UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
|X| Filed by the Registrant
|_| Filed by a Party other than the Registrant
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
Buckeye Technologies Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Buckeye Technologies Inc.
P.O. Box 80407
1001 Tillman Street
Memphis, Tennessee 38108-0407
September 21, 2005
TO THE STOCKHOLDERS OF BUCKEYE TECHNOLOGIES INC.
You are cordially invited to attend the annual meeting of stockholders
of Buckeye Technologies Inc. to be held on Thursday, November 3, 2005 at 5:00
p.m., Central Time, at our headquarters, 1001 Tillman Street, Memphis,
Tennessee. At the meeting, you will be asked to consider the matters described
in the enclosed proxy statement.
In connection with the meeting, we are enclosing a notice of annual
meeting of stockholders, a proxy statement and a form of proxy. Please complete
the enclosed form of proxy so that your shares can be voted if you do not attend
the meeting. If you are present at the meeting and want to vote your shares
personally, your form of proxy will be withheld from voting upon your request
prior to balloting. Please return your proxy card to us in the enclosed,
postage-prepaid envelope at your earliest convenience, even if you plan to
attend the meeting. Also, registered and most beneficial stockholders may vote
by telephone or through the Internet. Instructions for using these convenient
services are explained on the enclosed proxy. Your vote is very important. I
urge you to vote your proxy as soon as possible.
Detailed information relating to Buckeye's activities and operating
performance during fiscal year 2005 is contained in our Annual Report, which is
being mailed to you with this proxy statement, but is not a part of the proxy
soliciting material. If you do not receive or have access to the 2005 Annual
Report, you may request a copy from Shirley Spears, Buckeye Technologies Inc.,
P.O. Box 80407, 1001 Tillman Street, Memphis, Tennessee 38108-0407, (901)
320-8125. It is also available on our Internet site at www.bkitech.com.
Very truly yours,
David B. Ferraro
Chairman and Chief Executive Officer
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Buckeye Technologies Inc.
P.O. Box 80407
1001 Tillman Street
Memphis, Tennessee 38108-0407
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 3, 2005
The regular annual meeting of stockholders of Buckeye Technologies Inc.
will be held on Thursday, November 3, 2005 at 5:00 p.m., Central Time, at our
headquarters, 1001 Tillman Street, Memphis, Tennessee, for the following
purposes:
1. Election of Directors. To elect three Class I directors to serve until
the 2008 annual meeting of stockholders;
2. Ratification of Auditors. To ratify the selection of Ernst & Young LLP
as Buckeye's independent auditors for fiscal year 2006; and
3. Other Business. To transact such other business as may properly come
before the meeting or any adjournment of the meeting.
Only those stockholders of record at the close of business on September 8,
2005 are entitled to notice of, and to vote at, the annual meeting and any
adjournment thereof. On that day, 37,587,664 shares of common stock were
outstanding. Each share entitles the holder to one vote.
This Proxy Statement is being sent, beginning approximately September 21,
2005, to all stockholders of record at the close of business on September 8,
2005, the record date fixed by our Board of Directors. We have enclosed with
this Proxy Statement a copy of our Annual Report. Although the Annual Report and
Proxy Statement are being mailed together, the Annual Report is not incorporated
into, and should not be deemed part of, this Proxy Statement.
By Order of the Board of Directors
Sheila Jordan Cunningham
Senior Vice President,
General Counsel and Corporate Secretary
September 21, 2005
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YOUR VOTE IS IMPORTANT
Please mark, sign and date your proxy card and return it promptly in the
enclosed envelope, whether or not you plan to attend the meeting.
Registered and most beneficial stockholders may also vote via telephone or
through the Internet.
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TABLE OF CONTENTS
Page No.
Information about the Annual Meeting................................................... 1
The Proposals ......................................................................... 4
Proposal 1 - Election of Directors................................................ 4
Information about the Board of Directors...................................... 6
Proposal 2 - Ratification of Appointment of Independent Auditors.................. 10
Report of the Audit Committee of the Board of Directors....................... 11
Audit Fees.................................................................... 12
Other Information...................................................................... 13
Buckeye Stock Ownership....................................................... 13
Certain Relationships and Related Transactions................................ 15
Executive Compensation................................................................. 15
Summary Compensation Table.................................................... 15
Options/SARs Granted in Last Fiscal Year...................................... 17
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values........................................................ 17
Equity Compensation Plan Information.......................................... 18
Compensation Committee Interlocks and Insider Participation................... 20
Report of the Compensation Committee on Executive Compensation................ 21
Performance Graph...................................................................... 23
Section 16(a) Beneficial Ownership Reporting Compliance................................ 24
Other Matters.......................................................................... 24
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Buckeye Technologies Inc.
P.O. Box 80407
1001 Tillman Street
Memphis, Tennessee 38108-0407
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
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Your vote is very important. Whether or not you plan to attend the
annual meeting, the Board of Directors requests that you sign, date and return
the enclosed proxy card, or vote by telephone or on the Internet at your
earliest convenience. This proxy statement, the form of proxy and the Annual
Report are being sent to you in connection with this request and are being
mailed to all stockholders beginning on or about September 21, 2005.
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Information about the Annual Meeting
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Date and Time of the Meeting
Thursday, November 3, 2005, 5:00 p.m., Central Time.
Location of the Meeting
Buckeye Technologies Inc., 1001 Tillman Street, Memphis, Tennessee.
Items to be Voted Upon by Stockholders
You will be voting on the following matters:
1. Election of Directors. To elect three Class I directors to serve
until the 2008 annual meeting of stockholders;
2. Ratification of Auditors. To ratify the selection of Ernst &
Young LLP as Buckeye's independent auditors for fiscal year 2006;
and
3. Other Business. To transact such other business as may properly
come before the meeting or any adjournment of the meeting.
Stockholders Entitled to Vote
You are entitled to vote your common stock if our records show that you
held your shares as of the close of business on the record date, September 8,
2005. Each stockholder is entitled to one vote for each share of common stock
held on that date. On September 8, 2005, there were 37,587,664 shares of common
stock outstanding and entitled to vote. A list of stockholders entitled to vote
on matters at the annual meeting will be available at Buckeye's headquarters
beginning on or about September 14, 2005.
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Voting by Proxy
You may choose one of the following ways to vote:
Vote by Internet: You can choose to vote your shares at any time using
the Internet site listed on your proxy card. This site will give you the
opportunity to make your selections and confirm that your instructions have been
followed. We have designed our Internet voting procedures to authenticate your
identity by use of a unique control number found on the enclosed proxy card. To
take advantage of the convenience of voting on the Internet, you must subscribe
to one of the various commercial services that offers access to the world wide
web. Costs normally associated with electronic access, such as usage and
telephone charges, will be borne by you. Buckeye does not charge any separate
fees for access to its Internet site. If you vote via the Internet, you do not
need to return your proxy card.
Vote by Telephone: You can also vote by telephone at any time by
calling the toll-free number (for residents of the U.S.) listed on your proxy
card. To vote, enter the control number listed on your proxy card and follow the
simple recorded instructions. If you vote by telephone, you do not need to
return your proxy card.
Vote by Mail: If you choose to vote by mail, simply mark your proxy
card, and then date, sign and return it to us, before the annual meeting, in the
postage pre-paid envelope provided. We will then vote your shares as you direct.
Stockholders who hold their shares beneficially in street name through
a nominee (such as a broker) may be able to vote by telephone or the Internet as
well as by mail. You should follow the instructions you receive from your
nominee to vote these shares.
For the election of directors, you may vote for (1) all of the
nominees, (2) none of the nominees, or (3) one or two of the nominees but not
the other(s). For each other item of business, you may vote "For" or "Against"
or you may "Abstain" from voting.
If you return your signed proxy card but do not specify how you want to
vote your shares, we will vote them
o "For" the election of our three nominees for director; and
o "For" the ratification of Ernst & Young LLP as our independent
auditors.
If any matters other than those set forth above are properly brought
before the annual meeting, the individuals named in your proxy card may vote
your shares in accordance with their best judgment.
Changing or Revoking a Proxy
You can change or revoke your proxy at any time before it is voted at
the annual meeting by:
(1) submitting another proxy in writing, by telephone or by the
Internet as of a more recent date than that of the proxy first
given;
(2) attending the annual meeting and voting in person; or
(3) sending written notice of revocation to our corporate secretary,
Sheila Jordan Cunningham.
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Votes Required
If a quorum is present at the annual meeting,
o the director nominees will be elected by a plurality of the votes
cast in person or by proxy at the meeting; and
o the approval of independent auditors and all other matters
submitted to the stockholders will require the affirmative vote
of a majority of the shares of common stock present or
represented by proxy at the meeting.
