SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.___)
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
___ Preliminary Proxy Statement
___ Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
X Definitive Proxy Statement
___
___ Definitive Additional Materials
___ Soliciting Material Pursuant to <section> 240.14a-11(c) or
<section> 240.14a-12
WAUSAU PAPER MILLS COMPANY
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required
___
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
___ Fee paid previously with preliminary materials.
___ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ___________________________
(2) Form, Schedule or Registration Statement No: _____________________
(3) Filing Party: ___________________________
(4) Date Filed: ___________________________
<PAGE>
WAUSAU PAPER MILLS COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
_____________________
The annual meeting of shareholders of Wausau Paper Mills Company will
be held at the Grand Theatre, 415 Fourth Street, Wausau, Wisconsin, on
December 16, 1996, at 2:00 p.m. for the following purposes:
1. To elect one Class III director for a term which will expire at
the annual meeting of shareholders to be held in 1999; and
2. To approve the appointment of Wipfli Ullrich Bertelson LLP as
independent auditors for the year ending August 31, 1997; and
3. To transact such other business as may properly come before the
meeting.
PLEASE PROMPTLY VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE
ENCLOSED ENVELOPE.
November 8, 1996
BY ORDER OF
THE BOARD OF DIRECTORS
Steven A. Schmidt
Secretary
____________________
A PROXY CARD AND POSTAGE-FREE ENVELOPE ARE ENCLOSED.
<PAGE>
NOVEMBER 8, 1996
WAUSAU PAPER MILLS COMPANY
ONE CLARK'S ISLAND
P.O. BOX 1408
WAUSAU, WISCONSIN 54402-1408
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 16, 1996
The enclosed proxy is solicited by the Board of Directors of Wausau
Paper Mills Company (the "Company") for use at the annual meeting of
shareholders to be held at 2:00 p.m., at the Grand Theatre, 415 Fourth
Street, Wausau, Wisconsin on December 16, 1996, and at any adjournment
thereof (the "Annual Meeting").
In addition to solicitation by mail, officers, directors and employees
of the Company and its subsidiaries may solicit proxies by telephone,
facsimile or in person. None of these persons will receive compensation,
but they will be reimbursed for actual expenses in connection therewith.
Expenses in connection with the solicitation of proxies, including the
reasonable expenses of brokers, fiduciaries and other nominees in
forwarding proxy material, will be borne by the Company.
VOTING OF PROXIES
Each holder of the Company's common stock is entitled to one vote in
person or by proxy for each share held of record on the record date,
November 1, 1996, on all matters to be voted upon at the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by an inspector of elections appointed by the Board of Directors.
If a shareholder is a participant in the Company's Dividend
Reinvestment and Stock Purchase Plan (the "DRP"), the proxy card will also
serve to direct the administrator of the DRP with respect to the voting of
any shares of common stock held for the participant under the DRP at the
close of business on the record date. Shares beneficially owned by
participants in the DRP for which no proxy or other voting directions are
received will not be voted.
With respect to the election of directors, shareholders may vote in
favor of the nominee specified on the accompanying form of proxy or may
withhold their vote. Votes that are withheld will be excluded entirely
from the voting for the election of the Class III director and will have
no effect. No other name has been submitted as a nominee for election as
a Class III director in accordance with the Company's bylaws (see
"Election of Directors").
On all matters other than the election of the Class III director,
shareholders may vote in favor of a proposal, against a proposal or
abstain from voting. Abstentions on any matter presented to the Annual
Meeting will be treated as shares that are present and entitled to vote
<PAGE>
for purposes of determining whether a quorum is present. Abstentions
shall be treated as unvoted for purposes of determining whether the matter
has been approved by the shareholders. If the votes cast in favor of a
proposal (other than the election of directors) exceed the votes cast
against the proposal, the matter will be approved by the shareholders.
Brokers who hold shares of the Company's common stock in street name
for customers may have discretionary authority to vote on certain matters
when they have not received instructions from beneficial owners, but may
not have authority to vote the shares on other matters. As to matters for
which the broker cannot vote shares held in street name, the shares will
be recorded as a "broker non-vote". Shares reported as broker non-votes
will not be considered present and entitled to vote with respect to the
matter and will not be counted for purposes of determining whether a
quorum is present.
A shareholder who executes a proxy may revoke it at any time before it
is voted by giving written notice to the Secretary of the Company or oral
notice to the presiding officer at the Annual Meeting.
The persons named in the accompanying form of proxy, as members of the
Proxy Committee of the Board of Directors, will vote the shares subject to
each proxy. The proxy in the accompanying form will be voted as specified
by each shareholder, but if no specification is made, each proxy will be
voted:
(1) TO ELECT Gary W. Freels to a term of office as a Class III
director which will expire at the annual meeting of shareholders
to be held in 1999 (see "Election of Directors"); and
(2) TO APPROVE the appointment of Wipfli Ullrich Bertelson LLP as the
Company's independent auditors for the fiscal year ending August
31, 1997; and
(3) IN THE BEST JUDGMENT of those named as proxies on the
accompanying form of proxy on any other matters to properly come
before the Annual Meeting (see summary of bylaw requirements
under "Shareholder Proposals"), the approval of minutes and
matters incident to the conduct of the Annual Meeting or the
adjournment thereof.
