JEFFERSON SMURFIT CORPORATION
8182 Maryland Avenue
St. Louis, MO 63105
March 19, 1997
Dear Stockholder:
You are cordially invited to attend our Company's 1997 Annual
Meeting of Stockholders, which will be held on Thursday, May 1,
1997, at 1:00 p.m. local time at the Stouffer Renaissance St. Louis
Hotel, 9801 Natural Bridge Road, St. Louis, Missouri 63134. The
formal Notice of Annual Meeting of Stockholders and Proxy Statement
accompanying this letter describe the business to be acted upon at
the meeting.
Your vote is important and your shares should be represented at
the meeting whether or not you are personally able to attend.
Accordingly, you are requested to mark, sign, date and return the
accompanying proxy promptly.
On behalf of the Board of Directors, thank you for your
continued support of Jefferson Smurfit Corporation.
Sincerely,
Michael W.J. Smurfit
Chairman of the Board
FRONT OF PROXY
This proxy will be voted "FOR" items 1 and 2 if no instruction to
the contrary is indicated. If any other business is presented at
the meeting, this proxy will be voted in accordance with the
recommendation of Management. Please date, sign and mail this
proxy in the enclosed envelope. No postage is required.
Dated________________________________, 1997
Please sign name or names exactly as
appearing on this proxy. If signing
as a representative, please include
capacity.
(OVER)
BACK OF PROXY
COMMON STOCKHOLDERS
PROXY
JEFFERSON SMURFIT CORPORATION
Annual Meeting May 1, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned stockholder of Jefferson Smurfit Corporation, a
Delaware corporation, appoints RICHARD W. GRAHAM, PATRICK J. MOORE
and MICHAEL E. TIERNEY, or any of them, with full power to act
alone, the true and lawful attorneys-in-fact of the undersigned,
with full power of substitution and revocation, to vote all shares
of stock of said Corporation which the undersigned is entitled to
vote at the Annual Meeting of its stockholders to be held at the
Stouffer Renaissance St. Louis Hotel, 9801 Natural Bridge Road, St.
Louis, Missouri 63134 , on May 1, 1997 at 1:00 p.m. and at any
adjournment thereof, with all powers the undersigned would possess
if personally present, as follows:
1. Election of Directors:
[ ] FOR all nominees listed below (except [ ] WITHHOLD
as marked to the contrary below) AUTHORITY
to vote for
all nominees
listed below
Donald P. Brennan, James S. Hoch, Michael W.J. Smurfit, James E. Terrill
INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the line below.
2. Ratification of the appointment of Ernst & Young LLP as
independent auditors for the Company for 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. On any other matter that may properly be submitted to a vote
of stockholders.
(YOU ARE REQUESTED TO COMPLETE, SIGN AND RETURN THIS PROXY PROMPTLY)
JEFFERSON SMURFIT CORPORATION
Notice of Annual Meeting of Stockholders
To Be Held on May 1, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of
Stockholders of Jefferson Smurfit Corporation, a Delaware
corporation (the "Company"), will be held on Thursday, May 1,
1997, at 1:00 p.m. local time at the Stouffer Renaissance St.
Louis Hotel, 9801 Natural Bridge Road, St. Louis, Missouri
63134 to act upon the following matters which are described
more fully in the accompanying Proxy Statement:
1. The election of four directors for terms of office
expiring at the annual meeting of stockholders in
2000;
2. The ratification of the appointment of Ernst & Young
LLP as independent auditors of the Company
for 1997; and
3. Such other business as may properly come before the
meeting and/or any adjournment thereof.
All stockholders of record at the close of business on
March 3, 1997 are entitled to notice of, and to vote at, the
Annual Meeting and/or any adjournment thereof.
The Board of Directors of the Company has authorized the
solicitation of proxies. Unless otherwise directed, the
proxies will be voted FOR the election of the nominees listed
in the attached Proxy Statement to be members of the Board of
Directors of the Company; FOR the ratification of the
appointment of independent auditors of the Company for 1997;
and, on any other business that may properly come before the
Annual Meeting, as the named proxies in their best judgment
shall decide.
Any stockholder submitting a proxy may revoke such proxy
at any time prior to its exercise by notifying Michael E.
Tierney, Secretary of the Company, in writing at 8182
Maryland Avenue, St. Louis, Missouri 63105, prior to the
Annual Meeting, and if you attend the Annual Meeting you may
revoke your proxy if previously submitted and vote in person
by notifying the Secretary of the Company at the Annual
Meeting.
By Order Of The Board Of Directors
Michael E. Tierney
Secretary
St. Louis, Missouri
March 19, 1997
JEFFERSON SMURFIT CORPORATION
Proxy Statement
For 1997 Annual Meeting of Stockholders
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of
Jefferson Smurfit Corporation, a Delaware corporation (the
"Company"), 8182 Maryland Avenue, St. Louis, Missouri 63105,
for use at the 1997 Annual Meeting of Stockholders to be held
on Thursday, May 1, 1997 (the "Annual Meeting"). The Board
of Directors of the Company urges that your proxy be executed
and returned promptly in the enclosed envelope. Any
stockholder submitting a proxy may revoke such proxy at any
time prior to its exercise by notifying Michael E. Tierney,
Secretary of the Company, in writing, prior to the Annual
Meeting. Any stockholder attending the Annual Meeting may
revoke his proxy and vote personally by notifying the
Secretary of the Company at the Annual Meeting. Only
stockholders of record at the close of business on March 3,
1997 will be entitled to notice of, and to vote at, the
Annual Meeting and/or any adjournment thereof. At the close
of business on March 3, 1997, the Company had 110,989,156
outstanding shares of common stock (the "Common Stock").