Quorum
A majority of the outstanding shares, present or represented by proxy,
constitutes a quorum. A quorum is necessary to conduct business at the annual
meeting. Under Delaware law, stockholders who abstain from voting on a proposal
are treated as present and entitled to vote at the annual meeting and therefore
have the effect of a vote against the proposal. If shares of common stock are
held in the name of a broker, the failure of the broker to vote the shares is
treated as if the beneficial owner of such shares failed to vote such shares.
Cost of Soliciting Proxies
We will pay the cost of preparing, printing and mailing material in
connection with this solicitation of proxies. In addition to solicitation by
mail, regular employees of Buckeye and paid solicitors may make solicitations
personally and by telephone or otherwise. We will, upon request, reimburse
brokerage firms, banks and others for their reasonable out-of-pocket expenses in
forwarding proxy material to beneficial owners of stock or otherwise in
connection with this solicitation of proxies.
Stockholder Proposals for the 2006 Annual Meeting of Stockholders
In accordance with Buckeye's bylaws, stockholders' proposals intended
to be presented at the 2006 annual meeting of stockholders must be received in
writing by the Secretary of Buckeye not fewer than 60 days nor more than 90 days
prior to the 2006 annual meeting (which is expected to be held in October or
November 2006), in the form set forth in the bylaws, for inclusion in the proxy
statement and form of proxy relating to that meeting.
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The Proposals
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Proposal 1 -- Election of Directors
The Board of Directors is divided into three classes, with each class
elected for a three-year term. The Board has nominated the following three
persons to serve as Class I Directors: George W. Bryan, R. Howard Cannon and
Katherine Buckman Gibson. We do not anticipate that any of these nominees will
be unavailable for election, but if such a situation arises, the proxy will be
voted in accordance with the best judgment of the named proxies unless you have
directed otherwise. The election of a director requires the affirmative vote of
a plurality of shares present or represented by proxy at the meeting. The
remaining members of the Board listed below will continue as members of the
Board until their respective terms expire, as indicated below.
Information about the three individuals nominated as directors and the
remaining members of the Board is provided below. Shares of common stock
represented by proxy cards returned to us will be voted for the nominees listed
below unless you specify otherwise.
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Nominees for Election as Class I Directors
(Terms expiring 2008)
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George W. Bryan, age 61, has been a director of Buckeye since April
2001. Mr. Bryan served as Chief Executive Officer of Sara Lee Foods from 1998
until his retirement in 2000 and as a Senior Vice President of the Sara Lee
Corporation between 1983 and 1998. Mr. Bryan is a director of Regions Financial
Corp.
R. Howard Cannon, age 43, has been a director of Buckeye since 1996.
Mr. Cannon resigned from service as an officer of Buckeye in April 2005 to
pursue other interests. From April 2003 to April 2005, he served as Senior Vice
President, Wood Cellulose. Mr. Cannon was Vice President, Nonwovens Sales from
August 2000 to April 2003 and was Manager, Corporate Strategy from November 1999
to August 2000. Before assuming a position with Buckeye, he was President of
Dryve, Inc., a company which at one time consisted of 33 dry cleaning
operations, a position he had held since 1987. He is co-trustee of the Cannon
Family Trust. R. Howard Cannon is the son of Robert E. Cannon.
Katherine Buckman Gibson, age 43, has been a director of Buckeye since
August 2004. Since April 2000 she has been Chairman of the Board of Bulab
Holdings, Inc., the parent company of Buckman Laboratories International, Inc.
From May 1993 to May 2001, she served as Secretary of Buckman Laboratories and
as Vice President-Legal from 1994 to 2001. She currently serves as Vice Chairman
of Buckman Laboratories.
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The Board of Directors recommends a vote "FOR" each of the nominees listed
above.
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Incumbent Directors -- Class II
(Terms expiring 2006)
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Red Cavaney, age 62, has been a director of Buckeye since 1996. Since
October 1997 he has served as President, Chief Executive Officer and Director of
the American Petroleum Institute. He was President, Chief Executive Officer and
a director of the American Plastics Council from 1994 to 1997 immediately
following service as President of the American Forest & Paper Association and
President of its predecessor, the American Paper Institute. He is a past
Chairman of the American Society of Association Executives.
John B. Crowe, age 58, has been a director of Buckeye since August
2004. Since April 2003 he has served as President and Chief Operating Officer of
Buckeye. He was Senior Vice President, Wood Cellulose from January 2001 to April
2003. He joined Buckeye in December 1997 and was Vice President, Wood Cellulose
from January 1998 to January 2001. Prior to joining Buckeye, he was Executive
Vice President and General Manager at Alabama River Pulp Co., Inc. and Alabama
Pine Pulp Co., Inc. from 1994 to 1997. He was Vice President and Site Manager of
Flint River Operations, a subsidiary of the Weyerhaeuser Company from 1992 to
1994. From 1979 to 1992, he served in numerous positions with the Procter &
Gamble Company.
David B. Ferraro, age 67, has been a director of Buckeye since March
1993. Since April 2003 he has served as Chairman of the Board and Chief
Executive Officer of Buckeye. From March 1993 to April 2003 he was President and
Chief Operating Officer of Buckeye. He was Manager of Strategic Planning of The
Procter & Gamble Company from 1991 through 1992. He served as President of
Buckeye Cellulose Corporation, then a subsidiary of Procter & Gamble, from 1989
through 1991, as its Executive Vice President and Manager of Commercial
Operations from 1987 through 1989, and as its Comptroller from 1973 through
1986.
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Incumbent Directors -- Class III
(Terms expiring 2007)
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Robert E. Cannon, age 75, has been a director of Buckeye since March
1993 and has been Presiding Director since April 2003. He retired from Buckeye
on June 30, 2003. From March 1993 until April 2003, he served as Chairman and
Chief Executive Officer of Buckeye. He served as Dean of the College of
Management, Policy and International Affairs at the Georgia Institute of
Technology from 1991 through 1992, and Senior Vice President of Procter & Gamble
from 1989 to 1991. He was Group Vice President - Industrial Products of Procter
& Gamble, which included the operations of Buckeye Cellulose Corporation, then a
subsidiary of Procter & Gamble, from 1981 to 1989. He was President of the
subsidiary from 1971 through 1981. Robert E. Cannon is the father of R. Howard
Cannon.
Henry F. Frigon, age 70, has been a director of Buckeye since 1996. He
has been a private investor and consultant since 1995. He previously served as
Executive Vice President - Corporate Development and Strategy and Chief
Financial Officer of Hallmark Cards, Inc. from 1991 to 1995 and as President and
Chief Executive Officer of BATUS Inc. from 1983 to 1991. Mr. Frigon is a
director of H&R Block Inc., Sypris Solutions Inc., Tuesday Morning Corporation
and Packaging Corporation of America.
Lewis E. Holland, age 63, was recently elected to serve as a director
of Buckeye effective September 13, 2005 due to the vacancy created by the
resignation of former director, Samuel M. Mencoff. Mr. Holland is, and has been
since November 2001, President of Henry Turley Company, a real estate company
specializing in development of urban communities. He previously served as Vice
Chairman and Chief Financial Officer and also head of ancillary businesses at
National Commerce Bancorporation, from 1994 until July 2001. From 1989 to 1994,
Mr. Holland was a partner with the accounting firm of Ernst & Young LLP where he
managed the Memphis audit staff.
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Other Executive Officers
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For additional information on Buckeye's executive officers, please
refer to the "Executive Officers of the Registrant" section of our annual report
on Form 10-K for the fiscal year ended June 30, 2005, which was filed with the
Securities and Exchange Commission, or the "SEC," on September 9, 2005.
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Information about the Board of Directors
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Role of the Board
Pursuant to Delaware law, our business, property and affairs are
managed under the direction of our Board of Directors. The Board has
responsibility for establishing broad corporate policies and for the overall
performance and direction of Buckeye Technologies Inc., but is not involved in
day-to-day operations. Members of the Board keep informed of our business by
participating in Board and committee meetings, by reviewing reports sent to them
regularly, and through discussions with our executive officers. Our Board has
determined that a majority of its members are "independent" as that term is
defined in the listing standards of the New York Stock Exchange. These
independent members are Mr. George W. Bryan, Mr. Red Cavaney, Mr. Henry F.
Frigon, Ms. Katherine Buckman Gibson and Mr. Lewis E. Holland.