BENEFICIAL OWNERSHIP OF SHARES
As of October 11, 1996, the Company had 36,897,433 shares of common
stock outstanding (including 384,905 shares subject to options exercisable
within 60 days).
The following table sets forth, based on statements filed with the
Securities and Exchange Commission or otherwise made to the Company, the
amount of common stock of the Company which may be deemed beneficially
owned as of October 11, 1996 by each person known to the Company to be the
beneficial owner of more than 5% of the Company's outstanding common
stock.
<PAGE>
<TABLE>
<CAPTION>
Common Shares Percent of
NAME AND ADDRESS BENEFICIALLY OWNED CLASS
<S> <C> <C>
Wilmington Trust Company 8,455,389 (1) 22.92%
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
Trustees of David B. Smith 3,194,915 (2) 8.66%
Family Trust
1206 E. Sixth Street
Merrill, WI 54452
</TABLE>
The following table sets forth, based on statements filed with the
Securities and Exchange Commission or otherwise made to the Company, the
amount of common stock of the Company beneficially owned as of October 11,
1996 by each of the directors, each person nominated to become a director,
each of the current executive officers of the Company named in the summary
compensation table on page __ and all directors and executive officers as
a group.
<TABLE>
<CAPTION>
Common Stock Percent of
NAME BENEFICIALLY OWNED CLASS
<S> <C> <C>
San W. Orr, Jr. 438,763 (3) 1.19%
Daniel D. King 119,791 (4) *
David B. Smith, Jr. 2,446,125 (5) 6.63%
Stanley F. Staples, Jr. 467,502 (6) 1.27%
Harry R. Baker 2,595 *
Gary W. Freels 444,683 (6) 1.21%
Larry A. Baker 54,549 (4) *
Thomas J. Howatt 40,609 (4) *
Steven A. Schmidt 28,518 (4) *
D. Michael Wilson 5,500 (4) *
All directors and executive
officers as a group (9 persons) 3,604,002 (7) 9.77%
<FN>
* Less than 1%
(1) Held in a fiduciary capacity as trustee, including 8,413,077 shares
held for the benefit of the descendants of A.P. Woodson and family.
(2) David B. Smith, Jr., Thomas P. Smith, Margaret S. Mumma and Sarah
S. Miller are the co-trustees of the David B. Smith Family Trust
(the "Trust") which owns 2,368,372 shares of common stock.
Including common stock which is beneficially owned by the trustees
on an individual basis and common stock owned by the Trust, each of
the trustees has sole or shared investment authority with respect
to the following percentage of common stock: David B. Smith, Jr.,
6.63%; Thomas P. Smith, 6.68%; Margaret S. Mumma, 7.40%; and Sarah
S. Miller, 7.21%.
(3) Includes 163,763 shares as to which Mr. Orr exercises shared voting
and investment power (and as to which beneficial ownership is
disclaimed) and shares which may be acquired through the exercise
of options on or before 60 days.
(4) Includes shares which may be acquired through the exercise of
options on or before 60 days.
(5) David B. Smith, Jr. is a co-trustee of the David B. Smith Family
Trust which holds 2,368,372 shares of common stock. See note (2).
(6) Includes 442,883 shares of common stock held by a charitable
foundation of which Mr. Staples serves as Chairman of the Board and
a director and Mr. Freels serves as President and a director.
Mr. Staples has reached mandatory retirement age and is not a
candidate for reelection.
(7) Includes shares described in notes (3), (4), (5) and (6).
</TABLE>
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers and persons who own more than 10% of the
Company's common stock ("reporting persons") to file reports of ownership
and changes in ownership with the Securities and Exchange Commission
("SEC"). Reporting persons are also required by SEC regulations to
furnish the Company with copies of all section 16(a) forms filed by them
with the SEC. David B. Smith, Jr., a director of the Company, did not
file a timely Form 5 (due October 15, 1995) with respect to a gift of 400
shares which occurred in December 1994; this gift was reported in January
1996. Based solely on its review of the copies of the section 16(a) forms
received by it or upon written representations from certain of these
reporting persons as to compliance with the section 16(a) regulations, the
Company is of the opinion that during the 1996 fiscal year, and for all
prior fiscal years, all filing requirements applicable under section 16(a)
to all other reporting persons were satisfied.
ELECTION OF DIRECTORS
The Company's restated articles of incorporation, as amended, provide
that the number of directors shall be determined pursuant to the Company's
bylaws and resolutions of the Board of Directors, but there shall be not
less than three nor more than nine directors. Directors are to be divided
into three classes so that each class has, to the extent possible, an
equal number of directors. One class of directors is to be elected at
each annual meeting of shareholders to serve a three-year term. Vacancies
caused by the death or resignation of a director are filled by the Board
of Directors for the remainder of the unexpired term. The Board is now
composed of three classes consisting of two Class I and Class II
Directors, respectively, and one Class III Director. No person may be
elected a director if that person has attained age 70 as of the date of
the election.
