiscal 2006, our
CEO was eligible to earn a cash bonus ranging up to a maximum of
125% of his year-end base salary to the extent we achieved
certain specified operating income, safety and customer
satisfaction goals established by the compensation committee.
During fiscal 2006, under this plan, our CEO earned a bonus that
was approximately 117% of his base salary. Under
30
our Annual Executive Bonus Program and under our other employee
bonus programs, in fiscal 2006, our executive officers,
excluding our CEO, were eligible to earn a maximum total cash
bonus ranging from 70% to 100% of their respective year-end base
salaries to the extent we achieved (as applicable) certain
specified operating income, safety, customer satisfaction, and
specific objectives established by the compensation committee.
During fiscal 2006, our executive officers, excluding our CEO,
earned bonuses ranging from 48% to 90% of their respective base
salaries. Bonuses paid to our executive officers, excluding our
CEO, were paid, in part, under our Annual Executive Bonus
Program and, in part, under other employee bonus programs.
Restricted Stock and Stock Options. We
annually review the grant of equity incentives to our executive
officers (including our CEO). In fiscal 2006, we granted awards
of restricted stock to our executive officers to implement the
compensation policy described above. We believe restricted stock
grants are appropriate incentives because they most closely
align the interests of the employee with the interests of the
shareholders since the value of the restricted stock award will
increase or decrease proportionately with the value of our
Common Stock. Restricted stock awards also create an incentive
to the executive to remain in the companys employ during
the restricted period. In fiscal 2006, we granted stock options
to one of our executive officers, Mr. Kiepura, to recognize
his promotion to Executive Vice President of the Folding Carton
Division. On May 8, 2006, Mr. Kiepura received stock
option grants in respect of fiscal 2006 to purchase
50,000 shares. These options will vest in one-third
increments on May 8, 2007, 2008 and 2009. We believe that
stock options are an appropriate incentive and reward because
the executive only benefits from the award to the extent that
the value of Common Stock increases.
In fiscal 2006, we made restricted stock grants ranging from
7,500 to 38,250 shares to each of our executive officers,
excluding our CEO, and a restricted stock grant of
121,500 shares to our CEO. These shares of restricted stock
include two tranches, both of which have a service condition and
either a performance condition or market conditions. The shares
of restricted stock will not be deemed issued and will not have
voting or dividend rights until the relevant performance or
market conditions have been met. Once the relevant performance
condition or market conditions have been met, the shares of
restricted stock will be deemed issued and will have voting and
dividend rights as of that time, but they will be held by the
company and be subject to forfeiture if the service conditions
are not met. Unless forfeited (e.g., by termination of
employment) at an earlier date, the shares will vest in
one-third increments on, and may not be transferred before,
May 8, 2009, 2010 and 2011, respectively.
We compared the implied value of the equity grants to our
executive officers to the compensation data referred to above
and determined that the equity grants were competitive with
market levels based on the expected levels of contribution of
the grantees to our companys results over the term of the
equity incentives.
Tax Compliance Policy. The compensation
committee has reviewed the applicability of Section 162(m)
of the Code, as amended by the Omnibus Budget Reconciliation Act
of 1993. In certain circumstances, Section 162(m) may deny
a federal income tax deduction for compensation to our named
executive officers in excess of $1 million per year,
effective for tax years beginning on or after January 1,
1994. Certain compensation that qualifies as performance
based and is approved by shareholders may be exempt from
the Section 162(m) limit. We intend to qualify certain
compensation paid to our executive officers for deductibility
under the Code, including Section 162(m). However, we
believe that the interests of our company and our shareholders
may sometimes be best served by providing compensation that is
not deductible in order to attract, retain, motivate and reward
executive talent. Accordingly, the compensation committee
intends to retain the flexibility to provide for payments of
compensation that is not deductible.
We have also taken steps designed to maximize the deductibility
for bonuses paid under our Annual Executive Bonus Program and
options granted under our 2004 Incentive Stock Plan. It is also
our intention that the awards under our 2004 Incentive Stock
Plan that include performance criteria also will meet the
conditions necessary for deductibility.
2005 Incentive Plan. On June 6, 2005, our
compensation committee adopted and approved the
2005 Shareholder Value Creation Incentive Plan (which we
refer to as the 2005 Incentive Plan).
31
The following description of the 2005 Incentive Plan is a
summary only and does not purport to be complete. The summary is
qualified in its entirety by reference to the 2005 Incentive
Plan.
The 2005 Incentive Plan is intended to allow us to
(1) achieve the goals that we established to value the Pulp
and Paperboard and Paperboard Packaging (which we refer to as
GSPP) business of Gulf States Paper
Corporation that we acquired on June 6, 2005, including
(a) administrative and operating synergies related to the
acquired GSPP business and (b) the reduction of debt
incurred to finance the acquisition and (2) provide plan
participants with a meaningful reward for their role in
achieving these goals.
The 2005 Incentive Plan permits the granting of cash incentive
awards. The 2005 Incentive Plan is administered by the
compensation committee. On June 6, 2005, the compensation
committee granted awards under the 2005 Incentive Plan. The
maximum value of the award for our CEO was $2 million. The
maximum value of the awards for other executive officers
receiving awards ranged from $166,700 to $500,000. The awards
were based 50% on each of the two performance metrics included
in the 2005 Incentive Plan, as described below (which we refer
to as the Standard Performance Metrics). An
award to one of our executive officers incorporated performance
metrics that included only one of the Standard Performance
Metrics. This award was based 50% on the Standard Performance
Metric that is the ratio of Debt to EBITDA, and 50% on the
achievement of threshold, target and maximum performance goals
tied to his divisions adjusted EBIT for fiscal 2007. The
compensation committee will calculate adjusted EBIT in a manner
that is substantially similar to its calculation of EBITDA, as
described below.
Each participant designated by the compensation committee
received an award having threshold, target and maximum potential
values designated in the grant. The compensation committee will
use these values together with threshold, target and maximum
performance goals included in each award, as described below to
determine the value of the award that each participant will
receive.
All grants vest upon completion of service to the following
dates:
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|
All grants with a target value less than $100,000 vest 100% on
September 30, 2007, payable on November 1,
2007; and
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|
All grants with a target value of $100,000 or greater vest:
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|
50% on September 30, 2007, payable on November 1,
2007; and
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|
50% on September 30, 2008, payable on October 1, 2008.
|
Any grant to a participant whose employment terminates for any
reason prior to vesting will terminate and have no value, except
(i) as the compensation committee, in its sole discretion,
may determine otherwise and (ii) any unvested portion of a
grant to any participant who becomes disabled (as defined in
Section 409A of the Code) or dies after September 30,
2007 and prior to September 30, 2008, will vest on the date
of disability (as defined in Section 409A of the Code) or
death and be payable as soon as practical thereafter; provided
that the payment to any specified employees (as defined in
Section 409A of the Code) will be made not sooner than six
months after the termination of employment.
Except as otherwise provided by the compensation committee, the
value of the grants under the 2005 Incentive Plan will be
determined on the basis of the achievement of the following two
performance metrics:
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|
Realized Synergies: The amount of synergies
from the acquisition of the GSPP operations and actions taken to
improve the efficiency and effectiveness of the combined
operations realized and sustained will be measured at the end of
our fiscal year ending September 30, 2007 to establish the
then annualized run rate of realized and sustained synergies.
The value of any portion of an award measured by realized
synergies will be based on the relationship of the realized
synergies to threshold, target and maximum amounts specified in
the plan.
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|
Debt to EBITDA: The compensation committee
will calculate the ratio of our consolidated debt as of
September 30, 2007 to an annualized EBITDA amount for the
period April 1, 2007 to September 30, 2007 in
accordance with the rules set forth in the 2005 Incentive Plan
and summarized below. The
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32
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|
value of any portion of an award measured by the Debt to EBITDA
ratio will be based on the relationship of the calculated ratio
to threshold, target and maximum amounts specified in the plan.
|
Under the 2005 Incentive Plan, the compensation committee will
calculate EBITDA in accordance with our published financial
statements, except that the compensation committee will adjust
such calculations to exclude the effect of non-recurring items
of gain or loss and other special items specified in the plan,
including, without limitation, certain effects related to
acquisitions, discontinued or sold operations, plant closings,
severance costs, extraordinary items, the cumulative effect of
accounting changes, any adjustments made to accounting records
that relate to prior periods, asset impairment charges and the
effect of new accounting pronouncements with which we comply.
The compensation committee also may, in its sole discretion,
exclude the results of acquired operations and reduce debt by
the purchase price for the relevant acquired operations.
In the event of a change in control, as defined in the
regulations under Section 409A of the Code, all awards
granted under the 2005 Incentive Plan will vest 100% at maximum
value.
L. L. Gellerstedt, III, chairman, compensation committee
G. Stephen Felker, compensation committee member
John W. Spiegel, compensation committee member
The foregoing report should not be deemed incorporated by
reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act or
under the Exchange Act, except to the extent that we
specifically incorporate this information by reference, and
shall not otherwise be deemed to be soliciting material or to be
filed under such Acts.
33
STOCK
PRICE PERFORMANCE GRAPH
The graph below reflects cumulative shareholder return (assuming
the reinvestment of dividends) on our Common Stock compared to
the return on the S&P 500 Index, the S&P Paper Products
Index, and the S&P Paper Packaging Index. The graph reflects
the investment of $100 on September 30, 2001 in our Common
Stock, the S&P 500 Index, the S&P Paper Products
Index, and the S&P Paper Packaging Index and the
reinvestment of dividends.
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ROCK-TENN COMPANY, THE S & P 500 INDEX,
THE S & P PAPER PACKAGING INDEX AND THE S & P PAPER
PRODUCTS INDEX
* $100 invested on 9/30/01 in stock or index-including
reinvestment of dividends.
Fiscal year ending September 30.
Copyright
©
2006, Standard & Poors, a division of The McGraw-Hill
Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
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9/30/2001
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9/30/2002
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9/30/2003
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9/30/2004
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9/30/2005
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9/30/2006
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ROCK-TENN COMPANY
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$
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100.00
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$
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143.05
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$
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138.45
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$
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152.87
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$
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150.73
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$
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202.36
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S & P 500
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100.00
|
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79.51
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98.91
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112.63
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126.43
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140.08
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S & P PAPER PRODUCTS
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100.00
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80.34
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119.26
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139.90
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152.91
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174.37
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S & P PAPER PACKAGING
|
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100.00
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82.82
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109.66
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130.86
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109.61
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136.35
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The stock price performance graph shall not be deemed
incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the
Securities Act or under the Exchange Act, except to the extent
that we specifically incorporate this information by reference,
and shall not otherwise be deemed to be soliciting material or
to be filed under such Acts.
ADOPTION
AND APPROVAL OF AMENDMENT TO 1993 EMPLOYEE STOCK PURCHASE
PLAN
ITEM 2
The board of directors has approved and recommends to the
shareholders that they adopt and approve the Purchase Plan
Amendment, which would amend the 1993 Employee Stock Purchase
Plan (which we refer to as the ESPP) to
increase by 1,000,000 the number of shares of Common Stock
available for grant under the
34
plan. If the Purchase Plan Amendment is approved,
1,201,204 shares of Common Stock would be available for
issuance under the ESPP on January 26, 2007.
The board of directors has determined that the adoption of the
Purchase Plan Amendment is in the best interests of our company
and our shareholders. The Purchase Plan Amendment would provide
additional shares for sale to employees of our company. The
board of directors believes that the sale of our Common Stock at
a discount is an effective method to attract and retain
employees and that the availability of shares for future
issuance under the ESPP is important to our business prospects
and operations.
The following description of the ESPP is a summary only and does
not purport to be complete. The following description of the
ESPP is qualified in its entirety by reference to the text of
the ESPP and the Purchase Plan Amendment. We have filed both the
ESPP and the Purchase Plan Amendment with the SEC as appendices
to this proxy statement, and they are available on the
SECs website at www.sec.gov/edgar or by the link to
our SEC filings located on our website at
www.rocktenn.com. You are urged to read the ESPP and the
Purchase Plan Amendment.
Plan
Description
The ESPP permits employees to purchase Common Stock at a
discount to its market price through payroll deductions over
successive three-month purchase periods. To participate in the
ESPP, an employee generally must have been employed for at least
two years and, generally, must be a regular, full-time employee
(as defined in the ESPP) of our company or one of the eligible
subsidiaries (which are determined in accordance with the ESPP
and exclude the employees of certain specified subsidiaries). As
of November 30, 2006, there were approximately
7,091 employees who would be eligible to participate in the
ESPP. The board of directors has approved, and we intend to
implement, a six month holding period on shares purchased under
the ESPP effective with the purchase period which begins
February 1, 2007.
Prior to each three-month purchase period, participating
employees may authorize us to withhold up to $5,312.50 of their
compensation (or such lesser amount determined by the
compensation committee) during the succeeding purchase period
for purposes of purchasing shares of Common Stock under the
ESPP. At the end of each three-month purchase period, such
withheld compensation, if not previously withdrawn by the
participating employee, will be used to purchase from us the
number of newly issued shares of Common Stock resulting from
dividing the amount of compensation withheld by payroll
deductions by the purchase price for that period. The purchase
price of the shares will equal 85% of the average of the high
and low sales price of Common Stock on the last day of the
three-month purchase period. An employee may terminate his or
her participation at any time before the last day of each
purchase period and receive the full balance of his or her
withheld compensation in cash without interest. An employee also
may elect on or before the last day of a purchase period to use
a specific dollar amount less than the total amount of withheld
payroll deductions made by the employee for the period to
purchase shares on the last day of the purchase period and
receive a refund in cash of the balance of his or her withheld
compensation remaining after such partial purchase.
The ESPP is administered by the compensation committee of the
board of directors and qualifies as an employee stock
purchase plan within the meaning of Section 423 of
the Code. While the Code requires us to offer the opportunity to
participate in the ESPP to all employees of any of our
subsidiaries who meet the requirements to participate if we
offer that opportunity to any such employee of the subsidiary,
we have been advised that, under applicable labor laws, we
cannot offer the opportunity to participate to employees of a
subsidiary who are represented by a union unless the union
agrees that we can make the offer to such employee. As a result
of this interaction between the tax laws and the labor laws, we
do not offer the opportunity to participate in the ESPP to any
employee of a subsidiary until each union that represents
employees of that subsidiary either agrees that we can make the
offer to the employees represented by the union or rejects the
opportunity for those employees to participate in the ESPP.
The ESPP may be amended from time to time by our board of
directors, subject to the approval of our shareholders to the
extent required by Section 423 of the Code, the laws of the
State of Georgia, or
Rule 16b-3
under the Exchange Act. No provision of the ESPP may be amended
more than once every six months if the amendment would result in
the loss of an exemption under Section 16(b) of the
Exchange Act. The board of
35
directors may terminate the ESPP, or any offering made under the
ESPP, at any time. However, once a three-month purchase period
has begun, the board of directors does not have the right to
modify, cancel or amend any outstanding right to purchase for
that purchase period unless (1) each participant consents
in writing to the modification, amendment or cancellation,
(2) the modification only accelerates the date of purchase
for the three-month purchase period, or (3) the board of
directors deems the action is required under applicable law.
Estimate
of Benefits
The number of shares that will be purchased under the ESPP by
our CEO and other executive officers at future dates is not
currently determinable.
The following table sets forth the shares purchased under the
ESPP by the named executive officers and by the executive
officers and other employees eligible to participate in the ESPP
as a group during fiscal 2006.
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Number of
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Dollar Value of
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Shares
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Benefits in Fiscal
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Purchased in
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Name and Position
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2006(1)
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Fiscal 2006
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James A. Rubright
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Chairman and Chief Executive
Officer
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$
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David D. Dreibelbis
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Executive Vice President; General
Manager Paperboard Division
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Michael E. Kiepura
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Executive Vice President; General
Manager Folding Carton Division
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Steven C. Voorhees
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Executive Vice President; and
Chief Financial Officer
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3,750
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1,662
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Robert B. McIntosh
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Senior Vice President; General
Counsel and Secretary
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All current executive officers as
a group (7 persons)
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7,498
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3,325
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All current directors who are not
executive officers as a group (10 persons)
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All employees, including all
current officers who are not executive officers, as a group
(1196 persons)
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702,461
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311,975
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(1) |
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Represents the difference between the purchase price per share
of Common Stock under the ESPP and the market price per share of
Common Stock on the date of purchase multiplied by the number of
shares purchased on such date. |
Federal
Income Tax Consequences
The following discussion outlines generally the federal income
tax consequences of participation under the ESPP. Individual
circumstances may vary these results. The federal income tax law
and regulations are frequently amended, and each participant
should rely on his or her own tax counsel for advice regarding
federal income tax treatment under the ESPP.
