FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0-7574
WAUSAU PAPER MILLS COMPANY
(Exact name of registrant as specified in charter)
WISCONSIN 39-0690900
(State of incorporation) (I.R.S. Employer Identification
Number)
ONE CLARK'S ISLAND
P.O. BOX 1408
WAUSAU, WISCONSIN 54402-1408
(Address of principal executive office)
Registrant's telephone number, including area code: 715-845-5266
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
X
Yes _______ No ________
The number of common shares outstanding at December 31, 1996 was 36,512,528.
<PAGE>
WAUSAU PAPER MILLS COMPANY
AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of 1
Income Three Months Ended
November 30, 1996 (unaudited) and
November 30, 1995 (unaudited)
Condensed Consolidated Balance 2
Sheets November 30, 1996 (unaudited)
and August 31, 1996 (derived from audited
financial statements)
Condensed Consolidated Statements 3
of Cash Flows Three Months
Ended November 30, 1996 (unaudited) and
November 30, 1995 (unaudited)
Notes to Condensed Consolidated 4 - 5
Financial Statements
Item 2. Management's Discussion and 6 - 8
Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9 - 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Wausau Paper Mills Company and Subsidiaries
<CAPTION>
For the Three Months
(Dollars in thousands, except per share data - unaudited) Ended November 30
1996 1995
<S> <C> <C>
Net Sales $ 139,639 $ 141,904
Cost of products sold 113,299 122,276
GROSS PROFIT 26,340 19,628
Selling, administrative and
research expenses 8,016 7,416
OPERATING PROFIT 18,324 12,212
Interest income 89 210
Interest expense (585) (570)
Other income (expense) 36 (47)
EARNINGS BEFORE INCOME TAXES 17,864 11,805
Provision for income taxes 6,750 4,500
NET EARNINGS $ 11,114 $ 7,305
NET EARNINGS PER COMMON SHARE $ .30 $ .20
WEIGHTED AVERAGE NUMBER OF SHARES 36,513,000 36,831,000
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Wausau Paper Mills Company and Subsidiaries
<CAPTION>
(Dollars in thousands) November 30 August 31
1996* 1996*
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,900 $ 2,372
Accounts and notes receivable 36,310 38,217
Inventories 81,058 70,443
Other current assets 7,964 8,208
Total current assets 127,232 119,240
Property, plant and equipment 332,041 330,536
Other assets 14,709 17,252
TOTAL ASSETS $473,982 $467,028
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 6,344 $ 6,340
Accounts payable 29,176 26,307
Accrued and other liabilities 24,616 23,496
Accrued income taxes 3,811 2,910
Total current liabilities 63,947 59,053
LONG-TERM LIABILITIES
Long-term debt 41,573 53,119
Deferred income taxes 45,525 43,469
Other liabilities 47,080 46,676
Total long-term liabilities 134,178 143,264
Total shareholders' equity 275,857 264,711
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $473,982 $467,028
<FN>
* The consolidated balance sheet at November 30, 1996 is unaudited. The
August 31, 1996 consolidated balance sheet is derived from audited financial
statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Wausau Paper Mills Company and Subsidiaries
<CAPTION>
For the Three Months
(Dollars in thousands - unaudited) Ended November 30
1996 1995
<S> <C> <C>
Operating Activities:
Net earnings $ 11,114 $ 7,305
Noncash items:
Provision for depreciation, depletion
and amortization 6,354 5,332
Deferred income taxes 2,056 1,245
Changes in operating assets and liabilities:
Receivables 1,907 (1,559)
Inventories (10,615) (2,589)
Other assets 230 307
Accounts payable and other liabilities 7,855 6,756
Accrued income taxes 901 1,673
NET CASH PROVIDED BY OPERATING ACTIVITIES 19,802 18,470
Investing Activities:
Capital expenditures (10,234) (17,316)
Proceeds from property, plant and
equipment disposals 60
Net cash distributed from funds
restricted for capital additions 2,552 2,935
NET CASH USED IN INVESTING ACTIVITIES (7,682) (14,321)
Financing Activities:
Net repayments under
revolving credit facility (10,500) (4,200)
Repayments of long-term debt (84) (112)
Dividends paid (2,008) (1,841)
Proceeds from stock option exercises 32
NET CASH USED IN FINANCING ACTIVITIES (12,592) (6,121)
Net decrease in cash and cash equivalents (472) (1,972)
Cash and cash equivalents at beginning of year 2,372 2,347
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 1,900 $ 375
Supplemental Information:
Interest paid (net of amount capitalized) $ 627 $ 532
Income taxes paid 3,814 1,582
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: The accompanying unaudited condensed financial statements include all
adjustments, which are all normal and recurring in nature and, in the
opinion of management, present fairly the results for the interim
periods presented. Refer to the Notes to Financial Statements which
appear in the 1996 Annual Report for the company's accounting policies
which are pertinent to these statements.
Note 2: Selling, administrative and research expenses include stock
appreciation rights and stock option discount expense of $584,000 or
$.01 per share for the quarter ended November 30, 1996 and $653,000 or
$.01 per share for the quarter ended November 30, 1995.
Note 3: All shares and per share data have been restated to reflect the 5-for-
4 stock split in January 1996.
<TABLE>
Note 4: Accounts receivable consisted of the following:
<CAPTION>
NOVEMBER 30, 1996 AUGUST 31, 1996
<S> <C> <C>
Customer Accounts $42,927,000 $42,818,000
Misc. Notes and Accounts
Receivable 820,000 1,403,000
$43,747,000 $44,221,000
Less: Allowance for Discounts,
Doubtful Accounts and Pending
Credits 7,437,000 6,004,000
Net Receivables $36,310,000 $38,217,000
</TABLE>
<TABLE>
Note 5: The various components of inventories were as follows:
<CAPTION>
NOVEMBER 30, 1996 AUGUST 31, 1996
<S> <C> <C>
Raw Materials and Supplies $51,184,000 $40,822,000
Work in Process
and Finished Goods 41,883,000 41,630,000
$93,067,000 $82,452,000
Less: LIFO Reserve 12,009,000 12,009,000
Net Inventories $81,058,000 $70,443,000
</TABLE>
Note 6: The accumulated depreciation on fixed assets was $170,348,000 as of
November 30, 1996 and $164,983,000 as of August 31, 1996.
<TABLE>
Note 7: A summary of long-term debt is as follows:
<CAPTION>
NOVEMBER 30, 1996 AUGUST 31, 1996
<S> <C> <C>
Bonds, Mortgages and
Similar Debt $41,286,000 $52,744,000
Capitalized Leases 287,000 375,000
Total Long Term Debt $41,573,000 $53,119,000
</TABLE>
<PAGE>
<TABLE>
Note 8: Dividends per share were as follows:
<CAPTION>
THREE MONTHS ENDING
NOVEMBER 30, 1996 NOVEMBER 30, 1995
<S> <C>
$.00* $.00*
<FN>
* The company's Board of Directors meeting schedule did not result in
the declaration of a cash dividend in the three months ended
November 30, 1996 or 1995.
</TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS*:
RESULT OF OPERATIONS
Net Sales
For the three months ended November 30, 1996, net sales were $139.6 million or
1.6% below net sales of $141.9 million recorded in last year's first quarter.
Selling prices for the company's products declined from a year ago due to
market pressures primarily as a result of lower pulp prices. Shipments of
110,200 tons represent the highest quarterly shipment total ever and were 6.1%
ahead of a year ago.
Shipments of Rhinelander's technical specialty grades were an all-time
quarterly record, exceeding last year's shipment level by 12.4%. The record
shipment performance was driven by strong demand for the company's pressure
sensitive grades, where shipments increased 25% over the prior year.