Each share of Common Stock entitles the holder thereof to one
vote.
If the accompanying proxy card is signed and returned,
the shares represented thereby will be voted in accordance
with the directions on the proxy card. Unless a stockholder
specifies otherwise therein, the proxy will be voted in favor
of the election of the four nominees named below to the Board
of Directors of the Company and in favor of ratifying the
appointment of Ernst & Young LLP as independent auditors for
the Company for 1997. The presence in person or by proxy of
a majority of the voting power represented by outstanding
shares of the Common Stock (55,494,579 shares) will
constitute a quorum for the transaction of business at the
Annual Meeting. Directors will be elected by a plurality of
the voting power represented at the meeting and ratification
of the appointment of independent auditors will be determined
by the affirmative vote of the majority of the voting power
represented and entitled to vote at the meeting. In the
election of directors, abstentions and broker non-votes will
not affect the outcome except in determining the presence of
a quorum and in the sense that they do not contribute to
reaching the number of votes required for approval. An
instruction to "abstain" from voting on the proposal to
ratify the appointment of independent auditors will be
treated as shares present and will have the same effect as a
vote against the proposal. Broker non-votes will not be
considered "entitled to vote" on the proposal to ratify the
appointment of independent auditors; therefore, broker non-
votes will have no effect on the number of affirmative votes
required to adopt such proposal.
As noted under the "Principal Stockholders" section
herein, as of the close of business on March 3, 1997, Smurfit
International B.V., an entity organized under the laws of The
Netherlands ("SIBV"), and certain of its subsidiaries were
the owner of approximately 46.5% of the outstanding Common
Stock and The Morgan Stanley Leveraged Equity Fund II, L.P.
("MSLEF II") and certain related entities (together, the
"MSLEF II Associated Entities") were the owner of
approximately 28.7% of the outstanding Common Stock. SIBV
and the MSLEF II Associated Entities, acting together, by
reason of their ownership of Common Stock (representing
approximately 75.2%, in the aggregate, of the outstanding
Common Stock), have sufficient votes, without any additional
votes, to elect the four nominees named herein, to ratify the
appointment of independent auditors and to approve or defeat
any other action or proposal to be taken or made at the
Annual Meeting which requires the approval of a plurality or
a majority of the votes represented by outstanding shares of
the Common Stock. SIBV and the MSLEF II Associated Entities,
which are parties to a Stockholders Agreement dated May 3,
1994 and amended January 13, 1997 (the "Stockholders
Agreement"), have advised the Company that they are obligated
to vote their respective shares of Common Stock FOR the four
nominees of the Board of Directors named herein, and that
they intend to vote their respective shares of stock FOR the
ratification of the appointment of independent auditors.
SIBV is an indirect wholly-owned subsidiary of Jefferson
Smurfit Group plc, a public corporation organized under the
laws of the Republic of Ireland ("JS Group"), which, through
its subsidiaries, is principally an integrated manufacturer
and converter of paper and board. MSLEF II is a Delaware
limited partnership investment fund formed to make
investments in industrial and other companies. See
"Principal Stockholders" and "Certain Transactions."
This Proxy Statement and the enclosed proxy card are
being mailed to the stockholders of the Company on or about
March 19, 1997.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists
of ten directors. The directors are classified into three
groups: four directors having terms expiring at the
forthcoming Annual Meeting; three directors having terms
expiring in 1998; and three directors having terms expiring
in 1999.
Set forth below is information concerning the four
nominees for directorships having terms expiring at the
forthcoming 1997 Annual Meeting. Donald P. Brennan, James S.
Hoch, Dr. Michael Smurfit and James E. Terrill are the
nominees of the Board of Directors of the Company to fill
these directorships. Such nominations were made pursuant to
the terms of the Stockholders Agreement. For purposes of the
Stockholders Agreement, Donald P. Brennan and James S. Hoch
have been designated as nominees by MSLEF II, and Dr. Michael
Smurfit and James E. Terrill have been designated as nominees
by SIBV. The Board of Directors of the Company recommends a
vote FOR these four nominees. If elected, each nominee will
serve until the annual election of directors for the year
2000 or until his successor is duly elected and qualified, or
until his earlier death, resignation or removal. Donald P.
Brennan, James S. Hoch, Dr. Michael Smurfit and James E.
Terrill are presently members of the Board of Directors of
the Company and have been approved unanimously by the Board
of Directors of the Company for re-election. If any of the
nominees are unavailable for election, an event which the
Board of Directors of the Company does not presently
anticipate, the persons named in the enclosed proxy intend to
vote the proxies solicited hereby FOR the election of such
other nominee or nominees, if any, as they may select in
accordance with the terms of the Stockholders Agreement.
Also set forth below is information concerning directors
whose terms are not expiring this year.
Nominees for Directors to be Elected at the 1997 Annual Meeting
Name and Year
First Elected
Director Principal Occupation and Other Information
Donald P. Brennan Mr. Brennan, 56, is an Advisory Director
1989 of Morgan Stanley & Co. Incorporated
("MS&Co"). He was a Managing Director
of MS&Co. from 1984 to February 1996,
responsible for MS&Co.'s Merchant
Banking Division. Mr. Brennan also
serves as a Director of Fort Howard
Corporation, ICT Group, Inc. and SITA
Telecommunications Holdings N.V.