Mr. Robert E. Cannon has been appointed by the Board to serve as
Presiding Director to chair meetings of the Board's executive sessions of
non-management directors. The non-management directors met in executive session
at least three times during fiscal year 2005. Issues of concern may be addressed
to Mr. Robert E. Cannon in written correspondence directed to him at our
corporate headquarters at 1001 Tillman Street, P.O. Box 80407, Memphis,
Tennessee 38108-0407.
Board Structure
Effective August 17, 2004, the size of our Board was increased from
seven to nine directors. Our Board is divided into three groups, Class I
Directors, Class II Directors, and Class III Directors. Each class of directors
is elected to serve a three-year term. This means that the Class I directors who
are elected at the 2005 meeting will serve until the 2008 annual meeting of
stockholders unless they resign or are removed.
2005 Board Meetings
Buckeye's Board of Directors met nine times (exclusive of committee
meetings) during fiscal year 2005, and no directors attended less than 75% of
the meetings held by the Board and by committees of which they were members.
We adopted a policy for attendance by the Board of Directors at our
stockholder annual meetings which encourages directors, if practicable and time
permitting, to attend our stockholder annual meetings. Three of our directors
attended our 2004 annual meeting.
Board Committees
The Board of Directors has an Audit Committee, a Compensation Committee
and a Nominating and Corporate Governance Committee.
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The Audit Committee for fiscal year 2006 consists of Messrs. Henry F.
Frigon (Chairman), Red Cavaney and Lewis E. Holland, all of whom are
independent, non-employee directors of Buckeye under the listing standards of
the New York Stock Exchange. While Mr. Frigon presently serves on audit
committees of four public companies, the Board has determined that such
simultaneous service would not impair his ability to effectively serve on
Buckeye's Audit Committee. For fiscal year 2005, Mr. Samuel M. Mencoff, who has
since resigned as a director effective September 13, 2005, served as a member of
the Audit Committee.
The Audit Committee met nine times during fiscal year 2005. A copy of
the Audit Committee charter is available on our website at www.bkitech.com. The
Audit Committee has the authority and responsibility to:
o hire one or more independent public accountants to audit our
books, records and financial statements and to review our systems
of accounting (including our systems of internal control);
o discuss with the independent accountants the results of the
annual audit and quarterly reviews;
o conduct periodic independent reviews of the systems of accounting
(including systems of internal control);
o make reports periodically to the Board with respect to its
findings; and
o undertake other activities described more fully in the section
called "Report of the Audit Committee of the Board of Directors."
The Compensation Committee for fiscal year 2006 consists of Messrs. Red
Cavaney (Chairman) and George W. Bryan and Ms. Katherine Buckman Gibson, all of
whom are independent non-employee directors of Buckeye under the listing
standards of the New York Stock Exchange. For fiscal year 2005, Mr. Samuel M.
Mencoff, who has since resigned as a director effective September 13, 2005,
served as Chairman of the Compensation Committee. The Compensation Committee met
four times during fiscal year 2005. The Compensation Committee is responsible
for evaluating, approving and administering the Company's compensation policies
and programs for its executive officers, as well as determining the salaries,
benefits and incentive compensation of the Chief Executive Officer and the Chief
Operating Officer. A copy of the Compensation Committee charter is available on
our website at www.bkitech.com. The responsibilities of the Compensation
Committee are described in more detail in the section called "Report of the
Compensation Committee on Executive Compensation."
The Nominating and Corporate Governance Committee for fiscal year 2006
consists of Messrs. George W. Bryan (Chairman) and Lewis E. Holland and Ms.
Katherine Buckman Gibson, all of whom are independent non-employee directors of
Buckeye under the listing standards of the New York Stock Exchange. For fiscal
year 2005, Mr. Red Cavaney served as a member of the Nominating and Corporate
Governance Committee. The Nominating and Corporate Governance Committee met four
times during fiscal year 2005. A copy of the Nominating and Corporate Governance
Committee charter is available on our website at www.bkitech.com. The Nominating
and Corporate Governance Committee has the authority and responsibility to:
o assist the Board by actively identifying individuals qualified to
become Board members;
o recommend to the Board the director nominees for election at the
next annual meeting of stockholders or for appointment to the
Board, as appropriate;
o monitor significant developments in the law and practice of
corporate governance and of the duties and responsibilities of
directors of public companies;
o lead the Board and each committee of the Board in its annual
performance self-evaluation, including establishing criteria to
be used in connection with such evaluation; and
o develop and recommend to the Board and administer the Corporate
Governance Guidelines of Buckeye, a copy of which is available on
our website at www.bkitech.com.
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The Committee will consider stockholder recommendations for nominees to
the Board. Nominations should be submitted to Mr. George W. Bryan, Chairman of
the Nominating and Corporate Governance Committee at our corporate headquarters
at P.O. Box 80407, 1001 Tillman Street, Memphis, Tennessee 38108-0407.
Stockholder recommendations should include the name of the candidate,
as well as relevant biographical information. The Committee will consider
candidates recommended by stockholders on the same basis as those candidates
recommended by the Committee. During the fiscal year ended June 30, 2005, the
Committee did not engage any third party to assist it in identifying or
evaluating nominees for election to the Board.
Director Compensation
Board Fees
Directors who are employees of Buckeye are not entitled to receive any
fees for serving as directors. However, non-employee directors receive annual
directors' fees in the amount of $40,000, payable in equal quarterly
installments.
In June 2005, the Non-Employee Directors Compensation Committee
considered changes to Buckeye's non-employee director compensation and retained
a compensation consultant, Mercer Human Resources Consulting, Atlanta, Georgia,
to evaluate and assess its compensation program for non-employee directors in
light of current market practices and recent tax developments in non-employee
director compensation. Based on the data provided by its consultant, effective
August 2, 2005, the Non-Employee Directors Compensation Committee considered and
approved the following new fee schedule to compensate non-employee directors for
their committee service and other additional duties:
Types of Compensation Amount
Board Retainer............................. $40,000 annually (payable in equal quarterly installments)
Board Meeting Fees......................... None
Committee Meeting Fees..................... None
Service Fees:
Presiding Director.................... $10,000 annually (payable in equal quarterly installments)
Audit Committee Chair................. $10,000 annually (payable in equal quarterly installments)
Audit Committee Member................ $ 5,000 annually (payable in equal quarterly installments)
Other Committee Chair................. $ 5,000 annually (payable in equal quarterly installments)
Other Committee Member................ $ 2,500 annually (payable in equal quarterly installments)
Deferred Compensation Plan for Non-Employee Directors
Pursuant to Buckeye's Deferred Compensation Plan for Non-Employee
Directors (the "Deferred Compensation Plan"), each non-employee director may
elect to receive payment of all or any part of his or her directors' fees in
shares of Buckeye common stock. Each non-employee director has the opportunity
to voluntarily defer receipt of his or her directors' fees pursuant to the
Deferred Compensation Plan into either an interest bearing account or a common
stock unit account. Amounts deferred into a common stock unit account are
payable in cash, in a lump sum payment or installment payments, in an amount
equal to the number of shares of common stock that could have been purchased on
the open market at the time of the deferral multiplied by the fair market value
of the common stock at the time of distribution.
Amended and Restated Formula Plan for Non-Employee Directors
Pursuant to Buckeye's Amended and Restated Formula Plan for
Non-Employee Directors (the "Formula Plan"), non-employee directors receive an
initial grant of an option to purchase 10,000 shares of common stock upon
election to the Board and a grant of an option to purchase 10,000 shares of
common stock on the date of each annual meeting of stockholders at which they
are reelected to the Board. The options are granted with an exercise price equal
to the fair market value of the common stock on the date of grant. Under the
Formula Plan, each option
8
that is issued on the date of an annual meeting becomes fully exercisable on the
first anniversary of its issuance or the next regularly scheduled annual meeting
of stockholders, whichever occurs first. Each option issued on a date other than
the date of an annual meeting of stockholders becomes fully exercisable on the
first anniversary of its issuance. Upon the termination of a non-employee
director's tenure as a result of death or disability, all unvested options
granted pursuant to the Formula Plan will vest and remain exercisable for one
year. Upon the termination of a non-employee director's tenure for any other
reason, all unvested options will expire immediately and vested options will
expire 90 days after the date of termination. No options may be granted under
the Formula Plan after May 15, 2006.
On October 28, 2004, Messrs. Bryan, R. E. Cannon, Cavaney, Frigon and
Mencoff and Ms. Buckman Gibson were each granted an option to purchase 10,000
shares of common stock at the fair market value on the date of grant. On
September 13, 2005, Mr. Holland was granted an option to acquire 10,000 shares
of common stock at the fair market value on the date of grant.