The amounts withheld from a participants pay under the
ESPP will be taxable income to that participant and must be
included in gross income for federal income tax purposes in the
year in which the amounts otherwise would have been received.
A participant will not be required to recognize any income for
federal income tax purposes either at the time the participant
is granted an option (which will be on the first day of the
three-month purchase period) or by virtue of the exercise of the
option (which will take place on the last day of such purchase
period). The federal income tax consequences of a sale or
disposition of shares acquired under the ESPP depend in part on
the length of time the shares are held by a participant before
such sale or disposition. If a participant sells or otherwise
disposes of shares acquired under the ESPP (other than any
transfer resulting from his death) within two years after the
date on which the option to purchase such shares is granted to
such participant, such participant will recognize ordinary
income in the year of such sale or disposition in an amount
equal to the
36
excess of (1) the fair market value of the shares on the
date such shares were acquired by him or her over (2) his
or her purchase price. The tax law requires a participant to
recognize this amount of ordinary income even if the fair market
value of the shares has decreased since the date the shares were
purchased, and the ordinary income recognized is added to his or
her basis in such shares. Any gain realized on the sale or
disposition in excess of the basis (after increasing the basis
in such shares by the amount of the ordinary income recognized)
will be taxed as capital and any loss realized (after increasing
the basis in such shares by the ordinary income recognized) will
be a capital loss.
If a participant sells or otherwise disposes of shares acquired
under the ESPP after holding those shares for two or more years
after the date on which the option to purchase the shares is
granted to the participant, or the participant dies, he or she
must recognize as ordinary income in the year of sale (or his or
her taxable year ending with his or her death) an amount equal
to the lesser of (1) the excess of the fair market value of
the shares on the date the option was granted over the option
price on the date of the option grant, or (2) the excess of
the fair market value of the shares on the date he or she sells
or otherwise disposes of the shares or on the date of his or her
death over the purchase price. Except in the case of a transfer
as a result of death, this amount of ordinary income recognized
by the participant is added to his or her basis in the shares.
The basis of shares transferred as a result of the death of a
participant will not be increased as a result of the ordinary
income recognized by the deceased participant. Any gain realized
on the sale or disposition in excess of the participants
basis (after increasing the basis in such shares by the ordinary
income recognized) will be taxed as a long-term capital gain.
Any loss realized will be treated as long-term capital loss.
We do not receive any income tax deduction as a result of
issuing shares pursuant to the ESPP, except upon sale or
disposition of shares by a participant within two years after
the date on which the option to purchase the shares is granted
to the participant. In that event, we ordinarily will be
entitled to a deduction equal to the amount included as ordinary
income to the participant with respect to the sale or
disposition of the shares. In fiscal 2006, we incurred expenses
in connection with the ESPP of approximately $0.6 million.
Recommendation
of the Board of Directors
The board of directors recommends a vote FOR the
adoption and approval of the Purchase Plan Amendment. Proxies
returned without instructions (other than broker non-votes) will
be voted FOR the adoption and approval of the Purchase Plan
Amendment.
ADOPTION
AND APPROVAL OF AMENDMENT TO 2004 INCENTIVE STOCK PLAN
ITEM 3
The board of directors has approved and recommends to the
shareholders that they adopt and approve the Stock Plan
Amendment, which would amend the 2004 Incentive Stock Plan to
increase by 900,000 the number of shares of our Common Stock
available for any type of award under the plan, including stock
grants, to remove the restriction that limits the number of
shares available under the plan for stock grants so that all
shares available for issuance under the plan will be available
for any type of award under the plan, including stock grants,
and to increase the annual limitation on stock grants to any
employee under the plan so that no employee will be permitted to
receive in any calendar year stock grants or stock unit grants
under the plan with a fair market value in excess of $5,000,000
at the time of the grant. If the Stock Plan Amendment is
approved, 1,906,666 shares of Common Stock would be
available for issuance under the 2004 Incentive Stock Plan
pursuant to any form of grant permitted under that plan on
January 26, 2007.
The board of directors has determined that the adoption of the
Stock Plan Amendment is in the best interests of our company and
our shareholders. The board of directors believes the 2004
Incentive Stock Plan allows us to (1) attract and retain
key employees and certain directors, (2) provide such
persons with an additional incentive to work to increase the
value of our Common Stock, and (3) provide such persons
with a stake in the future of our company that corresponds to
the stake of our shareholders and that the 2004 Incentive Stock
Plan, as amended by the Stock Plan Amendment, is important to
our business prospects and operations.
37
The following information regarding the 2004 Incentive Stock
Plan is being provided to you in connection with the
solicitation of proxies for the adoption and approval of the
Stock Plan Amendment. The following description of the 2004
Incentive Stock Plan is a summary only and does not purport to
be complete. The summary is qualified in its entirety by
reference to the 2004 Incentive Stock Plan and the Stock Plan
Amendment. We have filed both the 2004 Incentive Stock Plan and
the Stock Plan Amendment with the SEC as appendices to this
proxy statement, and they are available on the SECs
website at www.sec.gov/edgar or by the link to our SEC
filings located on our website at www.rocktenn.com. You
are urged to read the 2004 Incentive Stock Plan and the Stock
Plan Amendment.
Plan
Description
Types of Awards. The 2004 Incentive Stock Plan
permits the granting of any or all of the following types of
equity-based incentive awards: (1) stock options, including
incentive stock options intended to qualify for special tax
treatment under Section 422 of the Code, (2) stock
appreciation rights, in tandem with stock options or
freestanding, (3) stock grants, which may or may not be
subject to issuance or forfeiture conditions, and (4) stock
unit grants, which may or may not be subject to forfeiture
conditions.
Administration and Eligibility. The 2004
Incentive Stock Plan is administered by our compensation
committee, which includes two or more members each of whom is a
non-employee director within the meaning of
Rule 16b-3
under the Exchange Act and an outside director
within the meaning of Section 162(m) of the Code. The
compensation committee has the authority to select eligible
persons to whom stock options or other awards under the 2004
Incentive Stock Plan are granted, to determine the number of
shares covered by such awards, and to set the terms, conditions
and provisions of such awards, consistent with the terms of the
plan. The committee may not take any action, whether through
amendment, cancellation, replacement grants or other means, to
reduce the exercise price of any outstanding options without the
approval of our shareholders.
The compensation committee may grant awards under the 2004
Incentive Stock Plan to those of our employees, or employees of
our subsidiaries or certain affiliates, and our non-employee
directors as the committee may select. Stock options intended to
qualify as incentive stock options under Section 422 of the
Code, however, only may be granted to our employees or to
employees of our subsidiaries. Subject to adjustment as
described below, (1) no employee in any one calendar year
may be granted a stock option to purchase more than
500,000 shares of Common Stock, or a stock appreciation
right with respect to more than 500,000 shares of Common
Stock, (2) no employee in any one calendar year may be
granted a stock grant or stock unit grant where the fair market
value of the Common Stock that is subject to the grant on the
date of the grant exceeds $2,000,000 (this would be increased to
$5,000,000 if the Stock Plan Amendment is adopted and approved),
(3) currently no more than 1,000,000 non-forfeitable shares
of Common Stock shall be issued pursuant to stock grants (this
would be increased to 1,906,666 non-forfeitable shares of Common
Stock if the Stock Plan Amendment is adopted and approved) and
(4) currently no more than 2,000,000 shares may be
used for awards of incentive stock options under the plan (this
total amount would increase by 900,000 shares if the Stock
Plan Amendment is adopted and approved).
The compensation committee is authorized to interpret the 2004
Incentive Stock Plan, to determine the provisions of any
agreements entered into under the plan and to take such other
action as the committee deems equitable under the circumstances
in the administration of the plan.
Shares Subject to the Plan. Subject to
adjustment as described below, if the Stock Plan Amendment is
adopted and approved there will be available for awards granted
under the 2004 Incentive Stock Plan during the remaining term of
the plan 1,906,666 shares of Common Stock, plus the number
of shares of Common Stock subject to grants under the 2000
Incentive Stock Plan that will be outstanding on the effective
date of the Stock Plan Amendment and that are subsequently
forfeited or expire. All shares available in any year that are
not awarded under the 2004 Incentive Stock Plan are available in
subsequent years. If any shares subject to an award under the
2004 Incentive Stock Plan are forfeited, or an award expires or
is otherwise terminated without issuance of shares, the shares
subject to that award will again be available for grant pursuant
to the 2004 Incentive Stock Plan. If shares are tendered to us
in connection with the payment of the exercise price of
38
a stock option or other award under the 2004 Incentive Stock
Plan, those shares will then be available for award under the
2004 Incentive Stock Plan. The shares of stock deliverable under
the 2004 Incentive Stock Plan may be authorized and unissued
shares or shares that have been reacquired by us.
Stock Options. Stock options granted under the
2004 Incentive Stock Plan may be options that are intended to
qualify as incentive stock options within the
meaning of Section 422 of the Code or nonqualified
stock options that are not intended to so qualify. The
price per share of stock purchasable under any stock option will
be determined by the compensation committee, but may not be less
than 100% of the fair market value of the stock on the date of
the grant of the option (or 110% of the fair market value in the
case of incentive stock options granted to employees holding 10%
or more of our voting stock). The compensation committee will
fix the term of each option. Options will be exercisable at such
time or times as determined by the compensation committee, but
no option may be exercised more than ten years from the date the
option is granted (or five years from the date of grant in the
case of incentive stock options granted to employees holding 10%
or more of our voting stock).
Each stock option granted will be evidenced by an option
certificate that will specify the terms and conditions of the
grant, which may include continuous employment of an employee
during a specified period (which ordinarily will be no less than
one year) or the achievement of performance objectives necessary
for the stock option to become exercisable.
Upon the exercise of a stock option, the option exercise price
must be fully paid in cash, by check or in shares of our Common
Stock held for at least six months, or a combination thereof.
The compensation committee also may provide for an option to be
exercised, in whole or part, through a cashless exercise
procedure facilitated through a sale of stock in the open market
effected by an unrelated broker. If an option recipient ceases
to be an employee, or ceases to be a director, his or her option
will be exercisable in accordance with the terms of the
applicable option certificate.
Stock Appreciation Rights. A stock
appreciation right may be granted freestanding or in tandem with
a stock option granted under the 2004 Incentive Stock Plan. Upon
exercise of a stock appreciation right, the employee or director
is entitled to receive the excess of the fair market value of
the shares for which the right is exercised (calculated on the
exercise date) over either the option exercise price for the
related stock option in the case of a stock appreciation right
granted in tandem with an option or, in the case of a
freestanding stock appreciation right, a specified SAR
Value determined by the compensation committee at the time
of grant. The SAR Value and other terms of a stock appreciation
right are determined by the compensation committee, but the SAR
Value may not be less than the fair market value of the shares
on the date of grant and no stock appreciation right may be
exercisable more than ten years from the grant date.
Payment by us upon exercise of a stock appreciation right may be
in cash, Common Stock or a combination of cash and Common Stock,
as determined by the compensation committee. A stock option will
no longer be exercisable to the extent any related stock
appreciation right has been exercised, and the exercise of a
stock option will cancel any related stock appreciation right to
the extent of such exercise.
Stock Grants. A stock grant involves the
issuance by us of shares of our Common Stock in consideration of
the rendering of services. At the discretion of the compensation
committee, a stock grant may be subject to satisfaction of one
or more conditions prior to issuance (including performance
goals qualifying the grant as performance-based
compensation under Section 162(m) of the Code) and
also, upon issuance, may be subject to satisfaction of one or
more employment, performance or other forfeiture conditions
(including performance goals qualifying the grant as
performance-based compensation under
Section 162(m) of the Code) that subject the grant to a
risk of forfeiture for a period determined by the compensation
committee. An employee or director who is issued Common Stock
pursuant to a stock grant is entitled to vote such stock and is
entitled to cash dividends paid on such stock before the stock
grant is forfeited or becomes non-forfeitable. If a stock
dividend is paid on shares subject to a stock grant before the
stock grant is forfeited or becomes non-forfeitable, receipt of
the stock dividend will be subject to satisfaction of the same
forfeiture conditions as applicable to the underlying stock
grant. The compensation committee may specify performance
objectives that, if achieved, will result in termination or
early termination of the restrictions applicable to a stock
grant.
39
Stock Unit Grants. A stock unit grant is a
contractual right to receive a payment of cash based on the fair
market value of the number of shares of stock described in the
grant rather than the issuance of the number of shares of stock
described in the grant. At the discretion of the compensation
committee, a stock unit grant may be subject to satisfaction of
one or more employment, performance or other forfeiture
conditions prior to payment (including performance goals
qualifying the grant as performance-based
compensation under Section 162(m) of the Code) that
subject the grant to a risk of forfeiture for a period
determined by the compensation committee. The compensation
committee may specify performance objectives that, if achieved,
will result in termination or early termination of the
restrictions applicable to a stock unit grant. Payment by us
upon exercise of a stock unit grant will be in cash.
Performance Goals. A performance goal is
described in the 2004 Incentive Stock Plan as a goal that
relates to (1) our companys return over capital costs
or increases in return over capital costs, (2) our
companys safety record, (3) our companys
customer satisfaction survey, (4) our companys total
earnings or the growth in such earnings, (5) our
companys consolidated earnings or the growth in such
earnings, (6) our companys earnings per share or the
growth in such earnings, (7) our companys net
earnings or the growth in such earnings, (8) our
companys earnings before interest expense, taxes,
depreciation, amortization and other non-cash items or the
growth in such earnings, (9) our companys earnings
before interest and taxes or the growth in such earnings,
(10) our companys consolidated net income or the
growth in such income, (11) the value of our companys
common stock or the growth in such value, (12) our
companys stock price or the growth in such price,
(13) the tons of paperboard produced or converted by our
company, (14) our companys return on assets or the
growth on such return, (15) our companys cash flow or
the growth in such cash flow, (16) our companys total
shareholder return or the growth in such return, (17) our
companys expenses or the reduction of such expenses,
(18) our companys sales growth, (19) our
companys overhead ratios or changes in such ratios,
(20) our companys
expense-to-sales
ratios or the changes in such ratios, or (21) our
companys economic value added or changes in such value
added. The performance goals for participants will (as the
compensation committee deems appropriate) be based on criteria
related to company-wide performance, division-specific
performance (where the compensation committee can apply the
business criteria on a division-specific basis), plant or
facility-specific performance, department-specific performance,
personal goal performance or any combination of the
performance-based criteria.
Non-transferability of Awards. Unless the
compensation committee otherwise consents, (1) no award
granted under the 2004 Incentive Stock Plan may be transferred
by an employee or director other than by will or the laws of
descent and distribution and (2) no such award may be
exercised during an employees or directors lifetime
except by the employee or director.
Adjustments. In the event the shares of Common
Stock are affected by any equity restructuring or change in
capitalization of our company, including spin-offs, stock
dividends or splits, large non-reoccurring dividends or rights
offerings, or any merger, consolidation, acquisition of property
or stock, separation, reorganization, liquidation or other
transaction described in Section 424(a) of the Code that
does not constitute a change in control, the compensation
committee will adjust the aggregate number and class of shares
which may be distributed under the 2004 Incentive Stock Plan,
the annual grant caps described above, and the number, class and
price of shares subject to outstanding awards granted under the
plan, as it deems reasonable and equitable to maintain the
aggregate intrinsic value of the outstanding grants immediately
before any such transaction.
Change in Control. In the event of a change in
control, as defined in the 2004 Incentive Stock Plan, any
conditions to the exercise of outstanding stock options and
stock appreciation rights and any issuance and forfeiture
conditions on outstanding stock grants and stock unit grants
will be deemed satisfied, and, in such event, our board of
directors under certain circumstances has the right to cancel
such options, stock appreciation rights, stock grants and stock
unit grants after providing each employee and director a
reasonable period to exercise his or her options and stock
appreciation rights and to take such action as necessary to
receive the shares subject to any stock grant and the cash or
shares subject to any stock unit grant. Any issuance or
forfeiture condition related to satisfying a performance goal
that includes a target shall be deemed satisfied only to the
extent of the target if it has not been exceeded before the date
of the change in control or, if so exceeded, only to the extent
that the target has been exceeded.