James S. Hoch Mr. Hoch, 36, joined MS&Co. in 1986 and
1997 is a Principal in MS&Co.'s Merchant
Banking Division. He is a Vice
President of Morgan Stanley Capital
Partners III, Inc. ("MSCP III, Inc.")
and The Morgan Stanley Leveraged Equity
Fund, Inc. ("MSLEF"), which is the
general partner of MSLEF II. He also
serves as a Director of Kabelmedia
Holding GmbH, Nordic Aluminum, Inc.,
SITA Telecommunications Holdings N.V.
and Shuttleway.
Michael W.J. Smurfit Dr. Smurfit, 60, has been Chairman and
1989 Chief Executive Officer of JS Group
since 1977 and has been Chairman of
the Board of the Company since 1989.
He was Chief Executive Officer of the
Company prior to July 1990.
James E. Terrill Mr. Terrill, 63, was Chief Executive
1994 Officer from July 1996 to December 1996
and President and Chief Executive
Officer of the Company from February
1994 to July, 1996. He has been Vice
Chairman of the Board since February
1997. He served as Executive Vice
President - Operations of the Company
from August 1990 to February 1994. He
also served as President of SNC from
February 1986 to February 1993.
Members of the Board of Directors Continuing in Office with Terms
Expiring in 1998
Name and Year
First Elected
Director Principal Occupation and Other Information
Leigh J. Abramson Mr. Abramson, 28, joined MS&Co. in 1990
1997 and is a Senior Associate in MS&Co.'s
Merchant Banking Division. He is a
Vice President of MSCP III, Inc. and
MSLEF, which is the general partner of
MSLEF II. Mr. Abramson also serves as
a Director of Pagemart Wireless, Inc.,
Pagemart, Inc. and Silgan Holdings Inc.
Richard W. Graham Mr. Graham, 62, has been President and
1997 Chief Executive Officer of the Company
since January 1997. He was President
of the Company from July 1996 to
December 1996. He served as Senior
Vice President from February 1994 until
July 1996. Prior to that, he held
various positions in the Folding Carton
and Boxboard Mill Division, including
Vice President and General Manager from
February 1991 to January 1994.
G. Thompson Hutton Mr. Hutton, 41, has been President and
1994 Chief Executive Officer of Risk
Management Solutions, Inc., an
information services company based in
Menlo Park, California, since 1991.
Prior to that, he was a management
consultant with McKinsey & Company,
Inc. from 1986 to 1991. He also serves
as a Trustee of Colorado Outward Bound
School.
Members of the Board of Directors Continuing in Office with Terms
Expiring in 1999
Name and Year
First Elected
Director Principal Occupation and Other Information
Alan E. Goldberg Mr. Goldberg, 42, has been a Managing
1989 Director of MS&Co. since January 1988, is
co-head of MS&Co.'s Merchant Banking
Division and is a Vice Chairman of MSLEF,
which is the general partner of MSLEF II,
and of MSCP III, Inc. Mr. Goldberg also
serves as Director of CIMIC Holdings
Limited, Cat Limited, Hamilton Services
Limited, Amerin Corporation and Amerin
Guaranty Corporation, Direct Response
Corporation and several other companies,
which are also private.
Howard E. Kilroy Mr. Kilroy, 61, was Chief Operations
1989 Director of JS Group from 1978 until March
1995 and President of JS Group from
October 1986 until March 1995. He was a
member of the Supervisory Board of SIBV
from January 1978 to January 1992. He was
Senior Vice President of the Company for
over 5 years. He retired from his
executive positions with JS Group and the
Company at the end of March 1995, but
remains a Director of JS Group and the
Company. In addition, he is Governor
(Chairman) of Bank of Ireland and a
Director of CRH plc.
James R. Thompson Mr. Thompson, 60, is Chairman of the
1994 Executive Committee and a Partner of
Winston & Strawn, a law firm that
regularly represents the Company on
numerous matters. He served as Governor
of the State of Illinois from 1977 to
1991. Mr. Thompson also serves as a
Director of FMC Corporation, the Chicago
Board of Trade, International Advisory
Council of the Bank of Montreal, Prime
Retail, Inc., American National Can
Corporation, National Council on
Compensation Insurance, Hollinger
International, Inc., Union Pacific
Resources, Inc. and The Japan Society
(N.Y.).
BOARD AND BOARD COMMITTEE MEETINGS,
COMMITTEE FUNCTIONS AND COMPOSITION
Each non-employee director receives as compensation for
serving on the Board of Directors an annual fee of $35,000,
a fee of $2,000 for attendance at each meeting in excess of
four meetings per year and travel expenses in connection with
attendance at such meetings. Directors who are employees of
the Company do not receive any additional compensation by
reason of their membership on, or attendance at, meetings of
the Board. The Board of Directors held four meetings in
1996.
The Board of Directors has appointed an Audit Committee,
a Compensation Committee and an Appointment Committee. The
number of meetings held by these committees, their functions
and the members of the Board serving on such committees are
set forth below.