The Executive Committee will consider nominating for directors
individuals whose names are submitted by shareholders. Recommendations
concerning nominations with pertinent background information should be
directed to the Chairman of the Executive Committee, in care of the
Company. Pursuant to the Company's bylaws, shareholders entitled to vote
at the annual meeting of shareholders to be held in 1997 may make
nominations from the floor only if proper notice of the proposed
nomination has been provided to the Secretary of the Company not earlier
than September 17, 1997 and not later than October 17, 1997. The precise
requirements, including the information required to be provided in the
notice and the procedures for notice in the event the date of the annual
meeting is changed, are set forth in the Company's bylaws which may be
obtained from the Secretary of the Company.
Stanley F. Staples, Jr. has reached mandatory retirement age under the
policy adopted by the Board of Directors and will not be a candidate for
reelection at the Annual Meeting. Mr. Staples has been a member of the
Board of Directors since 1968. The Board has nominated Gary W. Freels to
fill the vacancy created by Mr. Staples' retirement. Mr. Freels has
consented to serve if elected, but in case he is not a candidate at the
Annual Meeting, it is the intention of the Proxy Committee to vote for
such substitute as may be designated by the Board.
<PAGE>
The following information is furnished with respect to Mr. Freels and
all continuing directors:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION CLASS AND YEAR
AND OTHER WHICH TERM DIRECTOR
NAME AGE DIRECTORSHIPS WILL EXPIRE SINCE
<S> <C> <C> <C> <C>
NOMINEE
Gary W. Freels 47 President, Alexander Properties, Inc. Class III -
(investment management); previously 1999
President, M&I First American
Bank, 1992 to 1995, Executive Vice
President of the Bank, 1989 to 1992
CONTINUING DIRECTORS
San W. Orr, Jr. 55 Chairman of the Board; also Chief Class I 1970
Executive Officer of the Company 1997
from July 1994 to December 1995;
Attorney, Estates of A.P. Woodson
and family; also a director of
Mosinee Paper Corporation, MDU
Resources Group, Inc. and
Marshall & Ilsley Corporation
David B. Smith, Jr. 58 Consultant; previously, Vice Class I 1972
President, Labor Relations, 1997
Weyerhaeuser Company
Daniel D. King 49 President and Chief Executive Class II 1994
Officer of the Company since 1998
December 1995; Mr. King was
President and Chief Operating
Officer, July 1994 to December
1995, and managed the Company's
Printing and Writing Division from
September 1990 to July 1994
Harry R. Baker 63 President and Chief Executive Class II 1992
Officer, Marathon Electric Mfg. 1998
Corp.; also a director of Mosinee
Paper Corporation
</TABLE>
COMMITTEES AND COMPENSATION OF BOARD OF DIRECTORS
COMMITTEES AND MEETINGS
The Board of Directors appointed Audit and Executive Committees for
the 1996 fiscal year. The Board does not have a standing nominating
committee. The functions of a nominating committee are performed by the
Executive Committee in accordance with a Board of Directors resolution
(see "Election of Directors").
The Audit Committee, consisting of Messrs. Orr, Staples and Baker, met
twice during the last fiscal year. The Audit Committee reviews the scope
of the audit engagement and the audit fees and nature of consulting fees.
<PAGE>
The Executive Committee consists of Messrs. Orr, Smith and King. The
Executive Committee met six times during the last fiscal year. Its
principal duties include review of the Company's overall performance, the
development and implementation of policies during intervals between Board
meetings, the establishment, with management, of long- and short-term
growth and performance goals and the establishment of management
compensation programs. The Board does not have a separate compensation
committee (see "Committees' Report on Compensation Policies", page __).
During the last fiscal year the Board of Directors met seven times.
Each of the directors attended at least 75% of the aggregate number of the
meetings of the Board of Directors and the committees on which they served
during the last fiscal year.
DIRECTOR COMPENSATION
Directors of the Company, excluding Mr. King and members of the
Executive Committee, are paid a retainer of $1,000 per month and $1,000
for each meeting of the Board of Directors attended. Members of the
Executive Committee are considered employees of the Company and
participate in various retirement and welfare benefit plans available to
all salaried employees. Mr. King receives no additional compensation for
service on the Executive Committee; the other members of the Committee are
paid a salary of $40,000 per year. Mr. Orr also received compensation for
his services as Chief Executive Officer through December 18, 1995, but no
other director received more than the standard arrangements described
above.
The Directors' Deferred Compensation Plan provides that directors may
elect each year to defer fees otherwise payable in cash during the year.
Amounts deferred become payable in a lump sum after the director's
termination of service as a director or, if the participant elects with
the approval of the Company, in quarterly installments over a period not
in excess of 10 years. In the event a director's service terminates
because of a change of control of the Company, as defined by the plan,
payment of all deferred amounts will be made in a lump sum. During the
period of deferral, a director may elect that the deferred fees be
credited with interest at the prime rate in effect as of each calendar
quarter at The Chase Manhattan Bank of New York or be converted into stock
equivalent units. If stock equivalent units are elected, the director's
account is also credited with common stock equivalent units representing
the shares of common stock which could, hypothetically, have been
purchased with the hypothetical cash dividends which would have been paid
on the accumulated stock equivalent units had they been actual shares of
common stock. Upon distribution, stock units are converted to cash based
upon the fair market value of the Company's common stock at the time of
distribution. During 1996, Mr. Baker participated in the plan and
deferred the director or meeting fees otherwise payable to him.
