def14a
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant ¨
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as Permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Orchids Paper Products Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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(1) Title of each class of securities to which transaction applies: |
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(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): |
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(4) Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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¨ Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing. |
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(1) Amount Previously Paid: |
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(2) Form, Schedule or Registration Statement No.: |
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(3) Filing Party: |
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(4) Date Filed: |
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Orchids
Paper Products Company
4826 Hunt Street
Pryor, Oklahoma 74361
May 12, 2006
Dear Stockholder:
You are cordially invited to attend the annual meeting of
stockholders of Orchids Paper Products Company to be held at the
Companys headquarters located at 4826 Hunt Street in the
Mid-America
Industrial Park, Pryor, Oklahoma 74361 on Tuesday, June 13,
2006, at 10:00 a.m. Central Time.
At the meeting you will be asked to elect five directors and to
ratify the appointment of Tullius Taylor Sartain &
Sartain LLP as the Companys independent registered public
accounting firm for 2006, and to transact such other business as
may properly come before the meeting.
The formal Notice of Annual Meeting of Stockholders and Proxy
Statement accompanying this letter provide detailed information
concerning matters to be considered and acted upon at the
meeting.
Thank you for your continued support of, and interest in,
Orchids Paper Products Company.
Sincerely,
Michael P. Sage
Chief Executive Officer and President
Your vote is important
I urge you to vote as soon as possible, whether or not you
plan to attend the Annual Meeting. Regardless of whether you
expect to attend the Annual Meeting, you may vote by completing,
signing, dating and mailing the proxy card.
ORCHIDS
PAPER PRODUCTS COMPANY
4826 Hunt Street
Pryor, Oklahoma 74361
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
May 12, 2006
The 2006 Annual Meeting of Stockholders of ORCHIDS PAPER
PRODUCTS COMPANY, a Delaware corporation (the
Company), will be held at the Companys
headquarters located at 4826 Hunt Street in the
Mid-America
Industrial Park, Pryor, Oklahoma 74361 on Tuesday, June 13,
2006, at 10:00 a.m. Central Time (the
meeting) to consider and act upon the following
matters:
1. to elect five directors for one-year terms expiring at
the conclusion of the Companys annual meeting in 2007;
2. to ratify the appointment of Tullius Taylor
Sartain & Sartain LLP as the Companys independent
registered public accounting firm for 2006; and
3. to transact such other business as may properly come
before the meeting or any adjournments thereof.
Only stockholders of record at the close of business on
May 5, 2006, are entitled to notice of and to vote in
person or by proxy at the meeting. At least ten days prior to
the meeting, a complete list of stockholders entitled to vote
will be available for inspection by any stockholder for any
purpose germane to the meeting, during ordinary business hours,
at the office of the Secretary of the Company at 4826 Hunt
Street, Pryor, Oklahoma 74361. As a stockholder of record, you
are cordially invited to attend the meeting in person.
Regardless of whether you expect to be present at the meeting,
please complete, sign and date the enclosed proxy and mail it
promptly in the enclosed envelope. Returning the enclosed proxy
will not affect your right to vote in person if you attend the
meeting.
The enclosed proxy solicitation material is being mailed to
stockholders on or about May 12, 2006, with a copy of our
Annual Report, which includes financial statements for the year
ended December 31, 2005 and our independent registered
public accounting firms report thereon.
By Order of the Board of Directors
Keith R. Schroeder
Chief Financial Officer and Secretary
Even though you may plan to attend the meeting in person,
please execute the enclosed proxy card and mail it promptly. A
return envelope (which requires no postage if mailed in the
United States) is enclosed for your convenience. Should you
attend the meeting in person, you may revoke your proxy and vote
in person.
Table of
Contents
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A-1
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ORCHIDS
PAPER PRODUCTS COMPANY
4826 Hunt Street
Pryor, Oklahoma 74361
2006 ANNUAL MEETING OF
STOCKHOLDERS
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Orchids
Paper Products Company, a Delaware corporation (the
Company), to be voted at the 2006 Annual Meeting of
Stockholders of the Company (the annual meeting or
the meeting) and any adjournment or postponement of
the meeting. The meeting will be held at the Companys
headquarters located at 4826 Hunt Street in the
Mid-America
Industrial Park, Pryor, Oklahoma 74361 on Tuesday, June 13,
2006, at 10:00 a.m. Central Time, for the purposes
contained in the accompanying Notice of Annual Meeting of
Stockholders and in this proxy statement. This proxy statement
and the accompanying proxy will be first sent or given to
stockholders on or about May 12, 2006.
ABOUT THE
MEETING
Why Did I
Receive This Proxy Statement?
Because you were a stockholder of the Company as of May 5,
2006 (the Record Date) and are entitled to vote at
the annual meeting, the Board of Directors is soliciting your
proxy to vote at the meeting.
This proxy statement summarizes the information you need to know
to vote at the meeting. This proxy statement and form of proxy
were first mailed to stockholders on or about May 12, 2006.
What Am I
Voting On?
You are voting on two items:
1. Election of five directors for one-year terms expiring
at the conclusion of the annual meeting in 2007 (see
page 5); and
2. Ratification of Tullius Taylor Sartain &
Sartain LLP as the Companys independent registered public
accounting firm for 2006 (see page 18).
How Do I
Vote?
Stockholders of Record: If you are a
stockholder of record, there are two ways to vote:
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by completing and returning your proxy card; or
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by written ballot at the meeting.
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Street Name Holders: Shares which are held in
a brokerage account in the name of the broker are said to be
held in street name. If your shares are held in
street name you should follow the voting instructions provided
by your broker. You may complete and return a voting instruction
card to your broker, or, in many cases, your broker may also
allow you to vote via the telephone or internet. Check your
proxy card for more information. If you hold your shares in
street name and wish to vote at the meeting, you must obtain a
legal proxy from your broker and bring that proxy to the meeting.
Regardless of how your shares are registered, if you complete
and properly sign the accompanying proxy card and return it to
the address indicated, it will be voted as you direct.
1
What Are
the Voting Recommendations of the Board of Directors?
The Board of Directors recommends the following votes:
1. FOR each of the nominees as directors named in this
proxy statement; and
2. FOR ratification of the appointment of Tullius Taylor
Sartain & Sartain LLP as independent registered public
accounting firm for 2006.
Unless you give contrary instructions on your proxy card, the
persons named as proxy holders will vote your shares in
accordance with the recommendations of the Board of Directors.
Will Any
Other Matters Be Voted On?
We do not know of any other matters that will be brought before
the stockholders for a vote at the annual meeting. If any other
matter is properly brought before the meeting, your signed proxy
card gives authority to Michael P. Sage to vote on such matters
in his discretion.
Who Is
Entitled to Vote at the Meeting?
Only stockholders of record at the close of business on the
Record Date are entitled to receive notice of and to participate
in the annual meeting. If you were a stockholder of record on
that date, you will be entitled to vote all of the shares that
you held on that date at the meeting, or any postponements or
adjournments of the meeting.
How Many
Votes Do I Have?
You will have one vote for every share of Orchids Paper Products
Company common stock you owned on the Record Date.
How Many
Votes Can Be Cast by All Stockholders?
4,156,250 consisting of one vote for each share of Orchids Paper
Products Company common stock outstanding on the Record Date.
There is no cumulative voting.
How Many
Votes Must Be Present to Hold the Meeting?
The holders of a majority of the aggregate voting power of
Orchids Paper Products Companys common stock outstanding
on the Record Date, or 2,078,126 votes, must be present in
person, or by proxy, at the meeting in order to constitute a
quorum necessary to conduct the meeting.
If you vote, your shares will be part of the quorum. Abstentions
and broker non-votes will be counted in determining the quorum.
A broker non-vote occurs when a bank or broker holding shares in
street name submits a proxy that states that the broker does not
vote for some or all of the proposals, because the broker has
not received instructions from the beneficial owners on how to
vote on the proposals and does not have discretionary authority
to vote in the absence of instructions.
We urge you to vote by proxy even if you plan to attend the
meeting so that we will know as soon as possible that a quorum
has been achieved.
What
Vote Is Required to Approve Each Proposal?
In the election of directors, the affirmative vote of a
plurality of the votes present in person or by proxy and
entitled to vote at the meeting is required. A proxy that has
properly withheld authority with respect to the election of one
or more directors will not be voted with respect to the director
or directors indicated, although it will be counted for the
purpose of determining whether there is a quorum.
For the proposal to ratify the appointment of Tullius Taylor
Sartain & Sartain LLP as the Companys independent
registered public accounting firm, the affirmative vote of the
holders of a majority of the shares represented in person or by
proxy and entitled to vote on the proposal will be required for
approval. An abstention
2
with respect to this proposal will be counted for the purpose of
determining the number of shares entitled to vote that are
present in person or by proxy. Accordingly, an abstention will
have the effect of a negative vote.
If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as
present and entitled to vote with respect to the matter.
Can I
Change My Vote?
Yes. Just send in a new proxy card with a later date or send a
written notice of revocation to the Companys Corporate
Secretary at the address on the cover of this proxy statement.
Also, if you attend the meeting and wish to vote in person, you
may request that your previously submitted proxy not be used.
How Can I
Access Orchids Paper Products Companys Proxy Materials and
Annual Report Electronically?
This proxy statement and the 2005 annual report are available on
our website, and can be accessed from our homepage at
http://www.orchidspaper.com by selecting Investor
Resources.
Who Can
Attend the Annual Meeting?
Any Orchids Paper Products Company stockholder as of May 5,
2006 may attend the meeting. If you own shares in street name,
you should ask your broker or bank for a legal proxy to bring
with you to the meeting. If you do not receive the legal proxy
in time, bring your most recent brokerage statement so that we
can verify your ownership of our stock and admit you to the
meeting. However, you will not be able to vote your shares at
the meeting without a legal proxy.