40
Amendment and Termination. Our board of
directors generally may amend the 2004 Incentive Stock Plan, or
any portion thereof, at any time; provided that no amendment may
be made (1) without shareholder approval to the extent
approval is required under applicable law and (2) after the
date of any change in control that might adversely affect any
rights that would otherwise vest. The compensation committee may
not take any action, whether through amendment, cancellation,
replacement grants or other means, to reduce the exercise price
of any outstanding options without the approval of our
shareholders. Our board of directors also may suspend the
granting of awards under the 2004 Incentive Stock Plan and
terminate the plan at any time; provided, however, our board may
not modify or cancel any award made before the suspension or
termination unless (a) the employee or director consents in
writing to the modification or cancellation, or (b) the
modification or cancellation is provided for under the plan in
connection with a dissolution or liquidation of our company or a
corporate transaction described in the plan with respect to an
adjustment or a change in control (see
Adjustments and Change in
Control above). Unless earlier terminated as
provided above, no grants shall be made under the 2004 Incentive
Stock Plan on or after the earlier of (1) ten years from
the date on which the plan was adopted by our shareholders (in
which event the plan shall terminate after all outstanding
awards have been exercised, are no longer exercisable, have been
forfeited or have become non-forfeitable) and (2) all
shares of Common Stock reserved for issuance under the plan have
been issued or are no longer available for use under the plan
(in which event the plan shall terminate).
Estimate
of Benefits
Because the 2004 Incentive Stock Plan is discretionary and may
be subject to satisfaction of one or more conditions, including
our financial performance, it is not possible to determine or to
estimate the benefits or amounts that will be received in the
future by individual employees or groups of employees under the
plan.
The following table sets forth the shares granted under the 2004
Incentive Stock Plan to the named executive officers, to the
directors, and to the executive officers and other employees
eligible to participate in the 2004 Incentive Stock Plan as a
group during fiscal 2006.
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Number of Shares
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Dollar Value of
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of Restricted
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Benefits in Fiscal
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Stock Granted in
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Name and Position
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2006(1)
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Fiscal 2006
|
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James A. Rubright
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|
|
|
|
|
|
|
|
Chairman and Chief Executive
Officer
|
|
$
|
1,999,890
|
|
|
|
121,500
|
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David D. Dreibelbis
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|
|
|
|
|
|
|
|
Executive Vice President; General
Manager Paperboard Division
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|
$
|
629,595
|
|
|
|
38,250
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|
Michael E. Kiepura
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|
|
|
|
|
|
|
|
Executive Vice President; General
Manager Folding Carton Division
|
|
$
|
629,595
|
|
|
|
38,250
|
(2)
|
Steven C. Voorhees
|
|
|
|
|
|
|
|
|
Executive Vice President; and
Chief Financial Officer
|
|
$
|
629,595
|
|
|
|
38,250
|
|
Robert B. McIntosh
|
|
|
|
|
|
|
|
|
Senior Vice President; General
Counsel and Secretary
|
|
$
|
503,676
|
|
|
|
30,600
|
|
All current executive officers as
a group (7 persons)
|
|
$
|
5,326,462
|
|
|
|
323,450
|
|
All current directors who are not
executive officers as a group (10 persons)
|
|
$
|
502,938
|
|
|
|
33,300
|
|
All employees eligible for grants,
including all current officers who are not executive officers,
as a group (25 persons)
|
|
$
|
4,535,553
|
|
|
|
275,550
|
|
|
|
|
(1) |
|
Except where indicated below, dollar amounts shown equal the
number of shares of restricted stock multiplied by the closing
market price of our unrestricted stock on the date of grant as
reported on the NYSE ($16.46 on May 8, 2006). |
|
(2) |
|
Mr. Kiepura also received during fiscal 2006 a stock option
grant to acquire 50,000 shares of our Common Stock under
the 2004 Incentive Stock Plan having the terms and value
described in the table above entitled Options/SAR
Grants in Last Fiscal Year under the heading
Executive Compensation Option Grants
Table. |
41
Vesting
of Restricted Stock Grants
Shares of restricted stock granted under the 2004 Incentive
Stock Plan are generally subject to the satisfaction of certain
service conditions, and in some cases, performance conditions
and market conditions as well in order to vest. These shares
will be deemed issued and have voting or dividend rights prior
to the dates that they vest. The actual number of shares of
restricted stock grants that vested during the past three fiscal
years are 21,166 shares in fiscal 2004, 95,166 shares
in fiscal 2005 and 92,501 shares in fiscal 2006.
Federal
Income Tax Consequences
The following discussion outlines generally the federal income
tax consequences applicable to awards granted under the 2004
Incentive Stock Plan. Individual circumstances may cause these
results to vary. The federal income tax law and regulations are
frequently amended, and each plan participant should rely on his
or her own tax counsel for advice regarding federal income tax
treatment under the 2004 Incentive Stock Plan.
Nonqualified Stock Options. The recipient of a
nonqualified stock option under the 2004 Incentive Stock Plan is
not subject to any federal income tax upon the grant of the
option nor does the grant of the option result in an income tax
deduction for us. Upon the exercise of a nonqualified stock
option, a recipient will recognize ordinary income in an amount
equal to the excess, if any, of the fair market value of the
shares transferred to the recipient upon exercise over the
exercise price. The fair market value generally will be
determined on the date the shares are transferred pursuant to
the exercise. However, if the recipient is subject to
Section 16(b) of the Exchange Act, the date on which the
fair market value of the shares transferred will be determined
may be delayed for up to six months after the
purchase (although there is a U.S. Tax Court
case that holds that the purchase occurs on the date
of the grant). Alternatively, if the recipient is subject to
Section 16(b) of the Exchange Act and makes a timely
election under Section 83(b) of the Code, the fair market
value will be determined on the date the shares are transferred
pursuant to the exercise without regard to the effect of
Section 16(b) of the Exchange Act. The recipient will
recognize ordinary income in the year in which the fair market
value of the shares transferred is determined.
Depending on the period the shares are held after exercise, the
sale or other taxable disposition of shares acquired through the
exercise of a nonqualified stock option generally will result in
a short- or long-term capital gain or loss equal to the
difference between the amount realized on disposition and the
fair market value of the shares when the nonqualified stock
option was exercised.
Special rules not discussed above apply to a recipient who
exercises a nonqualified stock option by paying the exercise
price, in whole or in part, by the transfer of shares to us.
Incentive Stock Options. An employee is not
subject to any federal income tax upon the grant of an incentive
stock option pursuant to the 2004 Incentive Stock Plan, nor does
the grant of an incentive stock option result in an income tax
deduction for us. Further, an employee will not recognize income
for federal income tax purposes and we normally will not be
entitled to any federal income tax deduction as a result of the
exercise of an incentive stock option and the related transfer
of shares to the employee. However, the excess of the fair
market value of the shares transferred upon the exercise of the
incentive stock option over the exercise price for such shares
generally will constitute an item of alternative minimum tax
adjustment to the employee for the year in which the option is
exercised. Thus, certain employees may increase their federal
income tax liability as a result of the exercise of an incentive
stock option under the alternative minimum tax rules of the Code.
If the shares transferred pursuant to the exercise of an
incentive stock option are disposed of within two years from the
date the option is granted or within one year from the date the
option is exercised, the employee generally will recognize
ordinary income equal to the lesser of (1) the gain
realized (i.e., the excess of the amount realized on the
disposition over the exercise price) or (2) the excess of
the fair market value of the shares transferred upon exercise
over the exercise price for such shares. The balance, if any, of
the employees gain over the amount treated as ordinary
income on disposition generally will be treated as short- or
long-term capital gain depending upon whether the holding period
applicable to long-term capital assets is satisfied.
42
If the shares transferred upon the exercise of an incentive
stock option are disposed of after the holding periods have been
satisfied, that disposition generally will result in a long-term
capital gain or loss treatment with respect to the difference
between the amount realized on the disposition and the exercise
price. We will not be entitled to a federal income tax deduction
as a result of a disposition of the shares after these holding
periods have been satisfied.
Special rules not discussed above apply to an employee who
exercises an incentive stock option by paying the exercise
price, in whole or in part, by the transfer of shares to us.
Stock Appreciation Rights. The grant of a
stock appreciation right under the 2004 Incentive Stock Plan
ordinarily will not result in taxable income to a recipient or a
federal income tax deduction to us. Upon exercise of a stock
appreciation right, the recipient will recognize ordinary income
in an amount equal to the cash or the fair market value of the
shares received by the recipient. If a recipient allows a stock
appreciation right to expire, other than as a result of exercise
of a related stock option, the Internal Revenue Service may
contend that the recipient has ordinary income in the year of
expiration equal to the amount of cash or the fair market value
of the shares that the recipient would have received if he or
she had exercised the stock appreciation right immediately
before it expired. The provisions of the recently enacted
American Jobs Creation Act of 2004 that relate to the taxation
of deferred compensation are expected to extend to the taxation
of stock appreciation rights after 2004; however, until the
Internal Revenue Service issues any guidance, it is unclear
exactly how these provisions will apply to the taxation of stock
appreciation rights.
Stock Grants. A recipient of a stock grant
under the 2004 Incentive Stock Plan generally will be subject to
tax at ordinary income rates on the fair market value of the
shares subject to the grant (reduced by any amount paid by the
recipient) at such time as the shares are no longer subject to a
substantial risk of forfeiture or are freely transferable for
purposes of Section 83 of the Code. However, a recipient
who elects under Section 83(b) of the Code within
30 days of the date of issuance of the stock grant will
recognize ordinary income on the date of issuance of the stock
grant equal to the excess of the fair market value of the shares
subject to the grant on the issuance date (determined without
regard to the risk of forfeiture or restrictions on transfer)
over any purchase price paid for the shares. If a recipient
makes a Section 83(b) election, the recipient will
recognize no additional taxable income at the time the shares
are no longer subject to a substantial risk of forfeiture or are
freely transferable. However, if shares with respect to which a
Section 83(b) election is made are later forfeited, no tax
deduction is allowable to the recipient for the forfeited shares.
If a Section 83(b) election has not been made, any
dividends received with respect to a stock grant that is subject
at that time to a risk of forfeiture and not freely transferable
generally will be treated as compensation that is taxable as
ordinary income to the recipient.
Stock Unit Grants. A recipient of a stock unit
grant will recognize ordinary income in the amount of the cash
payment made to the recipient pursuant to the terms of the stock
unit grant. The provisions of the recently enacted American Jobs
Creation Act of 2004 that relate to the taxation of deferred
compensation are expected to extend to the taxation of stock
unit grants after 2004; however, until the Internal Revenue
Service issues more definitive guidance, it is unclear exactly
how these provisions will apply to the taxation of stock unit
grants.
Company Deduction. To the extent that a plan
participant recognizes ordinary income in connection with an
award, we or the subsidiary or affiliate for which the
participant performs services should be entitled to a
corresponding deduction, provided that applicable reporting
requirements are met and the income is not an excess
parachute payment within the meaning of Section 280G
of the Code and is not disallowed by the $1 million
limitation on certain executive compensation under
Section 162(m) of the Code.
Recommendation
of the Board of Directors
The board of directors recommends a vote FOR the
adoption and approval of the Stock Plan Amendment. Proxies
returned without instructions (other than broker non-votes) will
be voted FOR the adoption and approval of the Stock Plan
Amendment.
43
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
ITEM 4
The audit committee of the board of directors selected
Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year ending September 30,
2007. Although we are not required to submit this matter to you,
the board of directors believes that it is good corporate
governance to do so. This proposal asks you to ratify this
selection. If the appointment of Ernst & Young LLP is
not ratified by you, the audit committee will reconsider the
appointment. Representatives of Ernst & Young are
expected to be present at the annual meeting. They will have the
opportunity to make a statement if they so desire, and they will
be available to respond to appropriate questions that you may
have.
Pursuant to the rules and regulations of the SEC, the audit
committee has the direct responsibility to appoint, retain, fix
the compensation and oversee the work of our independent
registered public accounting firm. Consequently, the audit
committee will consider the results of the shareholder vote on
ratification but will exercise its judgment, consistent with its
primary responsibility, on the appointment and retention of our
independent public registered accounting firm, and the
appointment of Ernst & Young will be subject to the
audit committee and Ernst & Young reaching agreement on
satisfactory terms of the appointment.
Recommendation
of the Board of Directors
The board of directors recommends a vote FOR the
ratification of the appointment of Ernst & Young LLP as
the independent registered public accounting firm of the
company. Proxies returned without instructions will be voted FOR
the ratification of the E&Y Appointment.
OTHER
MATTERS
The board of directors knows of no other matters that will be
brought before the annual meeting. If other matters are
introduced, the persons named in the enclosed proxy as the proxy
holders will vote on such matters in their discretion.
ADDITIONAL
INFORMATION
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that our
officers and directors and persons who beneficially own more
than 10% of our Common Stock file with the SEC certain reports,
and to furnish copies thereof to us, with respect to each such
persons beneficial ownership of our equity securities.
Based solely upon a review of the copies of the reports
furnished to us and certain representations of these persons,
all of these persons complied with the applicable reporting
requirements except as follows: Russell M. Currey, a director
and officer of our company, filed late the following statements
of changes in beneficial ownership:
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One report on Form 4 to report the transfer of
75,415 shares of stock from the Bradley N. Currey Jr.
12 Year Term Trust, of which Russell M. Currey is the
trustee; and
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One report on Form 4 to report the grant on May 8,
2006 of 10,200 shares of restricted Common Stock which were
part of annual grants to executives and officers.
|
Annual
Report on
Form 10-K
We will provide without charge, at the written request of any
shareholder of record as of November 30, 2006, a copy of
our Annual Report on
Form 10-K,
including the financial statements and financial statement
schedule, as filed with the SEC, excluding exhibits. We will
provide copies of the exhibits to eligible shareholders making
such a request. We may impose a reasonable fee for providing the
exhibits. Requests for copies of our Annual Report on
Form 10-K
should be mailed to: Rock-Tenn Company, 504 Thrasher Street,
44
Norcross, Georgia 30071, Attention: Corporate Secretary. You may
also access a copy of our Annual Report via the Internet by
visiting our website located at www.rocktenn.com.
Shareholder
Nominations for Election of Directors
Under our bylaws, only persons nominated in accordance with
certain procedures will be eligible for election as directors.
Shareholders are entitled to nominate persons for election to
the board of directors only if both (1) the shareholder is
otherwise entitled to vote generally in the election of
directors, and (2) the shareholder sends timely notice of
the nomination in writing to our Corporate Secretary.
All proposals should be addressed to Rock-Tenn Company, 504
Thrasher Street, Norcross, Georgia 30071, Attention: Corporate
Secretary. To be timely, a shareholders notice must be
received at our principal executive offices not less than
90 days and no more than 120 days prior to the
meeting. Next years annual meeting of shareholders is
currently scheduled for January 25, 2008, so shareholders
must submit nominations no earlier than the close of business on
September 27, 2007, and no later than the close of business
on October 26, 2007.
If we give less than 100 days notice or make prior
public disclosure of the date of the annual meeting to
shareholders, we must receive notice from the shareholder no
later than the close of business on the 10th day following
the day on which we mailed such notice or made such public
disclosure of the date of the meeting, whichever occurs first.
The shareholders notice must set forth for each person to
be nominated for election as a director all of the following:
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All information that is required to be disclosed in connection
with the solicitation of proxies for the election of directors
pursuant to Regulation 14(a) under the Exchange Act or any
other proxy rules promulgated by the SEC.
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The signed consent of the proposed nominee to serve as a
director if elected.
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The name and address of the proposed nominee.
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A description of all arrangements or understandings between the
shareholder and the nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by the shareholder.
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The total number of shares of Common Stock that such shareholder
believes will be voted for the proposed nominee.
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The shareholders notice must also set forth, with respect
to the shareholder giving such notice, all of the following:
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A representation that the shareholder is a holder of record of
Common Stock entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the
proposed nominee.
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The name and address of the shareholder, as they appear on our
companys books.
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The total number of shares of Common Stock beneficially owned by
the shareholder and how long the shareholder has owned such
shares.
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We may require any proposed nominee to furnish such other
information as may reasonably be required by us to determine the
eligibility of such proposed nominee to serve as a director.