The retirement policy for directors provides for the payment of
specified retirement benefits for directors who have served on the Board
for at least five years prior to their termination of service. A retired
director's benefit is equal to the monthly retainer and meeting fees
(based on the amount of such retainer or meeting fee in effect at his
termination of service) and is paid for a period of time equal to the
retired director's period of service on the Board. Retirement benefits
terminate at death and are accelerated in the event of a change of control
of the Company, as defined by the policy.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The table below sets forth compensation awarded, earned or paid by the
Company and its subsidiaries for services in all capacities during the
three years ended August 31, 1996, 1995 and 1994 to each person who served
as the Company's Chief Executive Officer in the last fiscal year and to
each of the four most highly compensated executive officers of the Company
as of August 31, 1996, other than CEO, whose total annual salary and bonus
compensation for the 1996 fiscal year exceeded $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Annual Compensation Compensation
Awards
Other Annual Options/ All Other
Name and Principal Position Year Salary(1) Bonus Compensation($) SARs(#)<dagger> Compensation(2)
<S> <C> <C> <C> <C> <C> <C>
San W. Orr, Jr.; 1996 $ 73,850(3) - - - $ 720
Chairman of the Board and CEO* 1995 $ 140,411(3) - - - $ 600
1994 $ 56,869(3) - - - $ 1,320
Daniel D. King; President 1996 $ 252,770 $ 215,000 - 9,375 $ 3,342
and CEO* 1995 $ 216,566 $ 106,970 - 89,375(4) $ 3,230
1994 $ 160,747 $ 92,785 - - $ 5,310
Larry A. Baker; Senior Vice 1996 $ 173,762 $ 171,000 - 18,750 $ 2,848
President, Administration 1995 $ 164,283 $ 51,945 - 4,125(4) $ 2,835
1994 $ 157,354 $ 105,563 - - $ 4,950
Thomas J. Howatt; Vice 1996 $ 163,950 $ 157,500 $ 105,017(5) 25,000 $ 137,352(6)
President/General Manager, 1995 $ 154,187 $ 158,500 $ 17,214(5) 4,125(4) $ 127,317(6)
Printing and Writing Division 1994 $ 137,750 $ 82,195 - - $ 4,340
Steven A. Schmidt; 1996 $ 126,597 $ 121,100 - 18,750 $ 2,264
Vice President, Finance, 1995 $ 116,852 $ 35,350 - 4,125(4) $ 1,742
Secretary and Treasurer 1994 $ 108,226 $ 73,750 - - $ 1,620
D. Michael Wilson; 1996 $ 58,115 $ 50,000 - 15,000 $ 909
Vice President/General
Manager, Rhinelander Division
<FN>
* Mr. Orr served as CEO until Mr. King's election on December 18,
1995.
<dagger> All grants indicated are options to acquire common stock.
(1) Includes compensation deferred by participants under the
Salaried Savings and Investment Plan (401(k)). See note (2).
(2) Except with respect to Mr. Howatt in 1996 and 1995,
contributions by the Company under the Salaried Savings and
Investment Plan, a 401(k) plan.
(3) Includes $33,333, $100,000, and $16,667 deferred in 1996, 1995
and 1994 respectively, under an agreement which provides that
the deferred amount will earn annual interest at a rate equal to
one percent below the prime rate in effect on the first day of
each calendar year and will be distributed in five annual
installments following the date Mr. Orr ceases to be a director
of the Company. The agreement provides for a lump sum payment
in the event of a change of control of the Company, as defined
in the agreement.
(4) Options lapsed in fiscal 1995 with respect to Mr. King (6,875
shares) and Messrs. Baker, Howatt and Schmidt (4,125 shares) due
to nonsatisfaction of Company performance criteria.
(5) Reimbursement for taxes under Company's relocation policy.
(6) Includes contributions of $2,900 and $2,235 in 1996 and 1995,
respectively, under 401(k) plan and reimbursements of $134,452
and $125,082 in 1996 and 1995, respectively, under Company
relocation policy.
</TABLE>
<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Company maintains a stock appreciation rights plan and a stock
option plan pursuant to which grants may be made to key employees. No
stock appreciation rights ("SARs") were granted in fiscal 1996. The
following table sets forth information with respect to the grant of stock
options to executive officers named in the summary compensation table in
fiscal 1996.
<PAGE>
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Alternative
Grants Grant Date
Value
% of total Market
Options/SARs Price of
Granted to Exercise or Stock on Grant Date
Options/SARs Employees in Base Price Date of Expiration Present
Name Granted(#) Fiscal Year ($/Sh) Grant Date Value $ (4)
<S> <C> <C> <C> <C> <C> <C>
Mr. King 9,375(1) 6.55% $18.50 $19.30 10/18/15 $ 64,219
Mr. Baker 6,250(1) 4.37% $18.50 $19.30 10/18/15 $ 42,813
12,500(2) 8.73% $18.50 $18.50 09/01/15 $ 82,000
Mr. Howatt 6,250(1) 4.37% $18.50 $19.30 10/18/15 $ 42,813
18,750(2) 13.10% $18.50 $18.50 09/01/15 $123,000
Mr. Schmidt 6,250(1) 4.37% $18.50 $19.30 10/18/15 $ 42,813
12,500(2) 8.73% $18.50 $18.50 09/01/15 $ 82,000
Mr. Wilson 5,000(1) 3.49% $22.75 $23.38 04/22/16 $ 43,800
10,000(3) 6.99% $22.75 $23.38 04/22/16 $ 87,600
<FN>
(1) Options became exercisable on the date audited financial statements
for fiscal 1996 were first available as to one-third of grant if
operating profit for fiscal 1996 was at least $56,070,000; two-
thirds if operating profit was at least $59,185,000 and as to all
shares if operating profit was at least $62,300,000. The options
became exercisable on September 18, 1996 as to all shares based on
1996 fiscal year performance of the Company.