If you return a proxy card without indicating your vote, your
shares will be voted as follows: (i) for each of the
nominees for director named in this proxy statement;
(ii) for ratification of the appointment of Tullius Taylor
Sartain & Sartain LLP as the independent registered
public accounting firm for the Company for 2006; and
(iii) in accordance with the recommendation of management
on any other matter that may properly be brought before the
meeting and any adjournment of the meeting.
VOTING
SECURITIES
On the Record Date there were 4,156,250 outstanding shares of
the Companys Common Stock, $0.001 par value per share
(the Common Stock).
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tables set forth certain information known to us
with respect to beneficial ownership of our Common Stock as of
April 24, 2006 by:
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each person known by us to own beneficially more than 5% of our
outstanding Common Stock;
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each of our directors;
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each named executive officer; and
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all of our directors and executive officers as a group.
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Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission (SEC) and
generally includes voting or investment power over securities.
The table below includes the number of shares underlying options
and warrants that are currently exercisable or exercisable
within 60 days of April 24, 2006. It is therefore
based on 4,354,857 shares of common stock outstanding as of
April 24, 2006. Shares of Common Stock subject to options
and warrants that are currently exercisable or exercisable
within 60 days of April 24, 2006 are considered
outstanding and beneficially owned by the person holding the
options or warrants for the purposes of computing beneficial
ownership of that person but are not treated as outstanding for
the purpose of computing the percentage ownership of any other
person. To our knowledge, except as set forth in the footnotes
to
3
this table and subject to applicable community property laws,
each person named in the table has sole voting and investment
power with respect to the shares set forth opposite such
persons name. Except as otherwise indicated, the address
of each of the persons in this table is as follows:
c/o Orchids Paper Products Company, 4826 Hunt Street,
Pryor, Oklahoma 74361.
Beneficial
Owners of More Than Five Percent
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Number of Shares
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Percent
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Beneficially
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Owned
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Owned
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Five percent
stockholders
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Robert F. Taglich
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281,330
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6.5%
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Michael N. Taglich
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283,830
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6.5%
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Does not include 35,050 shares of Common Stock issuable
under warrants held by Robert F. Taglich which vest on
July 15, 2006. |
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Does not include 35,050 shares of Common Stock issuable
under warrants held by Michael N. Taglich which vest on
July 15, 2006. |
Beneficial
Ownership of Directors, Director Nominees and Executive
Officers
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Number of Shares
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Percent
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Beneficially
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Beneficially
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Name of Beneficial
Owner
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Owned
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Owned
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Directors and named executive
officers
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Michael P. Sage(1)
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96,132
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2.2
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Keith R. Schroeder(2)
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43,689
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1.0
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Ronald E. Hawkinson(3)
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19,068
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*
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Gary P. Arnold(4)
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116,119
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2.7
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B. Kent Garlinghouse(5)
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71,111
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1.6
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John C. Guttilla(6)
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2,500
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*
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Douglas E. Hailey(7)
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63,882
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1.5
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Steven R. Berlin(8)
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3,600
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*
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All directors and executive
officers as a group (8 persons)
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416,101
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9.6
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Indicates ownership of less than 1%. |
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Includes 62,000 shares of Common Stock issuable upon
exercise of stock options granted under the Stock Incentive Plan
held by Mr. Sage. |
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Includes 38,000 shares of Common Stock issuable upon
exercise of stock options granted under the Stock Incentive Plan
held by Mr. Schroeder. |
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Includes 2,000 shares of Common Stock issuable upon
exercise of stock options granted under the Stock Incentive Plan
held by Mr. Hawkinson. Mr. Hawkinson retired as our Vice
President, Sales and Marketing on September 16, 2005. |
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Includes 3,842 shares of Common Stock issuable under
warrants held by Mr. Arnold and 2,500 shares of Common
Stock issuable upon exercise of stock options granted under the
Stock Incentive Plan held by Mr. Arnold. |
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Includes 68,611 shares of Common Stock held by Shadow
Capital LLC and 2,500 shares of Common Stock issuable upon
exercise of stock options granted under the Stock Incentive Plan
held by Mr. Garlinghouse. Mr. Garlinghouse is the
manager of Shadow Capital LLC and has voting and dispositive
control over the shares of Common Stock and stock options held
by Shadow Capital LLC. Mr. Garlinghouse resigned as a
director on December 7, 2005. |
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Includes 2,500 shares of Common Stock issuable upon
exercise of stock options granted under the Stock Incentive Plan
held by Mr. Guttilla. |
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Includes 1,537 shares of Common Stock issuable under
warrants held by Mr. Hailey. Does not include 30,000 shares
of Common Stock issuable under warrants held by Mr. Hailey
which vest on July 15, 2006. |
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Includes 2,500 shares of Common Stock issuable upon
exercise of stock options granted under the Stock Incentive Plan
held by Mr. Berlin. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Companys directors and executive officers,
persons who beneficially own more than ten percent of a
registered class of the Companys equity securities, and
certain other persons to file reports of ownership and changes
in ownership on Forms 3, 4 and 5 with the SEC, and to
furnish the Company with copies of the forms. Based solely on
its review of the forms it received, or written representations
from reporting persons, the Company believes that all of its
directors, executive officers and beneficial owners of greater
than ten percent of the outstanding Common Stock complied with
all such filing requirements during 2005, except that
(i) B. Kent Garlinghouse, Gary P. Arnold and John C.
Guttilla each filed a Form 5 reporting transactions that
occurred on September 8, 2005 that should have
instead been reported on Form 4, and (ii) Douglas E.
Hailey initially failed to report in his Form 3 his receipt
of warrants in connection with our initial public offering. An
amendment to Mr. Haileys Form 3 was subsequently
filed with the SEC.
PROPOSAL I.
ELECTION
OF DIRECTORS
The Companys Board of Directors presently has five
(5) members with each member serving a one-year term.
Currently, all our directors hold office until the end of the
next annual meeting of stockholders or until their successors
are duly elected and qualified.
The Nominating and Corporate Governance Committee of the Board
of Directors has nominated each of the Companys current
directors, Gary P. Arnold, Steven R. Berlin, Douglas E. Hailey,
John C. Guttilla and Michael P. Sage, to be re-elected to serve
until the 2007 Annual Meeting of Stockholders or until their
successors are duly elected and qualified.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE NAMED NOMINEES
Proxies cannot be voted for a greater number of persons than the
number of nominees named below. Unless otherwise specified, all
proxies will be voted in favor of the five nominees listed above
for election as directors of the Company.
The Board of Directors has no reason to expect that any of the
nominees will be unable to stand for election on the date of the
meeting or for good cause will not serve. If a vacancy occurs
among the original nominees prior to the meeting, the proxies
will be voted for a substitute nominee named by the Board of
Directors and for the remaining nominees. Directors are elected
by a plurality of the votes present in person or by proxy and
entitled to vote at the meeting.
The following information is furnished as of April 24,
2006, for each of the nominees for the Board of Directors:
5
Information
Relating to Directors, Nominees and Executive Officers
Set forth below is the name, age as of April 24, 2006,
position and a brief account of the business experience of each
of our executive officers, directors and key employees.
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Name
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Age
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Position(s)
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Michael P. Sage
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59
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Chief Executive Officer and
President, Director
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Keith R. Schroeder
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50
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Chief Financial Officer and
Secretary
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Douglas E. Hailey
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44
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Chairman of the Board
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Gary P. Arnold
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64
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Director
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Steven R. Berlin
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61
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Director
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John C. Guttilla
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49
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Director
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Michael
P. Sage, 59, Chief Executive Officer and President,
Director
Mr. Sage has been our Chief Executive Officer and President
since April 1998. From 1985 to 1998, Mr. Sage served in a
number of management positions with our predecessor company,
including Executive Vice President
(1995-1998),
Vice President of Mill Operations responsible for tissue mills
in Oklahoma, Arizona and Oregon
(1991-1995),
and Manager of Paper Manufacturing
(1985-1989).
From 1989 to 1991, he was Vice President of Operations for
Pentairs Niagara Division. From 1969 until 1985, he held a
number of manufacturing positions with Procter &
Gamble. Mr. Sage holds a BS degree in Chemical Engineering
from Montana State University.
Keith
R. Schroeder, 50, Chief Financial Officer and
Secretary
Mr. Schroeder has been our Chief Financial Officer since
January 2002. Prior to joining us, he served as Corporate
Finance Director for Kruger Inc.s tissue operations from
October 2000 to December 2001 and as Vice President of
Finance and Treasurer of Global Tissue from 1996 to October
2000. Global Tissue was acquired by Kruger Inc. in 1999. Prior
to joining Global Tissue, Mr. Schroeder held a number of finance
and accounting positions with Cummins Engine Company
(1989-1996)
and Atlas Van Lines
(1978-1989).
Mr. Schroeder is a certified public accountant and holds a
BS degree in Business Administration with an accounting major
from the University of Evansville.
Douglas
E. Hailey, 44, Chairman of the Board
Mr. Hailey has served on our Board of Directors since June
2005. Mr. Hailey has been Managing Director of the Investment
Banking Division of Taglich Brothers, Inc., a New York-based
full service brokerage firm that specializes in private equity
placements for small public companies, and he has been with
Taglich Brothers, Inc. since 1994. Mr. Hailey serves on the
board of directors of Williams Controls, Inc. Mr. Hailey
received a BA degree in Business Administration from Eastern New
Mexico University and an MBA from the University of Texas.