The Audit Committee is responsible for making
recommendations to the Board of Directors regarding the
independent auditors to be appointed for the Company, meeting
with the independent auditors, the Director of internal audit
and other corporate officers to review matters relating to
corporate financial reporting and accounting procedures and
policies, adequacy of financial, accounting and operating
controls and the scope of the audits of the independent
auditors and internal auditors and reviewing and reporting on
the results of such audits to the Board of Directors. The
members of the Audit Committee are Messrs. Abramson, Hutton,
Kilroy, and Thompson. The Audit Committee held two meetings
during 1996.
The Compensation Committee is responsible for
administering stock-based compensation programs (including
the Company's 1992 Stock Option Plan and the Management
Incentive Plan) for all participants in such programs and
determining other compensation (including fringe benefits) of
the Chief Financial Officer of the Company, officers and
employees of the Company who are directors of the Company
(other than the Chief Executive Officer) and all officers and
employees of the Company whose principal employer is JS Group
(including Dr. Smurfit). The Board of Directors is
responsible for approving awards under any nonstock-based
programs. The members of the Compensation Committee are
Messrs. Abramson, Brennan and Goldberg. The Compensation
Committee held one meeting during 1996.
The Appointment Committee is responsible for
determining the compensation (including fringe benefits but
excluding compensation awarded pursuant to executive
compensation programs) of those officers of the Company whose
compensation is not determined by the Compensation Committee.
The members of the Appointment Committee are Dr. Smurfit and
Messrs. Goldberg, Graham and Kilroy. Mr. Graham abstains
from votes concerning his own compensation. The Appointment
Committee held two meetings in 1996.
Nominations to the Board of Directors are made pursuant
to the terms of the Stockholders Agreement. See "Certain
Transactions - The Stockholders Agreement."
PRINCIPAL STOCKHOLDERS
Security Ownership of Certain Beneficial Owners
The table below sets forth certain information regarding
the beneficial ownership of the Common Stock by each person
who is known to the Company to be the beneficial owner of
more than 5% of the Company's voting stock as of March 3,
1997. Except as set forth below, the stockholders named
below have sole voting and investment power with respect to
all shares of Common Stock shown as being beneficially owned
by them.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name and Address of Beneficial Common
Beneficial Owner Ownership Stock
<S> <C> <C>
SIBV 51,638,462 46.5%
Smurfit International B.V.
Strawinskylaan 2001
Amsterdam 1077ZZ, The Netherlands
Attention: Rokin Corporate Services B.V.
MSLEF II Associated Entities 31,800,000 28.7%
c/o Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, NY 10020
Attention: Alan E. Goldberg
Mellon Bank, N.A., as Trustee for
First Plaza Group Trust <fn1> 5,000,000 4.5%
One Mellon Bank Center
Pittsburgh, PA 15258
<FN>
<fn1> Amounts shown exclude shares of Common Stock owned by
MSLEF II, of which First Plaza Group Trust is a limited
partner. If MSLEF II were to distribute its shares of
Common Stock to its partners, First Plaza Group Trust
would receive a number of shares based on its pro rata
ownership of MSLEF II.
</FN>
</TABLE>
Security Ownership of Management
The table below sets forth certain information regarding
the beneficial ownership of the Common Stock as of February
20, 1997 for (i) each of the directors and nominees for
director, (ii) each of the Named Executive Officers (as
defined below), and (iii) all directors and executive
officers of the Company as a group.
<TABLE>
Shares of Common Stock
Amount and
Nature of Percent
Beneficial of Common
Beneficial Owner Ownership<fn1><fn2> Stock<fn3>
<S> <C> <C>
Michael W.J. Smurfit<fn4> 117,700 0.1%
James E. Terrill<fn4> 47,913 --
Richard W. Graham<fn4> 47,730 --
Eric Priestley 157 --
John R. Funke 36,307 --
Patrick J. Moore 10,358 --
Howard E. Kilroy<fn4> 42,300 --
Leigh J. Abramson<fn5> 0 --
Donald P. Brennan<fn5> 0 --
Alan E. Goldberg<fn5> 0 --
James S. Hoch<fn5> 0 --
G. Thompson Hutton 0 --
James R. Thompson 510 --
All directors and
executive officers as
a group (29 persons)<fn4><fn5> 454,190 0.4%
__________
<FN>
<fn1> Shares shown as beneficially owned include the
number of shares of Common Stock that executive
officers have the right to acquire within 60 days
after February 20, 1997 pursuant to exercisable
options under the Company's 1992 Stock Option
Plan.
<fn2> Shares shown include the number of shares of
Common Stock held in the Company's Savings Plan,
which the executive officers have the right to
vote.
<fn3> Based upon a total of 110,989,156 shares of Common
Stock issued and outstanding.
<fn4> Excludes shares of Common Stock owned by JS Group.
Dr. Smurfit, Mr. Kilroy, Mr. Terrill and Mr.
Graham own 6.0%, 0.8% and less than 0.1% and 0.1%,
respectively, of the outstanding shares of JS
Group. Dr. Smurfit is an officer and a director
of JS Group and Mr. Kilroy is a director of JS
Group.
<fn5> Excludes shares of Common Stock owned by MSLEF II
Associated Entities.