(2) Options became exercisable six months from grant date.
(3) Options become exercisable on April 22, 1997.
(4) Determined pursuant to Black-Scholes option pricing model. Does
not include value of hypothetical shares credited to grantee under
the Company's Dividend Equivalent Plan which assumes cash dividends
are paid on a corresponding number of underlying shares and
invested in Company common stock. The material assumptions and
adjustments incorporated into the Black-Scholes model in estimating
the value of the options reflected in the above table include (a)
an option term of 20 years, (b) interest rates of 6.49%, 6.04% and
6.51% that represent the interest rate on long-term U.S. Treasury
securities with maturity dates corresponding to the option terms on
the grant dates (in respective chronological order), (c) volatility
of 28.4% to 30.5% (depending on the grant) calculated using daily
stock prices for the one-year period prior to the grant dates, (d)
dividends at the dividend rate as of the date of grant ($0.22 per
share for grants to Mr. Wilson, $0.20 per share for all other
grants) per share representing the annualized dividends paid with
respect to a share of common stock, and (e) reductions of
approximately 40% to reflect the probability of a shortened option
term due to termination of employment prior to the option
expiration date (discounts do not take into consideration Company
performance criteria which must be satisfied prior to vesting and
which made vesting still more uncertain as of the grant date). The
actual value, if any, an optionee will realize upon exercise of an
option will depend on the excess of the market value of the
Company's common stock over the exercise price on the date the
option is exercised. There is no assurance that the market price
of the common stock will increase as assumed for purposes of this
pricing model and no projections as to the actual future value of
the Company's common stock are intended or made. See subcaption
"Stock Based Compensation" on page __.
</TABLE>
<PAGE>
The following table sets forth information regarding the exercise of
stock options or SARs in fiscal 1996 by each of the executive officers
named in the summary compensation table and the August 31, 1996 value of
unexercised stock options or SARs held by each such person.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
<CAPTION>
Shares Ac- Number of Unexercised Value of Unexercised In-the-
quired on Value Options/SARs at FY-End(#) Money Options/SARs at FY-End
Exercise Realized ($)(2)(5)
Name (#)(1) ($)(2) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Mr. Orr - - 91,668* - $ 92,808 * -
Mr. King - - 30,556<dagger> - $ 405,376 <dagger> -
92,278* 9,375* (3) $ 75,849 * $ 1,258 *(3)
Mr. Baker - - 14,789<dagger> - $ 223,364 <dagger> -
22,278* 6,250* (3) $ 54,981 * $ 840 *(3)
Mr. Howatt - - 22,183<dagger> - $ 335,068 <dagger> $ -
30,362* 6,250* (3) $ 22,390 * $ 840 *(3)
Mr. Schmidt - - 21,668* 6,250* (3) $ 2,261 * $ 840 *(3)
Mr. Wilson - - - 5,000* (3) - $ 243 *(3)
- - - 10,000* (4) - $ 485 *(4)
<FN>
* Options
<dagger> SARs exercisable only for cash
(1) Number of shares as to which options or SARs were exercised.
(2) In cases of SAR exercise or valuation, includes the value of
hypothetical shares credited to grantee under provision in SAR
grant which assumes cash dividends are paid on underlying shares
and invested in hypothetical Company common stock.
(3) Options became exercisable on September 18, 1996.
(4) Options become exercisable on April 22, 1997.
(5) Includes the value of hypothetical shares credited to grantee under
provision in grant under Dividend Equivalent Plan which assumes
cash dividends are paid on underlying shares and invested in
hypothetical Company common stock.
</TABLE>
<PAGE>
PENSION PLAN BENEFITS
WAUSAU PAPER RETIREMENT PLAN
The following table reflects illustrative estimated single life
retirement benefits payable by the Retirement Plan on an annual basis to
participants in selected remuneration and years of service classifications.
The benefit amounts listed below are based on five year average earnings,
exclusive of bonuses, and are not subject to any deductions for Social
Security benefits or other offset amounts. In estimating the annual benefit,
it is assumed that average covered compensation and the factor for Social
Security benefits for years after 1996 will be at the same level as 1996.
Benefit amounts are subject to Internal Revenue Code limitations on maximum
compensation which can be used to determine such benefits.
<TABLE>
<CAPTION>
Final Average YEARS OF SERVICE
Earnings
(BASE SALARY) 10 20 30
<S> <C> <C> <C>
$ 50,000 $ 6,000 $12,000 $ 18,000
$ 80,000 $11,000 $22,000 $ 33,000
$110,000 $16,000 $32,000 $ 48,000
$140,000 $21,000 $42,000 $ 63,000
$170,000 $26,000 $52,000 $ 78,000
$200,000 $31,000 $62,000 $ 93,000
$230,000 $36,000 $72,000 $108,000
</TABLE>
At August 31, 1996, the credited years of service and the average covered
compensation for the persons named in the summary compensation table were:
Messrs. Orr, 26 years, $40,000; King, 6 years, $192,000; Baker, 18 years,
$148,000; Howatt, 16 years, $134,000; Schmidt, 4 years, $107,000; Wilson, 1
year, $150,000.