Gary
P. Arnold, 64, Director
Mr. Arnold has served on our Board of Directors since April
2005. He has significant international and domestic experience
in the electronics industry in the areas of finance, strategic
planning and operations, and has been involved in numerous
capital market transactions. He spearheaded the turnaround at
Tektronix Corp. where he was Chief Financial Officer from 1990
to 1992, and later served as Chairman and CEO of Analogy, Inc.,
a provider of design automation software used in the automotive
industry, from 1993 to 2000. Since 2000, Mr. Arnold has
been a private investor, and currently serves on the boards of
directors of National Semiconductor Corp. and Telenetics Corp.
Mr. Arnold is a certified public accountant and holds a BS
degree in accounting from East Tennessee State University and a
JD degree from the University of Tennessee School of Law.
Steven
R. Berlin, 61, Director
Mr. Berlin has served on our Board of Directors since
December 2005. Since January 2006 Mr. Berlin has been an
independent financial consultant. Mr. Berlin was Vice President
of Kaiser-Francis Oil Company from 2004 to January 2006, and the
Vice President and Chief Financial Officer of Kaiser-Francis Oil
Company from 1999 to
6
2004. He held the positions of Chief Financial Officer,
Secretary and Treasurer of PetroCorp Corporation from 1999 to
2004 and was a director of PetroCorp Corporation from 2001 to
2004. Mr. Berlin was on the faculty of the University of
Tulsa, where he taught business and finance courses, from 1996
to 1999. Prior to joining the faculty at the University of
Tulsa, Mr. Berlin worked for CITGO Petroleum Corporation
and its predecessors in various financial and management
positions, including the last ten years as Chief Financial
Officer. He is a member of the board of directors of North
American Palladium Limited (AMEX: PAL). Mr. Berlin received
his BSBA degree from Duquesne University, his MBA from the
University of Wisconsin and is a graduate of the Stanford
Executive Program. He is a certified public accountant.
John
C. Guttilla, 49, Director
Mr. Guttilla has served on our Board of Directors since
April 2005. Since 1988, Mr. Guttilla has been a principal
and director in the financial services department of the public
accounting firm of Rotenberg Meril Solomon Bertiger &
Guttilla, P.C. Mr. Guttilla focuses on providing tax
structuring and compliance advice in the area of real estate,
entertainment, brokerage, manufacturing, printing, restaurant
and construction. He is a certified public accountant and a
member of the American Institute of Certified Public
Accountants. Mr. Guttilla holds a BS degree in accounting from
Fordham University and a Masters degree in taxation from St.
Johns University.
Board of
Directors
Currently, we have authorized a five-member Board of Directors.
All of our directors hold office until the next annual meeting
of stockholders or until their successors are duly qualified.
Board
Committees
We have established an Audit Committee consisting of
Mr. Arnold, who chairs the committee, and
Messrs. Berlin and Guttilla, all of whom we believe qualify
as independent directors under the American Stock
Exchange rules. The Audit Committee is governed by a written
charter, attached hereto as Exhibit A, which must be
reviewed, and amended if necessary, on an annual basis. Under
the charter, the Audit Committee must meet at least four times a
year and is responsible for reviewing the independence,
qualifications and quality control procedures of our independent
auditors, and is responsible for recommending the initial or
continued retention, or a change in, our independent auditors.
In addition, the Audit Committee is required to review and
discuss with our management and independent auditors our
financial statements and our annual and quarterly reports, as
well as the quality and effectiveness of our internal control
procedures and critical accounting policies. The Audit Committee
Charter also requires the Audit Committee to review potential
conflict of interest situations, including transactions with
related parties, and to discuss with our management other
matters related to our external and internal audit procedures.
The Audit Committee has adopted a pre-approval policy for the
provision of audit and non-audit services performed by our
independent auditors. The Board of Directors has determined that
Mr. Arnold is an Audit Committee financial expert. The
Audit Committee was formed on April 6, 2005, and held five
meetings in 2005.
We have also established a Compensation Committee consisting of
Mr. Guttilla, who chairs the committee, and Messrs. Arnold
and Berlin. The Compensation Committee is governed by a written
charter, available in the Corporate Governance section of the
Companys Website which can be accessed from our homepage
at
http://www.orchidspaper.com
by selecting Investor Resources and then
Corporate Governance. The Compensation Committee is
responsible for making recommendations to the Board of Directors
regarding compensation arrangements for our executive officers,
including annual bonus compensation, and consults with our
management regarding compensation policies and practices. The
Compensation Committee also makes recommendations concerning the
adoption of any compensation plans in which management is
eligible to participate, including the granting of stock options
or other benefits under those plans. The Compensation Committee
was formed on April 6, 2005, and held two meetings in 2005.
We have also established a Nominating and Corporate Governance
Committee consisting of Mr. Berlin, who chairs the
committee, and Messrs. Arnold and Guttilla. The Nominating
and Corporate Governance Committee is governed by a written
charter, available in the Corporate Governance section of the
Companys Website which can be accessed from our homepage
at http://www.orchidspaper.com by selecting
Investor Resources and then
7
Corporate Governance. The Nominating and Corporate
Governance Committee is responsible for submitting to the Board
of Directors a proposed slate of directors for submission to the
stockholders at our annual meeting, recommending director
candidates in view of pending additions, resignations or
retirements, developing criteria for the selection of directors,
reviewing suggested nominees received from stockholders and
reviewing corporate governance policies and recommending changes
to the full Board of Directors. As set forth above, the members
of the Nominating and Corporate Governance Committee qualify as
independent directors under the American Stock
Exchange rules. The Nominating and Corporate Governance
Committee was formed on April 6, 2005, and held one meeting
in 2005. The Nominating and Corporate Governance Committee has
not adopted a director nomination policy, but is in the process
of adopting a policy substantially as described below.
Selection
of Nominees for the Board of Directors
The Nominating and Corporate Governance Committee is responsible
for identifying and recommending to the Board of Directors
candidates to serve as members of the Board of Directors. The
Nominating and Corporate Governance Committee has not adopted
specific, minimum qualifications that nominees must meet in
order for the committee to recommend them to the Board of
Directors, but rather each nominee is individually evaluated
based on his or her individual merits, taking into account the
needs of the Company and the composition of the Board of
Directors.
The Nominating and Corporate Governance Committee will consider
candidates submitted from a variety of sources (including,
without limit, incumbent directors, stockholders, Company
management and third-party search firms) when reviewing
candidates to fill vacancies
and/or
expand the Board of Directors. The committee will then evaluate
each potential candidates educational background,
employment history, outside commitments and other relevant
factors to determine whether he or she is potentially qualified
to serve on the Board of Directors. The committee will seek to
identify and recruit the best available candidates, and will
endeavor to evaluate qualified stockholder nominees on the same
basis as those submitted by members of the Board of Directors,
third-party search firms or other sources.
After completing this process, the committee will determine
whether one or more candidates are sufficiently qualified to
warrant further investigation. If the process yields one or more
desirable candidates, the committee will rank them by order of
preference, depending on their respective qualifications and the
Companys needs. The committee chair, or another director
designated by the committee chair, will then contact the
preferred candidate(s) to evaluate their potential interest and
to set up interviews with the full committee. All such
interviews will be held in person, to the extent possible, and
will include only the candidate and the committee members. Based
upon interview results and appropriate background checks, the
committee will decide whether it will recommend the
candidates nomination to the full Board of Directors.
The committee may, in its discretion, choose, from time to time,
to use additional resources (including independent third-party
search firms) if it determines that such resources could enhance
a particular director search.
Any stockholder wishing to submit a candidate for consideration
should send the following information to the Corporate
Secretary, Orchids Paper Products Company, 4826 Hunt Street,
Pryor, Oklahoma 74361:
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Stockholders name, number of shares owned, length of
period held, and proof of ownership;
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Name, age and address of candidate;
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A detailed resume describing among other things the
candidates educational background, occupation, employment
history, and material outside commitments (e.g., memberships on
other boards and committees, and charitable foundations);
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A supporting statement which describes the candidates
reasons for seeking election to the Board of Directors, and
documents his or her ability to serve on the Board of Directors;
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Any information relating to the candidate that is required to be
disclosed in the solicitation of proxies for election of
director;
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A description of any arrangements or understandings between the
stockholder and the candidate;
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Any other information that would be useful to the committee in
considering the candidate, and
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A signed statement from the candidate, confirming
his/her
willingness to serve on the Board.
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The Corporate Secretary will forward such materials to the
committee chair and the Chairman of the Board. The Corporate
Secretary will also maintain copies of such materials for future
reference by the committee when filling Board of Directors
positions.
Stockholders may submit potential director candidates at any
time pursuant to these procedures. The committee will consider
such candidates if a vacancy arises or if the Board of Directors
decides to expand its membership, and at such other times as the
committee deems necessary or appropriate. Separate procedures
apply, as provided in the Bylaws, if a stockholder wishes to
submit at an annual meeting a director candidate that is not
approved by the committee or the Board of Directors. See
STOCKHOLDER PROPOSALS.
Board of
Director Meetings
The Board of Directors held three meetings during the fiscal
year which ended December 31, 2005. During 2005, each
director attended at least 75% of the aggregate of the regular
meetings of the Board of Directors and meetings of the
committees of the Board on which he served. Our directors
discharge their responsibilities throughout the year, not only
at such Board of Directors and committee meetings, but through
personal meetings and other communications with members of
management and others regarding matters of interest and concern
to our Company.