</FN>
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and
noncash compensation for each of the last three fiscal
years awarded to or earned by the Chief Executive Officer of
the Company and the next five most highly compensated
executive officers of the Company (the "Named Executive
Officers") during 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Awards Payouts All Other
Annual Compensation Securities LTIP Compen-
Name and Principal 1997 Other Annual Underlying Payouts sation
Position Year Salary($) Bonus($) Bonus($)<fn1> Compensation($) Options(#) ($)<fn2> ($)<fn3>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael W.J. Smurfit, 1996 $ 834,000 $ 0 $ 0 $ 30,000 0 $ 0 $ 18,611
Chairman of the Board 1995 834,000 650,437 0 30,000 0 0 16,956
1994 834,000 299,084 0 30,000 0 1,964,088 11,922
James E. Terrill, 1996 900,000 0 0 84,689 250,000 0 45,075
Chief Executive Officer 1995 800,000 623,919 0 54,445 0 0 35,907
<fn4><fn5> 1994 678,333 251,029 1,000,000 52,471 319,000 346,604 26,235
Richard W. Graham, 1996 581,833 0 0 3,975 390,000 0 16,712
President <fn4> 1995 405,000 315,931 0 12,115 10,000 0 13,601
1994 378,667 110,876 475,000 9,270 9,000 173,302 9,937
Eric Priestley, 1996 312,500 1,000,000 0 25,246 250,000 0 0
Executive Vice President
and Cheif Operating
Officer<fn6>
Patrick J. Moore, Vice 1996 230,000 104,218 0 5,875 57,000 0 6,566
President and Chief 1995 200,000 64,494 0 3,089 0 0 5,095
Financial Officer 1994 150,000 53,792 250,000 0 23,000 86,651 4,413
John R. Funke, Vice 1996 332,000 0 0 30,499 0 0 15,376
President <fn7> 1995 315,000 245,632 0 28,753 0 0 12,663
1994 300,000 107,584 500,000 28,599 29,000 231,069 10,779
<FN>
<fn1> Amounts awarded in 1994 pursuant to the Company's
1994 Long-Term Incentive Plan. These
awards are not due and payable until
April 30, 1997 and may be subject to forfeiture if the
executive's employment is terminated,
other than for death or disability, prior to such date.
<fn2> Aggregate long-term incentive payment of
$7.67 million was made in 1994 prior to
consummation of the Company's initial
public offering of Common Stock on May 4, 1994 to a
number of the Company's and its affiliates'
officers, including the Named Executive Officers
and officers of JS Group and its affiliates.
These amounts represent deferred settlement
of the cancellation in 1992 of the Company's
1990 Long-Term Management Incentive Plan. The
amount paid to the officers of JS Group
and its affiliates (exclusive of Dr. Smurfit) was
$1.69 million.
<fn3> Amounts shown under "All Other Compensation" for
1996 include a $4,750 Company contribution
to the Company's Savings Plan for each Named
Executive Officer (other than Dr. Smurfit and
Mr. Priestley) and Company-paid split-dollar
term life insurance premiums for Dr. Smurfit
($18,611) and Messrs. Terrill ($40,325),
Graham ($11,962), Priestley ($0), Moore ($1,816)
and Funke ($7,804). Mr. Funke also had
reportable (above 120% of the applicable federal
long-term rate) earnings equal to $2,822
credited to his account under the Company's
Deferred Compensation Capital Enhancement Plan.
<fn4> Upon Mr. Terrill's retirement on December 31, 1996,
Mr. Terrill became Vice Chairman of the
Board of Directors and Mr. Graham became
President and Chief Executive Officer of the
Company. Previously, Mr. Terrill was Chief
Executive Officer and Mr. Graham was President
of the Company.
<fn5> On October 24, 1996, Mr. Terrill entered into
a Consulting Agreement (the "Agreement"),
effective January 1, 1997, to furnish
consultation and advisory services to the Board of
Directors of the Company, on a stand-by
basis, upon the request of the Board. The Agreement
provides for annual payments of $75,000
for a period of 10 years, beginning January 1, 1997.
<fn6> Pursuant to a letter dated August 1, 1996,
the Company has agreed to pay Mr. Priestley a
salary of $750,000 per year (pro rated for
1996) for a period of 2 years beginning on the
commencement date of his employment. Mr.
Priestley's employment arrangement can only be
terminated by the Company for cause or in
the event that Mr. Priestley quits, dies or
becomes permanently disabled. In addition,
pursuant to the letter, the Company paid Mr.
Priestley a one-time signing bonus of
$1,000,000, which amount was deferred pursuant to the
terms of the Company's Deferred Compensation Plan.
<fn7> Mr. Funke will retire as of May 1, 1997.
</FN>
</TABLE>
Option Grants in Last Fiscal Year -- The following table provides
information concerning stock options granted to the Named Executive
Officers during 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1996
Number of Potential Realizable Value
Securities % of Total at Annual Rates of
Underlying Options Granted Exercise or Stock Price Appreciation
Options to Employees Base Price Expiration for Option Term ($)<fn1>
Name Granted in Fiscal Year ($ Per Share) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Michael W.J. Smurfit 0 N/A N/A N/A N/A N/A
James E. Terrill 250,000 16.7% $13.00 10/23/08 $2,586,533 $ 6,949,892
Richard W. Graham 390,000 26.0% $13.00 10/23/08 $4,034,992 $10,841,832
Eric Priestley 250,000 16.7% $13.00 10/23/08 $2,586,533 $ 6,949,892
Patrick J. Moore 57,000 3.8% $13.00 10/23/08 $ 589,730 $ 1,584,575
John R. Funke 0 N/A N/A N/A N/A N/A
<FN>
<fn1> The dollar amounts under these columns are the result of calculations
at 5% and 10% rates, as set by the Securities and Exchange
Commission's executive compensation disclosure rules. Actual gains,
if any, on stock option exercises depend on future performance of the
Common Stock and overall stock market conditions. No assurance can be
made that the amounts reflected in these columns will be achieved.