Rhinelander's order backlog at November 30, 1996 was higher than a year ago
due to strong customer demand.
At the company's Printing and Writing Division, shipments were strong for the
quarter and were ahead of last year by 2.9%. At the end of the quarter, order
backlog was higher than a year ago due to strong demand.
Gross Profit
First quarter gross profit was $26.3 million or 18.9% of net sales compared to
last year's third quarter gross profit of $19.6 million or 13.8% of net sales.
The increase in gross profit over the previous year is due primarily to higher
production levels and lower pulp costs. Pulp prices remained essentially flat
since the end of fiscal 1996. Pulp price increases, which were announced for
October 1996, were not implemented and although pulp producers have announced
price increases effective in January 1997, it is uncertain whether current
market conditions will support these increases.
The Printing and Writing Division operated at capacity during the first
quarter of fiscal 1997 and paper mill production was 4% higher than a year ago
primarily as a result of productivity gains from capital improvements. The
Rhinelander mill also operated at capacity in the first quarter. Production
at Rhinelander was up 11%, compared to last year, due to full operations and
capital improvements including the $42 million capacity expansion completed in
fiscal 1996. The Rhinelander mill operated at 97% of capacity in the first
quarter of fiscal 1996 due to market weakness. Paper inventory levels
remained essentially unchanged at both divisions.
<PAGE>
In November, an operational problem occurred at the Brokaw mill when, during
start-up after a normal planned autumn maintenance shutdown, cracks developed
in two of the mill's four high-pressure cooking vessels known as digesters.
First quarter operating costs include $2.5 million for the impact of pulp
production curtailment and repair costs associated with the two digesters.
The digesters will be out of operation for several months, however, the
company expects no additional material impact from the digester outage and no
reduction in paper production at the Brokaw mill since pulp is readily
available on the open market.
* This discussion and analysis contains forward-looking statements. See
Item 5.
Selling, Administrative and Research Expenses
Selling, Administrative and research expenses were $8,016,000 in the first
quarter of fiscal 1997, compared to $7,416,000 a year ago. Higher marketing
and promotion expenses were the primary reasons for the increase in fiscal
1997 first quarter expenses over the previous year. Stock appreciation rights
and stock option discount expense was $584,000 and $653,000 for the first
quarter of fiscal 1997 and 1996, respectively.
Interest Income and Expense
For the three months ended November 30, 1996 and 1995, interest income was
$89,000 and $210,000, respectively. Lower interest income is primarily the
result of reduced interest income from the industrial development bond trust
fund due to cash distributions from the fund during the past year. Interest
expense was $585,000 in the first quarter of fiscal 1997, compared to $570,000
a year ago. Capitalized interest was $142,000 and $383,000 for the 1997 and
1996 periods, respectively. Interest expense, excluding capitalized interest,
was lower in the first quarter of fiscal 1997, compared to a year ago, due to
reduced debt levels.
Income Taxes
The income tax provision in the first quarter of fiscal 1997 was $6.8 million
for an effective tax rate of 37.8%. The effective tax rate in last year's
first quarter was 38.1%.
Net Earnings
Net earnings for the three months ended November 30, 1996 were $11.1 million
or $.30 per share, compared to $7.3 million or $.20 per share for the same
period a year ago. As a result of the charge for curtailment in pulp
production and the cost to repair the two digesters at the Brokaw mill, fiscal
1997 first quarter net earnings were negatively impacted by $.04 per share.
Cash Provided by Operations
Cash provided by operations was $19.8 million for the three months ended
November 30, 1996, compared to $18.5 million for the first quarter of fiscal
1996. Cash flow from improved margins, which was partially offset by greater
working capital needs due to higher inventory levels, was the primary
contributor to the increase in operating cash flow compared to a year ago.
<PAGE>
Capital Expenditures
Capital expenditures totaled $10.2 million in the first quarter of fiscal
1997, compared to $17.3 million for the same fiscal 1996 period. The decrease
in capital spending is due to the completion of the Rhinelander capacity
expansion and Brokaw fiber handling and processing projects in the second half
of fiscal 1996 and reduced spending on the wastewater treatment plant project
at Brokaw as it nears completion.
A new saveall and broke metering system was installed at the Groveton mill in
the first quarter of fiscal 1997, improving fiber yield and reducing operating
costs. An upgrade to the turbine generator at Groveton was also completed,
lowering the mill's electrical costs.
Total capital expenditures are projected to be approximately $40 - $45 million
in fiscal 1997.
Financing
Long-term debt decreased $11.5 million in the first quarter of fiscal 1997 to
$41.6 million as a result of strong earnings and reduced capital expenditure
requirements. Long-term debt at November 30, 1996 consisted primarily of $24
million in notes to Prudential Insurance Company of America and its
subsidiaries, including the current portion, at a fixed rate of 6.03% and $19
million in variable rate development bonds with an interest rate of 3.85% at
the end of the quarter. In addition, the company had $3 million outstanding
under its revolving credit facility, with an effective interest rate of 5.8%
at November 30, 1996. At the end of the quarter, there was no commercial
paper outstanding.
Cash provided by operations and the revolving credit facility are expected to
meet current and anticipated working capital needs and dividend requirements,
as well as fund the company's planned capital expenditures. The company
believes additional financing is readily available, should it be needed, to
fund a major expansion or acquisition.
Common Stock Repurchase
On June 30, 1994, the company's Board of Directors authorized the repurchase
of up to 1,856,250 shares (adjusted for subsequent stock dividends or splits)
of the company's common stock from time to time in the open market or through
privately negotiated transactions at prevailing market prices. There were no
repurchases of company stock during the first quarter of fiscal 1997.
Dividends
On December 16, 1996, the Board of Directors approved a 13.6% increase in the
quarterly cash dividend, from $.0550 per share to $.0625 per share. The cash
dividend is payable January 10, 1997 to shareholders of record as of December
31, 1996.
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION:
This quarterly report includes certain of management's expectations and other
forward-looking information regarding the company. While the company believes
that these forward-looking statements are based on reasonable assumptions, all
such statements involve risk and uncertainties that could cause actual results
to differ materially from those contemplated in this report. The assumptions,
risks and uncertainties relating to the forward-looking statements in this
report include those described under the caption "Cautionary Statement" in the
company's Form 10-K for the year ended August 31, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits required by Item 601 of Regulation S-K
Incorporated
EXHIBIT 3 - ARTICLES OF INCORPORATION AND BYLAWS EXHIBIT
(a) Articles of Incorporation, as amended December 21, 1995 .. 3(1)
(b) Bylaws, as restated July 17, 1992 ........................ 3(b)(2)
EXHIBIT 4 - INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
(a) Articles and Bylaws (see Exhibit 3)
EXHIBIT 10 - MATERIAL CONTRACTS*
(a) Executive Officers' Deferred Compensation Retirement Plan,
as amended 09/18/96 ..................................... 10(a)(3)
(b) Incentive Compensation Plans, as amended 09/18/96
(Printing and Writing Division and Rhinelander Paper
Company, Inc.) .......................................... 10(b)(3)
(c) Corporate Management Incentive Plan, as amended
09/18/96 ................................................ 10(c)(3)
(d) 1988 Stock Appreciation Rights Plan, as amended
04/17/91 ................................................ 10(d)(3)
(e) 1988 Management Incentive Plan, as amended 04/17/91 ...... 10(e)(3)
(f) 1990 Stock Appreciation Rights Plan, as amended
04/17/91 ................................................ 10(f)(3)
(g) Deferred Compensation Agreement dated 03/02/90,
as amended 07/01/94 ..................................... 10(h)(4)
(h) 1991 Employee Stock Option Plan
(i) 1991 Dividend Equivalent Plan
(j) Supplemental Retirement Benefit Plan dated 01/16/92,
as amended 11/13/95 ..................................... 10(5)
(k) Directors' Deferred Compensation Plan
(l) Director Retirement Benefit Policy ....................... 10(o)(6)
* All exhibits represent executive compensation plans and
arrangements.