Process
by Which Security Holders May Send Communications to the Board
of Directors
Our Board of Directors has adopted a policy to provide a process
for holders of our securities to send written communications to
our Board of Directors. Any stockholder wishing to send
communications to our Board of Directors should send the written
communication and the following information to our Corporate
Secretary, Orchids Paper Products Company, 4826 Hunt Street,
Pryor, Oklahoma 74361:
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stockholders name, number of shares of Common Stock owned,
length of period held, and proof of ownership;
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name, age, business and residential address of
stockholder; and
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any individual director or committee to which the stockholder
would like to have the written statement and other information
sent.
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The Corporate Secretary, or his or her designee, will collect
and organize all of such stockholder communications as he or she
deems appropriate and, at least once each year, forward these
materials to the Chairman of the Board, any committee chair or
individual director. The Corporate Secretary may refuse to
forward material which he or she determines in good faith to be
scandalous, threatening or otherwise inappropriate for delivery.
The Corporate Secretary will also maintain copies of such
materials.
Director
Compensation
We pay our independent directors an annual fee of $20,000.
Douglas E. Hailey receives an annual fee of $50,000 for his
services as Chairman of our Board of Directors. They are also
entitled to participate in our stock incentive plan. In
addition, we reimburse members of our Board of Directors for
travel expenses related to their services to us.
9
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee of Orchids Paper Products Company (the
Committee) is composed of three directors who, in
the judgment of the Board of Directors, meet the independence
requirements of our charter and the American Stock Exchange
rules. The Committee operates under a charter adopted by the
Board of Directors. The Audit Committee Charter is attached to
this proxy statement as Exhibit A. The primary function of
the Audit Committee is to assist the Board of Directors in its
oversight of the Companys financial reporting processes.
Management is responsible for the Companys financial
statements and overall reporting process, including the system
of internal controls. The independent auditors are responsible
for conducting annual audits and quarterly reviews of the
Companys financial statements and expressing an opinion as
to the conformity of the annual financial statements with
generally accepted accounting principles.
The Committee submits the following report pursuant to the SEC
rules:
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The Committee has reviewed and discussed with management and
with Tullius Taylor Sartain & Sartain LLP, the
Companys independent registered public accounting firm,
the audited financial statements of the Company for the year
ended December 31, 2005 (the Financial
Statements).
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Tullius Taylor Sartain & Sartain LLP has advised the
management of the Company and the Committee that it has
discussed with them all the matters required to be discussed by
Statement of Auditing Standards No. 61, as modified, which
include among other items, matters related to the conduct of the
audit of the Financial Statements.
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The Committee has received from Tullius Taylor
Sartain & Sartain LLP the written disclosures and the
letter required by Independence Standards Board Standard
No. 1 (which relates to the auditors independence
from the Company and its related entities) and has discussed
Tullius Taylor Sartain & Sartain LLPs
independence with them.
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Based upon the aforementioned review, discussions and
representations of Tullius Taylor Sartain &
Sartain LLP, and the unqualified audit opinion presented by
Tullius Taylor Sartain & Sartain LLP on the Financial
Statements, the Committee recommended to the Board of Directors
that the Financial Statements be included in the Companys
Annual Report on
Form 10-K,
and that Tullius Taylor Sartain & Sartain LLP be
selected as the independent registered public accounting firm
for the Company for fiscal 2006.
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Respectfully submitted,
Gary P. Arnold, Chairman
Steven R. Berlin
John C. Guttilla
10
REPORT OF
THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed
of three directors who, in the judgment of the Board of
Directors, meet the independence requirements of our charter and
the American Stock Exchange rules. The Compensation Committee is
responsible for determining and approving, either as a committee
or together with the Companys other independent directors,
the annual salary and other compensation of the Chief Executive
Officer, providing assistance and recommendations with respect
to compensation policies and practices of the Company, and
assisting with the administration of the Companys
compensation plans.
In order to attract and retain well-qualified key executives,
which the Compensation Committee believes is crucial to the
Companys success, the Compensation Committees
general approach to compensating such executives is to pay cash
salaries that are commensurate with the executives
experience and expertise and, where relevant, are competitive
with the salaries paid to key executives in the Companys
industry and primary geographic locations. In addition, to align
its key executives compensation with the Companys
business strategies, values and management initiatives, both
short and long term, the Compensation Committee may, with the
Boards approval, authorize the payment of discretionary
bonuses based upon an assessment of each such executives
contributions to the Company. In general, the Compensation
Committee believes that these discretionary bonuses should be
related to the Companys and the executives
performance.
On or about the end of each year, the Companys Chief
Executive Officer and other members of senior management prepare
a schedule of recommended incentive bonuses for the
Companys top management personnel and certain other
employees. Such recommendations are based, among other things,
upon (a) the Companys overall financial performance
and financial performance versus budget, (b) the
executives contribution to the progress of the Company,
(c) the executives compensation history, (d) an
evaluation by the Chief Executive Officer and other members of
senior management of the efforts expended by the individual
towards the furtherance of the corporate goals and (e) an
evaluation of the executives potential for advancement and
value towards the long-term future of the Company. The
Compensation Committee reviews each proposed incentive bonus
individually with the Chief Executive Officer. After making any
adjustments required by the Compensation Committee, such bonuses
are generally paid in the first quarter of the following fiscal
year.
The Compensation Committee also believes that stock ownership by
key executives helps align the interests of executives and
stockholders and that grants of ownership interest to such
executives provide a valuable incentive for their continued
efforts and diligence. The Compensation Committee has
historically made such grants to the executive officers to
facilitate these objectives. The Compensation Committee believes
that the key officers of the Company have provided excellent
services and been diligent in their commitment to the Company.
The Compensation Committee believes that stock ownership awards
to such executive officers should be performance based.
The Company has a stock incentive plan to provide it with means
to assist in recruiting, retaining and rewarding certain
employees, directors and consultants and to motivate such
individuals to exert their best efforts on behalf of the
Company. By granting stock options to such individuals, the
Company expects that the interests of the recipients will be
better aligned with those of the Company.
For 2005, the annual salary and bonus for Mr. Sage, the
Companys Chief Executive Officer, were $225,000 and
$135,000, respectively, as determined in accordance with his
employment agreement. Mr. Sage was also paid a car
allowance totaling $21,634. Mr. Sage is entitled to the
annual bonus as determined by the Board of Directors under the
terms of his employment agreement. In connection with our
initial public offering, Mr. Sage received a stock option
grant in 2005 covering 155,000 shares, 20% of which vested
in 2005. The remaining 80% of Mr. Sages stock options
vest ratably over the succeeding four years.
The Compensation Committee determines Mr. Sages
annual salary based on competitive data. Mr. Sages
bonus is dependent on the Company meeting certain performance
goals, as determined on an annual basis by the Board of
Directors.
COMPENSATION COMMITTEE
John C. Guttilla, Chairman
Gary P. Arnold
Steven R. Berlin
11
The Report of the Audit Committee, the Report of the
Compensation Committee on Executive Compensation and the
performance graph below will not be deemed incorporated by
reference by any general statement incorporating by reference
this proxy statement or portions thereof into any filing under
the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the Company specifically
incorporates this information by reference, and will not
otherwise be deemed filed under such Acts.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Gary P. Arnold,
Steven R. Berlin and John C. Guttilla, none of whom are
employees or current or former officers of the Company, and none
of whom had any relationship with the Company required to be
disclosed under CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS. None of our Compensation Committee members
and none of our executive officers have a relationship that
would constitute an interlocking relationship with executive
officers or directors of another entity or insider participation
in compensation decisions.
EXECUTIVE
COMPENSATION
The following table sets forth certain information concerning
the compensation of our Chief Executive Officer and each of our
most highly compensated executive officers whose aggregate cash
compensation exceeded $100,000 during the year ended
December 31, 2005. We refer to these persons as the
named executive officers elsewhere in this proxy
statement.
Summary
Compensation Table
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Securities
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All Other
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Other Annual
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Underlying
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Compensation
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Name and Principal
Position
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Year
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Salary
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Bonus(1)
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Compensation(2)
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Options (#)
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(3)(4)
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Michael P. Sage
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2005
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$
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225,000
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$
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110,000
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$
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21,634
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155,000
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$
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10,754
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Chief Executive Officer
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2004
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226,442
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186,860
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21,634
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439,275
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2003
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210,000
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22,593
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525,497
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Keith R. Schroeder
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2005
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138,531
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57,500
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95,000
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10,500
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Chief Financial Officer
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2004
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136,634
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60,312
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108,241
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and Secretary
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2003
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128,269
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64,583
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5,200
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Ronald E. Hawkinson(5)
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2005
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105,280
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40,000
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7,200
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10,000
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5,639
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Vice President,
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2004
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117,946
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70,935
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9,600
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103,753
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Sales and Marketing
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2003
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110,967
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54,150
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9,600
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6,300
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(1) |
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Includes for 2004 the imputed compensation on founders stock
purchased by the above executives in the amount of $61,860,
$10,312 and $30,935 for Messrs. Sage Schroeder and
Hawkinson, respectively. |
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Car allowance paid to named executives. |
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(3) |
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Includes matching Company contribution to the Companys
401(k) plan. |
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(4) |
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Certain Payments in 2004 and 2003 were made pursuant to the
Management Incentive Plan, dated September 1999 in the following
amounts: Mr. Sage $427,275 and $514,997, Mr. Schroeder
$98,601 and $0, and Mr. Hawkinson $98,601 and $0. The
Management Incentive Plan has been terminated. |
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(5) |
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Mr. Hawkinson retired as our Vice President, Sales and
Marketing on September 16, 2005. |
12
Stock
Option Grants in 2005
The following table sets forth certain information concerning
stock option grants to our Chief Executive Officer and each of
our most highly compensated executive officers whose aggregate
cash compensation exceeded $100,000 during the year ended
December 31, 2005.