Shareholder
Proposals
Bylaw Provisions. In accordance with our
bylaws, a shareholder who desires to present a proposal for
consideration at our 2008 annual meeting of shareholders must
deliver the proposal to our Corporate Secretary so that it is
received no earlier than the close of business
September 27, 2007, and no later than the close of business
on October 26, 2007. However, if we give less than
100 days notice of our 2008 annual meeting of
45
shareholders, then shareholder proposals intended to be
presented at the meeting but not to be included in the
boards proxy materials must be received no later than
10 days after notice of the date of the 2008 annual meeting
is mailed or the day on which public disclosure of the meeting
date is made. The submission should include the proposal and a
brief statement of the reasons for it, the name and address of
the shareholder (as they appear in our stock transfer records),
the number of shares of Common Stock beneficially owned by the
shareholder and a description of any material direct or indirect
financial or other interest that the shareholder (or any
affiliate or associate) may have in the proposal. Proposals
should be addressed to Rock-Tenn Company, 504 Thrasher Street,
Norcross, GA 30071, Attention: Corporate Secretary.
Inclusion in Next Years Proxy
Statement. Notwithstanding the bylaw provisions,
a shareholder who desires to have his or her proposal included
in next years proxy statement must deliver the proposal to
our principal executive offices (at the address noted above) no
later than the close of business on August 23, 2007.
Expenses
of Solicitation
We will bear the cost of solicitation of proxies by the board of
directors in connection with the annual meeting. We will
reimburse brokers, fiduciaries and custodians for reasonable
expenses incurred by them in forwarding proxy materials to
beneficial owners of Common Stock held in their names.
By Order of the Board of Directors
Robert B. McIntosh
Secretary
Our annual report to shareholders for fiscal 2006, which
includes audited financial statements, accompanies this proxy
statement. The annual report does not form any part of the
material for the solicitation of proxies.
46
APPENDIX
A
ROCK-TENN
COMPANY
CHARTER OF THE AUDIT COMMITTEE
1. Organization
and Membership. The Board of Directors
(the Board) of Rock-Tenn Company
(Rock-Tenn) shall appoint from its members an
Audit Committee (the Committee). The
Committee shall consist of three or more directors each of whom
shall be a Qualified Audit Committee Member (as defined in the
corporate governance guidelines adopted by the Board (the
Guidelines)) and one of whom shall be the
NYSE Qualified Audit Committee Member (as defined in the
Guidelines).
The Committee shall meet the size, independence, experience and
other requirements of applicable statutes, rules and regulations
(Applicable Law), including those issued by
the Securities and Exchange Commission and the New York Stock
Exchange.
2. Purpose. The
Committee shall assist the Board in fulfilling its
responsibilities with respect to the oversight of:
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The integrity of Rock-Tenns financial statements.
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Rock-Tenns system of internal control over financial
reporting.
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The performance of Rock-Tenns internal audit function.
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The independence, qualifications and performance of
Rock-Tenns independent auditor.
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Rock-Tenns system of compliance with legal and regulatory
requirements.
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3. Duties and
Responsibilities. The following shall be
the principal duties and responsibilities of the Committee:
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(a)
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Integrity
of Financial Statements
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Provide oversight of Rock-Tenns financial reporting
process, which shall include the following:
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Review managements processes for ensuring the integrity of
Rock-Tenns financial statements.
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Discuss with management and the independent auditor
Rock-Tenns annual audited financial statements and
quarterly financial statements, including disclosure under the
heading Managements Discussion and Analysis of
Financial Condition and Results of Operations.
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Discuss Rock-Tenns earnings press releases, as well as
financial information and earnings guidance provided to analysts
and rating agencies. The Committee may perform this
responsibility generally by discussing the types of information
to be disclosed and the type of presentation to be made. The
Committee need not discuss in advance each earnings release or
each instance in which Rock-Tenn may provide earnings guidance.
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Review with the independent auditor any audit problems or
difficulties the auditor may have encountered during the course
of performing the audit and managements response.
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Periodically meet separately with management, the Manager of
Internal Audit, and the independent auditor.
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(b)
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System of
Internal Control Over Financial Reporting
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Review periodically managements assessment of the
effectiveness of Rock-Tenns internal control over
financial reporting and any related attestation report prepared
by the independent auditor.
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A-1
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Review any significant issues as to the adequacy of internal
control over financial reporting, as well as any special audit
steps adopted in connection with any significant deficiencies or
material weaknesses related thereto.
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(c)
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Performance
of Internal Audit Function
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Review the internal audit departments responsibilities,
activities, budget and staffing.
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Review the effectiveness of the internal audit function,
including compliance with professional standards.
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(d)
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Independence,
Qualifications and Performance of Independent Auditor
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Directly appoint, compensate, retain, and oversee the work of
any registered public accounting firm engaged for the purpose of
preparing or issuing an audit report or performing other audit,
review or attest services for Rock-Tenn. Resolve disagreements
between management and any such registered public accounting
firm regarding financial reporting. Each such registered public
accounting firm shall report directly to the Committee.
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At least annually, obtain and review a report by the independent
auditor describing each of the following:
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The firms internal quality-control procedures.
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Any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the firm, and any steps
taken to deal with any such issues.
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All relationships between the independent auditor and Rock-Tenn.
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Evaluate the independent auditors independence,
qualifications and performance.
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Review and pre-approve, in accordance with Applicable Law, any
engagement of the independent auditor to provide audit, review,
or attest services or non-audit services and the fees for any
such services.
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Consider reports from the independent auditor on:
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Rock-Tenns critical accounting policies and practices.
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All alternative treatments of financial information permitted
within Generally Accepted Accounting Principles
(GAAP) related to material items that have
been discussed with management, including the ramifications of
the use and disclosure of such treatments as well as the
treatment preferred by the independent auditor.
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Other material written communications between the independent
auditor and management, such as any management letter or
schedule of unadjusted audit differences.
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Any other matters related to the conduct of the audit that are
required to be communicated to the Committee under GAAP or under
Applicable Law.
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Set and monitor compliance with policies regarding the hiring by
Rock-Tenn of any employee and former employee of the independent
auditor.
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(e)
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System of
Compliance and Business Conduct
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Discuss Rock-Tenns policies with respect to risk
assessment and risk management.
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Discuss Rock-Tenns policies with respect to legal and
regulatory compliance.
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A-2
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Establish procedures for (1) the receipt, retention, and
treatment of complaints received by Rock-Tenn regarding
accounting, internal accounting controls, or auditing matters,
and (2) the confidential, anonymous submission by Rock-Tenn
employees of concerns regarding questionable accounting or
auditing matters.
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As required by the Guidelines:
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Evaluate recommendations by management to adopt or amend codes
of business conduct and ethics and to recommend to the Board
such codes that the Audit Committee considers necessary to
comply with Applicable Law or otherwise appropriate.
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Evaluate periodically all codes of business conduct and ethics
adopted by the Board and recommend any changes that the Audit
Committee considers necessary to comply with Applicable Law or
otherwise appropriate.
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With respect to any code of business conduct and ethics adopted
by the Board, review and either approve or recommend to the
Board for approval: (1) any waiver of or material departure
from a provision thereof by any director, any executive officer,
or, solely with respect to Rock-Tenns Code of Ethical
Conduct for CEO and Senior Financial Officers, any senior
financial officer that is subject to such code, and (2) any
proposed disciplinary action for any such material departure
that is not approved by the Board or the Committee.
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Prepare the report from the Committee required by Applicable Law
to be included in Rock-Tenns annual proxy statement.
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Review and assess, at least annually, the adequacy of this
Charter.
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4. Delegation. The
Committee may from time to time delegate any of its duties and
responsibilities to subcommittees of one or more members as the
Committee may deem to be appropriate, in its sole discretion.
5. Resources. The
Committee shall have the power to conduct or authorize
examinations into any matters within the Committees
responsibilities with full access to all books, records,
facilities, and personnel of Rock-Tenn as well as
Rock-Tenns internal accountants, lawyers and other staff
and outside accountants, lawyers and other advisers. The
Committee shall also have the authority to engage, terminate and
compensate such independent counsel and other advisers, as the
Committee deems necessary to carry out its duties and
responsibilities. No Board approval shall be required for any
Committee expenditure. Further, Rock-Tenn shall provide for
appropriate funding, as determined by the Committee, in its
capacity as a committee of the Board, for payment of any of the
following:
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Compensation to any registered public accounting firm engaged
for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for Rock-Tenn.
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Compensation to any advisers employed by the Committee in
accordance with this Charter.
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The ordinary administrative expenses of the Committee that are
necessary or appropriate to carry out its duties.
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A-3
6. Annual
Performance Evaluation. An annual
evaluation shall be conducted in accordance with the Guidelines
to determine whether the Committee is functioning effectively.
7. Committee
Governance. The Committee shall meet as
scheduled by the Committee Chair or Chairman of the Board, but
not less frequently than quarterly after the end of each fiscal
quarter. The Committee shall also meet regularly in executive
session without management present. The Committee shall keep
written minutes of its proceedings, which shall be filed with
Board meeting minutes. All other matters regarding Committee
governance shall be administered in the same manner as provided
with respect to governance of the Board or its committees in
Rock-Tenns charter documents and Applicable Law or as
otherwise provided by the Board.
The Committee shall regularly report its actions to the Board
together with such recommendations as the Committee may deem
appropriate.
A-4
121097
ROCK-TENN COMPANY
1993 EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED AND RESTATED
EFFECTIVE
JANUARY 1, 1998
TABLE OF CONTENTS
Section
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Page |
§ 1. |
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Purpose |
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§ 2. |
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Amendment and Restatement |
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§ 3. |
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Definitions |
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3.1. |
Account |
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3.2. |
Authorization |
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3.3. |
Board |
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3.4. |
Code |
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3.5. |
Eligible Employee |
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3.6. |
Exercise Date |
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3.7. |
Offering Period |
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3.8. |
Option Price |
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3.9. |
Participant |
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3.10. |
Participating Employer |
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3.11. |
Plan |
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3.12. |
Plan Administrator |
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3.13. |
Purchase Period |
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8 |
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3.14. |
Rock-Tenn |
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8 |
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3.15. |
Share Limit |
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3.16. |
Stock |
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8 |
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3.17. |
Subsidiary |
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§ 4. |
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Offerings |
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9 |
§ 5. |
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Stock Available for Options |
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9 |
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§ 6. |
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Administration |
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§ 7. |
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Participation |
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§ 8. |
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Payroll Deductions |
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(a) Initial Authorization |
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(b) Subsequent Authorization |
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(c) Account Credits, General Assets and Taxes |
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(d) No Cash Payments |
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§ 9. |
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Granting of Option |
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(a) General Rule |
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(b) Statutory Limitation |
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(c) Available Shares of Stock |
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§ 10. |
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Exercise of Option |
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(a) General Rule |
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(b) Partial Exercise |
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(c) Automatic Refund |
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§ 11. |
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Delivery |
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§ 12. |
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Voluntary Account Withdrawal |
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§ 13. |
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Termination of Employment |
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§ 14. |
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Transferability |
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§ 15. |
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Adjustment |
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§ 16. |
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Securities Registration |
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§ 17. |
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Amendment or Termination |
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§ 18. |
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Notices |
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§ 19. |
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Employment |
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§ 20. |
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Headings, References and Construction |
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iii
1. §Purpose
The primary purpose of this Plan is to encourage Stock ownership by each Eligible Employee of
Rock-Tenn and each Subsidiary in the belief that such ownership will increase his or her interest
in the success of Rock-Tenn and will provide an additional incentive for him or her to remain in
the employ of Rock-Tenn or such Subsidiary. Rock-Tenn intends that this Plan constitute an
employee stock purchase plan within the meaning of § 423 of the Code and, further, intends that
any ambiguity in this Plan or any related offering be resolved to effect such intent.
2. §Amendment and Restatement
This Plan was first effective as of January 1, 1994 and has been amended and restated
effective as of January 1, 1998 primarily to increase the shares of Stock available for purchase
from Rock-Tenn pursuant to the terms of this Plan.
3. §Definitions
3.1. The term Account shall mean the separate bookkeeping account which shall be
established and maintained by the Plan Administrator (or its delegate) for each Participant for
each Purchase Period to record the payroll deductions made on his or her behalf to purchase Stock
under this Plan.
3.2. The term Authorization shall mean the participation election and payroll
deduction authorization form which an Eligible Employee shall be required to properly complete in
writing and timely file with the Plan Administrator (or its delegate) before the
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end of an Offering Period in order to participate in this Plan for the related Purchase
Period.
3.3. The term Board shall mean the Board of Directors of Rock-Tenn.
3.4. The term Code shall mean the Internal Revenue Code of 1986, as amended.
3.5. The term Eligible Employee shall mean each employee of Rock-Tenn or a Subsidiary
except
(a) an employee who has been employed less than two years (within the meaning of the
Code § 423(b)(4)(A)) by Rock-Tenn or such Subsidiary,
(b) an employee who customarily is employed (within the meaning of Code § 423(b)(4)(B))
20 hours or less per week by Rock-Tenn or such Subsidiary,
(c) an employee who (after completing at least two years of employment as an employee
of Rock-Tenn or such Subsidiary) customarily is employed (within the meaning of Code §
423(b)(4)(C)) for not more than 5 months in any calendar year by Rock-Tenn or such
Subsidiary, and
(d) an employee who would own (immediately after the grant of an option under this
Plan) stock possessing 5% or more of the total combined voting power or value of all classes
of stock of Rock-Tenn based on the rules set forth in § 423(b)(3) and § 424 of the Code.
3.6. The term Exercise Date shall mean for each Purchase Period the
last day of such Purchase Period.
3.7. The term Offering Period shall mean a period which (1) shall be set by the
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Board or its delegate, (2) shall come before the related Purchase Period and (3) shall
continue for no more than 30 days.
3.8. The term Option Price shall mean for each Purchase Period the lesser of 85% of
the average of the high and low sales prices for a share of Stock on the first day of such Purchase
Period or 85% of the average of the high and low sales prices for a share of Stock on the last day
of such Purchase Period, as such high and low prices are reported in The Wall Street
Journal or in any successor to The Wall Street Journal or, if there is no such
successor, any similar trade publication selected by the Plan Administrator (or its delegate) or,
if the Plan Administrator (or its delegate) makes no such selection, as such prices are determined
in good faith by the Plan Administrator (or its delegate); provided, if no such prices are so
reported for any such day, the average of the high and low sales prices for such day shall be
deemed to be the average of the high and low sales prices for a share of Stock which was so
reported on the most recent day before such day.
3.9. The term Participant shall mean for each Purchase Period an Eligible Employee who
has satisfied the requirements set forth in § 7 of this Plan for such Purchase Period.
3.10. The term Participating Employer shall for each Participant, as of any date, mean
Rock-Tenn or a Subsidiary, whichever employs such Participant as of such date.
3.11. The term Plan shall mean this Rock-Tenn Company 1993 Employee Stock Purchase
Plan as amended and restated effective as of January 1, 1998 and as thereafter amended from time to
time.
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3.12. The term Plan Administrator shall mean the person or persons appointed by the
Board to administer this Plan.
3.13. The term Purchase Period shall mean a 3 month period which shall begin on a date
(within the 15 day period which immediately follows the end of the related Offering Period) set by
the Board or its delegate on or before the beginning of the related Offering Period.
3.14. The term Rock-Tenn shall mean Rock-Tenn Company, a corporation incorporated
under the laws of the State of Georgia, and any successor to Rock-Tenn.
3.15. The term Share Limit shall mean for each Purchase Period a number of shares of
Stock (including a fractional share of Stock) determined by the Plan Administrator (or its
delegate) by dividing $5,312.50 by 85% of the average of the high and low sales prices for a share
of Stock on the first day of such Purchase Period as such high and low prices are reported in
The Wall Street Journal or any successor to The Wall Street Journal or, if there is
no successor, any similar trade publication selected by the Plan Administrator (or its delegate)
or, if the Plan Administrator (or its delegate) makes no such selection, as such prices are
determined in good faith by the Plan Administrator (or its delegate); provided, if no such prices
are so reported for any such day, the average of the high and the low sales prices for such day
shall be deemed to be the average of the high and the low sales prices for a share of Stock which
was so reported on the most recent day before such day.
3.16. The term Stock shall mean the $0.01 par value Class A Common Stock of Rock-Tenn.
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3.17. The term Subsidiary shall mean each corporation (1) which is in an unbroken
chain of corporations beginning with Rock-Tenn in which each corporation in such chain (except for
the last corporation in such chain) owns stock possessing 80% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain and (2) which the Plan
Administrator (or its delegate) has designated as eligible to participate in this Plan.
4. §Offerings
Options to purchase shares of Stock shall be offered to Participants in accordance with this
Plan from time to time at the discretion of the Plan Administrator (or its delegate); provided,
however, there shall be no more than one Offering Period in effect at any time and no more than one
Purchase Period in effect at any time.