</FN>
</TABLE>
As of December 31, 1996, there were 8,049,306 shares of Common Stock
reserved for issuance under the Company's 1992 Stock Option Plan, including
931,833 shares available for future grants.
Option Exercises and Year-End Value Table -- The following
table summarizes the exercise of options and the value of
options held by the Named Executive Officers as of the end of 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired on Value at January 1, 1997 (#) at January 1, 1997($)<fn1>
Name Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Michael W.J. Smurfit 0 N/A 102,600 / 923,400 $622,013 / $5,598,113
James E. Terrill 0 N/A 18,100 / 731,900 109,731 / 2,889,644
Richard W. Graham 0 N/A 9,100 / 490,900 55,169 / 1,722,956
Eric Priestley 0 N/A 0 / 250,000 0 / 765,625
Patrick J. Moore 0 N/A 4,500 / 120,500 27,281 / 502,031
John R. Funke 0 N/A 12,100 / 137,900 73,356 / 763,519
<FN>
<fn1> The closing market value of the Common Stock on
December 31, 1996 was $16.06 per share. On that
date, the exercise prices per share for outstanding
options held by the Named Executive Officers
ranged from $10.00 to $17.63.
</FN>
</TABLE>
Pension Plans
Salaried Employees' Pension Plan and Supplemental Income
Pension Plan
The Company and its subsidiaries maintain a non-
contributory pension plan for salaried employees (the
"Pension Plan") and a non-contributory supplemental income
pension plan (the "SIP") for certain key executive officers,
under which benefits are determined by final average earnings
and years of credited service and are offset by a certain
portion of social security benefits. Effective May 1, 1996,
the previous SIP plans (SIP I and SIP II) were merged into
the surviving SIP. The benefit formula was changed to 2.5%
of earnings times service up to 20 years, plus 1% of earnings
times service in excess of 20 years. For purposes of the
Pension Plan, final average earnings equals the participant's
average earnings for the five consecutive highest-paid
calendar years of the participant's last 10 years of service,
including overtime and certain bonuses, but excluding bonus
payments under the Management Incentive Plan, deferred or
acquisition bonuses, fringe benefits and certain other
compensation. For purposes of SIP, final average earnings
equals the participant's average earnings, including bonuses
under the Management Incentive Plan, for the five consecutive
highest-paid calendar years of the participant's last 10
years of service. SIP recognizes all years of credited
service.
The pension benefits for the Named Executive Officers can
be calculated pursuant to the following table, which shows
the total estimated single life annuity payments (prior to
adjustment for Social Security) that would be payable to the
Named Executive Officers participating in the Pension Plan
and the SIP after various years of service at selected
compensation levels. Payments under the SIP are an unsecured
liability of the Company.
<TABLE>
<CAPTION>
Renumeration Each year
Final Average in excess of
Earnings 5 years 10 years 15 years 20 years 20 years
<C> <C> <C> <C> <C> <C>
$ 200,000 $ 25,000 $ 50,000 $ 75,000 $ 100,000 *
400,000 50,000 100,000 150,000 200,000 *
600,000 75,000 150,000 225,000 300,000 *
800,000 100,000 200,000 300,000 400,000 *
1,000,000 125,000 250,000 375,000 500,000 *
1,200,000 150,000 300,000 450,000 600,000 *
1,400,000 175,000 350,000 525,000 700,000 *
1,600,000 200,000 400,000 600,000 800,000 *
1,800,000 225,000 450,000 675,000 900,000 *
2,000,000 250,000 500,000 750,000 1,000,000 *
*An additional 1% of earnings is accrued for each year in
excess of 20 years.
</TABLE>
Dr. Smurfit and Messrs. Terrill, Graham, Priestley, Moore
and Funke, participate in SIP and have 41, 25, 38, 1, 10 and
20 years of credited service, respectively. Current average
earnings as of December 31, 1996, for each of the Named
Executive Officers was as follows: Dr. Smurfit ($1,123,110);
Mr. Terrill ($896,575); Mr. Graham ($506,871); Mr. Priestley
($750,300); Mr. Moore ($231,831); and Mr. Funke ($414,458).
REPORT OF THE COMPENSATION COMMITTEE
AND APPOINTMENT COMMITTEE ON
EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any
of the Company's previous or future filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934
that might incorporate this Proxy Statement or future filings
with the Securities and Exchange Commission, in whole or in
part, the following report and the Performance Graph shall
not be deemed to be incorporated by reference into any such
filings.
The Compensation Committee (the "Committee") consists of
three members of the Company's Board of Directors who are not
employees of the Company and who have no interlocking
relationships requiring disclosure. The Appointment
Committee consists of four members of the Company's Board of
Directors, two of whom are current officers or employees of
the Company and one of whom is a former officer of the
Company (see below). These committees oversee the
administration of executive compensation programs and
determine the compensation of the executive officers,
including the Named Executive Officers. See "Board and Board
Committee Meetings, Committee Functions and Composition"
above for a description of the allocation of responsibilities
between these committees.