SUPPLEMENTAL PLANS
Executive officers (defined as the President and all corporate Vice
Presidents) of the Company are covered by the Executive Officers' Deferred
Compensation Retirement Plan. The plan provides that each employee of the
Company who attains age 55 and completes 10 years of service as an executive
officer will be entitled to a benefit determined under a formula similar to
that used by the Wausau Paper Retirement Plan described above. However, the
formula used in the Deferred Compensation Retirement Plan assumes that each
retiree had completed 30 years of service with the Company, that the
limitations on benefits imposed on qualified plans under the Internal Revenue
Code are not applicable, and that 100% of bonuses are included in the
calculation of retirement benefits. The benefit payable under the plan is
reduced by the participant's actual benefit from the Retirement Plan. Plan
benefits become fully vested and payment is accelerated for certain classes
of participants in the event of a change of control of the Company. Assuming
average compensation levels as of August 31, 1996 remained unchanged, the
following annual benefits would be payable from the Deferred Compensation
Retirement Plan upon retirement at age 65: Messrs. King, $91,000; Baker,
$64,000; Howatt, $58,000; Schmidt, $42,000; and Wilson, $25,000. As of
August 31, 1996, no current executive officer other than Mr. Baker had
acquired a vested right to a benefit.
Mr. Orr participates in a plan which will provide, beginning at age 60
(or upon Mr. Orr's later termination of employment), an annual retirement
<PAGE>
benefit of 50% of covered compensation. Mr. Orr's covered compensation under
this plan at August 31, 1996 was $62,000. The plan provides for payment of
the present value of the benefit in a lump sum in the event of a change of
control of the Company, as defined in the agreement.
COMMITTEES' REPORT ON COMPENSATION POLICIES
The Executive Committee of the Board of Directors (the "Executive
Committee") establishes and reviews base salaries of executive officers and
is also responsible for the establishment and implementation of executive
bonus and incentive programs and general compensation policies. Executive
officers who serve on the Executive Committee do not participate in the
Executive Committee's determination of their own compensation. The salaries
of Mr. Orr, for services as Chairman of the Board, and Mr. Smith, a member of
the Committee, are paid in lieu of meeting or other director fees and are
approved by the Board as a whole. The salary of Mr. Orr for services as
Chief Executive Officer was also approved by the Board as a whole.
The Company's compensation program for executive officers may include
various grants under the Company's stock option, stock appreciation rights
("SAR") and dividend equivalent plans. The Company's plans are administered
by separate committees appointed by the Board of Directors. The plan
committees generally consider recommendations of the Executive Committee with
respect to grants, but each committee has full discretion and control over
whether a grant will be made and the amount and terms of any such grant.
Insofar as this report includes a description of the compensation policies
relating to the stock option, SAR and dividend equivalent plans, this report
is a joint report of the Executive Committee and of each of the plan
committees.
This report describes the policies of the foregoing committees and the
Company as in effect for the 1996 fiscal year. As circumstances change and
one or more of the committees deem it appropriate, policies in effect from
time to time for years after 1996 may change.
GENERAL
The Company's executive compensation policies are designed to attract and
retain individuals who have experience in the paper industry or who otherwise
have particular training or skills which will satisfy particular requirements
of the Company. These policies are also intended to reward job performance
which results in superior Company performance. The total compensation paid
to executive officers and the retirement and other fringe benefits provided
by the Company are designed to offer a level of compensation which is
competitive with other companies in the paper industry. Some, but not all,
of the companies used for purposes of compensation comparisons are included
in the fifty-five companies (representing fifty-six stock issues) which, in
addition to the Company, comprise the Media General MG Industry Group 381
index of paper company stock performance under the heading "Stock Price
Performance Graph." The Committee makes compensation comparisons only with
those companies whose operations are similar to the Company or which have
operating units which are similar to the Company. Given the disparity in
size between companies which operate in the paper industry and the difficulty
in determining the precise duties of executive officers of other companies,
it is difficult to draw exact comparisons with the compensation policies of
other companies. The determination of executive compensation is, therefore,
subjective.
<PAGE>
The Company's overall compensation policy is designed so that a
significant portion of each executive officer's compensation package is
directly related to the annual performance of the Company and the performance
of the Company's stock. Executive officers participate in incentive bonus
plans which are based primarily on the Company's financial performance during
the fiscal year, but also include incentives for individual performance.
Executive officers also participate in stock based incentive programs, the
value of which increases as the performance of the Company's common stock on
The Nasdaq Stock Market increases shareholder value as a whole.
The Company may not deduct as a business expense compensation paid to the
CEO and each of the four most highly paid executive officers named in the
summary compensation table who are officers on the last day of the year to
the extent the compensation paid to the individual officer exceeds $1 million
annually. This limitation is subject to certain exceptions for compensation
paid pursuant to performance based plans and amounts received through the
exercise of stock options and SARs provided certain requirements are met.