5. §Stock Available for Options
There shall be 1,260,000 shares of Stock available under this Plan, 600,000 shares of Stock of
which shall be attributable to this Plan as in effect on December 31, 1997. Such shares of Stock
shall be available for purchase from Rock-Tenn upon the exercise of options granted under § 9 of
this Plan, and any shares of Stock which are subject to options granted as of the first day of a
Purchase Period but which are not purchased on the related Exercise Date shall again become
available under this Plan.
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6. §Administration
The Plan Administrator shall be responsible for the administration of this Plan and shall have
the power in connection with such administration to interpret this Plan and to take such other
action in connection with such administration as the Plan Administrator deems necessary or
equitable under the circumstances. The Plan Administrator also shall have the power to delegate
the duty to perform such administrative functions as the Plan Administrator deems appropriate under
the circumstances. Any person to whom the duty to perform an administrative function is delegated
shall act on behalf of and shall be responsible to the Plan Administrator for such function. Any
action or inaction by or on behalf of the Plan Administrator under this Plan shall be final and
binding on each Eligible Employee, each Participant and on each other person who makes a claim
under this Plan based on the rights, if any, of any such Eligible Employee or Participant under
this Plan.
7. §Participation
Each person who is an Eligible Employee on the first day of an Offering Period shall satisfy
the requirements to be a Participant in this Plan for the related Purchase Period if
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he or she properly completes in writing and files an
Authorization with the Plan Administrator (or its delegate) on or before the
last day of such Offering Period to purchase shares of Stock pursuant to the
option granted under § 9, and |
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his or her employment as an Eligible Employee continues
throughout the period which begins on the first day of such Offering Period and
ends on the first day of the related Purchase Period, and his or her employment
as an Eligible Employee shall not be treated as interrupted by a transfer
directly between Rock-Tenn and any Subsidiary or between one Subsidiary and
another Subsidiary. |
An Authorization shall require an Eligible Employee to provide such information and to take such
action as the Plan Administrator (or its delegate) in his or her discretion deems necessary or
helpful to the orderly administration of this Plan, including specifying (in accordance with § 9)
his or her payroll deductions to purchase shares of Stock pursuant to the option granted under § 9
and whether he or she desires such Authorization to remain in effect for one or more than one
Purchase Period. A Participants status as such shall terminate for a Purchase Period (for which
he or she has an effective Authorization) at such time as his or her Account has been withdrawn
under § 12 or § 13 or the purchases and distributions contemplated under § 10 with respect to his
or her Account have been completed, whichever comes first.
8. §Payroll Deductions
(a) Initial Authorization. Each Participants Authorization made under § 7
shall specify the specific dollar amount which he or she authorizes his or her Participating
Employer to deduct from his or her compensation each pay period (as such pay period is
determined in accordance with his or her Participating Employers standard payroll policies
and practices) during the Purchase Period
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for which such Authorization is in effect to purchase shares of Stock pursuant to
the option granted under § 9, provided
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the total of such dollar amount shall not be less than $15.00
if such Participant is on a Participating Employers weekly payroll or the
equivalent of such figure if such Participant is on any other payroll, provided
that the aggregate amount deducted from his or her compensation during any
Purchase Period shall not be less than $195 and such Participating Employer
shall make adjustments to amounts deducted from a Participants compensation in
any pay period to the extent necessary to comply with this restriction; and |
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the total of such dollar amount shall not be more than
$5,312.50 (or such lower amount as is set from time to time by the Plan
Administrator (or its delegate)). |
(b) Subsequent Authorization. A Participant shall have the right to make one
amendment to an Authorization after the end of an Offering Period to reduce or to stop the
payroll deductions which he or she previously had authorized for the related Purchase
Period, and such reduction shall be effective as soon as practicable after the Plan
Administrator (or its delegate) actually receives such amended Authorization.
(c) Account Credits, General Assets and Taxes. All payroll deductions made for
a Participant shall be credited to his or her Account as of the pay day as of which the
deduction is made. All payroll deductions shall be
held by Rock-Tenn, by Rock-Tenns agent or by one, or more than one, Subsidiary (as
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determined by the Plan Administrator (or its delegate)) as part of the general assets of
Rock-Tenn or any such Subsidiary, and each Participants right to the payroll deductions
credited to his or her Account shall be those of a general and unsecured creditor.
Rock-Tenn, Rock-Tenns agent or such Subsidiary shall have the right to withhold on payroll
deductions to the extent such person deems necessary or appropriate to satisfy applicable
tax laws.
(d) No Cash Payments. A Participant may not make any contribution to his or
her Account except through payroll deductions made in accordance with this § 8.
9. §Granting of Option
(a) General Rule. Subject to § 9(b) and § 9(c), each person who is a
Participant for a Purchase Period automatically shall be granted by operation of this Plan
an option as of the first day of such Purchase Period to purchase the number of shares of
Stock (including any fractional share of Stock) equal to the Share Limit as determined by
the Plan Administrator (or its delegate) for such Purchase Period. Each such option shall
be exercisable only in accordance with the terms of this Plan.
(b) Statutory Limitation. No option granted by operation of this Plan to any
Eligible Employee under § 9(a) shall permit his or her rights to purchase shares of Stock
under this Plan or under any other employee stock purchase plan (within the meaning of § 423
of
the Code) or
any other shares of Stock under any other employee stock purchase plans (within the
meaning of § 423 of
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the Code) of Rock-Tenn and any of its subsidiaries (within the meaning
of § 424(f) of the Code) to accrue (within the meaning of § 423(b)(8) of the Code) at a rate
which exceeds $25,000 of the fair market value of such Stock for any calendar year. Such
fair market value shall be determined as of the first day of the Purchase Period for which
the option is granted.
(c) Available Shares of Stock. If the number of shares of Stock available for
purchase for any Purchase Period is insufficient to cover the number of shares which
Participants have elected to purchase through effective Authorizations, then each
Participants option to purchase shares of Stock for such Purchase Period shall be reduced
to the number of shares of Stock (including any fractional share) which the Plan
Administrator (or its delegate) shall determine by multiplying the number of shares of Stock
available for options for such Purchase Period by a fraction, the numerator of which shall
be the number of shares of Stock for which such Participant would have been granted an
option under § 9(a) if sufficient shares were available and the denominator of which shall
be the total number of shares of Stock for which options would have been granted to all
Participants under § 9(a) if sufficient shares were available.
10. §Exercise of Option
(a) General Rule. Unless a Participant files an amended Authorization under §
10(b) or § 12 on or before the Exercise Date for a Purchase Period for which he or she has
an effective Authorization, his or her option shall be exercised automatically on such
Exercise Date for the purchase of as many
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shares of Stock (including any fractional share)
subject to such option as the balance credited to his or her Account as of that date will
purchase at the Option Price for such shares of Stock if he or she also is an Eligible
Employee on such Exercise Date.
(b) Partial Exercise. A Participant may file an amended Authorization under
this § 10 with the Plan Administrator (or its delegate) on or before an Exercise Date to
elect, effective as of such Exercise Date, to exercise his or her option with respect to a
specific dollar amount (which is less than the aggregate amount of payroll deductions made
by such Participant pursuant to § 8), and any such amended Authorization shall be effective
only if such Participant is an Eligible Employee on such Exercise Date.
(c) Automatic Refund. If a Participants Account has a remaining balance after
his or her option has been exercised as of an Exercise Date under this § 10, such balance
automatically shall be refunded to the Participant in cash (without interest) as soon as
practicable following such Exercise Date.
11. §Delivery
A stock certificate representing any shares of Stock purchased upon the exercise of an option
under this Plan shall be held for, or at the Participants direction and expense, delivered to the
Participant and shall be registered in (1) his or her name or, if the Participant so directs on his
or her Authorization filed with the Plan Administrator (or its delegate) on or before the Exercise
Date for such option and if permissible under applicable law, (2) the names of the Participant and
one such other person as may be
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designated by the Participant, as joint tenants with rights of
survivorship; provided, however, Rock-Tenn shall not have any obligation to deliver a certificate
to a Participant which represents a fractional share of Stock. No Participant (or any person who
makes a claim through a Participant) shall have any interest in any shares of Stock subject to an
option until such option has been exercised and the related shares of Stock actually have been
delivered to such person or have been transferred to an account for such person at a broker-dealer
designated by the Plan Administrator (or its delegate).
12. §Voluntary Account Withdrawal
A Participant may elect to withdraw the entire balance credited to his or her Account for a
Purchase Period by completing in writing and filing an amended Authorization with the Plan
Administrator (or its delegate) on or before the Exercise Date for such period. If a Participant
makes such a withdrawal election, such balance shall be paid to him or her in cash (without
interest) as soon as practicable after such amended Authorization is filed, and no further payroll
deductions shall be made on his or her behalf for the remainder of such Purchase Period. If a
Participant dies on or before an Exercise Date and the Plan Administrator (or its delegate) has
timely notice of
his or her death, the Plan Administrator (or its delegate) shall deem such Participant to have
elected to withdraw the entire balance credited to his or her Account under this § 12.
13. §Termination of Employment
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If a Participants employment as an Eligible Employee terminates on or before the Exercise
Date for a Purchase Period for any reason whatsoever, his or her Account shall be distributed as
soon as practicable as if he or she had elected to withdraw his or her Account in cash under § 12
immediately before the date his or her employment had so terminated. However, if a Participant is
transferred directly between Rock-Tenn and a Subsidiary or between one Subsidiary and another
Subsidiary while he or she has an Authorization in effect, his or her employment shall not be
treated as terminated merely by reason of such transfer and any such Authorization shall (subject
to all the terms and conditions of this Plan) remain in effect after such transfer.
14. § Transferability
Neither the balance credited to a Participants Account nor any rights to the exercise of an
option or to receive shares of Stock under this Plan may be assigned, encumbered, alienated,
transferred, pledged, or otherwise disposed of in any way by a Participant during his or her
lifetime or by any other person during his or her lifetime, and any attempt to do so shall be
without effect; provided, however, that the Plan Administrator (or its delegate) in its absolute
discretion may treat any such action as an
election by a Participant to withdraw the balance credited to his or her Account in accordance
with § 12.
15. § Adjustment
The number of shares of Stock covered by outstanding options granted pursuant to this Plan and
the related Option Price and the number of shares of Stock
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available under this Plan shall be
adjusted by the Board in an equitable manner to reflect any change in the capitalization of
Rock-Tenn, including, but not limited to such changes as dividends paid in the form of Stock or
Stock splits. Furthermore, the Board shall adjust (in a manner which satisfies the requirements of
§ 424(a) of the Code) the number of shares of Stock available under this Plan and the number of
shares of Stock covered by options granted under this Plan and the related Option Prices in the
event of any corporate transaction described in § 424(a) of the Code. Any such adjustment under
this § 15 may create fractional shares of Stock or a right to acquire a fractional share. An
adjustment made under this § 15 by the Board shall be conclusive and binding on all affected
persons.
16. § Securities Registration
If Rock-Tenn shall deem it necessary to register under the Securities Act of 1933, as amended,
or any other applicable statutes any shares of Stock with respect to which an option shall have
been exercised under this Plan or to qualify any such shares of Stock for an exemption from any
such statutes, Rock-Tenn shall take such action at its own expense before delivery of the
certificate representing such shares of Stock. If
shares of Stock are listed on any national stock exchange at the time an option to purchase
shares of Stock is exercised under this Plan, Rock-Tenn whenever required shall register shares of
Stock for which such option is exercised under the Securities Exchange Act of 1934, as amended, and
shall make prompt application for the listing on such national stock exchange of such shares, all
at the expense of Rock-Tenn.
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17. § Amendment or Termination
This Plan may be amended by the Board from time to time to the extent that the Board deems
necessary or appropriate in light of, and consistent with, § 423 of the Code and the laws of the
State of Georgia, and any such amendment shall be subject to the approval of Rock-Tenns
shareholders to the extent such approval is required under § 423 of the Code or the laws of the
State of Georgia or to the extent such approval is required to meet the security holder approval
requirements under Rule 16b-3 under the Securities Exchange Act of 1934, as amended. However, no
provision of this Plan shall be amended more than once every 6 months if amending such provision
more frequently would result in the loss of an exemption under Section 16(b) of the Securities
Exchange Act of 1934, as amended. The Board also may terminate this Plan or any offering made
under this Plan at any time; provided, however, the Board shall not have the right to modify,
cancel, or amend any option outstanding after the beginning of a Purchase Period unless (1) each
Participant consents in writing to such modification, amendment or cancellation, (2) such
modification only accelerates the Exercise Date for the related Purchase Period or (3) the Board
acting in good faith deems that such action is required under applicable law.
18. § Notices
All Authorizations and other communications from a Participant to the Plan Administrator (or
its delegate) under, or in connection with, this Plan shall be deemed to have been filed with the
Plan Administrator (or its delegate) when actually received in the form specified by the Plan
Administrator (or its delegate) at the location, or by the
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person, designated by the Plan
Administrator (or its delegate) for the receipt of such Authorizations and communications.
19. § Employment
No offer under this Plan shall constitute an offer of employment, and no acceptance of an
offer under this Plan shall constitute an employment agreement. Any such offer or acceptance shall
have no bearing whatsoever on the employment relationship between any Eligible Employee and
Rock-Tenn or any subsidiary of Rock-Tenn, including a Subsidiary. Finally, no Eligible Employee
shall be induced to participate in this Plan by the expectation of employment or continued
employment.
20. § Headings, References and Construction
The headings to sections in this Plan have been included for convenience of reference only.
Except as otherwise expressly indicated, all references to sections (§) in this Plan shall be to
sections (§) of this Plan. This Plan shall be interpreted and construed in accordance with the
laws of the State of Georgia.
This amended and restated Plan has been executed and shall be effective as of January 1, 1998.
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ROCK-TENN COMPANY
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By: |
/s/ David C. Nicholson
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Title: |
Sr. VP & CFO |
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AMENDMENT NUMBER ONE TO
ROCK-TENN COMPANY
1993 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
Pursuant to the power reserved in § 17 of the Rock-Tenn Company 1993 Employee Stock Purchase
Plan (as amended and restated effective January 1, 1998), Rock-Tenn Company hereby amends § 5 of
the Plan to read as follows:
Stock Available for Options.
One million shares of Stock shall (subject to shareholder approval) be
added effective November 1, 2000 to the number of shares of Stock then
available under this Plan. All such shares of Stock shall be available for
purchase from Rock-Tenn upon the exercise of options granted under § 9 of
this Plan, and any shares of Stock which are subject to options granted as
of the first day of a Purchase Period but which are not purchased on the
related Exercise Date shall again become available for purchase under this
Plan.
This Amendment Number One shall be effective November 1, 2000, but no shares covered by this
Amendment Number One shall be issued absent the approval of this Amendment Number One by Rock-Tenn
Companys shareholders at the 2001 Annual Meeting of such shareholders.
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ROCK-TENN COMPANY |
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By:
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/s/ Robert B. McIntosh |
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Date:
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10/27/00 |
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AMENDMENT NUMBER TWO TO
ROCK-TENN COMPANY
1993 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
Pursuant to the power reserved in § 17 of the Rock-Tenn Company 1993 Employee Stock Purchase
Plan (as amended and restated effective January 1, 1998), Rock-Tenn Company hereby amends § 5 of
the Plan to read as follows:
Stock Available for Options.
One million shares of Stock shall (subject to shareholder approval) be
added effective January 1, 2004 to the number of shares of Stock then
available under this Plan. All such shares of Stock shall be available for
purchase from Rock-Tenn upon the exercise of options granted under § 9 of
this Plan, and any shares of Stock which are subject to options granted as
of the first day of a Purchase Period but which are not purchased on the
related Exercise Date shall again become available for purchase under this
Plan.
This Amendment Number Two shall be effective January 1, 2004, but no shares covered by this
Amendment Number Two shall be issued absent the approval of this Amendment Number Two by Rock-Tenn
Companys shareholders at the 2004 Annual Meeting of such shareholders.
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ROCK-TENN COMPANY |
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By:
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/s/ Steven C. Voorhees
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Date:
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02/09/04 |
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AMENDMENT NUMBER THREE TO
ROCK-TENN COMPANY
1993 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
Pursuant to the power reserved in § 17 of the Rock-Tenn Company 1993 Employee Stock Purchase
Plan (as amended and restated effective January 1, 1998), Rock-Tenn Company hereby deletes in its
entirety the language contained in § 3.8 and inserts the following language in its place:
Option Price.