The goals of the Company's executive compensation program
are: to attract, retain and motivate qualified executives
with outstanding abilities; to tie a significant portion of
the overall compensation of executive officers to the
Company's profitability; and to seek to enhance the Company's
profitability by aligning the interests of executive officers
with those of the Company's stockholders.
In determining base salaries for each of the Named
Executive Officers, as well as other executive officers,
consideration is given to national and local salary surveys
and the results of an informal, internal review of salaries
paid to officers with comparable qualifications, experience
and responsibilities at other companies of similar size.
The Company's executive officers, as well as other key
employees of the Company, participate in an annual management
incentive plan (the "MIP"), with awards based upon the
attainment of pre-established individual goals and profit
targets for the Company.
Each fiscal year the Committee considers the desirability
of granting awards under the Company's 1992 Stock Option Plan
to executive officers, including the Named Executive
Officers. In determining the amount and nature of awards
under the Plan to executive officers other than the Chief
Executive Officer, the Committee takes into account the
respective scope of accountability, strategic and operational
goals, and anticipated performance requirements and
contributions of each executive officer. Stock options
awarded to the Chief Executive Officer are established
separately. The Committee believes that past grants of stock
options have successfully focused the Company's senior management on
building profitability and shareholder value.
Section 162(m) ("Section 162(m)") of the Internal Revenue
Code of 1986, as amended (the "Code"), generally limits to
$1,000,000 per person a publicly held corporation's federal
income tax deduction for compensation paid in any year to its
Chief Executive Officer and each of its four other highest
paid executive officers to the extent such compensation is
not "performance-based" within the meaning of Section 162(m).
Section 162(m) does not apply to the Company for the 1996 tax
year because the Company is not "publicly held" as defined
for this purpose in the Code. The Company has historically
set compensation and bonuses based upon performance, and the
Company intends to continue this practice. At such time as
Section 162(m) becomes applicable to the Company, the
committees will, in general, seek to qualify compensation
paid to its executive officers for deductibility under
Section 162(m) although the committees believe it is
appropriate to retain the flexibility to authorize payments
of compensation that may not qualify for deductibility if, in
the committees' judgment, it is in the Company's best
interest to do so.
CEO Compensation
Mr. Terrill's salary as the Chief Executive Officer was
set by the Appointment Committee. Mr. Terrill's salary was
based on an informal review of salaries paid to officers with
comparable qualifications, experience and responsibilities at
other companies of similar size. Based on this assessment,
the Chief Executive Officer was awarded a base salary for
1996 of $900,000. Pursuant to the terms of the MIP, he did
not receive a performance based incentive award for 1996.
Mr. Terrill was awarded 250,000 stock options in 1996 in
accordance with the general award policies described above.
The Appointment Committee undertakes the responsibility
for reviewing the salary level and the overall compensation
of the Chief Executive Officer based upon a periodic review
of peer group companies, the performance of the Company in
relation to its peers and the performance of the individual.
The evaluation recognizes the major role of the Chief
Executive Officer in strategic initiatives to be accomplished
by the Company, including cost savings measures instituted
under the tenure of the Chief Executive Officer; growth in
the market price for the Company's securities; and favorable
corporate developments for increased sales volume. Mr.
Terrill abstained from votes concerning his own compensation.
Submitted by the Compensation Committee and the
Appointment Committee of the Company's Board of Directors.
Compensation Committee Appointment Committee
D.P. Brennan M.W.J. Smurfit
A.E. Goldberg H.E. Kilroy
L.J. Abramson R.W. Graham
A.E. Goldberg
COMPENSATION/APPOINTMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Company's Compensation Committee (the
current members of which are Messrs. Abramson, Brennan and
Goldberg) was, during the year ended December 31, 1996, an
officer, former officer or employee of the Company or any of
its subsidiaries. With regard to the Appointment Committee
of the Company (the current members of which are Messrs.
Goldberg, Graham and Kilroy and Dr. Smurfit), Mr. Graham and
Dr. Smurfit are currently officers of the Company and Mr.
Kilroy is a former officer of the Company. No executive
officer of the Company served as a member of (i) the
compensation committee of another entity in which one of the
executive officers of such entity served on the Company's
Compensation or Appointment Committees, (ii) the Board of
Directors of another entity in which one of the executive
officers of such entity served on the Company's Compensation
or Appointment Committees, or (iii) the compensation
committee of another entity in which one of the executive
officers of such entity served as a member of the Company's
Board of Directors, during the year ended December 31, 1996.
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder
return on the Common Stock, the S&P 500 Index and an index of
a peer group of paper companies for the period from May 4,
1994, the date on which the Common Stock commenced trading on
the Nasdaq Stock Market, until December 31, 1996. The peer
group index comprises the following 11 medium to large sized
companies whose primary business is the manufacture and sale
of paper products: Chesapeake Corporation, Gaylord Container
Corporation, Georgia Pacific Corporation, International
Paper, Rock-Tenn Company, Sonoco Products Company, Stone
Container Corporation, Temple-Inland Inc., Union Camp
Corporation, Weyerhaeuser Company and Willamette Industries,
Inc. The graph assumes the value of an investment in the
Common Stock and each index was $100.00 at May 4, 1994 and
that all dividends were reinvested.