EXHIBIT 21 - SUBSIDIARIES ..................................... 22(6)
<PAGE>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
Exhibit numbers set forth herein correspond to the exhibit numbers where
such exhibit can be found in the following reports of the company
(Commission File No. 0-7574) filed with the Securities and Exchange
Commission:
(1) Registrant's quarterly report on Form 10-Q for the quarterly period
ended February 29, 1996.
(2) Registrant's annual report on Form 10-K for the fiscal year ended
August 31, 1992.
(3) Registrant's annual report on Form 10-K for the fiscal year ended August
31, 1996.
(4) Registrant's annual report on Form 10-K for the fiscal year ended
August 31, 1994.
(5) Registrant's quarterly report on Form 10-Q for the quarterly period
ended November 30, 1995.
(6) Registrant's annual report on Form 10-K for the fiscal year ended
August 31, 1993.
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
WAUSAU PAPER MILLS COMPANY
Registrant
By: STEVEN A. SCHMIDT
Steven A. Schmidt
Vice President Finance, Secretary and Treasurer
(Principal Financial Officer)
Date: January 10, 1997
<PAGE>
EXHIBIT INDEX
TO
FORM 10-Q
OF
WAUSAU PAPER MILLS COMPANY
FOR THE PERIOD ENDED NOVEMBER 30, 1996
Pursuant to Section 102(d) of Regulation S-T
(17 C.F.R. <section>232.102(d))
EXHIBIT 10 - MATERIAL CONTRACTS*
(h) 1991 Employee Stock Option Plan
(i) 1991 Dividend Equivalent Plan
(k) Directors' Deferred Compensation Plan
*All exhibits represent executive compensation plans and
arrangements.
EXHIBIT 10(h)
WAUSAU PAPER MILLS COMPANY
1991 EMPLOYEE STOCK OPTION PLAN
Wausau Paper Mills Company, a Wisconsin corporation (the "Company"),
hereby adopts the Wausau Paper Mills Company 1991 Employee Stock Option
Plan (the "Plan"), as set forth herein.
Section 1. PURPOSE. The Plan has been adopted for the purpose of
recognizing and rewarding the job performance of key employees of the
Company and to enable the Company to attract and retain superior
management-level employees by increasing the personal interest of all such
employees in the growth and success of the Company. It is the express
intent of the Company that, subject to Section 6(g) hereof, all options
granted hereunder designated "Incentive Stock Options" shall meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor section or sections. It is the
further intent of the Company that options granted hereunder designated
"Non-Qualified Stock Options" shall not meet the requirements of Section
422 of the Code.
Section 2. NUMBER OF SHARES AVAILABLE FOR OPTIONS. The aggregate
number of shares of common stock, no par value, of the Company (the
"Shares") which may be issued under options granted pursuant to the Plan
shall be 250,000.
Section 3. ADMINISTRATION OF THE PLAN.
Section 3.1 GENERAL. The Plan shall be administered by a committee
(the "Committee") consisting of at least two members designated by the
Board of Directors of the Company from among those of its members who are
not officers or employees of the Company or a parent or subsidiary of the
Company and who otherwise satisfy the definition of a "Non-Employee
Director" in Rule 16b-3(b)(3) promulgated under Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act"). In the absence of
specific rules to the contrary, action by the Committee shall require the
consent of a majority of the members of the Committee, expressed either
orally at a meeting of the Committee or in writing in the absence of a
meeting.
Section 3.2 AUTHORITY OF COMMITTEE. The Committee shall have full
and complete authority to grant options to such eligible employees on such
terms, which need not be the same as to all Optionees, as will, in its
discretion and subject only to the specific limitations elsewhere
contained in the Plan, carry out the purpose of the Plan. The Committee
shall also have full and complete authority to interpret the Plan and
adopt rules governing the administration of the Plan. The Committee's
decision on any matter with respect to the Plan shall be final.
Section 3.3 INDEMNIFICATION OF COMMITTEE. To the extent permitted by
applicable law, the members of the Committee and each of them shall be
indemnified and saved harmless by the Company from any liability or claim
of liability which may arise from the administration of the Plan if the
acts giving rise to such liability or claim of liability were taken in
good faith and without negligence.
<PAGE>
Section 4. ELIGIBLE EMPLOYEES.
Section 4.1 DEFINITION OF ELIGIBLE EMPLOYEES. Subject to the
limitations of Section 4.2, key employees of the Company and its
subsidiary corporations shall be eligible to participate in the Plan. For
purposes of the Plan, the term "key employee" shall include all employees
of all participating employers employed in management, administrative or
professional capacities.
Section 4.2 LIMITATIONS ON ELIGIBILITY. No person who is serving as
a member of the Committee shall be eligible to receive an option;
provided, however, that options outstanding prior to an Optionee's
becoming a member of the Committee shall remain in effect.
Section 5. GRANTING OF OPTIONS. Subject to the limitations of
Section 4.2, options to purchase Shares shall be granted to such key
employees who are eligible to participate in the Plan as the Committee
may, from time to time and at any time, select. Membership in a class of
eligible key employees shall not, without specific Committee action,
entitle a key employee to receive an option to purchase Shares. Eligible
key employees selected by the Committee shall be referred to herein as
"Optionees."
Section 6. TERMS AND CONDITIONS OF THE OPTIONS.
Section 6.1 WRITTEN INSTRUMENT. Each option to purchase Shares
granted under the Plan shall be evidenced by a written option agreement
signed on behalf of the Company and the optionee which sets forth the name
of the Optionee, the date granted, the price at which the Shares subject
to the option may be purchased (the "option price"), whether the option is
an Incentive Stock Option or a Non-Qualified Stock Option, the number of
Shares subject to the option and such other terms and conditions
consistent with the Plan as determined by the Committee. The Committee
may at the time of grant or at any time thereafter impose such additional
terms and conditions on the exercise of such option as it deems necessary
or desirable for compliance with Section 16 of the Exchange Act and the
regulations promulgated thereunder. Such option agreement shall
incorporate by reference all terms, conditions and limitations set forth
in the Plan.
Section 6.2 TERMS AND CONDITIONS OF THE OPTIONS. In addition to any
other limitations, terms and conditions specified in the Plan, each option
granted hereunder shall, as to each Optionee, satisfy the following
requirements:
(a) DATE OF GRANT. Options must be granted on or before June
18, 2001.
(b) EXPIRATION. No Incentive Stock Option shall be exercisable
after the expiration of ten years from the date such option is
granted. No Non-Qualified Stock Option shall be exercisable after the
expiration of twenty years from the date such option is granted.
(c) PRICE. The option price as to any Share subject to an
Incentive Stock Option will be not less than one hundred percent of
the fair market value of the Share on the date the option is granted.
The option price as to any Share subject to a Non-Qualified Stock
Option will be not less than fifty percent of the fair market value of
the Share on the date the option is granted.
<PAGE>
For purposes of the Plan, the fair market value of a Share means:
(i) The mean between the high and the low prices at which the Shares
were traded if the Shares were then listed for trading on a
national or regional securities exchange or were then traded on a
bona fide over-the-counter market; or
(ii) If the Shares were not traded on an exchange or a bona fide over-
the-counter market, a value determined by an appraiser selected
by the Committee.
In the event that the date on which the fair market value of a Share
is to be determined is a date on which there is no trading of the
Shares on a national or regional securities exchange or on the over-
the-counter market, such fair market value shall be determined by
referring to the next preceding business day on which trading occurs.