Amounts receivable by Company officers under stock options or SARs granted
before February 18, 1993 are not subject to this limit. No compensation paid
in 1996 exceeded the deductible limit. The Committee will continue to review
this limit and its application to the Company's compensation policies.
BASE COMPENSATION
The Executive Committee does not rely on specific salary and benefit
comparisons, but does consider and review a general survey of paper industry
compensation prepared by an independent compensation and benefit consultant
in order to gauge the relationship of its executive officers' base salary and
benefit levels to the levels of comparable operating units of larger paper
companies. Annual increases in the base salary of each of the Company's
executive officers are determined by the Committee's policy of maintaining
competitive salary levels with other paper industry companies (as discussed
above), more general factors such as the rate of inflation, and individual
job performance. Individual job performance in the prior fiscal year is the
most important factor considered by the Executive Committee in annual reviews
and in determining appropriate increases in base salary.
The salary of Mr. Orr, as Chief Executive Officer ("CEO") through
December, 1995, was determined by the Board of Directors on the same basis
and using the same general criteria as that of the Company's other executive
officers, but was less than the compensation paid to the CEO in prior years
because Mr. King was then fulfilling the duties of Chief Operating Officer
("COO"). Mr. King was elected CEO in December, 1995 and also continues to
perform his prior duties.
INCENTIVE COMPENSATION BASED ON FINANCIAL PERFORMANCE OF THE COMPANY AND
INDIVIDUAL PERFORMANCE
The Company maintains incentive reward plans for executive officers which
provide for the payment of annual cash bonuses to participants if annual
Company financial and/or individual performance objectives are met. The
criteria by which incentive awards are determined are based on the Executive
Committee's assessment of the total cash compensation available to executive
officers as base salary and under the incentive plans and are designed to
provide total annual cash compensation which is comparable to other executive
officers in the paper industry. The Executive Committee can modify
performance objectives during a fiscal year under any of the plans if an
unusual or nonrecurring event occurs which would have a significant effect on
the stated performance goals.
<PAGE>
Mr. Orr does not participate in an incentive compensation plan. All
other executive officers with Company-wide responsibilities participate in
the Corporate Management Incentive Plan under which participants are eligible
to receive incentive awards of up to 100% of base salary based on the
Company's actual return on average equity as compared to a targeted return on
average equity established by the Executive Committee. The Company's actual
return on equity is determined by net earnings before giving effect to bonus
expense, adjustments for stock appreciation rights and certain other
adjustments. Messrs. King, Baker and Schmidt participate in the plan. In
addition, in the last fiscal year, individual performance objectives for each
participant (other than Mr. King) provided for a maximum aggregate bonus of
$15,000.
Executive officers with direct management responsibilities for the
Company's Printing and Writing and Rhinelander Divisions participated in 1996
in plans which provided incentive compensation based upon the respective
division's actual return on the division's total controllable assets (as
defined by the plans) as compared to a targeted return established by the
Executive Committee or, in the case of Rhinelander, the board of directors.
Mr. Wilson received a bonus of $50,000 in 1996 in lieu of the bonus otherwise
payable under the plan. In addition, individual performance objectives for
each participant which provided for a maximum aggregate bonus of $15,000.
Messrs. Howatt and Wilson participate in their respective divisional
incentive plans.
STOCK BASED COMPENSATION
Executive officers of the Company participate in stock option, SAR and
dividend equivalent plans at various levels. The plans are administered by
specific plan committees, each of which may impose restrictions as to
exercise or vesting of grants under its respective plan. For example,
certain of the options, SARs and dividend equivalents granted to executive
officers in 1996 or in prior years can be exercised only if the Company meets
specified operating profit targets or are subject to the satisfaction of
certain service requirements for vesting. None of the committees has
established formal criteria by which the size of plan grants are determined,
but each committee considers the amount and terms of each grant already held
by an executive officer in determining the size and terms of any new grant.
The value of these grants are principally related to the long-term
performance of the Company's common stock and, therefore, provide an identity
of interests between the Company's executive officers and its shareholders.
In addition, grantees of SARs and dividend equivalents benefit from the
increase in value of the underlying common stock and from the value of the
hypothetical reinvested cash dividends which would be paid with respect to a
share of stock to which the SAR or dividend equivalent relates. Therefore,
executive officers who receive grants of options with an exercise price of
less than current fair market value at the time of grant or who exercise SARs
or who receive dividend equivalents will benefit from such grants even if
there is no increase in the price of the Company's common stock. The value
of any such grant will be enhanced by increases in the price of the Company's
common stock and will be of maximum value to the executive officer only if
such an increase occurs. It is the intention of the Company that the
hypothetical dividend features of the SARs and the dividend equivalents will
place the executive officers in the same position as shareholders of the
Company, thereby enhancing the officer's long-term incentive and increasing
his identity with the shareholders.
Options, SARs and dividend equivalents can be, but are not necessarily,
granted on an annual basis. See table on page __.
<PAGE>
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Orr, King and Smith are members of the Executive Committee and
are considered employees of the Company. Mr. Orr is Chairman of the Board
and Mr. King is President and CEO of the Company. See "Committees and
Compensation of Board of Directors". Mr. Orr is also Chairman of the Board
of Marathon Electric Mfg. Corp. and Mr. Baker, who is President and CEO of
Marathon Electric, serves on the committees listed below. None of the
members of the committees which administer the stock option, SAR and dividend
equivalent plans are officers of the Company.