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Percent of
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No. of Securities
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Total Options
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Underlying
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Granted to
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Exercise
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Options
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Employees
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Price
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Expiration
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Grant Date
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Name
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Granted (#)
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in 2005
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per Share
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Date
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Value(1)
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Michael P. Sage
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155,000
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57.4%
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$
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8.00
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4/17/2015
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$
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558,000
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Keith R. Schroeder
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95,000
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35.2%
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8.00
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4/17/2015
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342,000
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Ronald E. Hawkinson(2)
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10,000
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3.7%
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8.00
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4/17/2015
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36,000
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(1) |
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Grant Date Values were estimated at the date of grant of the
options using the Black-Scholes option valuation model with the
following assumptions: risk-free interest rate of 3.92%,
volatility factor of the expected market price of the
Companys common stock of 40%, no dividend yield on the
Companys Common Stock, and weighted average expected life
of the options of six years. The Black-Scholes option valuation
model was developed for use in estimating the fair value of
traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected
stock price volatility. |
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(2) |
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Mr. Hawkinson retired as our Vice President, Sales and
Marketing on September 16, 2005, at which time 2,000 of his
option shares had vested. |
Aggregate
Option Exercises in Last Fiscal Year and Year-End Options
Values
The following table sets forth certain information concerning
the year-end value of stock options of our Chief Executive
Officer and each of the most highly compensated executive
officers whose aggregate cash compensation exceeded $100,000
during the year ended December 31, 2005. There were no
option exercises by the named executive officers during the
fiscal year ended December 31, 2005.
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Shares
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Securities Underlying
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In-the-Money
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Acquired on
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|
Unexercised Options at
|
|
|
Options at
|
|
|
|
Exercise
|
|
|
Value
|
|
|
December 31, 2005 (#)
|
|
|
December 31, 2005 ($)
|
|
Name
|
|
During 2005 (#)
|
|
|
Realized ($)
|
|
|
Exercisable/Unexercisable
|
|
|
Exercisable/Unexercisable
|
|
|
Michael P. Sage
|
|
|
|
|
|
|
|
|
|
|
31,000/124,000
|
|
|
$
|
69,750/$279,000
|
|
Keith R. Schroeder
|
|
|
|
|
|
|
|
|
|
|
19,000/76,000
|
|
|
|
42,750/171,000
|
|
Ronald E. Hawkinson
|
|
|
|
|
|
|
|
|
|
|
2,000/0
|
|
|
|
4,500/0
|
|
Limitation
of Liability and Indemnification
Our amended and restated certificate of incorporation provides
that we may indemnify our directors, officers, employees and
other agents, to the fullest extent permitted by the General
Corporation Law of the State of Delaware. We maintain a
directors and officers liability insurance policy
that insures such persons against the costs of defense,
settlement or payment of a judgment under certain circumstances.
We believe that these indemnification and liability provisions
are essential to attracting and retaining qualified persons as
officers and directors.
In addition, our amended and restated certificate of
incorporation limits the personal liability of our directors to
the Company and its stockholders for monetary damages to the
fullest extent permissible under the General Corporation Law of
the State of Delaware. This provision in our amended and
restated certificate of incorporation does not eliminate a
directors duty of care, and, in appropriate circumstances,
equitable remedies such as an injunction or other forms of
non-monetary relief remain available. Each director will
continue to be subject to liability for any breach of the
directors duty of loyalty to us, for acts or omissions not
in good faith or involving intentional misconduct or knowing
violations of law, for acts or omissions that the director
believes to be contrary to the best interests of the Company or
our stockholders, for any transaction from which the director
derived an
13
improper personal benefit, for improper transactions between the
director and the Company, and for improper distributions to
stockholders and loans to directors and officers. This provision
also does not affect a directors responsibilities under
any other laws, such as the federal securities laws or state or
federal environmental laws.
We have entered into separate indemnification agreements with
each of our directors and officers which are broader than the
specific indemnification provision contained in the Delaware
General Corporation Law. Under these agreements, we are required
to indemnify them against all expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred
in connection with any actual, or any threatened, proceeding if
any of them may be made a party because he or she is or was one
of our directors or officers. We are obligated to pay these
amounts only if the officer or director acted in good faith and
in a manner that he or she reasonably believed to be in or not
opposed to our best interests. With respect to any criminal
proceeding, we are obligated to pay these amounts only if the
officer or director had no reasonable cause to believe that his
or her conduct was unlawful. The indemnification agreements also
set forth procedures that will apply in the event of a claim for
indemnification under such agreements.
Employee
Benefit Plans
Stock Incentive Plan. Our 2005 Stock Incentive
Plan was adopted by our Board of Directors and approved by our
stockholders in April 2005. Our plan provides for the granting
of incentive stock options to employees and for the granting of
non-qualified stock options, stock appreciation rights and other
cash or stock-based awards to any individual selected by our
Compensation Committee. The plan authorizes 465,000 shares
of our Common Stock to be issued under the plan. We have awarded
options to our officers and directors for an aggregate
272,000 shares of our Common Stock at an exercise price
ranging from $8.00 per share to $11.42 per share. Our
Compensation Committee administers the plan.
On the date of the grant, the exercise price must equal at least
100% of the fair market value in the case of incentive stock
options, or 110% of the fair market value with respect to
optionees who own at least 10% of the total combined voting
power of all classes of stock. The fair market value is
determined by computing the arithmetic mean of our high and low
stock prices on a given determination date. The exercise price
on the date of grant is determined by the Compensation Committee
in the case of non-qualified stock options.
Stock appreciation rights granted under the plan are subject to
the same terms and restrictions as the option grants and may be
granted independent of, or in connection with, the grant of
options. The Compensation Committee determines the exercise
price of stock appreciation rights. A stock appreciation right
granted independent of an option entitles the participant to
payment in an amount equal to the excess of the fair market
value of a share of our Common Stock on the exercise date over
the exercise price per share, times the number of stock
appreciation rights exercised. A stock appreciation right
granted in connection with an option entitles the participant to
surrender an unexercised option and to receive in exchange an
amount equal to the excess of the fair market value of a share
of our Common Stock over the exercise price per share for the
option, times the number of shares covered by the option which
is surrendered. Fair market value is determined in the same
manner as it is determined for options.
The Compensation Committee may also grant awards of stock,
restricted stock and other awards valued in whole or in part by
reference to the fair market value of our Common Stock. These
stock-based awards, in the discretion of the Compensation
Committee, may be, among other things, subject to completion of
a specified period of service, the occurrence of an event or the
attainment of performance objectives. Additionally, the
Compensation Committee may grant awards of cash, in values to be
determined by the Compensation Committee. If any awards are in
excess of $1,000,000 such that Section 162(m) of the
Internal Revenue Code applies, the committee may, in its
discretion, alter its compensation practices to ensure that
compensation deductions are permitted.
Awards granted under the plan are generally not transferable by
the participant except by will or the laws of descent and
distribution, and each award is exercisable, during the lifetime
of the participant, only by the participant or his or her
guardian or legal representative, unless permitted by the
committee.
Options granted under the plan will vest as provided by the
Compensation Committee at the time of the grant. The
Compensation Committee may provide for accelerated vesting or
termination in exchange for cash of any
14
outstanding awards or the issuance of substitute awards upon
consummation of a change in control, as defined in the plan. The
currently outstanding employee options vest 20% on the date of
grant and then ratably at 20% per year over the next four
years. Options granted to members of the Board of Directors
vested upon grant.
The plan may be amended, altered, suspended or terminated by the
administrator at any time. We may not alter the rights and
obligations under any award granted before amendment of the plan
without the consent of the affected participant. Unless
terminated sooner, the plan will terminate automatically in
April 2015.
401(k) Plan. We established three 401(k)
retirement savings plans in 1998. One plan covers all non-union
employees, one covers our union employees in the paper mill and
one covers our union employees in the converting facility. Each
of our participating employees may contribute to the 401(k)
plan, through payroll deductions, not less than 1% nor more than
25% of his or her compensation. We may make matching or
additional contributions to the 401(k) plan in amounts to be
determined annually by our Board of Directors in the case of our
401(k) plan for non-union employees, and by the respective union
contracts in the case of the 401(k) plans for union employees.
Employees may elect to invest their contributions in various
established mutual funds. All amounts contributed by employee
participants are fully vested at all times. Under the two union
plans, employer matching contributions are fully vested at all
times. Under the salaried employees plan, the employer
matching contributions vest ratably over the first four years of
employment. For the years ended December 31, 2003, 2004 and
2005, administrative expenses paid to our third-party provider
related to the 401(k) plans were $16,000, $18,000 and $18,000,
respectively.
15
PERFORMANCE
GRAPH
The following graph compares the cumulative total stockholder
return on our Common Stock since the initial public offering on
July 14, 2005, with the cumulative total return of the
Standard & Poors Small Cap Price Index, the
Standard & Poors Paper and Paper Products Index
and our selected peer group comprised of Potlatch, Wausau Paper,
and Cascades. These comparisons assume the investment of $100 on
July 15, 2005, and the reinvestment of dividends.
These indices are included only for comparative purposes as
required by SEC and do not necessarily reflect managements
opinion that such indices are an appropriate measure of the
relative performance of the Common Stock. They are not intended
to forecast possible future performance of the common stock.
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|
|
|
|
|
|
|
|
|
|
July 15, 2005
|
|
December 31, 2005
|
|
Orchids Paper Products Company
|
|
$
|
100
|
|
|
$
|
120.59
|
|
Peer Group
|
|
$
|
100
|
|
|
$
|
93.94
|
|
S&P Small Cap
|
|
$
|
100
|
|
|
$
|
101.76
|
|
S&P Composite 1500 Paper
Products
|
|
$
|
100
|
|
|
$
|
115.11
|
|
AGREEMENTS
WITH NAMED EXECUTIVE OFFICERS
We have employment agreements with Michael P. Sage, our
President and Chief Executive Officer, and Keith R.