(d) TRANSFERABILITY.
(i) No Incentive Stock Option shall be transferable by the Optionee
otherwise than by will or the laws of descent and distribution
nor can it be exercised by anyone other than the Optionee during
the Optionee's lifetime.
(ii) The Committee may, in its discretion, authorize all or a portion
of any options to be granted to an Optionee or which were granted
to any Optionee on or before December 16, 1996 to permit transfer
by the Optionee to (A) the spouse, children or grandchildren of
the Optionee ("Immediate Family"), (B) a trust for the exclusive
benefit of the Optionee or the Optionee's Immediate Family, (C) a
partnership in which the Optionee or the Optionee's Immediate
Family are the only partners, or (D) to a former spouse of the
Optionee pursuant to a domestic relations order within the
meaning of Rule 16a-12 promulgated under Section 16 of the
Exchange Act; provided, however, that (X) there may be not
consideration for any such transfer, (Y) the written option
agreement required by Section 6.1, or any amendment thereof
approved by the Committee, must expressly provide for
transferability of the option evidenced in such agreement in a
manner consistent with this Section 6.2(d), and (Z) once
transferred pursuant to the preceding provisions of this Section
6.2(d)(ii), no subsequent transfer of any options shall be
permitted except a transfer by will or the laws of descent and
distribution. In authorizing all or any portion of an option to
be transferred, the Committee may impose any conditions on
exercise, prescribe a holding period for the Shares acquired upon
such exercise and/or impose any other conditions or limitations
it deems desirable or necessary in order to carry out the
purposes and requirements of the Plan. Following transfer, the
terms and conditions of the plan and the written option agreement
relating to such option shall continue to be applicable in all
respects to the Optionee making such transfer and each
transferred option shall continue to be subject to the same terms
and conditions as were applicable immediately prior to transfer
as if such option had not been transferred, including, but not
limited to, the terms and conditions with respect to the lapse
and termination of such option. For purposes of Section 7, the
<PAGE>
transferee of an option shall be deemed an "Optionee". Neither
the Company, the Committee or any Optionee shall have any
obligation to inform any transferee of the termination or lapse
of any option for any reason. Notwithstanding any other
provision of the plan, (YY) following the termination of
employment of an Optionee, a transferred Non-Qualified Option
shall be exercisable by the transferee only to the extent, and
for the periods specified in Section 6(e) as if such option had
not been transferred and (ZZ) no Non-Qualified Stock Option
granted prior to November 1, 1996 may be transferred until such
option has been held by the Optionee for a period of not less
than six months after the date on which such option was granted.
(e) EMPLOYMENT. No option shall be exercisable unless the
Optionee shall have been employed by the Company (or any present or
future parent or subsidiary of the Company) during the period
beginning on the date the option is granted and ending on a date
ninety days before the date of exercise; provided, however, that in
the event an Optionee dies while in the employ of the Company (or any
present or future parent or subsidiary of the Company) or within
ninety days after such employment had terminated, the employment
period requirement described above shall be deemed to have been
satisfied.
(f) MINIMUM HOLDING PERIOD. No option granted prior to November
1, 1996 may be exercised before the date which is six months after the
date on which such option was granted. Each option shall contain such
additional or other restriction or restrictions with respect to the
stated percentage of Shares covered by such option as to which such
option may be exercised as the Committee may deem desirable or
necessary in order to carry out the purposes and requirements of the
Plan.
(g) ADDITIONAL RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS.
To the extent that the aggregate fair market value (determined as of
the time the option is granted) of the Shares for which Incentive
Stock Options are exercisable for the first time by an individual
during any calendar year (under this Plan or any other plan of the
Company or any of its subsidiaries) exceeds $100,000 (or such other
individual limit as may be in effect under the Code on the date of
grant), such options shall not be Incentive Stock Options. No
Incentive Stock Option shall be granted to an employee who, at the
time such option is granted, owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the Company within the
meaning of Section 422(b)(6) of the Code unless: (i) at the time the
option is granted, the option price is at least one hundred ten
percent of the fair market value of the Shares subject to the option,
and (ii) such option by its terms is not exercisable after the
expiration of five years from the date such option is granted.
Section 7. EXERCISE AND PAYMENT OF OPTION PRICE.
Section 7.1 EXERCISE OF OPTIONS. Options shall be exercised as to
all or a portion of the Shares by written notice to the Company setting
forth the exact number of Shares as to which the option is being exercised
and including with such notice payment of the option price (plus required
tax withholding). The date of exercise shall be the date such written
<PAGE>
notice and payment have been delivered to the Secretary of the Company
either in person or by depositing said notice and payment in the United
States mail, postage pre-paid and addressed to such officer at the
Company's home office. Notwithstanding the fact that an option has been
transferred pursuant to Section 6.2(d)(ii), the grantee of such option
shall remain liable for any required tax withholding.
Section 7.2 PAYMENT FOR SHARES. Payment of the option price (plus
required tax withholding) may be made by (a) tendering cash (in the form
of a check or otherwise) in such amount, or (b) tendering Shares with a
fair market value on the date of exercise equal to such amount, or (c)
delivering a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the sale or
loan proceeds equal to such amount. Notwithstanding the fact that an
option has been transferred pursuant to Section 6.2(d)(ii), the grantee of
such option shall remain liable for any required tax withholding.
Section 8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. If any option
is exercised in whole or in part subsequent to any stock dividend, stock
split, recapitalization, reorganization, merger or other change in the
corporate structure of the Company as a result of which (a) shares of any
class or classes of the Company shall be issued in respect of the Shares
or (b) the Shares shall be changed into the same or a different number of
shares of the same or another class or classes of the Company or another
corporation, the Optionee so exercising the option shall receive, for the
aggregate option price payable upon such exercise, the aggregate number
and class or classes of shares equal to the number and class or classes of
shares such Optionee would have had on the date of actual exercise if the
Optionee had purchased on the date the option was granted the Shares as to
which the option is so exercised and the Shares so purchased had not been
disposed of as of the date of such actual exercise, taking into
consideration such stock dividend, stock split, recapitalization,
reorganization, merger or other change in the corporate structure of the
Company.
Section 9. TERMINATION OR LAPSE OF OPTIONS. Each option shall
terminate or lapse upon the first to occur of (a) the expiration date set
forth in the applicable Stock Option Agreement, (b) the applicable date
set forth in Section 6.2(b), or (c) the date which is ninety days after
the date on which the Optionee's employment with the Company or any
present or future parent or subsidiary of the Company terminated;
provided, however, that in the event of an Optionee's death while in the
employ of the Company or a parent or subsidiary of the Company or, if the
Optionee is no longer so employed, in the event of the Optionee's death
within ninety days after such employment had terminated, an option may be
exercised, to the extent exercisable by the Optionee immediately prior to
his death, in whole or in part by the Optionee's estate or his designee by
will, or, if applicable, the transferee of such option pursuant to Section
6.2(d)(ii), but only if the date of exercise is on or before the first to
occur of (i) the expiration date set forth in the applicable Stock Option
Agreement, (ii) the applicable date set forth in Section 6.2(b), or (iii)
the date which is twelve months after the date of the Optionee's death.
Section 10. AMENDMENT AND TERMINATION OF PLAN.
Section 10.1 AMENDMENT OF PLAN. The Board of Directors of the
Company may amend the Plan from time to time and at any time; provided,
however, that no amendment shall adversely affect any option which has
<PAGE>
been granted prior to the amendment and no amendment with respect to the
maximum number of Shares which may be issued pursuant to options or the
class of eligible employees, or which materially increases benefits
accruing to Optionees under the Plan (within the meaning of section 162(m)
of the Code) shall be effective unless approved by a majority of the
shares entitled to vote at a meeting of shareholders.