The term Option Price shall mean for each Purchase Period 85% of the average of the high and
low sales prices for a share of Stock on the last day of such Purchase Period, as such high and low
prices are reported in The Wall Street Journal or in any successor to The Wall Street Journal or,
if no such successor, any similar trade publication selected by the Plan Administrator (or its
delegate) or, if the Plan Administrator (or its delegate) makes no such selection, as such prices
are determined in good faith by the Plan Administrator (or its delegate); provided, if no such
prices are so reported for any such day, the average of the high and low sales prices for such day
shall be deemed to be the average of the high and low sales prices for a share of Stock which was
so reported on the most recent day before such day.
This Amendment Number Three shall be effective with the purchase period that commences on May
1, 2005.
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ROCK-TENN COMPANY |
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By:
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/s/ Steven C. Voorhees
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Title:
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EVP and CFO |
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Date:
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April 23, 2005 |
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AMENDMENT NUMBER FOUR TO
ROCK-TENN COMPANY
1993 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
Pursuant to the power reserved in § 17 of the Rock-Tenn Company 1993 Employee Stock Purchase
Plan (as amended and restated effective as of January 1, 1998), Rock-Tenn Company hereby amends the
Plan effective as of May 1, 2005, as follows:
§ 1.
By amending paragraph (a) of § 3.5 to read as follows:
(a) an employee who has been employed less than 20 months by Rock-Tenn or such Subsidiary,
§ 2.
By amending paragraph (c) of § 3.5 to read as follows:
(c) an employee who (after completing at least 20 months of employment as an employee of
Rock-Tenn or such Subsidiary) customarily is employed (within the meaning of Code § 423(b)(4)(C))
for not more than 5 months in any calendar year by Rock-Tenn or such Subsidiary, and
§ 3.
By deleting § .3.15, Share Limit, in its entirety and substituting the following:
3.15 [Reserved]
§ 4.
By amending § 9(a) to read as follows:
(a) General Rule. Subject to § 9(b) and § 9(c), each person who is a
Participant for a Purchase Period automatically shall be granted by operation of this Plan an
option as of the last day of such Purchase Period to purchase the number of shares of Stock
(including any fractional share of Stock) as determined by the Plan Administrator (or its delegate)
for such Purchase Period. Each such option shall be exercisable only in accordance with the terms
of this Plan.
§ 5.
This Amendment Number Four shall be effective with the purchase period that commences on May
1, 2005.
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ROCK-TENN COMPANY |
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By:
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/s/ Robert B. McIntosh
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Title:
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Sr. Vice President
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Date:
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April 23, 2005 |
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PROPOSED
AMENDMENT NUMBER FIVE TO
ROCK-TENN COMPANY
1993 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
Pursuant to the power reserved in § 17 of the Rock-Tenn Company 1993 Employee Stock Purchase
Plan (as amended and restated effective January 1, 1998), Rock-Tenn Company hereby amends § 5 of
the Plan to read as follows:
Stock Available for Options.
One million shares of Stock shall (subject to shareholder approval) be added effective
February 1, 2007 to the number of shares of Stock then available under this Plan. All such shares
of Stock shall be available for purchase from Rock-Tenn upon the exercise of options granted under
§ 9 of this Plan, and any shares of Stock which are subject to options granted as of the first day
of a Purchase Period but which are not purchased on the related Exercise Date shall again become
available for purchase under this Plan.
This Amendment Number Five shall be effective with the purchase period that commences on
February 1, 2007.
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ROCK-TENN COMPANY
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By: |
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Title: |
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Date: |
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ROCK-TENN COMPANY
2004 INCENTIVE STOCK PLAN
TABLE OF CONTENTS
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Page |
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§ 1. BACKGROUND AND PURPOSE |
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1 |
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§ 2. DEFINITIONS |
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1 |
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2.1 Affiliate |
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2.2 Board |
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2.3 Change Effective Date |
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2.4 Change in Control |
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2.5 Code |
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2.6 Committee |
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2.7 Company |
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2.8 Director |
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2.9 Eligible Employee |
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2.10 Fair Market Value |
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2.11 ISO |
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2.12 1933 Act |
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2.13 1934 Act |
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2.14 Non-ISO |
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2.15 Option |
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2.16 Option Certificate |
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2.17 Option Price |
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2.18 Parent |
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2.19 Plan |
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2.20 Preexisting Plan |
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2.21 Rule 16b-3 |
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2.22 SAR Value |
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2.23 Stock |
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2.24 Stock Appreciation Right |
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2.25 Stock Appreciation Right Certificate |
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2.26 Stock Grant |
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2.27 Stock Grant Certificate |
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2.28 Stock Unit Grant |
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2.29 Subsidiary |
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2.30 Ten Percent Shareholder |
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§ 3. SHARES AND GRANT LIMITS |
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5 |
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3.1 Shares Reserved |
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3.2 Source of Shares |
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3.3 Use of Proceeds |
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3.4 Grant Limits |
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3.5 Preexisting Plan |
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§ 4. EFFECTIVE DATE |
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6 |
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§ 5. COMMITTEE |
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§ 6. ELIGIBILITY |
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6 |
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§ 7. OPTIONS |
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7.1 Committee Action |
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7.2 $100,000 Limit |
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7.3 Option Price |
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7.4 Payment |
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7.5 Exercise |
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§ 8. STOCK APPRECIATION RIGHTS |
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8.1 Committee Action |
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8.2 Terms and Conditions |
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8.3 Exercise |
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§ 9. STOCK GRANTS |
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9.1 Committee Action |
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9.2 Conditions |
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9.3 Dividends, Voting Rights and Creditor Status |
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9.4 Satisfaction of Forfeiture Conditions |
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9.5 Income Tax Deduction |
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§ 10. NON-TRANSFERABILITY |
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14 |
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§ 11. SECURITIES REGISTRATION |
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§ 12. LIFE OF PLAN |
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§ 13. ADJUSTMENT |
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13.1 Capital Structure |
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13.2 Available Shares |
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13.3 Transactions Described in § 424 of the Code |
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13.4 Fractional Shares |
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§ 14. CHANGE IN CONTROL |
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§ 15. AMENDMENT OR TERMINATION |
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§ 16. MISCELLANEOUS |
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16.1 Shareholder Rights |
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16.2 No Contract of Employment |
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16.3 Withholding |
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16.4 Construction |
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16.5 Other Conditions |
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16.6 Rule 16b-3 |
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16.7 Coordination with Employment Agreements and Other Agreements |
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§ 1.
BACKGROUND AND PURPOSE
The purpose of this Plan is to promote the interest of the Company by authorizing the
Committee to grant Options and Stock Appreciation Rights and to make Stock Grants and Stock Unit
Grants to Eligible Employees and Directors in order (1) to attract and retain Eligible Employees
and Directors, (2) to provide an additional incentive to each Eligible Employee or Director to work
to increase the value of Stock and (3) to provide each Eligible Employee or Director with a stake
in the future of the Company which corresponds to the stake of each of the Companys shareholders.
§ 2.
DEFINITIONS
2.1 Affiliate means any organization (other than a Subsidiary) that would be
treated as under common control with the Company under § 414(c) of the Code if 50 percent were
substituted for 80 percent in the income tax regulations under § 414(c) of the Code.
2.2 Board means the Board of Directors of the Company.
2.3 Change Effective Date means either the date which includes the closing of the
transaction which makes a Change in Control effective if the Change in Control is made effective
through a transaction which has a closing or the date a Change in Control is reported in
accordance with applicable law as effective to the Securities and Exchange Commission if the Change
in Control is made effective other than through a transaction which has a closing.
2.4 Change in Control means a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the 1934 Act as in effect at the time of such change in control, provided that
such a change in control shall be deemed to have occurred at such time as
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any person (as that term is used in Sections 13(d) and
14(d)(2) of the 1934 Act), is or becomes the beneficial owner (as defined in
Rule 13d-3 under the 1934 Act) directly or indirectly, of securities
representing 20% or more of the combined voting power for election of directors
of the then outstanding securities of the Company or any successor to the
Company; |
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during any period of two consecutive years or less, individuals
who at the beginning of such period constitute the Board cease, for any |
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reason, to constitute at least a majority of the Board, unless the election
or nomination for election of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of the period; |
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the shareholders of the Company approve any reorganization,
merger, consolidation or share exchange as a result of which the common stock
of the Company shall be changed, converted or exchanged into or for securities
of another corporation (other than a merger with a wholly-owned subsidiary of
the Company) or any dissolution or liquidation of the Company or any sale or
the disposition of 50% or more of the assets or business of the Company; or |
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the shareholders of the Company approve any reorganization,
merger, consolidation or share exchange unless (A) the persons who were the
beneficial owners of the outstanding shares of the common stock of the Company
immediately before the consummation of such transaction beneficially own more
than 50% of the outstanding shares of the common stock of the successor or
survivor corporation in such transaction immediately following the consummation
of such transaction and (B) the number of shares of the common stock of such
successor or survivor corporation beneficially owned by the persons described
in § 2.4(d)(A) immediately following the consummation of such transaction is
beneficially owned by each such person in substantially the same proportion
that each such person had beneficially owned shares of the Company common stock
immediately before the consummation of such transaction, provided (C) the
percentage described in § 2.4(d)(A) of the beneficially owned shares of the
successor or survivor corporation and the number described in § 2.4 (d)(B) of
the beneficially owned shares of the successor or survivor corporation shall be
determined exclusively by reference to the shares of the successor or survivor
corporation which result from the beneficial ownership of shares of common
stock of the Company by the persons described in § 2.4(d)(A) immediately before
the consummation of such transaction. |
2.5 Code means the Internal Revenue Code of 1986, as amended.
2.6 Committee means a committee of the Board which shall have at least 2 members,
each of whom shall be appointed by and shall serve at the pleasure of the Board and shall come
within the definition of a non-employee director under Rule 16b-3 and an outside director under
§ 162(m) of the Code.
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2.7 Company means Rock-Tenn Company and any successor to Rock-Tenn Company.
2.8 Director means any member of the Board who is not an employee of the Company or
a Parent or Subsidiary or affiliate (as such term is defined in Rule 405 of the 1933 Act) of the
Company.
2.9 Eligible Employee means an employee of the Company or any Subsidiary or Parent
or Affiliate to whom the Committee decides for reasons sufficient to the Committee to make a grant
under this Plan.
2.10 Fair Market Value means either (a) the closing price on any date for a share
of Stock as reported by The Wall Street Journal or, if The Wall Street Journal no
longer reports such closing price, such closing price as reported by a newspaper or trade journal
selected by the Committee or, if no such closing price is available on such date, (b) such closing
price as so reported in accordance with § 2.10(a) for the immediately preceding business day, or,
if no newspaper or trade journal reports such closing price or if no such price quotation is
available, (c) the price which the Committee acting in good faith determines through any reasonable
valuation method that a share of Stock might change hands between a willing buyer and a willing
seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge
of the relevant facts.
2.11 ISO means an option granted under this Plan to purchase Stock which is
intended to satisfy the requirements of § 422 of the Code.
2.12 1933 Act means the Securities Act of 1933, as amended.
2.13 1934 Act means the Securities Exchange Act of 1934, as amended.
2.14 Non-ISO means an option granted under this Plan to purchase Stock which is
intended to fail to satisfy the requirements of § 422 of the Code.
2.15 Option means an ISO or a Non-ISO which is granted under § 7.
2.16 Option Certificate means the certificate (whether in electronic or written
form) which sets forth the terms and conditions of an Option granted under this Plan.
2.17 Option Price means the price which shall be paid to purchase one share of
Stock upon the exercise of an Option granted under this Plan.
2.18 Parent means any corporation which is a parent corporation (within the meaning
of § 424(e) of the Code) of the Company.
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2.19 Plan means this Rock-Tenn Company 2004 Incentive Stock Plan as effective as of
the date approved by the shareholders of the Company and as amended from time to time thereafter.
2.20 Preexisting Plan means the following plan, as such plan has been amended from
time to time up to the date this Plan is effective: the 2000 Rock-Tenn Company Incentive Stock
Plan.
2.21 Rule 16b-3 means the exemption under Rule 16b-3 to Section 16(b) of the 1934
Act or any successor to such rule.
2.22 SAR Value means the value assigned by the Committee to a share of Stock in
connection with the grant of a Stock Appreciation Right under § 8.
2.23 Stock means the Class A common stock of the Company.
2.24 Stock Appreciation Right means a right which is granted under § 8 to receive
the appreciation in a share of Stock.
2.25 Stock Appreciation Right Certificate means the certificate (whether in
electronic or written form) which sets forth the terms and conditions of a Stock Appreciation Right
which is not granted as part of an Option.
2.26 Stock Grant means a grant under § 9 which is designed to result in the
issuance of the number of shares of Stock described in such grant rather than a payment in cash
based on the Fair Market Value of such shares of Stock.
2.27 Stock Grant Certificate means the certificate (whether in electronic or
written form) which sets forth the terms and conditions of a Stock Grant or a Stock Unit Grant.
2.28 Stock Unit Grant means a grant under § 9 which is designed to result in the
payment of cash based on the Fair Market Value of the number of shares of Stock described in such
grant rather than the issuance of the number of shares of Stock described in such grant.
2.29 Subsidiary means a corporation which is a subsidiary corporation (within the
meaning of § 424(f) of the Code) of the Company.
2.30 Ten Percent Shareholder means a person who owns (after taking into account the
attribution rules of § 424(d) of the Code) more than ten percent of the total combined voting power
of all classes of stock of either the Company, a Subsidiary or Parent.
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§ 3.
SHARES AND GRANT LIMITS
3.1 Shares Reserved. There shall (subject to § 13) be reserved for issuance under
this Plan (a) 2.0 million shares of Stock plus (b) the number of shares of Stock which would remain
available for issuance under each Preexisting Plan if shares were issued on the effective date of
this Plan sufficient to satisfy grants then outstanding under such plan plus (c) the number of
shares of Stock subject to grants under any Preexisting Plan which are outstanding on the effective
date of this Plan and which are forfeited or expire on or after such effective date in accordance
with the terms of such grants; provided, however, (d) no more than the number of shares of Stock
described in § 3.1(a) shall be issued in connection with the exercise of ISOs and (e) nothing in
this Plan shall affect any grants under any Preexisting Plan which are outstanding on the effective
date of this Plan until such time, if any, that any shares of Stock subject to such grants are
forfeited or grants respecting any shares of Stock expire on or after such effective date in
accordance with the terms of such grants.
3.2 Source of Shares. The shares of Stock described in § 3.1 shall be reserved to the
extent that the Company deems appropriate from authorized but unissued shares of Stock and from
shares of Stock which have been reacquired by the Company. All shares of Stock described in § 3.1
shall remain available for issuance under this Plan until issued pursuant to the exercise of an
Option or a Stock Appreciation Right or issued pursuant to a Stock Grant, and any such shares of
stock which are issued pursuant to an Option, a Stock Appreciation Right or a Stock Grant which are
forfeited thereafter shall again become available for issuance under this Plan. Finally, if the
Option Price under an Option is paid in whole or in part in shares of Stock or if shares of Stock
are tendered to the Company in satisfaction of any condition to a Stock Grant, such shares
thereafter shall become available for issuance under this Plan and shall be treated the same as any
other shares available for issuance under this Plan.
3.3 Use of Proceeds. The proceeds which the Company receives from the sale of any
shares of Stock under this Plan shall be used for general corporate purposes and shall be added to
the general funds of the Company.
3.4 Grant Limits. No Eligible Employee or Director in any calendar year shall be
granted an Option to purchase (subject to § 13) more than 500,000 shares of Stock or a Stock
Appreciation Right based on the appreciation with respect to (subject to § 13) more than 500,000
shares of Stock, and no Stock Grant or Stock Unit Grant shall be made to any Eligible Employee or
Director in any calendar year where the Fair Market Value of the Stock subject to such grant on the
date of the grant exceeds $2,000,000. No more than 1,000,000 non-forfeitable shares of Stock shall
(subject to § 13) be issued pursuant to Stock Grants under § 9.
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3.5 Preexisting Plan. No grants shall be made under any Preexisting Plan on or after
the date this Plan becomes effective.
§ 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date the shareholders of the Company (acting at a
duly called meeting of such shareholders) approve the adoption of this Plan.
§ 5.
COMMITTEE
This Plan shall be administered by the Committee. The Committee acting in its absolute
discretion shall exercise such powers and take such action as expressly called for under this Plan
and, further, the Committee shall have the power to interpret this Plan and (subject to § 14 and §
15 and Rule 16b-3) to take such other action in the administration and operation of this Plan as
the Committee deems equitable under the circumstances, which action shall be binding on the
Company, on each affected Eligible Employee or Director and on each other person directly or
indirectly affected by such action. Furthermore, the Committee as a condition to making any grant
under this Plan to any Eligible Employee or Director shall have the right to require him or her to
execute an agreement which makes the Eligible Employee or Director subject to non-competition
provisions and other restrictive covenants which run in favor of the Company.
