Schedule 14A


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NameSchedule 14A
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Based upon performance of kraft paper business excluding the Charleston kraft division acquisition.
        EBITDA is defined as earnings excluding interest, income taxes, depreciation and amortization, extraordinary items and the cumulative effect of accounting changes. This non-GAAP EBITDA measure used is the same measure management uses internally to manage and to evaluate the business of the Company. The Committee believed that, based on the Company's budget, it would be difficult for executives to achieve payouts towards the high end of the EBITDA target payout levels. Nevertheless, in order to motivate the Named Executive Officers to significantly exceed budgeted performance, the Company provided an opportunity for them to share in the potential superior performance if it met these higher goals.
        For purposes of the annual incentive plan, EBITDA for 2008 was calculated at $ 52.5 million. Based on the foregoing, each of the Named Executive Officers was entitled to receive a payout of 45% of his or her potential bonus that was tied to achievement of the Company's EBITDA. However, at the request of Mr. Stone and Mr. Kaplan, the Committee did not award a bonus to either gentleman. Although Mr. Stone and Mr. Kaplan were satisfied with the Company's performance during 2008, each believed that the Company's operating and financial performance could have been better in 2008. The Committee accepted the request of Mr. Stone and Mr. Kaplan even though the Committee believed that a bonus payout was appropriate in light of the Company's financial performance.
        The Committee, after consultation with Mr. Stone, determined that Mr. Keneally was entitled to receive 80% and Ms. Tarbox was entitled to receive 92.5% of such executive's bonus potential tied to individual performance. However, due to cost containment measures suggested by Mr. Stone and adopted by the Committee, Mr. Keneally and Ms. Tarbox each received 70% of his/her bonus potential tied to individual performance.
Long-Term Incentive Compensation
        The Committee determines the awards of long-term compensation through equity incentives (in the form of stock options, restricted stock and restricted stock units) granted to executive officers as well as other eligible employees. The Committee believes that including an equity component in executive compensation closely aligns the interests of the executives and the Company's stockholders and rewards executives in line with stockholder gains. The practice of the Committee has been to consider annual equity grants to key employees, including the Named Executive Officers, at its regularly scheduled meeting in April. Option grants at other times depend upon circumstances, including, but not limited to, promotions or new hires.
        Equity awards are made under the 2006 Incentive Plan, which provides for the grant of non-qualified stock options, incentive stock options, restricted stock, restricted stock units and other stock-based awards. The Committee determined that it would be advisable to consider the award of restricted stock in combination with stock options in appropriate cases. This determination reflected the desire to maintain a strong long-term equity component in executive compensation, to reduce the number of equity units required to provide such component and to adjust compensation practices appropriately in light of Statement of Financial Accounting Standards No. 123R ("SFAS 123R"), which requires companies to recognize the compensation cost related to "share-based payment transactions,"
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like stock options, in their financial statements. To date, only non-qualified stock options, restricted stock units and restricted stock have been granted under the 2006 Incentive Plan.
        Equity grants made during 2008 to executive officers and senior management, including the Named Executive Officers, were determined by the Committee based upon the compensation objectives of the Committee, as discussed above, and informed by the evolving nature of executive compensation practices. In determining the size of the equity grants for the Named Executive Officers, the Committee made an evaluation of a number of factors, including: competitive market practices; the level of responsibility of the individual; the individual's job performance and ability to influence corporate results; and the cost to the Company under SFAS 123R and the related effect of equity grants on earnings per share dilution. During 2008, shares of restricted stock were awarded in a ratio of one share of restricted stock for each approximately three stock options awarded. This reflects the relationship between the value of restricted stock, which is based on the market value of the underlying Common Stock, and the SFAS 123R value of stock options (which is generally two or three to one), as well as the intent of delivering approximately the same economic value through the restricted stock component of the award as the stock option component.
        Stock options produce value for executives and employees only if the Common Stock price increases over the exercise price, which is set at the market price of the Common Stock on the date of grant, calculated as the closing price on the date of grant. Also, through vesting and forfeiture provisions, stock options create incentives for executive officers and senior management to remain with the Company. Stock options granted in 2008 to executive officers and senior management, including the Named Executive Officers, vest 50% on the second anniversary of the grant date and the remaining 50% on the third anniversary of the grant date.
        The restricted stock received by the Named Executive Officers and other members of senior management vest 100% on the third anniversary of the grant date.
        The specific grants to the Named Executive Officers are set forth below in the "Grants of Plan-Based Awards" table, and information regarding the equity awards held by the Named Executive Officers as of the end of 2008 is set forth below in the "Outstanding Equity Awards at December 31, 2008" table.
        On April 10, 2008, the Committee granted the following equity awards under the 2006 Incentive Plan to the Named Executive Officers:


 

 

 

 

 

 

 

 

Executive Officers

 

Stock Options

 

Restricted

Stock Units

 

Roger W. Stone

 

 

167,671

 

 

53,217

 

Matthew Kaplan

 

 

167,671

 

 

53,217

 

Timothy P. Keneally

 

 

60,548

 

 

19,217

 

Andrea K. Tarbox

 

 

60,548

 

 

19,217

 
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