Section 10.2 TERMINATION OF PLAN. The Plan shall terminate on the
first to occur of (a) June 18, 2001 or (b) the date specified by the Board
of Directors of the Company as the effective date of Plan termination;
provided, however, that the termination of the Plan shall not limit or
otherwise affect any options outstanding on the date of termination.
Section 11. EFFECTIVE DATE. The Effective Date of the Plan shall be
June 19, 1991, the date of approval by the Board of Directors of the
Company; provided, however, that neither the Plan nor grants made under
the Plan shall be effective unless the adoption of the Plan is approved at
the annual meeting of the Company's shareholders next following such date
by the majority of the shares entitled to vote at such meeting.
Section 12. INVESTMENT INTENT. Shares acquired pursuant to the
exercise of an option, if not registered by the Company under the
Securities Act of 1933 (the "Act"), will be "restricted" stock which will
not be freely transferable by the holder after exercise of the option.
Each participating employee and assignee in interest of the employee
accordingly represents, as a condition of participation in the Plan, that
Shares which are unregistered under the Act are being acquired for the
Optionee's (or his assignee's) own account for investment only and not
with a view to offer for sale or for sale in connection with the
distribution or transfer thereof.
Section 13. AVAILABILITY OF INFORMATION. The Company shall furnish
each Optionee with (a) a copy of the Plan and the Company's most recent
annual report to its shareholders at the time the option agreement
provided for in Section 6.1 is executed by the Optionee and (b) a copy of
each subsequent annual report, on or about the same date as such report
shall be made available to shareholders of the Company. The Company will
furnish, upon written request addressed to the Secretary of the Company,
but at no charge to the Optionee or any duly authorized representative of
the Optionee, copies of all reports filed by the Company with the
Securities and Exchange Commission or the commissioner of securities of
any state, including, but not limited to, the Company's annual reports on
Form 10-K, its quarterly reports on Form 10-Q, and its proxy statements.
Section 14. CONDITIONS OF EMPLOYMENT. Participation in or
eligibility for participation in the Plan shall not confer upon any
employee the right to be continued as an employee of the Company or any
present or future parent or subsidiary of the Company and the Company and
its participating subsidiaries hereby expressly reserve the right to
terminate the employment of any employee, with or without cause, as if the
Plan and any options granted pursuant to it were not in effect.
<PAGE>
IN WITNESS WHEREOF, the Company has caused the Plan, as amended
December 16, 1996, to be executed by its duly authorized officers as of
the 16th day of December, 1996.
WAUSAU PAPER MILLS COMPANY
By: DANIEL D. KING
Daniel D. King, President
and Chief Executive Officer
ATTEST:
By: STEVEN A. SCHMIDT
Steven A. Schmidt,
Vice President, Finance,
Secretary and Treasurer
EXHIBIT 10(i)
WAUSAU PAPER MILLS COMPANY
DIVIDEND EQUIVALENT PLAN
1. PURPOSE.
The purpose of the Wausau Paper Mills Company Dividend Equivalent
Plan (the "Plan") is to attract and retain outstanding individuals as
officers and key employees of Wausau Paper Mills Company (the "Company")
and its subsidiaries, and to furnish incentives to such individuals
through rewards based upon the performance of the Company and its common
stock. To this end, the Committee hereinafter designated may grant
dividend equivalents to officers and other key employees of the Company
and its subsidiaries, on the terms and subject to the conditions set forth
in this Plan.
2. PARTICIPANTS.
Participants in the Plan shall consist of such officers and other key
employees of the Company and its subsidiaries as the Committee in its sole
discretion may select from time to time to receive dividend equivalents.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee (the "Committee")
consisting of at least two members designated by the Board of Directors of
the Company from among those of its members who are not officers or
employees of the Company or a parent or subsidiary of the Company and who
otherwise satisfy the definition of a "Non-Employee Director" in Rule 16b-
3(b)(3) promulgated under Section 16 of the Securities Exchange Act of
1934 (the "Exchange Act"). In the absence of specific rules to the
contrary, action by the Committee shall require the consent of a majority
of the members of the Committee, expressed either orally at a meeting of
the Committee or in writing in the absence of a meeting. Subject to the
provisions of the Plan, the Committee shall have authority (a) to
determine which employees of the Company and its subsidiaries shall be
eligible for participation in the Plan; (b) to select employees to receive
grants under the Plan; (c) to determine the number of dividend equivalents
subject to the grant, the time and conditions of vesting, and all other
terms and conditions of any grant; (d) to determine the fair market value
of the common stock of the Company for purposes of the Plan; and (e) to
prescribe the form of agreement, certificate or other instrument
evidencing the grant. The Committee shall also have authority to
interpret the Plan and to establish, amend and rescind rules and
regulations for the administration of the Plan, and all such
interpretations, rules and regulations shall be conclusive and binding on
all persons; provided, however, that the Committee shall not exercise such
authority in a manner adversely and significantly affecting dividend
equivalents previously granted unless the action taken is required to
comply with any applicable law or regulation.
4. EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall become effective on June 19, 1991, the date of its
approval by the Board of Directors of the Company. The Plan shall
terminate ten years after it becomes effective, unless terminated sooner
<PAGE>
by action of the Board of Directors. No further grants may be made under
the Plan after its termination, but the termination of the Plan shall not
affect the rights of any participant under, or the authority of the
Committee with respect to, any grants made prior to termination.
5. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 7 hereof, the aggregate
number of shares of common stock of the Company with respect to which
dividend equivalents may be granted under the Plan shall not exceed
250,000. Whenever dividend equivalents granted under the Plan are
forfeited, the shares subject to such dividend equivalents shall thereupon
be released from such dividend equivalents and shall thereafter be
available for additional grants of dividend equivalents under the Plan.
6. DIVIDEND EQUIVALENTS.
(a) Grants. Dividend equivalents entitling the grantee to receive
cash equal to the value of the hypothetical reinvested cash dividends
(defined below) which would have been paid with respect to a stated number
of shares of common stock of the Company between the date of grant and the
date of termination of the grantee's employment with the Company and its
subsidiaries may be granted from time to time to such officers and other
key employees of the Company and its subsidiaries as may be selected by
the Committee.
(b) Vesting of Grant. Dividend equivalents shall vest in whole or in
such installments and at such times as may be determined by the Committee.
(c) Payment. The value of dividend equivalents granted prior to
December 16, 1996 shall be paid to the grantee (or his beneficiary in the
event of his death) in the amount determined in accordance with this
Section 6(c) upon the grantee's termination of employment with the Company
and its subsidiaries. The value of dividend equivalents granted on or
after December 16, 1996 shall be paid to the grantee (or his beneficiary
in the event of his death) in the amount determined in accordance with
this Section 6(c) upon the first to occur of (i) the grantee's termination
of employment with the Company and its subsidiaries or (ii) the date on
which the grantee exercises a stock option granted in tandem with the
grant of such dividend equivalents; provided, however, that only the value
of such proportion of the dividend equivalent as corresponds to the
proportion of shares subject to such option as are exercised shall be
paid. An option shall be deemed to have been granted in tandem with a
grant of dividend equivalents if such option grant was made at or about
the same date, relates to the same number of shares of common stock and is
subject to the same conditions on vesting or exercise the grant of such
dividend equivalents. The value of the dividend equivalents to be paid
pursuant to this Section 6(c) shall be an amount in cash equal to the
value of the hypothetical reinvested cash dividends associated with the
aggregate number of shares of common stock of the Company with respect to
which such dividend equivalents have been granted to the grantee. The
value of the hypothetical reinvested cash dividends associated with a
share of common stock of the Company in respect of which a dividend
equivalent has been granted shall be equal to the fair market value on the
date of termination of the grantee's employment of the number of shares
(or fraction thereof) of the Company's common stock which the grantee
would have owned if it is assumed (i) that cash dividends which would have
been paid with respect to the share if the share had been outstanding from
<PAGE>
the date of grant of the dividend equivalent had been paid in cash to the
grantee and then immediately reinvested by the grantee in the Company's
common stock at the fair market value thereof on the applicable dividend
payment date, and (ii) that, once assumed issued, hypothetical shares
resulting from assumed dividend reinvestment themselves paid cash
dividends (at the same time and in the same amount as shares of the
Company's outstanding common stock) which were reinvested in a similar
manner.