Schroeder, our Chief Financial Officer.
Mr. Sages agreement has a term of five years from
March 2004. The agreement may be terminated by us prior to the
end of the term upon Mr. Sages death, disability or
for cause (as defined in the agreement). As compensation for his
services, Mr. Sage receives an annual base salary of
$225,000, subject to adjustment by the Board of Directors.
Mr. Sage is entitled to an annual bonus as determined by
our Board of Directors. Mr. Sages agreement also
provides that, upon termination for cause or Mr. Sage
voluntarily terminating his employment with us, we may elect to
repurchase shares of our stock held by Mr. Sage at the
greater of $3.64 per share (subject to adjustment for stock
splits, stock dividends and other stock recapitalizations
affecting us) or its fair market value.
Mr. Schroeders agreement has a term of five years
from March 2004. The agreement may be terminated by us prior to
the end of the term upon Mr. Schroeders death, disability
or for cause (as defined in the agreement). As compensation for
his services, Mr. Schroeder receives an annual base salary
of $135,000, subject to adjustment by the President and Chief
Executive Officer. Mr. Schroeder is entitled to an annual
bonus as determined by our Chief
16
Executive Officer. Mr. Schroeders agreement also
provides that, upon termination for cause or Mr. Schroeder
voluntarily terminating his employment with us, we may elect to
repurchase shares of our stock held by Mr. Schroeder at the
greater of $3.64 per share (subject to adjustment for stock
splits, stock dividends and other stock recapitalizations
affecting us) or its fair market value.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Since the beginning of 2005, there has not been, nor is there
currently planned, any transaction or series of similar
transactions to which we were or are a party in which the amount
involved exceeds $60,000 and in which any director, executive
officer or holder of more than 5% of our Common Stock or any
member of such persons immediate families had or will have
a direct or indirect material interest other than agreements
which are described under the caption AGREEMENTS WITH
NAMED EXECUTIVE OFFICERS and the transactions described
below.
Management
Services Agreement.
In March 2004, we entered into a management services agreement
with Weatherly Group, LLC and Taglich Brothers, Inc., the
underwriter in the July 2005 initial public offering. Under this
agreement, these parties agreed to provide advisory and
management services to us in consideration of an annual
management fee of $325,000, payable monthly, and additional fees
based on a formula if we engage in certain major transactions.
The agreement expires on February 28, 2009. In April 2005,
the management services agreement was amended and restated to
reduce the annual management fee to $125,000, payable monthly,
in consideration of a lump sum payment of $150,000 and the
completion of the July 2005 initial public offering. During
2005, we paid a management fee of $391,667 under this agreement
of which $150,417 was paid to Taglich Brothers, Inc.
Mr. Hailey is the Chairman of our Board of Directors and is
a Managing Director of Taglich Brothers, Inc.
Indemnification
and Employment Agreements
As permitted by the Delaware General Corporation Law, we have
adopted provisions in our amended and restated certificate of
incorporation and bylaws that authorize and require us to
indemnify our officers and directors to the full extent
permitted under Delaware law, subject to limited exceptions. Our
amended and restated bylaws provide that we will indemnify our
directors and officers, and may indemnify our employees and
other agents, to the fullest extent permitted by the General
Corporation Law of the State of Delaware. We currently have a
directors and officers liability insurance policy
that insures such persons against the costs of defense,
settlement or payment of a judgment under certain circumstances.
We believe that these indemnification and liability provisions
are essential to attracting and retaining qualified persons as
officers and directors. We have also entered into employment
agreements with our named executive officers. See
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS.
We have entered into indemnification agreements with our
directors and executive officers. Under these agreements, we are
required to indemnify them against all expenses, judgments,
fines, settlements and other amounts actually and reasonably
incurred in connection with any actual, or any threatened,
proceeding if any of them may be made a party because he or she
is or was one of our directors or officers. We are obligated to
pay these amounts only if the officer or director acted in good
faith and in a manner that he or she reasonably believed to be
in or not opposed to our best interests. With respect to any
criminal proceeding, we are obligated to pay these amounts only
if the officer or director had no reasonable cause to believe
that his or her conduct was unlawful. The indemnification
agreements also set forth procedures that will apply in the
event of a claim for indemnification under such agreements.
In addition, our amended and restated certificate of
incorporation limits the personal liability of our directors to
the Company and its stockholders for monetary damages to the
fullest extent permissible under the General Corporation Law of
the State of Delaware. This provision in our amended and
restated certificate of incorporation does not eliminate a
directors duty of care, and, in appropriate circumstances,
equitable remedies such as an injunction or other forms of
non-monetary relief would remain available. Each director will
continue to be subject to liability for any breach of the
directors duty of loyalty to us, for acts or omissions not
in good faith or involving
17
intentional misconduct or knowing violations of law, for acts or
omissions that the director believes to be contrary to the best
interests of the Company or our stockholders, for any
transaction from which the director derived an improper personal
benefit, for improper transactions between the director and the
Company, and for improper distributions to stockholders and
loans to directors and officers. This provision also does not
affect a directors responsibilities under any other laws,
such as the federal securities laws or state or federal
environmental laws.
Underwriters
Warrants
In connection with our initial public offering, we issued
warrants to Taglich Brothers, Inc., which acted as the
underwriter, and its affiliates to purchase up to
150,000 shares of our Common Stock. Douglas E. Hailey, the
Chairman of our Board of Directors and the then Vice President
of the Investment Banking Division of Taglich Brothers, Inc.,
was issued a warrant to purchase up to 30,000 shares of our
Common Stock. The warrants are exercisable during the four-year
period commencing on July 14, 2006 at a price per share
equal to $9.60 and allow for cashless exercise. The warrants
provide for registration rights, including a one-time demand
registration right and unlimited piggyback registration rights,
and customary antidilution provisions for stock dividends,
splits and recapitalization.
Stock
Option Grants
We have granted stock options to purchase shares of our common
stock to our executive officers and directors. See
EXECUTIVE COMPENSATION-Summary Compensation Table
and EXECUTIVE COMPENSATION-Employee Benefit Plans.
Other
Transactions
We reimburse members of the Board of Directors for travel
expenditures related to their services to us. Our independent
directors are paid an annual fee of $20,000. Douglas E. Hailey
receives an annual fee of $50,000 for his services as Chairman
of our Board of Directors. Our independent directors are
entitled to participate in our stock incentive plan.
PROPOSAL II.
RATIFICATION
OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of Tullius Taylor Sartain & Sartain LLP served
as the Companys independent registered public accounting
firm for the year ended December 31, 2005. The Audit
Committee of the Board of Directors has appointed Tullius Taylor
Sartain & Sartain LLP to act in that capacity for the
year ending December 31, 2006. A representative of Tullius
Taylor Sartain & Sartain LLP is expected to be present
at the annual meeting with the opportunity to make a statement
if he or she desires to do so and to be available to respond to
appropriate questions from stockholders.
Although the Company is not required to submit this appointment
to a vote of the stockholders, the Audit Committee of the Board
of Directors continues to believe it appropriate as a matter of
policy to request that the stockholders ratify the appointment
of Tullius Taylor Sartain & Sartain LLP as independent
registered public accounting firm. If the stockholders do not
ratify the appointment, the Audit Committee will investigate the
reasons for stockholder rejection and consider whether to retain
Tullius Taylor Sartain & Sartain LLP or appoint another
independent registered public accounting firm. Even if the
appointment is ratified, the Audit Committee in its discretion
may direct the appointment of a different independent registered
public accounting firm at any time during the year if it
determines that such a change would be in the best interests of
the Company and its stockholders.
Fees Paid
to Independent Auditors
Audit Fees. The aggregate fees for
professional services rendered by Tullius Taylor
Sartain & Sartain LLP for the audit of our financial
statements included in our annual report on
Form 10-K
for the year ended December 31, 2005 and for the review of
our financial statements included in our quarterly reports on
Form 10-Q
for the quarters ended June 30, 2005 and September 30,
2005 were approximately $75,000 for 2005. In addition, we
incurred fees of
18
$138,000 in connection with the initial public offering in July
2005. Comparable fees for the 2004 audit, when we were privately
held, amounted to $48,000.
Audit-Related Fees. The aggregate fees billed
for audit-related services rendered by Tullius Taylor
Sartain & Sartain LLP were approximately $12,000 and
$8,000 in 2005 and 2004, respectively. These fees primarily
relate to audits of our defined contribution pension plans in
each year as well as Audit Committee and other technical
consultations in 2005.
Tax Fees. The aggregate fees paid to Tullius
Taylor Sartain & Sartain LLP for tax compliance and tax
consulting amounted to approximately $7,000 in 2005 and $12,000
in 2004.
All Other Fees. There were no other fees paid
to, or services rendered by, Tullius Taylor Sartain &
Sartain LLP in 2005 and 2004.
Policy
Regarding Pre-Approval of Services Provided by the Independent
Auditors
The Audit Committee Charter requires the committees
pre-approval of all services, both audit and permitted
non-audit, to be performed for the Company by the independent
auditors. In determining whether proposed services are
permissible, the committee considers whether the provision of
such services is compatible with maintaining auditor
independence. As part of its consideration of proposed services,
the committee may (i) consult with management as part of
the decision making process, but may not delegate this authority
to management, and (ii) delegate, from time to time, its
authority to pre-approve such services to one or more committee
members, provided that any such approvals are presented to the
full committee at the next scheduled Audit Committee meeting.