On June 7, 2005, the Compensation Committee and the Non-Employee
Directors Compensation Committee approved a proposal to accelerate the vesting
of all options with an exercise price greater than $8.32 that remained unvested
at June 30, 2005. Please see the section called "Report of the Compensation
Committee on Executive Compensation" for more detailed information regarding the
acceleration of vesting of options.
Other Benefits
All directors are reimbursed for out-of-pocket expenses related to
their service as directors.
Mr. Mencoff, who resigned as a director effective September 13, 2005,
has contractually agreed to assign to Madison Dearborn Partners, L.P., an entity
for which Mr. Mencoff's employer serves as general partner, all rights to
directors' fees and options, if any, to which he may have been entitled as a
director of Buckeye.
Stockholder Communications
Stockholders who wish to communicate with the Board of Directors may
direct any inquiries or comments to Mr. Robert E. Cannon, Presiding Director, at
our corporate headquarters at P.O. Box 80407, 1001 Tillman Street, Memphis,
Tennessee 38108-0407.
Code of Business Conduct and Ethics
The Buckeye Code of Business Conduct and Ethics is available on our
website at www.bkitech.com and will be provided in print without charge to any
stockholders who submit a request in writing to Shirley Spears, Buckeye
Technologies Inc., P. O. Box 80407, 1001 Tillman Street, Memphis, Tennessee
38108-0407. The Code applies to the members of our Board of Directors, our Chief
Executive Officer and our senior financial officers as well as all other
officers and employees. The Code provides that any waiver of the Code may be
made only by the Board. Any waiver in favor of a director or executive officer
will be publicly disclosed. We plan to disclose amendments to, and waivers from,
the Code on our website listed at the beginning of this paragraph.
9
--------------------------------------------------------------------------------
Proposal 2 -- Ratification of Appointment of Independent Auditors
--------------------------------------------------------------------------------
The Audit Committee has reappointed Ernst & Young LLP, independent
accountants, to audit and certify our financial statements for the fiscal year
ending June 30, 2006, subject to ratification by the stockholders. If the
appointment of Ernst & Young LLP is not ratified by the stockholders at the
annual meeting, the Audit Committee will reconsider its action and will appoint
auditors for the 2006 fiscal year without further stockholder action.
Furthermore, even if the appointment is ratified by stockholder action, the
Audit Committee may at any time in the future, in its discretion, reconsider the
appointment without submitting the matter to a vote of stockholders. A
representative of Ernst & Young LLP is expected to be present at the meeting,
will have the opportunity to make a statement and is expected to be available to
respond to appropriate questions. We are presenting this proposal to the
stockholders for ratification at the annual meeting.
Ratification of the selection of Ernst & Young LLP as Buckeye's
independent auditors requires the affirmative vote of the holders of a majority
of the shares of common stock represented at the annual meeting.
The Board of Directors recommends a vote "FOR" the ratification of the
appointment of Ernst & Young LLP as Buckeye's independent auditors for fiscal
year 2006.
10
--------------------------------------------------------------------------------
Report of the Audit Committee of the Board Of Directors
--------------------------------------------------------------------------------
The Audit Committee for fiscal year 2005 consisted of three directors,
Messrs. Henry F. Frigon (Chairman), Red Cavaney and Samuel M. Mencoff. Each
member meets the independence and qualification standards required by the New
York Stock Exchange. The Board of Directors determined that Messrs. Frigon and
Mencoff were "audit committee financial experts," as defined by SEC rules, for
fiscal year 2005. Effective as of September 13, 2005, Mr. Lewis E. Holland
joined the Audit Committee upon Mr. Mencoff's resignation. Mr. Holland meets the
independence and qualification standards required by the New York Stock
Exchange. The Board of Directors has determined that Mr. Frigon continues to be,
and Mr. Holland is, an "audit committee financial expert," as defined by SEC
rules. The Audit Committee operates in accordance with its written charter,
which was most recently revised in August 2004, a copy of which is available on
our website at www.bkitech.com.
The Audit Committee monitors and reviews the performance of the
independent auditors and the quality and integrity of Buckeye's internal
accounting, auditing and financial reporting practices.
The Audit Committee has obtained from the independent auditors, Ernst &
Young LLP, a formal written statement describing all relationships between the
auditors and Buckeye that might bear on the auditors' independence. This
statement conforms to Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees." The Audit Committee also has discussed with
the auditors any relationships that may impact their objectivity and
independence, and it has considered Buckeye's payment of fees to the auditors,
and the Audit Committee is satisfied that the auditors are independent of
Buckeye.
The Audit Committee has reviewed and discussed with management
Buckeye's audited financial statements for the year ended June 30, 2005. The
Audit Committee also has discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended
("Communication with Audit Committees"), and with and without management
present, discussed and reviewed the results of the independent auditors'
examination of Buckeye's financial statements. The Audit Committee also has
discussed with the independent auditors its evaluation of Buckeye's internal
controls and the overall quality of Buckeye's financial reporting.
Based upon the results of the inquiries and actions discussed above, in
reliance upon management and Ernst & Young LLP, and subject to the limitations
of its role, the Audit Committee recommended to the Board that Buckeye's audited
financial statements be included in its Annual Report on Form 10-K for the year
ended June 30, 2005, for filing with the SEC. The Audit Committee has also
recommended the reappointment, subject to stockholder approval, of the
independent auditors, Ernst & Young LLP.
Audit Committee
Henry F. Frigon, Chairman
Red Cavaney
Samuel M. Mencoff
11
--------------------------------------------------------------------------------
Audit Fees
--------------------------------------------------------------------------------
During fiscal year 2005, Ernst & Young LLP not only acted as
independent auditors for Buckeye and our subsidiaries (work related to auditing
the annual financial statements for fiscal year 2005 and reviewing the financial
statements included in our Forms 10-Q) but also rendered on our behalf other
services, including tax-related services and other accounting and auditing
services. The following table sets forth the aggregate fees billed by Ernst &
Young LLP for audit services related to the most recent two fiscal years and for
other services billed in the most recent two fiscal years.
Type of Service 2005 2004
--------------- ---- ----
Audit Fees (1) $ 1,608,781 $ 831,779
Audit-Related Fees (2) 26,340 58,963
Tax Fees (3) 142,138 179,750
All Other Fees (4) 3,639 15,963
---------- ----------
Total $1,780,898 $1,086,455
========== ==========
------------------
(1) Comprised of the audit of Buckeye's annual financial statements and
reviews of Buckeye's quarterly financial statements, as well as
statutory audits of Buckeye subsidiaries, attest services, consulting
regarding audit issues, comfort letters and consents to SEC filings.
(2) Comprised of Sarbanes-Oxley Act of 2002 Section 404 consulting fees.
(3) Comprised of services for tax compliance, tax return preparation, tax
advice and tax planning.
(4) Comprised of other miscellaneous services.
The Audit Committee establishes pre-approved services for which
Buckeye's management can engage Buckeye's auditors. The Audit Committee approved
100% of the services for audit fees, audit-related fees, tax fees and all other
fees. Any work in addition to these pre-approved services in a quarter requires
the advance approval of the Audit Committee. The Audit Committee considers
whether the provision of permitted non-audit services is compatible with
maintaining the independence of Ernst & Young LLP.
12
--------------------------------------------------------------------------------
Other Information
--------------------------------------------------------------------------------
Buckeye Stock Ownership
--------------------------------------------------------------------------------
The following table shows the number of shares of our common stock that
were beneficially owned as of September 8, 2005 by (A) each person known to own
more than 5% of Buckeye's shares; (B) each director of Buckeye and each of the
five most highly compensated executive officers; and (C) all directors and
executive officers of Buckeye as a group.
Amount and Nature of
Beneficial
Name Ownership (1) Percent of Class (1)
---------------------------------------------------------------- ------------------------------- ----------------------
(A) FMR Corp. (2)............................... 3,778,000 10.1
82 Devonshire Street
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc. (3).......... 3,339,800 8.9
100 E. Pratt Street
Baltimore, Maryland 21202
Dimensional Fund Advisors Inc. (4).......... 3,204,576 8.5
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
NewSouth Capital Management, Inc. (5)....... 3,004,665 8.0
1000 Ridgeway Loop Road, Suite 233
Memphis, Tennessee 38120-4023
(B) George W. Bryan (6)......................... 60,000 *
Robert E. Cannon (7)........................ 1,574,496 4.2
R. Howard Cannon (8)........................ 1,065,586 2.8
Red Cavaney (9)............................. 110,000 *
Christian G. Chavassieu (10)................ 96,900 *
John B. Crowe (11).......................... 278,254 *
Katherine Buckman Gibson (12)............... 20,000 *
David B. Ferraro (13)....................... 1,316,268 3.5
Henry F. Frigon (9)......................... 104,000 *
Lewis E. Holland............................ 0 *
Paul N. Horne (14).......................... 338,572 *
Kristopher J. Matula (15)................... 311,699 *
(C) All Directors and Executive Officers as a 6,535,310 17.4
group (17 persons) (16)
------------------------------
* Less than 1% of the issued and outstanding shares of common stock of Buckeye.