For purposes of the Plan, the fair market value of a share of common
stock of the Company means:
(A) The mean between the high and the low prices at which the
common stock of the Company was traded if the common stock of the
Company was then listed for trading on a national or regional
securities exchange or was then traded on a bona fide over-the-counter
market; or
(B) If the common stock of the Company was not traded on an
exchange or on a bona fide over-the-counter market, a value determined
by an appraiser selected by the Committee.
In the event that the date of termination of the grantee's employment with
the Company and its subsidiaries is a date on which there is no trading of
the common stock of the Company on a national or regional securities
exchange or on the over-the-counter market, such fair market value shall
be determined by referring to the next preceding business day on which
trading occurs.
(d) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of dividend equivalents may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be
determined by the Committee in its sole discretion. The Committee may at
the time of grant or at any time thereafter impose such additional terms
and conditions on dividend equivalents as it deems necessary or desirable
for compliance with Section 16(a) or 16(b) of the Securities Exchange Act
of 1934 and the rules and regulations thereunder.
7. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Dividend equivalents shall be subject to adjustment by the Committee
in its sole discretion as to the number of shares subject to such grants
in the event of changes in the outstanding common stock of the Company by
reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in corporate structure or capitalization occurring after
the date of the grant of any dividend equivalent, provided that if the
Company shall change its common stock into a greater or lesser number of
shares through a stock dividend, stock split-up, or combination of shares,
outstanding dividend equivalents shall be adjusted proportionately,
consistent with existing law and regulation, to prevent inequitable
results.
8. EFFECT OF LIQUIDATION, MERGER, CONSOLIDATION OR OTHER EVENTS.
Nothing contained in the Plan or in any dividend equivalent granted
under the Plan shall in any way prohibit the Company from merging with or
consolidating into another company, or from selling or transferring all or
<PAGE>
substantially all of its assets, or from distributing all or substantially
all of its assets to its stockholders in liquidation, or from dissolving
and terminating its corporate existence; and in any such event, payment
shall be made with respect to all then outstanding dividend equivalents
(whether or not then vested) as if all of the grantees of such dividend
equivalents had terminated employment with the Company and its
subsidiaries at the time of such merger, consolidation, sale or transfer
of assets, liquidation, or dissolution, except to the extent that any
agreement or undertaking of any party to such merger, consolidation, or
sale or transfer of assets, or any plan pursuant to which such liquidation
or dissolution is effected, shall make specific provision to continue such
dividend equivalents and the rights of the grantees under such dividend
equivalents.
9. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended or terminated by the Board of Directors of the
Company in any respect; provided, however, that the Board shall not
exercise such authority in a manner adversely and significantly affecting
dividend equivalents previously granted unless the action taken is
required to comply with any applicable law or regulation.
10. MISCELLANEOUS.
(a) No Right to a Grant. Neither the adoption of the Plan nor any
action of the Board of Directors or of the Committee shall be deemed to
give any employee any right to be selected as a participant or to be
granted a dividend equivalent.
(b) Rights as Stockholder. No person shall have any rights as a
stockholder of the Company with respect to any shares covered by dividend
equivalents.
(c) Employment. Nothing contained in this Plan shall be deemed to
confer upon any employee any right of continued employment with the
Company or any of its subsidiaries or to limit or diminish in any way the
right of the Company or any such subsidiary to terminate his or her
employment at any time with or without cause.
(d) Taxes. The Company shall be entitled to deduct from any payment
under the Plan the amount of any tax required by law to be withheld with
respect to such payment or may require any participant to pay such amount
to the Company prior to and as a condition of making such payment.
(e) Nontransferability. No dividend equivalent shall be
transferable.
<PAGE>
IN WITNESS WHEREOF, the Company has caused the Plan, as amended
effective December 16, 1996, to be executed by its duly authorized
officers as of the 16th day of December, 1996.
WAUSAU PAPER MILLS COMPANY
By: DANIEL D. KING
Daniel D. King,
President and Chief
Executive Officer
ATTEST:
By: STEVEN A. SCHMIDT
Steven A. Schmidt,
Vice President,
Finance, Secretary and
Treasurer
EXHIBIT 10(k)
WAUSAU PAPER MILLS COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
1. ESTABLISHMENT OF PLAN. Wausau Paper Mills Company (the
"Company") hereby establishes the Wausau Paper Mills Company Directors'
Deferred Compensation Plan effective as of February 17, 1993 (the "Plan").
2. PURPOSE. The purpose of the Plan is to establish an alternative
method of compensating members of the Board of Directors of the Company
(the "Directors"), whether or not they otherwise receive compensation as
employees of the Company, in order to aid the Company in attracting and
retaining as Directors persons whose abilities, experience and judgment
can contribute to the continued progress of the Company and to provide a
mechanism by which the interests of the Directors and the shareholders can
be more closely aligned.
3. DEFINITIONS. As used in this Plan the following terms shall have
the meaning set forth in this paragraph 3:
(a) "BENEFICIARY" shall mean such person or persons, or organization
or organizations, as the Participant from time to time may designate
by a written designation filed with the Company during the
Participant's life. Any amounts payable hereunder to a Participant's
Beneficiary shall be paid in such proportions and subject to such
trusts, powers and conditions as the Participant may provide in such
designation. Each such designation, unless otherwise expressly
provided therein, may be revoked by the Participant by a written
revocation filed with the Company during the Participant's life. If
more than one such designation shall be filed by a Participant with
the Company, the last designation so filed shall control over any
revocable designation filed prior to such filing. To the extent that
any amounts payable under this Plan to a Participant's Beneficiary are
not effectively disposed of pursuant to the above provisions of this
paragraph 3(a), either because no designation was in effect at the
Participant's death or because a designation in effect at the
Participant's death failed to dispose of such amounts in their
entirety, then for purposes of this Plan, the Participant's
"Beneficiary" as to such undisposed of amounts shall be the
Participant's estate.
(b) "CHANGE OF CONTROL OF THE COMPANY" shall be deemed to have
occurred when:
(1) any one of the following events occurs:
(A) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any
of its subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a
company owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership
<PAGE>
of stock of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such persons any securities
acquired directly from the Company or its affiliates)
representing more than 50% of the combined voting power of the
Company's then outstanding securities; provided, however, that
for the purpose of determining whether any shareholder of the
Company on the date hereof becomes the beneficial owner of
securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding
securities, the securities of the Company held by such
shareholder on the date hereof shall not be taken into account;
(B) the shareholders of the Company approve a merger or
consolidation of the Company or a share exchange with any other
company, other than a merger or consolidation or share exchange
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) in combination with
the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, at
least 50% of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately
after such merger or consolidation or share exchange, or a merger
or consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which
no person acquires more than 50% of the combined voting power of
the Company's then outstanding securities; or
(C) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets and
(2) a majority of the members of the Board of Directors who are
unaffiliated with an Interested Shareholder (defined below) and who
were members of the Board of Directors as of a date prior to the date
on which the Interested Shareholder became an Interested Shareholder
has not, by resolution prior to (A) the person described in
subparagraph (1)(A) becoming the beneficial owner of 10% of the
combined voting power of the Company's then outstanding securities or
(B) the approval of shareholders described in (1)(B) or (C) the
approval of shareholders described in (1)(C), approved or recommended
such event. For purposes of this paragraph 3(b), the term "Interested
Shareholder" shall mean any person (other than the Company or any of
its subsidiaries or any member of the Board of Directors as of the
effective date of this Plan or any affiliate of such person) who first
became the beneficial owner of 10% or more of the combined voting
power of the Company's then outstanding securities after the effective
date of this Plan.