1991 Employee Stock Option Plan Committee
1990 SAR Plan Committee
1991 DIVIDEND EQUIVALENT PLAN COMMITTEE
Harry R. Baker
Stanley F. Staples, Jr.
David B. Smith, Jr.
EXECUTIVE COMMITTEE
San W. Orr, Jr.
Daniel D. King
David B. Smith, Jr.
STOCK PRICE PERFORMANCE GRAPH
The following graph and table compare the yearly percentage change in the
cumulative total shareholder return on the Company's common stock for the
five-year period beginning August 31, 1991 with two indices published by
Media General Financial Services. The Media General Nasdaq Market Index
indicates the performance of all stocks which have been traded on The Nasdaq
Stock Market during the entire five-year period. The Media General MG
Industry Group 381-Paper Products Index indicates the performance of fifty-
seven paper products industry stocks (including the stock of the Company).
The graph and table assume that the value of the investment in the Company's
common stock and each index on August 31, 1991 was $100 and that all
dividends were reinvested.
[Stock performance graph filed pursuant to
Rule 304(d) of Regulation S-T.]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Wausau Paper Mills Company $100.00 $109.92 $163.79 $148.42 $147.59 $143.24
MG Paper Industry Group 381 $100.00 $102.76 $104.54 $129.67 $151.25 $156.81
MG Nasdaq Market Index $100.00 $101.69 $132.39 $144.65 $172.11 $193.26
</TABLE>
APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors will present to the Annual Meeting a resolution
that the shareholders approve the appointment of the firm of Wipfli Ullrich
Bertelson LLP as independent auditors to audit the books, records and
accounts of the Company for the fiscal year ending August 31, 1997.
Representatives of Wipfli Ullrich Bertelson LLP will be present at the Annual
Meeting and will have an opportunity to make a statement or respond to
appropriate questions.
<PAGE>
SHAREHOLDER PROPOSALS
If any shareholder desires to submit a proposal to be included in the
proxy statement relating to the annual meeting of shareholders to be held in
1997, the proposal must be in proper form and received by the Company no
later than July 11, 1997. See "Voting of Proxies" and "Election of
Directors" regarding bylaw requirements relating to nominations and business
to be brought from the floor at the annual meeting of shareholders to be held
in 1997.
Pursuant to the Company's bylaws, shareholders entitled to vote at the
annual meeting of shareholders to be held in 1997 may bring business before
the annual meeting for consideration only if proper notice of the proposed
business has been provided to the Secretary of the Company not earlier than
September 17, 1997 and not later than October 17, 1997. The precise
requirements, including the information required to be provided in the
shareholder notice and the procedures for notice in the event the date of the
annual meeting is changed, are set forth in the Company's bylaws which may be
obtained from the Secretary of the Company.
OTHER MATTERS
At this date, there are no other matters management intends to present or
has reason to believe others will present to the Annual Meeting. If other
matters now unknown to management come before the meeting, the members of the
Proxy Committee of the Board of Directors will vote in accordance with their
judgment.
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.
November 8, 1996
BY ORDER OF THE BOARD OF DIRECTORS
STEVEN A. SCHMIDT
Steven A. Schmidt
Secretary
<PAGE>
WAUSAU PAPER MILLS COMPANY
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING
TO BE HELD DECEMBER 16, 1996
The undersigned, having received the Notice of Annual Meeting, Proxy
Statement, and Annual Report for the year ended August 31, 1996, hereby
appoint(s) San W. Orr, Jr., Daniel D. King and Steven A. Schmidt and each of
them, with full power of substitution, proxies of the undersigned to vote all
shares of the undersigned in Wausau Paper Mills Company at the annual meeting
of shareholders to be held on December 16, 1996 and at any adjournments
thereof.
THE DIRECTORS RECOMMEND A VOTE FOR THE ELECTION OF MR. FREELS AND THE
APPOINTMENT OF WIPFLI ULLRICH BERTELSON CPAS.
UNLESS AUTHORITY IS WITHHELD OR UNLESS OTHERWISE SPECIFIED, THE PROXIES SHALL
VOTE FOR THE ELECTION OF MR. FREELS AND THE APPOINTMENT OF WIPFLI ULLRICH
BERTELSON CPAS.
(Continued and to be signed on reverse side.)
<PAGE>
WAUSAU PAPER MILLS COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Election of Directors: For Withheld
GARY W. FREELS
2. Approval of appointment of Wipfli For Against Abstain
Ullrich Bertelson CPAs as independent
auditors for the year ending August
31, 1997.
3. In their discretion, the proxies are authorized to vote upon matters not
known to the Board of Directors as of the date of the accompanying proxy
statement, approval of minutes of the prior annual meeting, matters
incident to the conduct of the meeting and to vote for any nominee of the
Board whose nomination results from the inability of an above named
nominee to serve.
Please sign exactly as name appears below.
Dated ______________________________, 1996
__________________________________________
Signature
__________________________________________
Signature if held jointly
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title.
If a corporation, please sign in full
corporate name by president or other
authorized officer.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