The percentage of hours expended on the principal
accountants engagement to audit our financial statements
for the fiscal year ended December 31, 2005 that were
attributable to work performed by persons other than the
principal accountants full-time, permanent employees was
less than 50%.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF TULLIUS TAYLOR SARTAIN & SARTAIN LLP AS
THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE YEAR ENDING DECEMBER 31, 2006.
STOCKHOLDER
PROPOSALS
Our amended and restated bylaws provide that stockholders
seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders, must provide
timely notice in writing. To be timely, a stockholders
notice must be delivered to or mailed and received at our
principal executive offices not more than 120 days or less
than 90 days before the anniversary date of the immediately
preceding annual meeting of stockholders, or between
February 13, 2007 and March 15, 2007 in the case of
the 2007 annual meeting. However, if no annual meeting was held
in the previous year or if the annual meeting is called for a
date that is not within 30 days before or after the
anniversary date, notice by the stockholder must be received
before the close of business on the 10th day after the date
on which notice of the date of the annual meeting was mailed to
stockholders or made public, whichever first occurs. Our amended
and restated bylaws specify the requirements for the form and
content of a stockholders notice. These provisions may
preclude stockholders from bringing matters before an annual
meeting of stockholders or from making nominations for directors
at an annual meeting of stockholders.
Stockholder proposals intended to be presented at the 2007
annual meeting must be received by the Company at our principal
executive office no later than March 15, 2007, in order to
be included in the Companys proxy statement and proxy
relating to that meeting. We will determine whether to include
such proposal in accordance with regulations governing the
solicitation of proxies.
19
CODE OF
ETHICS
The Company has a Business Conduct Policy (Code of
Ethics) that applies to all of our directors, officers,
and employees, including our senior financial officers. A copy
of the Code of Ethics is available in the Corporate Governance
section of our website, which can be accessed from our homepage
at http://www.orchidspaper.com by selecting
Investor Resources followed by Corporate
Governance. We will post any amendments to the Code of
Ethics in the same section of our website.
OTHER
MATTERS
Management intends to bring before the meeting only the matters
specifically described above and knows of no other matters to
come before the meeting. If any other matters or motions
properly come before the meeting, it is the intention of the
persons named in the accompanying proxy to vote such proxy in
accordance with the recommendation of management on such matters
or motions, including any matters dealing with the conduct of
the meeting.
SOLICITATION
OF PROXIES
The Company will bear the cost of the solicitation of proxies
for the meeting. We are requesting that brokerage houses, banks,
custodians, nominees and fiduciaries forward the proxy material
to beneficial owners and their reasonable expenses of forwarding
will be reimbursed by us. Solicitation will be made by mail and
also may be made personally or by telephone, facsimile or other
means by our officers, directors and employees, without special
compensation for the solicitation.
By Order of the Board of Directors
Keith R. Schroeder
Chief Financial Officer and Secretary
May 12, 2006
20
EXHIBIT A
Orchids
Paper Products Company
AUDIT
COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
The Audit Committee (the Committee) shall aid the
Board of Directors in undertaking and fulfilling its oversight
responsibilities with regard to:
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the integrity of the Corporations financial statements;
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|
the Corporations compliance with legal and regulatory
requirements;
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the qualifications and independence of the Corporations
independent auditors (the Auditors); and
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the performance of the Auditors and the Corporations
internal audit function.
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The Committee shall also be responsible for preparing the Audit
Committee report that is required to be included in the
Corporations annual proxy statement.
The duties of the Committee are ones of oversight. It is not the
duty of the Committee to plan or conduct audits or to determine
that the Corporations financial statements are complete
and accurate and prepared in accordance with generally accepted
accounting principles. The primary responsibility for the
Corporations financial statements and internal controls
rests with the Corporations management. The Board of
Directors recognizes that the Committee necessarily will rely on
the advice and information it receives from the
Corporations management and internal auditors and the
Auditors. Recognizing these inherent limitations on the scope of
the Committees review, however, the Board expects the
Committee to exercise independent judgment in assessing the
quality of the Corporations financial reporting process
and internal controls. The Board also expects that the Committee
will maintain free and open communication with the other
directors, the Corporations internal auditors and
financial management and the Auditors.
The Audit Committee shall be comprised of three or more
directors as determined by the Board, each of whom shall be
independent directors, as defined in
Rule 10A-3
under the Securities Exchange Act of 1934 (the Act)
and the rules of any national securities exchange on which the
Corporations shares may be listed from time to time, and
shall be free from any relationship that, in the opinion of the
Board, would interfere with the exercise of his or her
independent judgment as a member of the Committee. All members
of the Committee shall be financially literate, as defined in
the rules of any national securities exchange on which the
Corporations shares may be listed from time to time, and
shall have a working familiarity with basic finance and
accounting practices, and at least one member of the Committee
shall be an audit committee financial expert as
defined in
Regulation S-K,
Item 401(h) under the Act. If a Committee member
simultaneously serves on the audit committees of more than two
other public companies, the Board of Directors must determine
that such simultaneous service does not impair the ability of
such Committee member to effectively serve on the Committee and
such determination must be disclosed in the Corporations
annual proxy statement.
The members of the Committee shall be recommended by the
Nominating and Corporate Governance Committee and elected by the
Board at the annual organizational meeting of the Board to serve
until their successors shall be duly elected and qualified.
Unless a Chair is elected by the full Board, the members of the
Committee may designate a Chair by majority vote of the full
Committee membership.
The Committee shall meet at least four times per year or more
often as the Committee deems appropriate or as circumstances
dictate. As part of its job to foster open communication, the
Committee should meet separately in
A-1
executive session, at least quarterly, with management, the
Auditors and the Corporations internal auditors to discuss
any matters that the Committee or any of these groups believe
should be discussed privately.
Additional meetings may be held at such other times as shall be
reasonably requested by the Chair of the Board, the Chair of the
Committee, the Auditors or the Corporations financial
management. Members of the Committee may participate in meetings
by means of teleconference telephone or similar communications
equipment whereby all persons participating in the meeting can
hear each other, and such participation shall constitute
presence at the meeting. The Committee may also act as otherwise
permitted by law or the Companys Bylaws.
The Committee shall have complete access to management. At the
invitation of the Committee Chair, meetings of the Committee may
be attended by the Chair of the Board, the Chief Executive
Officer, the Chief Financial Officer, the Chief Operating
Officer and the Controller, representatives of the Auditors and
other persons as are appropriate to matters under consideration.
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IV.
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AUTHORITY,
RESPONSIBILITIES AND DUTIES
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The Committee shall have the resources and authority to exercise
all powers with respect to discharging its duties and
responsibilities, including full access to the
Corporations employees and officers and internal or
external advisors or consultants. If in the course of fulfilling
its duties the Committee wishes to consult with outside legal,
accounting or other advisors, the Committee may retain these
advisors without seeking the approval of the Board of Directors
or management. The Corporation shall provide for appropriate
funding, as determined by the Committee, for payment of
compensation to the Auditors for the purpose of preparing or
issuing an audit report or performing other audit, review or
attest services, compensation to any advisors employed by the
Committee and ordinary administrative expenses of the Committee.
As part of its oversight role, the Committee may investigate any
matter brought to its attention, with the full power to retain
outside counsel or other experts for this purpose. The Committee
shall have complete access to management and employees and may
request any officer or employee of the Corporation or the
Corporations outside counsel or Auditors to attend a
meeting of the Committee or to meet with any member of, or
consultant to, the Committee.
Without limiting the generality of the foregoing, the authority,
duties and responsibilities of the Committee shall include the
following:
Independent
Accountants
1. The Committee shall be solely and directly responsible
for the appointment, compensation and retention of the Auditors
and for oversight of the work of the Auditors (including
resolution of disagreements between management and the Auditors)
for the purpose of preparing or issuing an audit report or
related work or performing other audit, review or attest
services for the Corporation. The Auditors shall report directly
to the Committee.
2. The Committee shall evaluate, at least annually, the
qualifications, performance and independence of the Auditors. In
conducting such review, the Committee shall obtain and review a
report by the Auditors describing (1) the firms
internal quality-control procedures, (2) any material
issues raised by the most recent internal quality-control
review, or peer review, of the firm or by any inquiry or
investigation by governmental or professional authorities,
within the preceding five years, respecting one or more
independent audits carried out by the firm, and any steps taken
to deal with any such issues, and (3) all relationships
between the Auditors and the Corporation that might bear on the
Auditors independence, including the impact of any
non-audit services provided by the Auditors. This evaluation
shall confirm that the firm is registered with the Public
Company Accounting Oversight Board as and when such registration
is required, shall include the review and evaluation of the lead
partner of the Auditors and shall be designed to ensure the
rotation of partners and the non-participation of specific
former Corporation officers or employees, all in accordance with
SEC rules and the securities laws. The Committee shall also
obtain and discuss the written disclosures and letter from the
Auditors contemplated by Independence Standards Board Standard
No. 1, Independence Discussions with Audit
Committees, as may be modified or supplemented, and
assurances from such firm that its compensation policies comply
with applicable SEC regulations. In addition, the
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Committee shall consider the advisability of regularly rotating
the Auditors in order to maintain the independence between the
Auditors and the Corporation. In making this evaluation, the
Committee should take into account the opinions of management
and the Corporations internal auditors.
3. The Committee shall set clear hiring policies with
management regarding the hiring of any current or former
employees of the Auditors, or any prior independent public
accountant, who participated in any capacity in the audit of the
Corporation, to address conflicts of interest and pressures that
may exist for employees of the Auditor that may be seeking or at
some point seek employment with the Corporation.