(c) "COMMON STOCK" shall mean the common stock, no par value, of the
Company.
(d) "DIRECTORS' FEES" shall mean all of the compensation to which a
Director would otherwise become entitled for services to be rendered
as a Director.
<PAGE>
(e) "FAIR MARKET VALUE" of the Common Stock on any day shall be
deemed to be the mean between the published high and low sale prices
at which the Common Stock is traded on a bona fide over-the-counter
market or, if such stock is not so traded on such day, on the next
preceding day on which the Common Stock was so traded.
(f) "PARTICIPANT" shall mean a Director who has made an election to
defer Directors' Fees in accordance with paragraph 4.
(g) "TERMINATION OF SERVICE" shall mean the BONA FIDE termination of
a Participant's services as a member of the Board of Directors of the
Company.
4. RIGHT TO DEFER DIRECTORS' FEES.
(a) Each Director may elect before September 1 of any fiscal year of
the Company to become a Participant and to defer the payment of all of the
Directors' Fees to which the Participant would otherwise become entitled
for services to be rendered during each fiscal year subsequent to the date
on which such election is effective. An election by a Director to defer
Directors' Fees pursuant to this subparagraph (a) shall be effective with
respect to Directors' Fees earned during the first fiscal year beginning
after the date such election is made and during each subsequent fiscal
year until revoked or amended, provided that any such revocation or
amendment shall only be effective with respect to fiscal years beginning
after the date written notice of such revocation or amendment is first
received by the Company.
(b) Despite any other provision of subparagraph (a), if a person
becomes a Director during a fiscal year, such Director may elect to become
a Participant with respect to Directors' Fees earned during the year in
which he became a Director, provided such election is made before such
person begins to serve as a Director. An election by a Director to defer
Directors' Fees pursuant to this subparagraph (b) shall be effective after
the date such election is made and received by the Company with respect to
Directors' Fees earned during the fiscal year in which such election is
made and during each subsequent fiscal year until revoked or amended,
provided that any such revocation or amendment shall only be effective
with respect to fiscal years beginning after the date written notice of
such revocation or amendment is first received by the Company.
(c) Directors' Fees deferred by a Participant shall be distributable
in accordance with paragraph 9 hereof and only after such Participant's
Termination of Service. Any Directors' Fees not subject to an election
made in accordance with this paragraph 4 shall be paid to the Director in
cash.
5. ACCOUNTING AND ELECTIONS.
(a) The Company shall establish a Deferred Cash Account and a
Deferred Stock Account in the name of each Participant.
(b) Each Participant shall make an initial election at the time his
deferral election is filed pursuant to paragraph 4 to have his deferred
Directors' Fees allocated to his Deferred Cash Account or his Deferred
Stock Account. Effective from and after December 16, 1996, each fiscal
<PAGE>
year, a Participant may file a new election with the Company specifying
(1) the Account to which all Directors' Fees deferred subsequent to the
last day of such fiscal year (and prior to the effective date of any
subsequent election) shall be allocated and/or (2) the Account to which
all or any portion of the balance of his Accounts as of the last day of
such fiscal year shall be allocated. The transfer of a Participant's
Account balance shall be made in accordance with the following:
(1) in the case of a transfer from a Deferred Cash Account into a
Deferred Stock Account, that portion of the balance in the
Participant's Deferred Cash Account as of the last day of the fiscal
year in which the Participant has made an election to transfer his
Deferred Cash Balance shall be determined after giving effect to all
other adjustments required by this Plan and such portion shall be
debited from the Participant's Deferred Cash Account and credited to
his Deferred Stock Account effective as of the first day of the next
subsequent fiscal year.
(2) in the case of a transfer from a Deferred Stock Account into a
Deferred Cash Account, the number of Stock Equivalent Units in the
Participant's Deferred Stock Account as of the last day of the fiscal
year to which the Participant has made an election to transfer his
Deferred Stock Account shall be determined after giving effect to all
other adjustments required by this Plan and such Stock Equivalent
Units shall be converted into cash equivalent by multiplying the
number of such units by an amount equal to the per share Fair Market
Value of the Common Stock on the last day of the fiscal year.
Effective as of the first day of the next subsequent fiscal year the
Participant's Deferred Stock Account shall be debited by the number of
Stock Equivalent Units so transferred and the Participant's Deferred
Cash Account credited by the amount of cash equivalent so determined.
Any election made by a Participant in accordance with this paragraph 5
shall remain in effect until a new election filed by the Participant
becomes effective. A Participant's initial election shall be effective as
of the date the Director becomes a Participant. Notwithstanding any other
provision of this Plan, no election shall become effective if it is made
by a Participant within six months of the immediately preceding election
filed by such Participant and any such election shall be null and void.
(c) As of each date on which the Company shall make a payment of
Director's Fees and a Participant has a deferral election then in effect,
there shall be credited to such Participant's Deferred Cash Account or
Deferred Stock Account, as the case may be in accordance with such
Participant's most recent effective election, the Directors' Fees
otherwise payable to such Participant in cash as of such date.
(d) Despite any other provision of this Plan, the most recent
election in effect on December 16, 1996, made by a Participant with
respect to the crediting of his Director's Fees to such Participant's
Deferred Cash Account or Deferred Stock Account shall remain in effect as
of December 16, 1996 as if such election had been made pursuant to
subparagraph (a).
(e) Within 90 days of the end of each fiscal year in which this Plan
is in effect, the Company shall furnish each Participant a statement of
the year-end balance in such Participant's Deferred Cash Account and
Deferred Stock Account.
<PAGE>
6. FORM FOR ELECTIONS. The Secretary of the Company shall provide
election forms for use by Directors in making an initial election to
become a Participant and for making all other elections or designations
permitted or required by the Plan.
7. DEFERRED CASH ACCOUNT. As of the last day of each fiscal
quarter, there shall be computed, with respect to each Deferred Cash
Account which is then in existence, an amount equal to interest on the
average daily balance in such Account during such quarter, computed at a
rate per annum equal to the prime rate of interest then in effect at The
Chase Manhattan Bank of New York. The amount so determined shall be
credited to and become part of the balance of such Account as of the first
day of the next fiscal quarter.
8. DEFERRED STOCK ACCOUNT.
(a) As of each date on which the Company shall make a payment of
Director's Fees and a Participant has a deferral election then in effect
which provides for the deferral of payment of such fees to the
Participant's Deferred Stock Account, the Directors' Fees otherwise
payable to such Participant in cash as of such date shall be converted
into that number of "Stock Equivalent Units" (rounded to the nearest
one-ten thousandth of a unit) determined by dividing the amount of such
Directors' Fees by an amount equal to the per share Fair Market Value of
the Common Stock on such date.
(b) On each date on which a dividend payable in cash or property is
paid on the Common Stock, there shall be credited to each Deferred Stock
Account such number of additional Stock Equivalent Units as are determined
by dividing (1) the amount of the cash or other dividend which would have
then been payable on the number of shares of Common Stock equal to the
number of Stock Equivalent Units (including fractional shares) then
represented in such Account by (2) an amount equal to the per share Fair
Market Value of the Common Stock on such date. If the date on which a
dividend is paid on the Common Stock is the same date as of which
Directors' Fees are to be converted into Stock Equivalent Units, the
dividend equivalent to be credited to such Account under this paragraph 8
shall be determined after giving effect to the conversion of the credit
balance in such Account into Stock Equivalent Units.