(1) Unless otherwise indicated, beneficial ownership consists of sole
voting and investing power based on 37,587,664 shares issued and
outstanding as of September 8, 2005. Options to purchase an aggregate
of 2,931,900 shares are exercisable or become exercisable within 60
days of September 8, 2005. Such shares
13
are deemed to be outstanding for the purpose of computing the
percentage of outstanding shares owned by each person to whom a
portion of such options relate but are not deemed to be outstanding
for the purpose of computing the percentage owned by any other person.
(2) FMR Corp. filed a Schedule 13F-HR with the SEC on August 15, 2005,
reporting that it had the sole power to dispose or to direct the
disposition of 3,778,000 shares, which constitutes more than 5% of
Buckeye's common stock.
(3) T. Rowe Price Associates, Inc. filed a Schedule 13F-HR with the SEC on
August 15, 2005, reporting that it had the sole power to dispose of or
direct the disposition of 3,339,800 shares, which constitutes more than
5% of Buckeye's common stock.
(4) Dimensional Fund Advisors Inc. filed a Schedule 13F-HR with the SEC on
July 21, 2005, reporting that it had the sole power to dispose of or
direct the disposition of 3,204,576 shares, which constitutes more than
5% of Buckeye's common stock.
(5) NewSouth Capital Management, Inc. filed a Schedule 13F-HR with the SEC
on August 11, 2005, reporting that it had the sole power to dispose of
or direct the disposition of 3,004,665 shares, which constitutes more
than 5% of Buckeye's common stock.
(6) Includes 50,000 shares issuable upon the exercise of options granted
under Buckeye's stock plan for non-employee directors.
(7) Includes 181,176 shares held by Kathryn Gracey Cannon, wife of Robert
E. Cannon, as to which Mr. Cannon disclaims beneficial ownership;
18,504 shares held in Buckeye's 401(k) and retirement plans; and
620,000 shares issuable upon the exercise of options.
(8) Includes 50,000 shares issuable upon the exercise of options. As of
September 8, 2005, also includes 1,014,410 shares held by the Cannon
Family Trust, R. Howard Cannon and Richard Prosser Guenther, Co-
Trustees.
(9) Includes 100,000 shares issuable upon the exercise of options granted
under Buckeye's stock option plan for non-employee directors.
(10) Includes 96,900 shares issuable upon exercise of options.
(11) Includes 6,910 shares held in Buckeye's 401(k) and retirement plans;
4,389 shares of restricted stock issued pursuant to Buckeye's
Restricted Stock Plan; and 259,200 shares issuable upon the exercise of
options.
(12) Includes 20,000 shares issuable upon exercise of options granted under
Buckeye's stock plan for non-employee directors.
(13) Includes 22,786 shares held in Buckeye's 401(k) and retirement plans;
29,174 shares of restricted stock issued pursuant to Buckeye's
Restricted Stock Plan; and 600,000 shares issuable upon the exercise of
options.
(14) Includes 1,787 shares held in Buckeye's 401(k) and retirement plans;
5,563 shares of restricted stock issued pursuant to Buckeye's
Restricted Stock Plan; and 145,000 shares issuable upon the exercise of
options.
(15) Includes 8,645 shares held in Buckeye's 401(k) and retirement plans;
4,588 shares of restricted stock issued pursuant to Buckeye's
Restricted Stock Plan; and 265,800 shares issuable upon the exercise of
options.
(16) Includes an aggregate of 2,931,900 shares issuable upon exercise of
options granted under the stock option plan for non-employee directors
and Buckeye's other stock option plans.
14
--------------------------------------------------------------------------------
Certain Relationships and Related Transactions
--------------------------------------------------------------------------------
R. Howard Cannon, a son of Presiding Director Robert E. Cannon, has
served as a director since 1996. From August 2000 to April 2005, he was an
employee of Buckeye. During fiscal year 2005, he received total compensation
from Buckeye of $201,692. Mr. R. Howard Cannon resigned from his position
effective April 1, 2005, but remains a member of the Board of Directors.
--------------------------------------------------------------------------------
Executive Compensation
--------------------------------------------------------------------------------
The following summary compensation table sets forth the annual salary,
bonus compensation and long-term incentive awards paid or accrued by Buckeye for
each of fiscal years 2005, 2004 and 2003 to or for the account of the Chief
Executive Officer and the four other most highly compensated executive officers
of Buckeye (the "named executive officers") for the fiscal year 2005.
--------------------------------------------------------------------------------
Summary Compensation Table
--------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation Awards
------------------------- ----------------------------
Securities
Restricted underlying All other
Fiscal Stock awards options/SARS compensation
Name and Position Year Salary($) Bonus($)(1) ($)(2) (#)(3) ($)(4)
----------------- ------ ----------- ----------- -------- ------------- -----------
David B. Ferraro.......... 2005 600,000 82,800 43,453 - 23,100
Chairman and Chief 2004 600,000 - 35,759 150,000 22,550
Executive Officer 2003 525,000 - 36,797 - 22,000
John B. Crowe............. 2005 400,000 55,200 17,550 - 11,450
President and Chief 2004 400,000 - 8,079 110,000 18,450
Operating Officer 2003 295,000 - 7,206 - 32,350
Christian G. Chavassieu (5). 2005 386,425 35,807 - 10,000 75,094
Senior Vice President, 2004 349,528 - - 12,000 67,567
Wood Cellulose 2003 307,417 - - - 56,113
Kristopher J. Matula...... 2005 325,000 40,788 11,177 - 15,650
Executive Vice President 2004 316,667 - 6,650 50,000 20,500
and Chief Financial Officer 2003 270,000 - 8,308 - 19,000
Paul N. Horne............. 2005 306,250 34,607 10,452 - 25,100
Senior Vice President, 2004 300,000 - 7,700 25,000 22,550
Cotton Cellulose 2003 270,000 - 10,153 - 22,000
--------------------------
15
(1) Buckeye has a broad-based bonus plan for most Buckeye employees,
including officers. Under this plan, participants may earn bonuses of
up to 15% of base salary depending upon the Company's business
performance measured against specific annual financial targets. No
bonuses were paid under this plan for fiscal years 2003 and 2004 due to
the Company's poor financial performance. For fiscal year 2005, Buckeye
paid bonuses equal to 3.8% of base salary to eligible employees,
including officers. Additionally, executive officers received
performance-based incentive payments under the At Risk Compensation
program.
(2) Pursuant to Buckeye's Restricted Stock Plan, awards of restricted stock
were awarded to the named executive officers during fiscal years 2005,
2004 and 2003 in the following amounts:
Mr. Ferraro, 4,016 shares, 3,780 shares, and 6,143 shares,
respectively;
Mr. Crowe, 1,622 shares, 854 shares, and 1,203 shares,
respectively;
Mr. Matula, 1,033 shares, 703 shares, and 1,387 shares,
respectively; and
Mr. Horne, 966 shares, 814 shares, and 1,695 shares, respectively.
The prices per share of $10.82 for fiscal year 2005, $9.46 for fiscal
year 2004 and $5.99 for fiscal year 2003 were based on the average
closing price of the common stock on the New York Stock Exchange for
the 20 business days prior to the date of grant. Although the
restricted stock may be voted by the recipient, the restricted stock
may not be sold, pledged or otherwise transferred before the
recipient's death, the recipient's approved retirement from Buckeye or
a change in control of Buckeye, and if the recipient should violate the
restrictions or otherwise leave Buckeye before an approved retirement
date, the restricted stock is subject to forfeiture. The aggregate
value of all restricted stock holdings by the named executive officers
at the end of fiscal year 2005 was:
Mr. Ferraro - $232,517 Mr. Matula - $36,566
Mr. Crowe - $34,980 Mr. Horne - $44,337
If dividends are paid to holders of common stock, holders of restricted
stock similarly will be eligible to receive dividends.