4. The Committee shall pre-approve any audit or permissible
non-audit engagement or relationship between the Corporation and
the Auditors, including the fees to be paid therefor. The
Committee shall establish guidelines for the retention of the
Auditors for any permissible non-audit services and to assure
that the Auditors do not provide any prohibited non-audit
services to the Corporation. In determining whether to engage
the Auditors for any permitted non-audit services, the Committee
shall consider whether or not the provisions of such non-audit
services is compatible with maintaining the independence of the
Auditors. The Committee may establish pre-approval policies and
procedures for the engagement of the Auditors, provided the
policies and procedures are detailed as to the particular
service, the Committee is informed of each service, and the
policies and procedures do not result in a delegation of the
Committees responsibilities to management. The Committee
hereby delegates to the Chair the authority to approve in
advance all audit or permitted non-audit services to be provided
by the Auditors. The Chair shall provide a report to the full
Committee at the next regularly scheduled meeting of all
services approved pursuant to such delegation.
5. The Committee shall meet with the Auditors and the
Corporations financial management prior to the audit to
review its proposed scope, the scope of the quarterly reviews,
the procedures to be followed in conducting the audit and
reviews and the major risk factors considered by the Auditors in
determining the scope of the audit.
Financial
Statements and Disclosure Matters
6. The Committee shall review and discuss prior to public
dissemination the annual audited and quarterly unaudited
financial statements with management and the Auditors, including
major issues regarding accounting, disclosure and auditing
procedures and practices as well as the adequacy of internal
controls that could materially affect the Corporations
financial statements. In addition, the review shall include the
Corporations disclosures under Managements
Discussion and Analysis of Financial Condition and Results of
Operations and other financial information included in the
report. Based on the annual review and if deemed appropriate,
the Committee shall recommend to the Board of Directors
inclusion of the financial statements in the Annual Report on
Form 10-K.
7. The Committee shall review and discuss with management
and the Auditors significant financial reporting issues and
judgments made in connection with the preparation of the
Corporations financial statements, including any
significant changes in the Corporations selection or
application of accounting principles, any major issues as to the
adequacy of the Corporations internal controls and any
special steps adopted in light of material control deficiencies.
8. The Committee shall, prior to issuance of an audit
report and otherwise as deemed appropriate, review and discuss
reports from the Auditors on: (1) all critical accounting
policies and practices to be used; (2) all alternative
treatments of financial information within generally accepted
accounting principles for policies and practices related to
material items that have been discussed with management,
including ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
Auditors; and (3) other material written communications
between the Auditors and management, such management
representation letters, schedules of unadjusted differences,
reports on observations and recommendation on internal controls,
listings of adjustments and reclassifications not recorded, the
engagement letter and the independence letter.
9. The Committee shall discuss with management the
Corporations earnings press releases as well as financial
information and earnings guidance provided to analysts and
rating agencies. Such discussion may consist of a general
discussion of the types of information to be disclosed and the
types of presentations to be made.
10. The Committee shall discuss with management and the
Auditors the effect on the Corporations financial
statements of significant regulatory and accounting initiatives
as well as off-balance sheet structures.
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11. The Committee shall discuss with management the
Corporations major financial risk exposures and the steps
management has taken to monitor and control such exposures,
including the Corporations risk assessment and risk
management policies.
12. The Committee shall review with the Auditors any audit
problems or difficulties and managements response,
including, but not limited to (1) any restrictions on the
scope of the Auditors activities, (2) any restriction
on the access of the Auditors to requested materials,
(3) any significant disagreements with management,
(4) any audit differences that were noted or proposed by
the Auditors but for which the Corporations financial
statements were not adjusted (as immaterial or otherwise),
(5) any communications between the audit team and the
Auditors national office respecting auditing or accounting
issues presented by the engagement, and (6) any
management or internal control letter
issued, or proposed to be issued, by the Auditors. The Committee
will resolve any disagreements between the Auditors and
management regarding financial reporting.
13. The Committee shall discuss at least annually with the
Auditors the matters required to be discussed by Statement of
Auditing Standards (SAS)
No. 61-Communication
with Audit Committees, as amended by SAS 90, and as may be
further modified or supplemented.
14. The Committee shall prepare the Committee report that
the SEC requires to be included in the Corporations annual
proxy statement and review the matters described in such report.
Financial
Reporting Process
15. The Committee shall review and discuss with the Chief
Executive Officer and Chief Financial Officer: (1) any
significant deficiencies or material weaknesses in the design or
operation of the Corporations internal control over
financial reporting that are reasonably likely to adversely
affect the Corporations ability to record, process,
summarize or report financial information; (2) any fraud,
whether or not material, involving management or other employees
who have a significant role in the Corporations internal
control over financial reporting; (3) any changes in the
Corporations internal control over financial reporting
that have materially affected, or are reasonably likely to
materially affect, internal control over financial reporting;
(4) any special audit steps adopted in light of material
control deficiencies; and (5) their report regarding the
effectiveness of the Corporations disclosure controls and
procedures and internal control over financial reporting.
16. The Committee shall review and discuss with the Chief
Executive Officer and Chief Financial Officer how they are
meeting their obligations with respect to the certification
process for the
Form 10-K
and
Form 10-Q
and review their evaluations of the Corporations
disclosure controls and procedures.
17. The Committee shall obtain annually a report from the
Auditors, with attestation, regarding managements
assessment of the effectiveness of the internal control
structure and procedures for financial reporting.
18. The Committee shall approve the annual audit plan,
charter, responsibilities and staffing of the Internal Audit
Department, including the appointment and replacement of the
senior internal audit executive.
19. The Committee shall review annually with the Auditors
and the Chief Financial Officer the coordination of audit
efforts to ensure completeness of coverage, reduction of
redundant efforts and the effective use of audit resources.
20. The Committee shall receive regular reports of major
findings by internal auditors and how management is addressing
the conditions reported.
Miscellaneous
21. The Committee shall review with the Corporations
counsel, any legal matter that could have a significant impact
on the Corporations financial statements.
22. The Committee shall oversee investigations deemed
appropriate by the Committee into any matters within the
Committees scope of responsibility as described in this
Charter or as may be subsequently delegated to the Committee by
the Board of Directors, with the power to retain independent
counsel, accountants and other advisors and experts to assist
the Committee if deemed appropriate.
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23. The Committee shall establish and maintain procedures
for the receipt, retention and treatment of complaints received
by the Corporation regarding accounting, internal accounting
controls or auditing matters and the confidential, anonymous
submission by employees of the Corporation of concerns regarding
questionable accounting, internal controls or auditing matters.
The Committee shall review any significant complaints or
concerns regarding accounting, internal accounting controls or
auditing matters received pursuant to such procedures.
24. The Committee shall report regularly to the Board of
Directors with respect to any issue that arise with respect to
the quality or integrity of the Corporations financial
statement, the Corporations compliance with legal or
regulatory requirements and the performance and independence of
the Auditors.
25. The Committee shall review and reassess the adequacy of
this Charter annually and recommend any proposed changes to the
Board of Directors for approval.
26. The Committee shall conduct an annual self-evaluation
of its performance.
27. The Committee shall perform any other activities
consistent with this Charter, the Corporations By-laws and
governing law, as the Committee or the Board deems necessary or
appropriate.
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ANNUAL MEETING OF STOCKHOLDERS OF
ORCHIDS PAPER PRODUCTS COMPANY
June 13, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
¯ Please
detach along perforated line and mail in the envelope
provided. ¯
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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FOR
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AGAINST
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ABSTAIN |
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ELECTION OF DIRECTORS: To elect as directors for one-year terms
expiring at the Companys next annual meeting. |
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RATIFICATION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: To ratify Tullius
Taylor Sartain & Sartain LLP as the Companys independent registered public accounting firm for 2006.
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NOMINEES: |
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FOR ALL NOMINEES |
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Gary P. Arnold |
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Steven R. Berlin |
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In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.
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WITHHOLD AUTHORITY |
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John C. Guttilla |
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FOR ALL NOMINEES
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Douglas E. Hailey |
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Michael P. Sage |
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FOR ALL EXCEPT
(See Instructions below) |
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S).
IF NO DIRECTION IS MADE BUT THE PROXY IS SIGNED, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES FOR DIRECTOR LISTED,
FOR THE RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND IN THE DISCRETION OF THE PROXIES
ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
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INSTRUCTION:
To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here:
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MARK
X HERE IF YOU PLAN TO ATTEND THE
MEETING. o |
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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REVOCABLE PROXY
ORCHIDS PAPER PRODUCTS COMPANY
ANNUAL MEETING OF STOCKHOLDERS JUNE 13, 2006
This Proxy is solicited on behalf of the Board of Directors of Orchids Paper Products Company
The undersigned stockholder(s), revoking all prior proxies, hereby appoint(s) Michael P. Sage
and Keith R. Schroeder, or either of them, the true and lawful attorneys-in-fact, agents and as
proxies for the undersigned, with full power of substitution, to act and to vote all of the common
stock of Orchids Paper Products Company that the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders to be held at 4826 Hunt Street, Pryor,
Oklahoma 74361 on Tuesday, June 13, 2006, at 10:00 a.m., or at any adjournment or postponement
thereof. The proxies are directed to vote as instructed on the matters set forth on this card and
all other matters at their discretion which may properly come before the meeting. The matters
listed on the reverse side were proposed by the Company. The undersigned acknowledges that he/she
has received a copy of the Notice of Annual Meeting of Stockholders and Proxy Statement.
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER REQUESTS FOR
PROXIES TO ENSURE A QUORUM AT THE ANNUAL MEETING. A SELF-ADDRESSED, POSTAGE-PREPAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
(Continued and to be signed on the reverse side.)