Cumulative Total Return
(from May 4, 1994 to December 31, 1996)
[PERFORMANCE GRAPH]
Jefferson Smurfit Corporation S&P 500 Index Peer Group
<TABLE>
<CAPTION>
May 4, December 31, December 31, December 31,
1994 1994 1995 1996
<S> <C> <C> <C> <C>
Jefferson Smurfit Corporation $100.00 $130.77 $ 73.08 $ 123.55
S&P 500 Index 100.00 105.91 145.71 179.16
Peer Group 100.00 109.21 116.41 129.79
</TABLE>
CERTAIN TRANSACTIONS
Net sales by the Company to JS Group, its subsidiaries and
its affiliates were $34 million for the year ended December
31, 1996. Net sales by JS Group, its subsidiaries and its
affiliates to the Company were $64 million for the year ended
December 31, 1996. Product sales to and purchases from JS
Group, its subsidiaries and its affiliates were consummated
on terms generally similar to those prevailing with unrelated
parties.
The Company provides certain subsidiaries and affiliates
of JS Group with general management and elective management
services under separate management services agreements. The
elective services provided include, but are not limited to,
management information services, accounting, tax and internal
auditing services, financial management and treasury
services, manufacturing and engineering services, research
and development services, employee benefit plan and
management services, purchasing services, transportation
services and marketing services. In consideration of general
management services, the Company is paid a negotiated fee,
which amounted to approximately $1 million for 1996. In
consideration for elective services provided in 1996, the
Company received reimbursements of approximately $4 million
in 1996. In addition, the Company paid JS Group and its
affiliates less than $1 million in 1996 for certain other
services.
In October 1991, an affiliate of JS Group completed a
rebuild of the No. 2 paperboard machine owned by it, located
in Jefferson Smurfit Corporation (U.S.)'s ("JSC (U.S.)")
Fernandina Beach, Florida paperboard mill (the "Fernandina
Mill"). Pursuant to the Fernandina Operating Agreement, JSC
(U.S.) operates and manages the machine, which is owned by a
subsidiary of SIBV. As compensation to JSC (U.S.) for its
services, the affiliate of JS Group agreed to reimburse JSC
(U.S.) for production and manufacturing costs directly
attributable to the No. 2 paperboard machine and to pay JSC
(U.S.) a portion of the indirect manufacturing, selling and
administrative costs incurred by JSC (U.S.) for the entire
Fernandina Mill. The compensation is determined by applying
various formulas and agreed upon amounts to the subject
costs. The amounts reimbursed to JSC (U.S.) totaled $54
million in 1996.
The Stockholders Agreement
Pursuant to the Stockholders Agreement among MSLEF II,
SIBV, the Company and certain other parties, SIBV and the MS
Holders (as defined in the Stockholders Agreement) shall vote
their shares of Common Stock subject to the Stockholders
Agreement to elect as directors of the Company a certain
number of individuals selected by SIBV and a certain number
of individuals selected by MSLEF II, with such numbers
varying, depending on the amount of Common Stock collectively
owned by the MS Holders, the amount of Common Stock owned by
SIBV and the magnitude of the Initial Return (as defined in
the Stockholders Agreement) received by the MS Holders on
their investment of Common Stock. Currently, the Company's
Board of Directors consists of five directors selected by
MSLEF II (one of whom is not affiliated with MSLEF II or the
Company) and five directors selected by SIBV (one of whom is
not affiliated with SIBV or the Company). Pursuant to the
Stockholders Agreement, SIBV and MSLEF II have agreed to
ensure the Board of Directors will consist of only ten
directors (unless they otherwise agree). Depending on the
amount of Common Stock collectively owned by the MS Holders
and the magnitude of the Initial Return received by the MS
Holders on their investment of Common Stock, approval of
certain specified actions of the Board shall require certain
approval as specified in the Stockholders Agreement.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
Upon the recommendation of the Company's Audit Committee,
Ernst & Young LLP, independent auditors of the Company since
July 1982, have been appointed by the Board of Directors of
the Company as independent auditors for the Company for the
fiscal year ending December 31, 1997. This selection is
being presented to the stockholders for ratification. The
Board of Directors of the Company recommends a vote FOR
ratification. The persons named on the enclosed proxy card intend to vote
the proxies solicited hereby FOR ratification unless
specifically directed otherwise on such proxy card.
Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and such representatives
are expected to be available to respond to appropriate
questions.
OTHER MATTERS
Management does not know of any other business which may
be considered at the Annual Meeting. However, if any
matters other than those referred to above should properly
come before the Annual Meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the
proxies held by them in accordance with their best judgment.
The entire expense associated with preparing, assembling
and mailing this Proxy Statement and with the solicitation of
proxies by the Board of Directors of the Company will be
borne by the Company. In addition to solicitation of proxies
by mail, the directors, officers and employees of the Company
may solicit proxies for use at the Annual Meeting by personal
interview, by telephone or by telegraph. Directors, officers
and other employees of the Company will receive no additional
compensation for soliciting such proxies for use at the
Annual Meeting. It is anticipated that the telephone and
telegraph charges so incurred will be minimal.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals submitted for inclusion in the proxy
statement for the 1998 Annual Meeting of Stockholders must be
received at the corporate offices of the Company, addressed
to the attention of Mr. Michael E. Tierney, Secretary,
Jefferson Smurfit Corporation, 8182 Maryland Avenue, St.
Louis, Missouri 63105 no later than December 1, 1997.
By Order Of The Board Of Directors
MICHAEL E. TIERNEY
Secretary
March 19, 1997