(3) In fiscal year 2005, pursuant to the 1995 Stock Option Plan for
Management Employees (the "1995 Stock Option Plan"), Mr. Chavassieu was
granted an option to purchase 10,000 shares of Buckeye common stock at
an exercise price per share of $10.64. The exercise price of options
granted pursuant to the 1995 Stock Option Plan to Messrs. Ferraro,
Crowe, Chavassieu, Matula and Horne during fiscal year 2004 was $10.77
per share. A portion of the options granted to Mr. Crowe during fiscal
year 2004 was granted pursuant to the 1995 Management Stock Option Plan
at an exercise price of $7.60 per share. No options were granted to the
named executive officers in fiscal year 2003. All outstanding options
vest periodically over a period of five years, except that optionees
who were over the age of 57 at the time of the option grant have
shorter vesting periods. On June 7, 2005, the Compensation Committee
approved the acceleration of vesting of all options with an exercise
price greater than $8.32 that remained unvested at June 30, 2005.
Please see the section called "Report of the Compensation Committee on
Executive Compensation" for more detailed information regarding the
acceleration of vesting of options. Options that have vested may be
exercised within a period of ten years from the date the options were
granted or such shorter periods as are defined in the option
subscription agreements between Buckeye and the optionees.
(4) For Messrs. Ferraro, Crowe, Matula and Horne, amounts for fiscal year
2005 consist of accruals under the Buckeye Retirement Plan (the
"Retirement Plan"), which is a defined contribution retirement plan
covering substantially all U.S. employees and, prior to July 1, 2004,
under the Buckeye Supplemental Retirement Plan which covers U.S.
officers with less than 20 years of service. Under the Retirement Plan,
Buckeye contributes 1% of the employee's gross compensation plus 1/2%
for each year of service up to a maximum of 11% of the employee's gross
compensation under the Retirement Plan. Effective July 1, 2004, the
Retirement Plan was amended to provide a company match for employees'
401(k) contributions. For each $1.00 that an employee contributes to
his or her 401(k), Buckeye will contribute $0.50 to the employee's
401(k), up to a maximum annual company contribution of $2,000 per
employee. Prior to July 1, 2004, the Supplemental Retirement Plan
accrued between 0.5% and 4% of the officer's gross compensation with
the combined annual benefit of the Retirement Plan and the Supplemental
Retirement Plan being capped at 11%. For Mr. Chavassieu, all other
compensation includes amounts contributed by Buckeye to pension plans
established by the Swiss government (in 2005 - $73,094; in 2004 -
$61,958; and in 2003 - $50,442) and tax return preparation fees paid by
Buckeye on Mr. Chavassieu's behalf (in 2005 - $2,000; in 2004 - $5,609;
and in 2003 - $5,671).
(5) Mr. Chavassieu is paid in Swiss francs (CHF), which were converted to
U.S. dollars (USD) using the average exchange rate for fiscal year 2005
of 0.8257 CHF/USD, fiscal year 2004 of 0.7684 CHF/USD, and fiscal year
2003 of 0.7089 CHF/USD. The average exchange rate is calculated by
taking the average of the average monthly exchange rates as supplied by
the Dresdner Bank in Germany.
16
--------------------------------------------------------------------------------
Options/SARs Granted in Last Fiscal Year
--------------------------------------------------------------------------------
The following table provides information regarding options granted to
the named executive officers in fiscal year 2005.
Percent of
Number of total Potential realizable
securities options value at assumed annual
underlying granted to Exercise or rates of stock price
options employees in base price Expiration appreciation for option
Name granted (#) fiscal year ($/stock) date term
---------------------------------------------------------------------------------------------------------------------
5% 10%
---------------------------
David B. Ferraro........ - - - - - -
John B. Crowe........... - - - - - -
Christian G. Chavassieu 10,000 33.3% 10.64 4/19/15 $66,914 $169,574
Kristopher J. Matula.... - - - - - -
Paul N. Horne........... - - - - - -
--------------------------------------------------------------------------------
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
--------------------------------------------------------------------------------
The following table discloses information regarding stock options held
at the end of or exercised in fiscal year 2005 for each of the named executive
officers as of June 30, 2005.
Shares Securities underlying Value of unexercised
acquired on Value unexercised options in-the-money options
Name exercise Realized (1) at June 30, 2005 at June 30, 2005 (2)
--------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
David B. Ferraro....... - - 600,000 - - -
John B. Crowe.......... - - 259,200 36,800 $ 7,200 $13,800
Christian G. Chavassieu 15,000 $67,610 96,900 - - -
Kristopher J. Matula... 135,000 $544,928 265,800 - - -
Paul N. Horne.......... 30,000 $82,460 145,000 - - -
-----------------
(1) Calculated based on the difference between the market price of the common
stock on the New York Stock Exchange on the date of exercise and the
exercise price of the relevant option multiplied by the number of shares
acquired.
(2) Based on $7.97 per share, the closing price on the New York Stock Exchange
as of June 30, 2005.
17
--------------------------------------------------------------------------------
Equity Compensation Plan Information
--------------------------------------------------------------------------------
Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under
Plan Category warrants and rights warrants and rights equity compensation plans
------------- ------------------------------------------------------------------------------
Equity compensation plans
approved by stockholders (1) 4,325,150 $13.74 109,200
Equity compensation plans not
approved by stockholders (2) 538,356(3) $11.97 911,644(4)
--------- ------------
Total 4,863,506 $13.56 1,020,844
========= =========
------------------
(1) Buckeye stockholders approved both the 1995 Incentive and Non-Qualified
Stock Option Plan and the 1995 Management Stock Option Plan.
(2) The Formula Plan and the Restricted Stock Plan were approved by the
unaffected members of the Board of Directors. See the descriptions below of
the Formula Plan and the Restricted Stock Plan.
(3) Shares subject to outstanding options issued under the Formula Plan.
(4) Includes 210,000 shares reserved for issuance under the Formula Plan and
701,644 shares reserved for issuance under the Restricted Stock Plan.
--------------------------------------------------------------------------------
The material terms of the Company's non-stockholder approved
equity-compensation plans are summarized below.
Formula Plan
------------
The Formula Plan was adopted by the Board of Directors, effective as of
May 15, 1996, to attract and retain the services of qualified persons who are
neither employees nor officers to serve as members of the Board of Directors.
The Formula Plan has not been approved by the Company's stockholders.
Shares Available Under the Plan. The Formula Plan was amended effective
as of October 19, 2000 to increase the number of shares of the Company's common
stock that may be granted under the plan to 700,000 shares.
Administration. The Formula Plan is administered by the Board of
Directors of the Company or a committee of the Board appointed by the Board to
administer the plan.
Awards. The Formula Plan provides for the grant of non-statutory stock
options only.
Eligibility. Non-statutory stock options may be granted to directors
who are not employees or officers of the Company.
Option Grants. Under the Formula Plan, each director who is not a
employee or officer of the Company receives a grant of a non-qualified option to
purchase 10,000 shares of the Company's common stock (i) on the date he or she
becomes a director of the Company if he or she becomes a director on a date
other than the date of the annual meeting of stockholders of the Company and
(ii) on the date of each annual meeting of stockholders of the Company at which
such non-employee director is newly elected or appointed to the Board of
Directors, reelected to the Board of Directors or continues his or her service
on the Board of Directors.
18
Terms of Options. The option exercise price per share of common stock
is 100% of the fair market value on the date the option is granted. Payment of
the option exercise price may be made in cash or shares of the Company's common
stock. Options granted on a date other than the date of an annual meeting of
stockholders of the Company vest on the one-year anniversary of the date of
grant. Options granted on the date of an annual meeting of the stockholders of
the Company vest on the one-year anniversary of the date of grant or, if
earlier, the date of the next annual meeting of stockholders of the Company. In
the event of the termination of the optionee's service as a director, his or her
options shall expire 90 days after the date of termination; provided, however,
that upon a director's termination due to death or disability all outstanding
grants of options will vest notwithstanding the original vesting schedule and
will expire on the first anniversary of the date of such termination. The term
of an option may not exceed ten years.
Change in Control. The Company will make such adjustments under the
Formula Plan as it deems appropriate and equitable in connection with any stock
dividend, stock split, merger, consolidation, reorganization, sale or other
similar corporate change of the Company. The Formula Plan provides for
acceleration of vesting of options in the event of a change in control in which
the successor does not agree to assume the options or grant substitute options.
Termination and Term of Plan. The Board or the committee appointed by
the Board to administer the Formula Plan has the discretion to amend the plan to
the fullest extent permitted under the Delaware General Corporation Law;
provided, however, that no amendment of the Formula Plan may materially and
adversely affect any right of a participant with respect to any outstanding
option granted under the plan without such participant's consent. No options may
be granted under the Formula Plan after May 15, 2006.