§ 6.
ELIGIBILITY
Only Eligible Employees who are employed by the Company or a Subsidiary or Parent shall be
eligible for the grant of ISOs under this Plan. All Eligible Employees and all Directors shall be
eligible for the grant of Non-ISOs and Stock Appreciation Rights and for Stock Grants and Stock
Unit Grants under this Plan.
§ 7.
OPTIONS
7.1 Committee Action. The Committee acting in its absolute discretion shall have the
right to grant Options to Eligible Employees and to Directors under this Plan from time to time to
purchase shares of Stock, but the Committee shall not (subject to § 13) take any action, whether
through amendment, cancellation, replacement grants, or any other means, to reduce the Option Price
of any outstanding Options absent the
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approval of the Companys shareholders. Each grant of an Option to a Eligible Employee or Director
shall be evidenced by an Option Certificate, and each Option Certificate shall set forth whether
the Option is an ISO or a Non-ISO and shall set forth such other terms and conditions of such grant
as the Committee acting in its absolute discretion deems consistent with the terms of this Plan;
however, (a) if the Committee grants an ISO and a Non-ISO to a Eligible Employee on the same date,
the right of the Eligible Employee to exercise the ISO shall not be conditioned on his or her
failure to exercise the Non-ISO and (b) if the only condition to exercise of the Option is the
completion of a period of service, such period of service shall be no less than the one (1) year
period which starts on the date as of which the Option is granted unless the Committee determines
that a shorter period of service (or no period of service) better serves the Companys interest.
7.2 $100,000 Limit. No Option shall be treated as an ISO to the extent that the
aggregate Fair Market Value of the Stock subject to the Option which would first become exercisable
in any calendar year exceeds $100,000. Any such excess shall instead automatically be treated as a
Non-ISO. The Committee shall interpret and administer the ISO limitation set forth in this § 7.2
in accordance with § 422(d) of the Code, and the Committee shall treat this § 7.2 as in effect only
for those periods for which § 422(d) of the Code is in effect.
7.3 Option Price. The Option Price for each share of Stock subject to an Option shall
be no less than the Fair Market Value of a share of Stock on the date the Option is granted;
provided, however, if the Option is an ISO granted to an Eligible Employee who is a Ten Percent
Shareholder, the Option Price for each share of Stock subject to such ISO shall be no less than
110% of the Fair Market Value of a share of Stock on the date such ISO is granted.
7.4 Payment. The Option Price shall be payable in full upon the exercise of any
Option and, at the discretion of the Committee, an Option Certificate can provide for the payment
of the Option Price either in cash, by check or in Stock which has been held for at least 6 months
and which is acceptable to the Committee, or through any cashless exercise procedure which is
effected by an unrelated broker through a sale of Stock in the open market and which is acceptable
to the Committee, or in any combination of such forms of payment. Any payment made in Stock shall
be treated as equal to the Fair Market Value of such Stock on the date the certificate for such
Stock (or proper evidence of such certificate) is presented to the Committee or its delegate in
such form as acceptable to the Committee.
7.5 Exercise.
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Exercise Period. Each Option granted
under this Plan shall be exercisable in whole or in part at such time
or times as set forth in the related Option Certificate, but no Option |
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Certificate shall make an Option exercisable on or after the earlier
of |
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the date which is
the fifth anniversary of the date the Option is granted,
if the Option is an ISO and the Eligible Employee is a
Ten Percent Shareholder on the date the Option is
granted, or |
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the date which is
the tenth anniversary of the date the Option is granted,
if the Option is (a) a Non-ISO or (b) an ISO which is
granted to an Eligible Employee who is not a Ten Percent
Shareholder on the date the Option is granted. |
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Termination of Status as Eligible Employee
or Director. Subject to § 7.5(a), an Option Certificate may
provide for the exercise of an Option after an Eligible Employees or a
Directors status as such has terminated for any reason whatsoever,
including death or disability. |
§ 8.
STOCK APPRECIATION RIGHTS
8.1 Committee Action. The Committee acting in its absolute discretion shall have the
right to grant Stock Appreciation Rights to Eligible Employees and to Directors under this Plan
from time to time, and each Stock Appreciation Right grant shall be evidenced by a Stock
Appreciation Right Certificate or, if such Stock Appreciation Right is granted as part of an
Option, shall be evidenced by the Option Certificate for the related Option.
8.2 Terms and Conditions.
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Stock Appreciation Right Certificate. If a Stock
Appreciation Right is granted independent of an Option, such Stock Appreciation
Right shall be evidenced by a Stock Appreciation Right Certificate, and such
certificate shall set forth the number of shares of Stock on which the Eligible
Employees or Directors right to appreciation shall be based and the SAR Value
of each share of Stock. Such SAR Value shall be no less than the Fair Market
Value of a share of Stock on the date that the Stock Appreciation Right is
granted. The Stock Appreciation Right Certificate shall set forth such other
terms and conditions for the exercise of the Stock Appreciation Right as |
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the Committee deems appropriate under the circumstances, but no Stock
Appreciation Right Certificate shall make a Stock Appreciation Right
exercisable on or after the date which is the tenth anniversary of the date
such Stock Appreciation Right is granted. |
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Option Certificate. If a Stock Appreciation Right is
granted together with an Option, such Stock Appreciation Right shall be
evidenced by an Option Certificate, the number of shares of Stock on which the
Eligible Employees or Directors right to appreciation shall be based shall be
the same as the number of shares of Stock subject to the related Option, and
the SAR Value for each such share of Stock shall be no less than the Option
Price under the related Option. Each such Option Certificate shall provide
that the exercise of the Stock Appreciation Right with respect to any share of
Stock shall cancel the Eligible Employees or Directors right to exercise his
or her Option with respect to such share and, conversely, that the exercise of
the Option with respect to any share of Stock shall cancel the Eligible
Employees or Directors right to exercise his or her Stock Appreciation Right
with respect to such share. A Stock Appreciation Right which is granted as
part of an Option shall be exercisable only while the related Option is
exercisable. The Option Certificate shall set forth such other terms and
conditions for the exercise of the Stock Appreciation Right as the Committee
deems appropriate under the circumstances. |
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Minimum Period of Service. If the only condition to
exercise of a Stock Appreciation Right is the completion of a period of
service, such period of service shall be no less than the one (1) year period
which starts on the date as of which the Stock Appreciation Right is granted
unless the Committee determines that a shorter period of service (or no period
of service) better serves the Companys interest. |
8.3 Exercise. A Stock Appreciation Right shall be exercisable only when the Fair
Market Value of a share of Stock on which the right to appreciation is based exceeds the SAR Value
for such share, and the payment due on exercise shall be based on such excess with respect to the
number of shares of Stock to which the exercise relates. An Eligible Employee or Director upon the
exercise of his or her Stock Appreciation Right shall receive a payment from the Company in cash or
in Stock issued under this Plan, or in a combination of cash and Stock, and the number of shares of
Stock issued shall be based on the Fair Market Value of a share of Stock on the date the Stock
Appreciation Right is exercised. The Committee acting in its
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absolute discretion shall have the right to determine the form and time of any payment under this §
8.3.
§ 9.
STOCK GRANTS
9.1 Committee Action. The Committee acting in its absolute discretion shall have the
right to make Stock Grants and Stock Unit Grants to Eligible Employees and to Directors. Each
Stock Grant and each Stock Unit Grant shall be evidenced by a Stock Grant Certificate, and each
Stock Grant Certificate shall set forth the conditions, if any, under which Stock will be issued
under the Stock Grant or cash will be paid under the Stock Unit Grant and the conditions under
which the Eligible Employees or Directors interest in any Stock which has been issued will become
non-forfeitable.
9.2 Conditions.
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Conditions to Issuance of Stock. The Committee acting
in its absolute discretion may make the issuance of Stock under a Stock Grant
subject to the satisfaction of one, or more than one, condition which the
Committee deems appropriate under the circumstances for Eligible Employees or
Directors generally or for an Eligible Employee or a Director in particular,
and the related Stock Grant Certificate shall set forth each such condition and
the deadline for satisfying each such condition. Stock subject to a Stock
Grant shall be issued in the name of an Eligible Employee or Director only
after each such condition, if any, has been timely satisfied, and any Stock
which is so issued shall be held by the Company pending the satisfaction of the
forfeiture conditions, if any, under § 9.2(b) for the related Stock Grant. |
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Conditions on Forfeiture of Stock or Cash Payment. The
Committee acting in its absolute discretion may make any cash payment due under
a Stock Unit Grant or Stock issued in the name of an Eligible Employee or
Director under a Stock Grant non-forfeitable subject to the satisfaction of
one, or more than one, objective employment, performance or other condition
that the Committee acting in its absolute discretion deems appropriate under
the circumstances for Eligible Employees or Directors generally or for an
Eligible Employee or a Director in particular, and the related Stock Grant
Certificate shall set forth each such condition, if any, and the deadline, if
any, for satisfying each such condition. An Eligible Employees or a
Directors non-forfeitable interest in the shares of Stock underlying a Stock
Grant or the |
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cash payable under a Stock Unit Grant shall depend on the extent to which
he or she timely satisfies each such condition. If a share of Stock is
issued under this § 9.2(b) before a Eligible Employees or Directors
interest in such share of Stock is non-forfeitable, (1) such share of Stock
shall not be available for re-issuance under § 3 until such time, if any,
as such share of Stock thereafter is forfeited as a result of a failure to
timely satisfy a forfeiture condition and (2) the Company shall have the
right to condition any such issuance on the Eligible Employee or Director
first signing an irrevocable stock power in favor of the Company with
respect to the forfeitable shares of Stock issued to such Eligible Employee
or Director in order for the Company to effect any forfeiture called for
under the related Stock Grant Certificate. |
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Minimum Period of Service. If the only condition to
the forfeiture of a Stock Grant or a Stock Unit Grant is the completion of a
period of service, such period of service shall be no less than the three (3)
year period which starts on the date as of which the Stock Grant or Stock Unit
Grant is made unless the Committee determines that a shorter period of service
(or no period of service) better serves the Companys interest. |
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Dividends, Voting Rights and Creditor Status. |
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Cash Dividends. Except as otherwise set forth in a
Stock Grant Certificate, if a dividend is paid in cash on a share of Stock
after such Stock has been issued under a Stock Grant but before the first date
that an Eligible Employees or a Directors interest in such Stock (1) is
forfeited completely or (2) becomes completely non-forfeitable, the Company
shall pay such cash dividend directly to such Eligible Employee or Director. |
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Stock Dividends. If a dividend is paid on a share of
Stock in Stock after such Stock has been issued under a Stock Grant but before
the first date that an Eligible Employees or a Directors interest in such
Stock (1) is forfeited completely or (2) becomes completely non-forfeitable,
the Company shall hold such dividend Stock subject to the same conditions under
§ 9.2(b) as the related Stock Grant. |
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Other. If a dividend (other than a dividend described
in § 9.3(a) or § 9.3(b)) is paid with respect to a share of Stock after such
Stock has been issued under a Stock Grant but before the first date that an
Eligible Employees or a Directors interest in such Stock (1) is |
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forfeited completely or (2) becomes completely non-forfeitable, the Company
shall distribute or hold such dividend in accordance with such rules as the
Committee shall adopt with respect to each such dividend. |
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Voting. Except as otherwise set forth in a Stock Grant
Certificate, an Eligible Employee or a Director shall have the right to vote
the Stock issued under his or her Stock Grant during the period which comes
after such Stock has been issued under a Stock Grant but before the first date
that an Eligible Employees or Directors interest in such Stock (1) is
forfeited completely or (2) becomes completely non-forfeitable. |
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General Creditor Status. Each Eligible Employee and
each Director to whom a Stock Unit grant is made shall be no more than a
general and unsecured creditor of the Company with respect to any cash payable
under such Stock Unit Grant. |
9.4 Satisfaction of Forfeiture Conditions. A share of Stock shall cease to be subject
to a Stock Grant at such time as an Eligible Employees or a Directors interest in such Stock
becomes non-forfeitable under this Plan, and the certificate or other evidence of ownership
representing such share shall be transferred to the Eligible Employee or Director as soon as
practicable thereafter.
9.5 Income Tax Deduction.
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General. The Committee shall (where the Committee
under the circumstances deems in the Companys best interest) either (1) make
Stock Grants and Stock Unit Grants to Eligible Employees subject to at least
one condition related to one, or more than one, performance goal based on the
performance goals described in § 9.5(b) which seems likely to result in the
Stock Grant or Stock Unit Grant qualifying as performance-based compensation
under § 162(m) of the Code or (2) make Stock Grants and Stock Unit Grants to
Eligible Employees under such other circumstances as the Committee deems likely
to result in an income tax deduction for the Company with respect such Stock
Grant or Stock Unit Grant. A performance goal may be set in any manner
determined by the Committee, including looking to achievement on an absolute or
relative basis in relation to peer groups or indexes. |
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Performance Goals. A performance goal is described in
this § 9.5(b) if such goal relates to (1) the Companys return over capital
costs or increases in return over capital costs, (2) the Companys |
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safety record, (3) the Companys customer satisfaction survey, (4) the
Companys total earnings or the growth in such earnings, (5) the Companys
consolidated earnings or the growth in such earnings, (6) the Companys
earnings per share or the growth in such earnings, (7) the Companys net
earnings or the growth in such earnings, (8) the Companys earnings before
interest expense, taxes, depreciation, amortization and other non-cash items
or the growth in such earnings, (9) the Companys earnings before interest
and taxes or the growth in such earnings, (10) the Companys consolidated
net income or the growth in such income, (11) the value of the Companys
common stock or the growth in such value, (12) the Companys stock price or
the growth in such price, (13) the tons of paperboard produced or converted
by the Company, (14) the Companys return on assets or the growth on such
return, (15) the Companys cash flow or the growth in such cash flow, (16)
the Companys total shareholder return or the growth in such return, (17)
the Companys expenses or the reduction of such expenses, (18) the Companys
sales growth, (19) the Companys overhead ratios or changes in such ratios,
(20) the Companys expense-to-sales ratios or the changes in such ratios, or
(21) the Companys economic value added or changes in such value added. The
performance goals for participants will (as the Committee deems appropriate)
be based on criteria related to company-wide performance, division-specific
or other business unit-specific performance (where the Committee can apply
the business criteria on such basis), plant or facility-specific
performance, department-specific performance, personal goal performance or
any combination of the performance-based criteria. |
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Adjustments. When the Committee determines whether a
performance goal has been satisfied for any period, the Committee may exclude
any or all extraordinary items as determined under U.S. generally accepted
accounting principles and any other unusual or non-recurring items, including,
without limitation, the charges or costs associated with restructurings of the
Company, discontinued operations, and the cumulative effects of accounting
changes. The Committee may also adjust any performance goal for a period as it
deems equitable in recognition of unusual or non-recurring events affecting the
Company, changes in applicable tax laws or accounting principles, or such other
factors as the Committee may determine (including, without limitation, any
adjustments that would result in the Companys paying non-deductible
compensation to an Eligible Employee). |
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§ 10.
NON-TRANSFERABILITY
No Option, Stock Grant, Stock Unit Grant or Stock Appreciation Right shall (absent the
Committees consent) be transferable by an Eligible Employee or a Director other than by will or by
the laws of descent and distribution, and any Option or Stock Appreciation Right shall (absent the
Committees consent) be exercisable during a Eligible Employees or Directors lifetime only by the
Eligible Employee or Director. The person or persons to whom an Option or Stock Grant or Stock
Unit Grant or Stock Appreciation Right is transferred by will or by the laws of descent and
distribution (or with the Committees consent) thereafter shall be treated as the Eligible Employee
or Director.
§ 11.
SECURITIES REGISTRATION
As a condition to the receipt of shares of Stock under this Plan, the Eligible Employee or
Director shall, if so requested by the Company, agree to hold such shares of Stock for investment
and not with a view of resale or distribution to the public and, if so requested by the Company,
shall deliver to the Company a written statement satisfactory to the Company to that effect.