(c) The number of Stock Equivalent Units credited to a Participant's
Deferred Stock Account shall be adjusted (to the nearest one-ten
thousandth of a unit) to reflect any change in the Common Stock resulting
from a stock dividend, stock split-up, combination, recapitalization or
exchange of shares, or the like.
9. DISTRIBUTION OF DEFERRED AMOUNTS.
(a) Distribution of amounts represented in a Participant's Deferred
Cash Account or a Deferred Stock Account shall be made in accordance with
the following:
(1) Payment of the balance of the Deferred Cash Account and Deferred
Stock Account of a Participant whose Termination of Service occurs for
a reason other than death and prior to a Change of Control of the
Company shall be made in a lump sum as of the last day of the fiscal
quarter coincident with or immediately subsequent to the Participant's
Termination of Service unless the Participant elects otherwise in
accordance with the provisions of paragraph 9(b).
<PAGE>
(2) In the event a Participant ceases to be a Director because of his
death or in connection with a Change of Control of the Company,
payment of the balance of his Deferred Cash Account and Deferred Stock
Account shall be made in a lump sum as of the last day of the fiscal
quarter coincident with or immediately subsequent to the Participant's
Termination of Service.
(b) A Participant may elect, (1) before the first day of each fiscal
year, (2) subject to the automatic distribution provisions of paragraph
9(a)(2), which shall govern the distribution of benefits in the event of
Termination of Service which occurs because of death or a Change of
Control of the Company, and (3) prior to his Termination of Service that
payment of the balance of his Deferred Cash Account and Deferred Stock
Account shall be made in installments and the:
(1) fiscal quarter in which distribution of the Participant's
Accounts shall begin (but in no event (A) earlier than the Director's
Termination of Service or (B) later than the earlier of (i) the
Director's 70th birthday or (ii) the date five years after the date of
the Director's Termination of Service; and
(2) number of fiscal quarters over which such Accounts shall be
distributed to the Participant, which period shall not extend beyond
the end of the 40th fiscal quarter following the fiscal quarter in
which such distribution begins.
Any election filed pursuant to this paragraph 9(b) shall be effective as
of the first day of the first fiscal year which begins next subsequent to
the fiscal year in which such election is made.
(c) If installment payments were elected by the Participant pursuant
to paragraph 9(b), distributions shall be made in quarterly installments
beginning on the first day of the first fiscal quarter following the date
on which such Participant's Termination of Service occurs or each other
later fiscal quarter as the Participant may have specified.
(1) In the case of a Deferred Cash Account with respect to which
installment payments were elected, the amount of each quarterly
installment shall be determined by dividing the credit balance in such
Account as of the distribution date by the number of installments then
remaining unpaid. The credit balance in such Account shall then be
reduced by the amount of each distribution out of such Account.
(2) In the case of a Deferred Stock Account with respect to which
installment payments were elected, the amount to be distributed as
each quarterly installment shall be determined as follows: (A)
multiply the number of Stock Equivalent Units (including any fraction
thereof) then reflected in such Account by the Fair Market Value of
the Common Stock on such date; (B) add to the product so determined
the amount (if any) which has been credited to such Account but which
has not been converted into Stock Equivalent Units; and (C) divide the
total so obtained by the number of installments then remaining unpaid.
The number of Stock Equivalent Units represented in a Deferred Stock
Account shall be reduced forthwith by that number (rounded to the
nearest one-ten thousandth of a unit) determined by dividing the
amount of the distribution by the Fair Market Value of the Common
Stock taken into account for purposes of clause (A) of the preceding
sentence.
<PAGE>
In the event that a Participant dies after receiving payment of some, but
less than all, of the entire amount to which such Participant is entitled
under this Plan, the unpaid balance shall be paid in a lump sum to the
Participant's Beneficiary.
(d) In the case of a Deferred Cash Account or a Deferred Stock
Account with respect to which payment is to be made in a lump sum, the
amount of such payment shall be determined as if installment payments had
been elected and the lump sum was the last (but only) such payment.
(e) After a Participant's Termination of Service occurs, neither such
Participant or his Beneficiary shall have any right to modify in any way
the schedule for the distribution of amounts credited to such Participant
under this Plan as specified in the last election filed by the
Participant. However, upon a written request submitted to the Secretary
of the Company by the person then entitled to receive payments under this
Plan (who may be the Participant, or a Beneficiary, the Board of Directors
may in its sole discretion, accelerate the time for payment of any one or
more installments remaining unpaid.
10. INCOMPETENCY. If, in the opinion of the Board of Directors of
the Company, a Participant shall at any time be mentally incompetent, any
payment to which such Participant would be entitled under this Plan may,
with the approval of the Board of Directors, be paid to the Participant's
legal representative, or to any other person for his benefit and in such
case, the Board of Directors may in its sole discretion, accelerate the
time for payment of any one or more installments remaining unpaid.
11. MISCELLANEOUS.
(a) This Plan shall be effective upon adoption by the Board of
Directors of the Company.
(b) Amounts payable hereunder may not be voluntarily or involuntarily
sold or assigned, and shall not be subject to any attachment, levy or
garnishment.
(c) Participation in this Plan by any person shall not confer upon
such person any right to be nominated for re-election to the Board of
Directors, or to be re-elected to the Board of Directors.
(d) The Company shall not be obligated to reserve or otherwise set
aside funds for the payment of its obligations hereunder, and the rights
of any Participant under the Plan shall be an unsecured claim against the
general assets of the Company. All amounts due Participants or
Beneficiaries under this Plan shall be paid out of the general assets of
the Company.
(e) The Board of Directors shall have all powers necessary to
administer this Plan, including all powers of Plan interpretation, of
determining eligibility and the effectiveness of elections and of deciding
all other matters relating to the Plan; provided, however, that no
Participant shall take part in any discussion of, or vote with respect to,
a matter of Plan administration which is personal to him and not of
general applicability to all Participants. All decisions of the Board of
Directors shall be final as to any Participant under this Plan.
<PAGE>
(f) The Board of Directors of the Company may amend this Plan in any
and all respects at any time, or from time to time, or may terminate this
Plan at any time, but any such amendment or termination shall be without
prejudice to any Participant's right to receive amounts previously
credited to such Participant under this Plan.
In Witness Whereof, this Plan, as amended effective as of December 16,
1996, has been executed as of this 16th day of December, 1996 by the
undersigned duly authorized officer of the Company.
WAUSAU PAPER MILLS COMPANY
DANIEL D. KING
Daniel D. King
President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED NOVEMBER 30, 1996 OF WAUSAU PAPER MILLS COMPANY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> NOV-30-1996
<CASH> 1,900
<SECURITIES> 0
<RECEIVABLES> 43,747
<ALLOWANCES> 7,437
<INVENTORY> 81,058
<CURRENT-ASSETS> 127,232
<PP&E> 502,389
<DEPRECIATION> 170,348
<TOTAL-ASSETS> 473,982
<CURRENT-LIABILITIES> 63,947
<BONDS> 41,573
<COMMON> 139,187
0
0
<OTHER-SE> 136,670
<TOTAL-LIABILITY-AND-EQUITY> 473,982
<SALES> 139,639
<TOTAL-REVENUES> 139,639
<CGS> 113,299
<TOTAL-COSTS> 113,299
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 585
<INCOME-PRETAX> 17,864
<INCOME-TAX> 6,750
<INCOME-CONTINUING> 11,114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,114
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