Restricted Stock Plan
---------------------
The Restricted Stock Plan was adopted by the Board of Directors,
effective as of July 1, 1995, to further the growth, development and financial
success of the Company by providing additional incentives for the purpose of
hiring and retaining key employees of the Company. The Restricted Stock Plan is
not required to be and has not been approved by the Company's stockholders.
Shares Available Under the Plan. As of September 8, 2005, the number of
shares of the Company's common stock that may be granted under the plan is
701,644 shares.
Administration. The Restricted Stock Plan is administered by the
Company.
Awards. The Restricted Stock Plan provides for the grant of shares of
the Company's common stock that are subject to certain conditions and
restrictions, which we refer to herein as "restricted stock".
Eligibility. The Chief Executive Officer and President of the Company,
and members of a select group of management and highly compensated employees who
are selected by the Chief Executive Officer, are eligible to participant in the
Restricted Stock Plan.
Restricted Stock Grants. Under the Restricted Stock Plan, the Chief
Executive Officer may make grants of restricted stock to a participant on a
one-time or recurring basis. The Chief Executive Officer and the President of
the Company and such other participants as are designated by the Chief Executive
Officer receive annual grants of restricted stock equal in value to the
difference between (i) the employer-provided contribution, if any, which would
have been allocated to the individual for such fiscal year under the Buckeye
Retirement Plan, if the statutory limitations of Sections 401(a)(17) and 415 of
the Code did not apply and (ii) the actual employer-provided allocation to such
participant's accounts under such plan. Prior to December 2004, in the case of a
participant who is also a participant in the Company's Supplemental Retirement
Plan and who would otherwise receive the benefit described in the preceding
sentence, such individual will instead receive an annual grant of restricted
stock equal in value to the difference between (x) the employer-provided
contribution, if any, which would have been allocated to the individual for such
fiscal year under the Buckeye Retirement Plan, if the individual were credited
with the number of additional years of service actually taken into account under
such plan for such fiscal year and if the statutory limitations of Sections
401(a)(17) and 415 of the Code did not apply and (y) the sum of the actual
employer provided allocation to the
19
individual's accounts under the Buckeye Retirement Plan and the actual
allocation to the individual's bookkeeping account under the Company's
Supplemental Retirement Plan. The Supplemental Retirement Plan was terminated in
December 2004.
Terms of Restricted Stock. The value of a grant of restricted stock is
determined by calculating the average closing price per share of the common
stock of the Company for the most recent twenty business days prior to the date
of grant. Upon the grant of restricted stock, a participant will have the right
to dividends with respect thereto, the right to vote the restricted stock and
the right to transfer the restricted stock to immediate family members.
Restricted stock vests upon the earlier to occur of the following: (i) the death
of the participant, (ii) the termination of the participant's employment by
reason of permanent disability, (iii) the voluntary termination of the
participant's employment at or after the attainment of age 55 with the approval
of the Chief Executive Officer, (iv) the participant's retirement from the
Company at or after age 62 or (v) upon a change in control of the Company. Upon
a participant's termination of employment with the Company prior to vesting or
violation of the restrictions placed on the restricted stock, the participant's
unvested grants of restricted stock will be forfeited to the Company.
Termination and Term of Plan. The Company may modify, alter, amend or
terminate the Restricted Stock Plan at any time by action of the Board of
Directors of the Company.
--------------------------------------------------------------------------------
Compensation Committee Interlocks and Insider Participation
--------------------------------------------------------------------------------
The Compensation Committee for fiscal year 2005 consisted of Messrs.
Samuel M. Mencoff (Chairman), George W. Bryan and Ms. Katherine Buckman Gibson,
all of whom were independent directors. Effective as of September 13, 2005, Mr.
Red Cavaney joined the Compensation Committee upon Mr. Mencoff's resignation.
For fiscal year 2006, the Compensation Committee is composed of Messrs. Cavaney
(Chairman) and Bryan and Ms. Gibson, all of whom are independent directors. No
executive officer serves as a member of the board of directors or compensation
committee of any other company that has one or more executive officers serving
as a member of our board of directors or compensation committee. No director who
also serves as an executive officer participated in deliberations regarding his
own compensation.
20
--------------------------------------------------------------------------------
Report of the Compensation Committee on Executive Compensation
--------------------------------------------------------------------------------
The Compensation Committee of the Board is comprised of three
non-employee directors who are independent as defined by the listing standards
of the New York Stock Exchange. The Compensation Committee operates in
accordance with its written charter, a copy of which is available on our website
at www.bkitech.com. The Compensation Committee is responsible for evaluating,
approving and administering the Company's compensation policies and programs for
its executive officers. The Committee reviews and approves corporate goals and
objectives relevant to the compensation of the Company's Chief Executive Officer
and Chief Operating Officer, evaluates their performance in light of those goals
and objectives and determines their compensation levels based on this
evaluation.
In the spring of 2005, the Compensation Committee engaged Mercer Human
Resources Consulting to review its executive compensation program, compile data
for comparable companies for Committee comparison and review and provide
recommendations for maintaining and improving the competitiveness of
compensation and the alignment of executive pay and business performance.
This report of the Compensation Committee describes the components of
Buckeye's executive officer compensation programs and describes the basis upon
which compensation is awarded to the executive officers of Buckeye.
This Compensation Committee report will not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that Buckeye specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under these Acts.
Compensation Philosophy and Structure
Total compensation levels are designed to attract, retain and reward
executives who contribute to Buckeye's long-term success and the creation of
stockholder value. Compensation for Buckeye executives is comprised of three
principal components: salary and benefits, annual at risk performance-based
incentive compensation, and long-term equity-based incentive compensation. The
Compensation Committee believes that executive compensation should be materially
influenced by Buckeye's financial performance and, as such, the Committee has
approved an executive compensation program that places a significant portion of
executive compensation "at risk" dependent upon the Company's and each
individual's performance against clearly established qualitative and
quantitative performance criteria. Buckeye includes an equity-based component in
total compensation because Buckeye believes that equity-based compensation
aligns the long-term interests of executives with those of stockholders.
Buckeye seeks to provide salary and benefit levels that are comparable
to those of companies that perform similarly. Salary targets are established for
various officer positions based on surveys of relevant industries conducted by
an outside compensation consultant. Utilizing these targets, individual salaries
are established to reflect the officer's performance in meeting Buckeye's
objectives.
Executive Compensation Components
Annual Salary. The Company periodically participates in surveys of
salaries and overall compensation. In the spring of 2005 the Company engaged
Mercer Human Resources Consulting to review executive salaries, benefits and
equity compensation and evaluate the compensation levels of the Buckeye's
executives. The consultant compared Buckeye's salary and compensation packages
with those of similarly situated manufacturing companies using compensation
surveys and data published in 2005 proxy statements.
21
Performance-Based Incentives. Buckeye has a broad-based profit sharing
plan for Buckeye employees, and under this plan, bonuses of up to 15% of base
salary are achievable depending upon Buckeye's business performance measured
against specific annual financial targets. Additionally, Buckeye has an At Risk
Compensation program ("ARC") for executive officers and certain other employees.
ARC participants are eligible to receive payments based on Buckeye's business
performance and the individual's role in contributing to the success of Buckeye.
Because of its poor financial performance in the 2003 and 2004 fiscal years,
Buckeye paid no bonuses in those years under either the broad-based profit
sharing plan or under the ARC program. For the 2005 fiscal year, Buckeye paid
bonuses of 3.8% of base salary to eligible participants, including officers,
based on Buckeye achieving certain financial objectives. Additionally, for 2005
fiscal year, Buckeye made payments under the ARC program to officers and certain
other employees based on Buckeye's business performance and the individual's
role in contributing to Buckeye's success.
Long-Term Incentives. From time to time, Buckeye makes long-term
incentive awards to officers and certain other employees of (1) incentive and
non-qualified stock options from stock option plans previously approved by the
stockholders and (2) restricted stock from treasury shares of common stock set
aside by Buckeye pursuant to the Restricted Stock Plan approved by the Board of
Directors. The purpose of these awards is to focus the participant's attention
on the long-term performance of the business and to strengthen the alignment of
stockholder and employee interests in share price appreciation. Restricted stock
has been issued to certain Buckeye officers under the Restricted Stock Plan, at
the fair market value of the common stock based on the average closing price on
the New York Stock Exchange for the 20 business days prior to the date of grant,
as a supplemental retirement benefit to partially offset the loss of benefits
under Buckeye's defined contribution plans resulting from the cap on wages
required by applicable rules and regulations.