Furthermore, if so requested by the Company, the Eligible Employee or Director shall make a written
representation to the Company that he or she will not sell or offer for sale any of such Stock
unless a registration statement shall be in effect with respect to such Stock under the 1933 Act
and any applicable state securities law or he or she shall have furnished to the Company an opinion
in form and substance satisfactory to the Company of legal counsel satisfactory to the Company that
such registration is not required. Certificates or other evidence of ownership representing the
Stock transferred upon the exercise of an Option or Stock Appreciation Right or upon the lapse of
the forfeiture conditions, if any, on any Stock Grant may at the discretion of the Company bear a
legend to the effect that such Stock has not been registered under the 1933 Act or any applicable
state securities law and that such Stock cannot be sold or offered for sale in the absence of an
effective registration statement as to such Stock under the 1933 Act and any applicable state
securities law or an opinion in form and substance satisfactory to the Company of legal counsel
satisfactory to the Company that such registration is not required.
§ 12.
LIFE OF PLAN
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No Option or Stock Appreciation Right shall be granted or Stock Grant or Stock Unit Grant made
under this Plan on or after the earlier of:
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the tenth anniversary of the effective date of
this Plan (as determined under § 4), in which event this Plan otherwise
thereafter shall continue in effect until all outstanding Options and
Stock Appreciation Rights have been exercised in full or no longer are
exercisable and all Stock issued under any Stock Grants under this Plan
have been forfeited or have become non-forfeitable, or |
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the date on which all of the Stock reserved
under § 3 has (as a result of the exercise of Options or Stock
Appreciation Rights granted under this Plan or the satisfaction of the
forfeiture conditions, if any, on Stock Grants) been issued or no
longer is available for use under this Plan, in which event this Plan
also shall terminate on such date. |
§ 13.
ADJUSTMENT
13.1 Capital Structure. The grant caps described in § 3.4, the number, kind or class
(or any combination thereof) of shares of Stock subject to outstanding Options and Stock
Appreciation Rights granted under this Plan and the Option Price of such Options and the SAR Value
of such Stock Appreciation Rights as well as the number, kind or class (or any combination thereof)
of shares of Stock subject to outstanding Stock Grants and Stock Unit Grants made under this Plan
shall be adjusted by the Committee in a reasonable and equitable manner to preserve immediately
after
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any equity restructuring or change in the capitalization of the
Company, including, but not limited to, spin offs, stock dividends, large
non-reoccurring dividends, rights offerings or stock splits, or |
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any other transaction described in § 424(a) of the Code which
does not constitute a Change in Control of the Company |
the aggregate intrinsic value of each such outstanding Option, Stock Appreciation Right, Stock
Grant and Stock Unit Grant immediately before such restructuring or recapitalization or other
transaction.
13.2 Available Shares. If any adjustment is made with respect to any outstanding
Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant under § 13.1, then the Committee
shall adjust the number, kind or class (or any combination
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thereof) of shares of Stock reserved under § 3.1 so that there is a sufficient number, kind and
class of shares of Stock available for issuance pursuant to each such Option, Stock Appreciation
Right, Stock Grant and Stock Unit Grant as adjusted under § 13.1 without seeking the approval of
the Companys shareholders for such adjustment unless such approval is required under applicable
law or the rules of the stock exchange on which shares of Stock are traded. Furthermore, the
Committee shall have the absolute discretion to further adjust such number, kind or class (or any
combination thereof) of shares of Stock reserved under § 3.1 in light of any of the events
described in § 13.1(a) and § 13.1(b) to the extent the Committee acting in good faith determinates
that a further adjustment would be appropriate and proper under the circumstances and in keeping
with the purposes of this Plan without seeking the approval of the Companys shareholders for such
adjustment unless such approval is required under applicable law or the rules of the stock exchange
on which shares of Stock are traded.
13.3 Transactions Described in § 424 of the Code. If there is a corporate
transaction described in § 424(a) of the Code which does not constitute a Change in Control of the
Company, the Committee as part of any such transaction shall have right to make Stock Grants, Stock
Unit Grants and Option and Stock Appreciation Right grants (without regard to any limitations set
forth under 3.4 of this Plan) to effect the assumption of, or the substitution for, outstanding
stock grants, stock unit grants and option and stock appreciation right grants previously made by
any other corporation to the extent that such corporate transaction calls for such substitution or
assumption of such outstanding stock grants, stock unit grants and stock option and stock
appreciation right grants. Furthermore, if the Committee makes any such grants as part of any such
transaction, the Committee shall have the right to increase the number of shares of Stock available
for issuance under § 3.1 by the number of shares of Stock subject to such grants without seeking
the approval of the Companys shareholders for such adjustment unless such approval is required
under applicable law or the rules of the stock exchange on which shares of Stock are traded.
13.4 Fractional Shares. If any adjustment under this § 13 would create a fractional
share of Stock or a right to acquire a fractional share of Stock under any Option, Stock
Appreciation Right or Stock Grant, such fractional share shall be disregarded and the number of
shares of Stock reserved under this Plan and the number subject to any Options or Stock
Appreciation Right grants and Stock Grants shall be the next lower number of shares of Stock,
rounding all fractions downward. An adjustment made under this § 13 by the Committee shall be
conclusive and binding on all affected persons.
§ 14.
CHANGE IN CONTROL
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If there is a Change in Control of the Company, then as of the Change Effective Date for such
Change in Control any and all conditions to the exercise of all outstanding Options and Stock
Appreciation Rights on such date and any and all outstanding issuance and forfeiture conditions on
any Stock Grants and Stock Unit Grants on such date automatically shall be deemed 100% satisfied as
of such Change Effective Date, and the Board shall have the right (to the extent expressly required
as part of such transaction) to cancel such Options, Stock Appreciation Rights, Stock Grants and
Stock Unit Grants after providing each Eligible Employee and Director a reasonable period to
exercise his or her Options and Stock Appreciation Rights and to take such other action as
necessary or appropriate to receive the Stock subject to any Stock Grants and the cash payable
under any Stock Unit Grants; provided, if any issuance or forfeiture condition described in this §
14 relates to satisfying any performance goal and there is a target for such goal, such issuance or
forfeiture condition shall be deemed satisfied under this § 14 only to the extent of such target
unless such target has been exceeded before the Change Effective Date, in which event such issuance
or forfeiture condition shall be deemed satisfied to the extent such target had been so exceeded.
§ 15.
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent that the Board deems
necessary or appropriate; provided, however, (a) no amendment shall be made absent the approval of
the shareholders of the Company to the extent such approval is required under applicable law or the
rules of the stock exchange on which shares of Stock are listed and (b) no amendment shall be made
to § 14 on or after the date of any Change in Control which might adversely affect any rights which
otherwise would vest on the related Change Effective Date. The Board also may suspend granting
Options or Stock Appreciation Rights or making Stock Grants or Stock Unit Grants under this Plan at
any time and may terminate this Plan at any time; provided, however, the Board shall not have the
right unilaterally to modify, amend or cancel any Option or Stock Appreciation Right granted or
Stock Grant made before such suspension or termination unless (1) the Eligible Employee or Director
consents in writing to such modification, amendment or cancellation or (2) there is a dissolution
or liquidation of the Company or a transaction described in § 13.1 or § 14.
§ 16.
MISCELLANEOUS
16.1 Shareholder Rights. No Eligible Employee or Director shall have any rights as a
shareholder of the Company as a result of the grant of an Option or a
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Stock Appreciation Right pending the actual delivery of the Stock subject to such Option or Stock
Appreciation Right to such Eligible Employee or Director. An Eligible Employees or a Directors
rights as a shareholder in the shares of Stock which remain subject to forfeiture under § 9.2(b)
shall be set forth in the related Stock Grant Certificate.
16.2 No Contract of Employment. The grant of an Option or a Stock Appreciation Right
or a Stock Grant or Stock Unit Grant to an Eligible Employee or Director under this Plan shall not
constitute a contract of employment or a right to continue to serve on the Board and shall not
confer on an Eligible Employee or Director any rights upon his or her termination of employment or
service in addition to those rights, if any, expressly set forth in this Plan or the related Option
Certificate, Stock Appreciation Right Certificate, or Stock Grant Certificate.
16.3 Withholding. Each Option, Stock Appreciation Right, Stock Grant and Stock Unit
Grant shall be made subject to the condition that the Eligible Employee or Director consents to
whatever action the Committee directs to satisfy the minimum statutory federal and state tax
withholding requirements, if any, which the Company determines are applicable to the exercise of
such Option or Stock Appreciation Right or to the satisfaction of any forfeiture conditions with
respect to Stock subject to a Stock Grant or Stock Unit Grant issued in the name of the Eligible
Employee or Director. No withholding shall be effected under this Plan which exceeds the minimum
statutory federal and state withholding requirements.
16.4 Construction. All references to sections (§) are to sections (§) of this Plan
unless otherwise indicated. This Plan shall be construed under the laws of the State of Georgia.
Each term set forth in § 2 shall, unless otherwise stated, have the meaning set forth opposite such
term for purposes of this Plan and, for purposes of such definitions, the singular shall include
the plural and the plural shall include the singular. Finally, if there is any conflict between
the terms of this Plan and the terms of any Option Certificate, Stock Appreciation Right
Certificate or Stock Grant Certificate, the terms of this Plan shall control.
16.5 Other Conditions. Each Option Certificate, Stock Appreciation Right Certificate
or Stock Grant Certificate may require that an Eligible Employee or a Director (as a condition to
the exercise of an Option or a Stock Appreciation Right or the issuance of Stock subject to a Stock
Grant) enter into any agreement or make such representations prepared by the Company, including
(without limitation) any agreement which restricts the transfer of Stock acquired pursuant to the
exercise of an Option or a Stock Appreciation Right or a Stock Grant or provides for the repurchase
of such Stock by the Company.
16.6 Rule 16b-3. The Committee shall have the right to amend any Option, Stock Grant
or Stock Appreciation Right to withhold or otherwise restrict the
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transfer of any Stock or cash under this Plan to an Eligible Employee or Director as the Committee
deems appropriate in order to satisfy any condition or requirement under Rule 16b-3 to the extent
Rule 16 of the 1934 Act might be applicable to such grant or transfer.
16.7 Coordination with Employment Agreements and Other Agreements. If the Company
enters into an employment agreement or other agreement with an Eligible Employee or Director which
expressly provides for the acceleration in vesting of an outstanding Option, Stock Appreciation
Right, Stock Grant or Stock Unit Grant or for the extension of the deadline to exercise any rights
under an outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant, any such
acceleration or extension shall be deemed effected pursuant to, and in accordance with, the terms
of such outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant and this Plan
even if such employment agreement or other agreement is first effective after the date the
outstanding Option or Stock Appreciation Right was granted or the Stock Grant or Stock Unit Grant
was made.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan to
evidence its adoption of this Plan.
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ROCK-TENN COMPANY |
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By: |
/s/ Steven C. Voorhees
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Date: |
January 28, 2005 |
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PROPOSED
AMENDMENT NUMBER ONE TO
ROCK-TENN COMPANY
2004 INCENTIVE STOCK PLAN
Pursuant to the power reserved in § 15 of the Rock-Tenn Company 2004 Incentive Stock Plan,
Rock-Tenn Company hereby amends the Plan as follows:
1. Section 3.1(a) of the Plan is hereby amended to read as follows: 2,900,000 shares of
Stock plus.
2. Section 3.4 is hereby amended to read as follows:
3.4 Grant Limits. No Eligible Employee or Director in any calendar year shall be granted
an Option to purchase (subject to § 13) more than 500,000 shares of Stock or a Stock
Appreciation Right based on the appreciation with respect to (subject to § 13) more than
500,000 shares of Stock, and no Stock Grant or Stock Unit Grant shall be made to any
Eligible Employee or Director in any calendar year where the Fair Market Value of the Stock
subject to such grant on the date of the grant exceeds $5,000,000.
This Amendment Number One shall be effective as of January 26, 2007.
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ROCK-TENN COMPANY
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By: |
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Title: |
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Date: |
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Mark this box with an X if you have made |
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changes to your name or address details above. |
Annual Meeting Proxy Card
PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET VOTING INSTRUCTIONS.
Please
mark your vote as indicated in this example.
þ
A Election of Directors
The Board of Directors Recommends a Vote FOR Item 1.
1. To elect four (4) directors:
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For
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Withhold
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For
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Withhold |
01 Stephen G. Anderson
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03 L.L. Gellerstedt, III
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For
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For
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02 Robert B. Currey
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04 John W. Spiegel
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B Other Proposals
The Board of Directors Recommends a Vote FOR Items 2, 3 and 4.
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2. To adopt and approve an amendment to the Rock-Tenn Company 1993 Employee Stock Purchase Plan
to increase by 1,000,000 the number of shares of our Class A Common Stock available for purchase under the plan.
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For
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Against
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Abstain
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3. To adopt and approve an amendment to the Rock-Tenn Company 2004 Incentive Stock Plan to increase
by 900,000 the number of shares of our Class A Common Stock available for any type of award under the
plan, including stock grants, to remove the restriction that limits the number of shares available under
the plan for stock grants so that all shares available for issuance under the plan will be available
for any type of award under the plan, including stock grants, and to increase the annual limitation on
stock grants to any employee under the plan so that no employee will be permitted to receive in any
calendar year stock grants or stock unit grants under the plan with a fair market value in excess of
$5,000,000 at the time of the grant.
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For
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4. To ratify the appointment of Ernst & Young LLP to serve as the independent registered public
accounting firm of Rock-Tenn Company.
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For
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C Authorized Signatures Sign Here This section must be completed for your instructions to be executed.
Please be sure to sign and date the proxy. Please sign exactly as your name or names appear hereon.
For more than one owner, each should sign. When signing in a fiduciary or representative capacity,
please give full title. If a corporation submits this proxy, it should be executed in the full corporate
name by a duly authorized officer; if a partnership, please have it signed in partnership name by an
authorized person.
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Signature 1 Please keep signature within the box
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Signature 2 Please keep signature within the box
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Date (mm/dd/yyyy) |
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Proxy ROCK-TENN COMPANY
PROXY FOR CLASS A COMMON STOCK
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS ON JANUARY 26, 2007
The undersigned hereby appoints James A. Rubright and Steven C. Voorhees and each of them, proxies,
with full power of substitution and resubstitution, for and in the name of the undersigned, to vote
all shares of Class A Common Stock of Rock-Tenn Company that the undersigned would be entitled to
vote if personally present at the annual meeting of shareholders to be held on January 26, 2007, at
9:00 a.m., local time, at the Northeast Atlanta Hilton at Peachtree Corners, 5993 Peachtree
Industrial Boulevard, Norcross, Georgia 30092, or at any adjournment thereof, upon the matters described in the
accompanying Notice of Annual Meeting of Shareholders and proxy statement, receipt of which is
hereby acknowledged, and upon any other business that may properly come before the annual meeting
or any adjournment thereof. Said proxies are directed to vote on the matters described in the
Notice of Annual Meeting of Shareholders and proxy statement as follows, and otherwise in their
discretion upon such other business as may properly come before the meeting or any adjournment
thereof.
Unless you are voting via the Internet or by telephone, please complete, date and sign this proxy
and return it promptly in the enclosed envelope, whether or not you plan to attend the annual
meeting on January 26, 2007. If you attend the annual meeting, you may vote in person if you wish,
even if you have previously returned your proxy or voted via the Internet or by telephone.
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR ITEM 1,
ITEM 2, ITEM 3 AND ITEM 4 AND IN THE DISCRETION OF THE PROXY HOLDERS WITH RESPECT TO ANY OTHER
MATTER.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Proxy card must be signed and dated on the reverse side.
(Continued on other side)
Telephone and Internet Voting Instructions
You can vote by telephone or the Internet. Available 24 hours a day 7 days a week.
Instead of mailing your proxy, you may choose one of the other two voting methods outlined below to vote your proxy.
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To vote using the Telephone (within U.S. and Canada)
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To vote using the Internet
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To vote by Mail |
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Call toll free 1-800-652-VOTE
(8683) in the United States or Canada any time on a touch-tone telephone.
There is NO CHARGE to you for the call.
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Go to the following web site:
WWW.COMPUTERSHARE.COM/EXPRESSVOTE
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Mark, sign and date the proxy card. |
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Follow the simple instructions provided by the recorded message.
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Enter the information requested on your computer
screen and follow the simple instructions.
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Return the proxy card in the
postage-paid envelope provided. |
VALIDATION DETAILS ARE LOCATED ON THE FRONT OF THIS FORM IN THE COLORED BAR.
If you vote by telephone or the Internet, please DO NOT mail back this proxy card.
Proxies submitted by telephone or the Internet must be received by 2:00 a.m., Eastern Time, on January 26, 2007.
THANK YOU FOR VOTING