On June 7, 2005, the Compensation Committee approved the acceleration
of vesting of all options to purchase shares of common stock of Buckeye
Technologies Inc. with an exercise price greater than $8.32 that remained
unvested at June 30, 2005. The acceleration of vesting of these out-of-the money
options was undertaken primarily to eliminate any future compensation expense
Buckeye would otherwise recognize in its income statement with respect to these
options with the implementation of the Financial Accounting Standard Board
statement "Stock-Based Payment" (FAS 123R) effective July 1, 2005. These options
were previously awarded to non-employee directors, executive officers, and other
employees under Buckeye's Amended and Restated 1995 Incentive and Nonqualified
Stock Option Plan for Management Employees and Buckeye's Amended and Restated
Formula Plan for Non-Employee Directors.
Chief Executive Officer and Chief Operating Officer
Policies with respect to the compensation of the Chief Executive
Officer and the Chief Operating Officer are essentially the same as those for
other officers described in this report, except that their compensation,
including the criteria used for determining their ARC, is directly established
by the Compensation Committee. The salary and bonus compensation of the Chief
Executive Officer and the Chief Operating Officer for fiscal year 2005 reflect
Buckeye's overall performance during the period. Based on Buckeye's poor
financial performance for fiscal years 2003 and 2004, the Compensation Committee
did not award any ARC payment to the Chief Executive Officer or the Chief
Operating Officer with respect to those fiscal years. Given Buckeye's improved
performance for fiscal year 2005, the Compensation Committee granted the Chief
Executive Officer and the Chief Operating Officer ARC payments equal to 10% of
their fiscal year 2005 base salary in consideration of their contributions to
Buckeye's performance.
Impact of Internal Revenue Code Section 162(m)
Under the Omnibus Budget Reconciliation Act of 1993, provisions were added
to the Internal Revenue Code under Section 162(m) that limit the tax deduction
for compensation expense in excess of one million dollars paid to each of
certain executive officers. The Compensation Committee's current policy is that
the amount of compensation subject to the deductibility limit under Section
162(m), including annual salary, bonus and other non-performance-based
compensation, that is payable to each of Buckeye's named executive officers
should be less than one million dollars.
22
Conclusion
Attracting and retaining talented and motivated executives is essential
to create long-term stockholder value. The Compensation Committee believes that
the compensation levels of Buckeye's executive officers are competitive and help
to achieve this objective by aligning the interests of executives with those of
stockholders. The Committee intends to continue to foster executive compensation
policies and programs that are designed to motivate executive officers to
contribute the Company's overall future success and enhance the value of the
Company for its stockholders.
Compensation Committee
Samuel M. Mencoff, Chairman
George W. Bryan
Katherine Buckman Gibson
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Performance Graph
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The following graph compares the cumulative total stockholder returns
from June 30, 2000 through June 30, 2005 with returns based on the S&P 500 Index
and the New York Stock Exchange (NYSE) listed Paper and Allied Products
companies (SIC 2600-2699 U.S. and foreign companies). The graph assumes $100
invested on June 30, 2000, and the reinvestment of any dividends paid on account
of the investments.
[THE FOLLOWING DATA WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
-------------------------------------------------------------------------------
Jun-00 June-01 June-02 June-03 June-04 June-05
-------------------------------------------------------------------------------
Buckeye Technologies Inc $100 $66 $45 $31 $52 $36
-------------------------------------------------------------------------------
S&P 500(R) $100 $85 $70 $70 $83 $89
-------------------------------------------------------------------------------
Custom Composite Index $100 $118 $138 $126 $164 $153
-------------------------------------------------------------------------------
Custom Composite Idex is comprised of NYSE Stocks (SIC 2600-2699 US + Foreign)-
Paper and allied products
23
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Section 16(a) Beneficial Ownership Reporting Compliance
--------------------------------------------------------------------------------
The federal securities laws require Buckeye's directors and executive
officers, and persons who beneficially own more than 10% of a registered class
of Buckeye's equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of any securities of Buckeye. To
Buckeye's knowledge, based solely on review of the copies of such reports
furnished to Buckeye and representations by certain reporting persons, all of
Buckeye's officers, directors and greater than 10% beneficial owners made all
filings required in a timely manner.
--------------------------------------------------------------------------------
Other Matters
--------------------------------------------------------------------------------
The Board of Directors knows of no matters other than those discussed
in this proxy statement which will be presented at the 2005 annual meeting of
stockholders. However, if any other matters are properly brought before the
meeting, any proxy given pursuant to this solicitation will be voted in
accordance with the recommendations of management.
Upon the written request of any record holder or beneficial owner of
common stock entitled to vote at the annual meeting, we will provide, without
charge, a copy of our Annual Report on Form 10-K for the year ended June 30,
2005. Requests should be directed to Shirley Spears, Buckeye Technologies Inc.,
P.O. Box 80407, 1001 Tillman Street, Memphis, Tennessee 38108-0407, (901)
320-8125.
BY ORDER OF THE BOARD OF DIRECTORS
Sheila Jordan Cunningham
Senior Vice President,
General Counsel and Corporate Secretary
Memphis, Tennessee
September 21, 2005
24
Buckeye Technologies Inc.
Annual Meeting of Stockholders
November 3, 2005
5:00 p.m. Central Time
THERE ARE THREE WAYS TO VOTE YOUR PROXY
INTERNET VOTING TELEPHONE VOTING VOTING BY MAIL
Visit the Internet voting This method of voting is Simply mark, sign and date your
website at available for residents of the Proxy Card and return it in the
http://proxy.georgeson.com. U.S. and Canada. On a touch tone postage-paid envelope. Any
Enter the COMPANY NUMBER and telephone, call TOLL FREE mailed Proxy Card must be
CONTROL NUMBER shown below and 1-877-260-0388, 24 hours a day, received prior to the vote at
follow the instructions on your 7 days a week. You will be asked the meeting. If you are voting
screen.You will incur only your to enter ONLY the CONTROL NUMBER by telephone or the Internet,
usual Internet charges. shown below. Have your Proxy please do not mail your card.
Available until 5:00 p.m. Card ready, then follow the
Eastern Time on Wednesday, prerecorded instructions. Your
November 2, 2005. vote will be confirmed and cast
as you directed. Available until
5:00 p.m. Eastern Time on
Wednesday, November 2, 2005.
-------------- ---------------
COMPANY NUMBER CONTROL NUMBER
-------------- ---------------
PLEASE DETACH PROXY HERE
--------------------------------------------------------------------------------
-- Please mark
x votes as in
-- this example.
ELECTION OF DIRECTORS FOR WITHHELD RATIFICATION OF APPOINTMENT OF FOR AGAINST ABSTAIN
(terms expiring in 2008) ----- ----- ERNST & YOUNG AS INDEPENDENT ----- ----- -----
Nominees: George W. Bryan AUDITORS.
R. Howard Cannon ----- ----- ----- ----- -----
Katherine Buckman Gibson
Exceptions:
----------------------------------------
For all nominees except as noted above.
Signed:
---------------------------------------------
Signed:
---------------------------------------------
Stockholder should sign here exactly as shown on the
label affixed hereto. Administrator, Trustee, or
Guardian, please give full title. If more than one
Trustee, all should sign.All Joint Owners should sign.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE TO:
Georgeson Shareholder
Wall Street Station
P.O. Box 1101
New York, NY 10269-0666
PLEASE DETACH PROXY HERE
-------------------------------------------------------------------------------
PROXY
Buckeye Technologies Inc.
P.O. Box 80407
1001 Tillman Street
Memphis, Tennessee 38108-0407
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
P R O X Y
The undersigned appoints each of Sheila Jordan Cunningham and Kristopher J.
Matula, or either of them, with full power of substitution and revocation as
Proxy to vote all shares of stock standing in my name on the books of Buckeye
Technologies Inc. (the "Company") at the close of business on September 8, 2005,
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of the Company to be held at the Company's
headquarters, 1001 Tillman Street, Memphis, Tennessee, on November 3, 2005, at
5:00 p.m., Central Time, and at any and all adjournments, upon the matters set
forth in the Notice of the meeting. The Proxy is further authorized to vote in
her or his discretion as to any other matters which may come before the meeting.
At the time of preparation of the Proxy Statement, the Board of Directors knows
of no business to come before the meeting other than that referred to in the
Proxy Statement.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN AND WHEN NO INSTRUCTIONS ARE GIVEN WILL BE VOTED FOR THE
PROPOSALS DESCRIBED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT AND ON THIS PROXY.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE