UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] 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 0-7475
WAUSAU-MOSINEE PAPER CORPORATION
(Exact name of registrant as specified in charter)
1244 KRONENWETTER DRIVE WISCONSIN
MOSINEE, WISCONSIN 54455 (State of incorporation)
(Address of principal executive office) 39-0690900
(I.R.S. Employer Identification
Number)
Registrant's telephone number, including area code: 715-693-4470
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
COMMON STOCK, NO PAR VALUE NEW YORK STOCK
EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check 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.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
As of February 26, 1999, the aggregate market value of the common
stock shares held by non-affiliates was approximately $774,695,015.
The number of common shares outstanding at February 26, 1999 was
53,165,639.
DOCUMENTS INCORPORATED BY REFERENCE
PROXY STATEMENT FOR USE IN CONNECTION WITH 1999 ANNUAL MEETING OF
SHAREHOLDERS
(TO THE EXTENT NOTED HEREIN): PART III
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business .................................................. 1
Item 2. Properties ............................................... 12
Item 3. Legal Proceedings ........................................ 13
Item 4. Submission of Matters to a Vote of Security Holders ...... 13
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters ................................... 14
Item 6. Selected Financial Data .................................. 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................... 16
Item 7A. Quantitative and Qualitative Disclosure About Market Risk. 25
Item 8. Financial Statements and Supplementary Data ...............26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures .................... 57
PART III
Item 10. Directors and Executive Officers of the Registrant ....... 58
Item 11. Executive Compensation ................................... 58
Item 12. Security Ownership of Certain Beneficial Owners and
Management ............................................... 58
Item 13. Certain Relationships and Related Transactions ........... 58
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K .............................................. 59
-ii-
PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
The Company was incorporated in Wisconsin on June 1, 1899, under the
name of Wausau Paper Mills Company ("Wausau"). On December 17, 1997,
Wausau completed a merger with Mosinee Paper Corporation ("Mosinee") in
which Mosinee became a wholly-owned subsidiary of Wausau. Simultaneous
with the consummation of the merger, Wausau changed its name to
Wausau-Mosinee Paper Corporation (hereinafter referred to as the
"Company").
<PAGE>
The Company manufactures, converts, and sells paper. The Company's
principal office is located in Mosinee, Wisconsin. At December 31,
1998, the Company had approximately 3,400 employees at eleven
facilities located in six states.
On December 17, 1997, the Company adopted a fiscal year-end reporting
period of December 31. This change from the Company's August 31 fiscal
year-end was effective on December 31, 1997. The merger with Mosinee
was accounted for as a pooling-of-interests and as a result, the
financial statements for the two companies have been restated as
indicated in the footnotes which accompany the financial statements.
See Notes 1 and 2 of "Notes to Consolidated Financial Statements."
This report contains 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 risks 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
in this Form 10-K under the caption "Cautionary Statement Regarding
Forward-looking Statements" and, from time-to-time, in the Company's
other filings with the Securities and Exchange Commission.
FINANCIAL INFORMATION ABOUT SEGMENTS
Information relating to the Company's sales, a measure of operating
profit or loss, and total assets by segment is set forth in Note 16 of
"Notes to Consolidated Financial Statements."
NARRATIVE DESCRIPTION OF BUSINESS
The Company competes in different markets within the paper industry.
Each of its operating groups serves distinct market niches. The
various markets for the products of the Company are highly competitive,
with competition based on service, quality and price.
The Company's eleven operating facilities are organized into the three
operating groups described below.
-1-
SPECIALTY PAPER GROUP
The Specialty Paper Group combines the Company's Mosinee, Sorg,
Rhinelander, and Otis facilities to produce a wide variety of technical
specialty papers. The Group is a leader in many of its markets,
although market position varies by product.
The Rhinelander and Otis mills together are one of the nation's largest
manufacturers of supercalendered backing papers for pressure sensitive
labeling applications. These facilities, located at Rhinelander,
Wisconsin, and Jay, Maine, also manufacture specialty paper for a broad
range of food, medical, and industrial applications, including
protective barrier papers for pet food and microwave popcorn, and
lightweight paper for sterilized medical packaging. Products, markets
<PAGE>
and distribution methods and principal competitors for the Rhinelander
and Otis mills can be summarized as follows:
PRINCIPAL PRODUCTS
Pressure-sensitive backing, silicone-coated release papers, grease-
resistant packaging, food service papers, sterilizable medical
packaging, and electrographic and translucent papers.
PRINCIPAL MARKETS & DISTRIBUTION METHODS
Sold directly to converters, mainly in the U.S., for the following
industries: pressure-sensitive labeling, convenience food, food
service, pet food, medical packaging, and specialized converters.
PRINCIPAL COMPETITION
Competition comes from large integrated companies such as
International Paper, Fraser Papers, UPM-Kymmene, EB Eddy, Crown
Vantage, and SAPPI, Ltd.
The Mosinee mill in Mosinee, Wisconsin, is one of the nation's largest
producers of masking tape base and manufactures a wide range of highly
engineered paper products. These include high-performance industrial
papers chemically treated for wet strength, flame retardancy,
anti-static, corrosion or grease resistance for various industries,
such as automotive, housing, and food processing. Products, markets
and distribution methods and principal competitors for the Mosinee mill
can be summarized as follows:
PRINCIPAL PRODUCTS
Industrial crepe, masking, gumming, foil laminating,
flame-resistant, specialty metal interleaver, cable wrap, creped
tape backing, electrical insulation, pressure-sensitive backing,
water base and film coating, ink-jet printing, packaging,
saturating, and grease-resistant papers.
PRINCIPAL MARKETS & DISTRIBUTION METHODS
Sold directly to manufacturers and converters, mainly in the U.S.,
in the following industries: housing, steel, aluminum and other
metal, masking tape and masking paper, electrical cable, wire and
components, automotive, general converters, composite can
packaging, filter, and specialty coating.
PRINCIPAL COMPETITION
Competition in several grades of paper made from the Mosinee mill's
natural kraft pulp comes from other fully-integrated, large paper
companies such as Thilmany Paper, Longview Fibre Company, and
Gilman Paper Company. Competition in grades of paper made from
market pulp comes from several non-integrated specialty paper mills
such as Little Rapids Paper Company, as well as large integrated
paper companies such as Crown Vantage.
-2-
The Sorg mill produces additional specialty grades of paper, including
decorative laminate papers, deep color tissue used in napkin and
tablecloth stock, and colored school construction paper. Products,
markets and distribution methods and principal competitors for the
Sorg mill in Middletown, Ohio, can be summarized as follows:
<PAGE>
PRINCIPAL PRODUCTS
Deep-color and white tissue (facial quality, napkin, and
tablecloth), filter paper (vacuum bag and food cooking), decorative
laminates (print base, solid color core, alpha overlay, and
barrier), report, construction, photo background, perforating tape,
flame-resistant, blotting, soapboard/soapwrap, and saturating
papers.
PRINCIPAL MARKETS & DISTRIBUTION METHODS
Sold directly to manufacturers and converters with limited
marketing through paper brokers and distributors mainly in the
U.S., in the following industries: housing, consumer product
packaging, home appliances, filters, printing, advertising and
promotion commercial goods, soapboard and soapwrap, saturators,
specialized industrial converters.
PRINCIPAL COMPETITION
Competition is from both non-integrated specialty mills and larger
integrated paper companies. Competitors in Sorg's major paper
grades of decorative, soapboard, saturating base and vacuum bag
include Crown Vantage, Mead Paper, Munksjo, Kimberly Clark, Dexter,
Fletcher, Monadnock, Riverside Paper Corp., Little Rapids Paper
Company, and French Paper.
PRINTING & WRITING GROUP
The Printing & Writing Group produces three lines of paper products in
five facilities.
Under the "Wausau Papers" trademark, the Group manufactures a broad
line of premium printing and writing papers, imaging papers, colored
offset papers and board grades at its mills in Brokaw, Wisconsin, and
Groveton, New Hampshire. Over 60% of the fine printing and writing
papers produced are colored papers. The Group's fine printing and
writing sales are estimated to be less than 3% of the total market.
Papers sold under the Wausau Papers label include a wide range of
virgin and recycled printing and writing papers, two-thirds of which
are colored papers, including Astrobrights<reg-trade-mark>, a 25-year
old national brand. Products, markets and distribution methods and
principal competitors for Wausau Papers can be summarized as follows:
PRINCIPAL PRODUCTS
Text and cover, index, tag and bristol, imaging, premium offset,
and envelope papers.
PRINCIPAL MARKETS & DISTRIBUTION METHODS
More than 80% of the sales of printing and writing papers are sold
in sheet form to paper distributors which serve commercial
printers, in-plant print shops, quick printers, copy centers, and
retail office supply and home office outlets. The Group also
markets to converters that serve the greeting card and announcement
industry.
-3-
<PAGE>
PRINCIPAL COMPETITION
Competition in printing and writing grades comes from specialty
divisions of major integrated paper companies such as International
Paper, Georgia Pacific, Champion International, Fraser Papers,
SAPPI, and smaller privately held non-integrated companies.
The Printing & Writing Group's Specialty Products facility
manufactures and sells school supply papers, craft, and retail
products. Converting facilities are operated in Appleton, Wisconsin.
Products, markets and distribution methods and principal competitors
for Wausau-Mosinee Specialty Products can be summarized as follows:
PRINCIPAL PRODUCTS
Construction, drawing, tablet, dual surface kraft, and craft
papers, tagboard, retail packaging, and flame retardant papers.
PRINCIPAL MARKETS & DISTRIBUTION METHODS
School, arts, and craft products are sold in sheet and roll form to
stocking distributors which serve the 16,000 school districts
throughout the United States and various retail markets.
PRINCIPAL COMPETITION
Competition is primarily from privately held companies such as
school paper manufacturer Riverside Paper Corporation, several
national paper converters such as Pacon, Roselle, Bemis Jason, and
American Converting, and regional converters with niche product
lines.
The Mosinee Converted Products facilities produce wax-laminated roll
wrap and related specialty finishing and packaging products such as
custom coating, laminating and converting wrap. Converting facilities
are operating in Columbus, Wisconsin, and Jackson, Mississippi.
Products, markets and distribution methods and principal competitors
for Mosinee Converted Products are as follows:
PRINCIPAL PRODUCTS
Roll and skid wrap, roll headers, can body stock, cold seal
packaging, and fabric softener, impregnated, medium, non-woven,
and coated papers.
PRINCIPAL MARKETS & DISTRIBUTION METHODS
Sold direct to manufacturers and converters in the U.S. in the
following markets: paper industry, industrial packaging, corrugated
containers, consumer products, and composite can manufacturers.
PRINCIPAL COMPETITION
Competition in roll wrap comes from the other wax and poly
laminators and includes Laminated Papers, Sonoco Products, Bonar
Packaging, Ltd., Fortifiber, Inc., Ludlow, Simplex, and Fiberlam,
Inc.
TOWEL & TISSUE GROUP
The Towel & Tissue Group produces a complete line of towel and tissue
products which are marketed along with soap and dispensing system
products for the industrial and commercial "away-from-home" market.
<PAGE>
Although the Group has grown significantly, it is one of the smaller
competitors in this market.
-4-
Towel and tissue products made from recycled material and marketed
under Bay West's EcoSoft<trademark> brand name are used in the
washrooms of theme parks, hospitals, hotels, office buildings,
factories, schools, and restaurants nationwide. The Group's towel and
tissue mill is located in Middletown, Ohio and its converting facility
is located in Harrodsburg, Kentucky. Products, markets and
distribution methods and principal competitors for the Towel & Tissue
Group can be summarized as follows:
PRINCIPAL PRODUCTS
Washroom roll towels, washroom folded towels, soaps, a variety of
towel, tissue, and soap dispensers, windshield folded towels,
industrial wipes, tissue products, dairy towels, and household roll
towels.
PRINCIPAL MARKETS & DISTRIBUTION METHODS
Sold almost exclusively through sanitary maintenance suppliers and
paper distributors in the U.S. and several foreign countries for
use in the following markets: industrial and commercial washroom,
educational institutions, and the healthcare, dairy, and automotive
service industries.
PRINCIPAL COMPETITION
Competition comes from major integrated paper companies which
service consumer and food service markets as well as the industrial
and institutional markets concentrated on by Bay West. Major
competitors include Fort James Corporation, Georgia Pacific,
Kimberly Clark, and Wisconsin Tissue Mills.
EXPORT SALES
In addition to the three operating groups, Wausau-Mosinee
International, Inc. is the commissioned sales agent for the export
sales of the Company. Wausau-Mosinee International, Inc. has elected
to be treated as a FSC for federal income tax purposes. During 1998
the Company terminated its regional sales office presence in Singapore.
RAW MATERIALS
Pulp is the basic raw material for paper production. The Mosinee and
Brokaw mills produce approximately 85% and 50%, respectively, of their
own pulp needs. Timber required for operation of the Company's pulp
mills is readily available. The balance of the Company's pulp needs
(approximately 450,000 tons) is purchased on the open market,
principally from pulp mills throughout the United States and Canada.
From time to time, the Company may purchase pulp futures contracts as a
hedge against significant future increases in the market price of pulp.
Recycled, de-inked fiber with a high content of post-consumer waste is
purchased from domestic suppliers as part of the fiber requirements for
Printing & Writing's recycled products. Recycled fiber is in adequate
supply and readily obtainable.
<PAGE>
The Towel & Tissue Group produces principally all of its de-inked fiber
needs from 100% post-consumer waste which is readily available from
domestic suppliers.
Various chemicals are used in the pulping and papermaking processes.
These industrial chemicals are all available from a number of suppliers
and are purchased at current market prices.
-5-
ENERGY
The Company's paper mills require large amounts of electrical and steam
energy which are adequately supplied by public utilities or generated
at Company operated facilities. The Company generates approximately
25% of its electrical power needs from steam, fuel oil, coal, wood
chips, fibercake, and natural gas powered generating facilities. The
Company generally purchases natural gas, coal, and fuel oil on a
contract basis at prevailing market prices. Wood chips and fibercake
are byproducts of mill operations. Some natural gas and fuel oil
purchase contracts may provide for variable prices or contain caps on
prices of natural gas to be delivered at future dates. In addition,
the Company continues to explore alternative power sources as an
ongoing business process.
In July 1996, the Company signed a natural gas transportation agreement
with the Portland Natural Gas Transmission System (PNGTS). Under the
terms of the long-term agreement, PNGTS has constructed necessary gas
supply and delivery equipment to the Groveton, New Hampshire mill
thereby assuring natural gas delivery at market rates. The Company is
progressing on schedule to begin transportation of natural gas to the
Groveton mill in the third quarter of 1999. Capital improvements,
which are estimated to cost approximately $1.5 million, will be made to
the Groveton mill's power plant to permit natural gas use. A reduction
in the mill's energy costs is expected from the use of natural gas as
an energy source instead of fuel oil.
PATENTS AND TRADEMARKS
The Company develops and files trademarks and patents, as appropriate.
Trademarks include AstroBright<reg-trade-mark>, Ecosoft
<reg-trade-mark>, Bay West<reg-trade-mark>, Dublsoft<reg-trade-mark>,
and Wave 'N Dry<reg-trade-mark>, among others. The Company considers
its trademarks and patents, in the aggregate, to be material to its
business, although the Company believes the loss of any one such mark
or patent right would not have a material adverse effect on its
business. The Company does not own or hold material licenses,
franchises or concessions.
SEASONAL NATURE OF BUSINESS
The markets for some of the grades of paper produced by the Company
tend to be somewhat seasonal. However, the marketing seasons for these
grades are not necessarily the same. Overall, the Company generally
experiences lower sales in the fourth quarter, in comparison to the
rest of the year, primarily due to downtime typically taken by its
<PAGE>
converting customers during the holiday season and a general slowing of
business activity for many industrial users of Company products at that
time of year.
WORKING CAPITAL
As is customary in the paper industry, the Company carries adequate
amounts of raw materials and finished goods inventory to facilitate the
manufacture and rapid delivery of paper products to its customers. The
Company will occasionally carry higher than normal quantities of pulp
in anticipation of rising pulp prices.
MAJOR CUSTOMERS
Two customers accounted for approximately 9.5% and 8.0%, respectively,
of consolidated net sales during 1998. The loss of either of these
customers would have a material adverse effect on the Company's
business, but the Company believes such effect would be of relatively
short duration.
-6-
BACKLOG
The Company's order backlog at December 31, 1998 approximated 30,000
tons, or 2 weeks of operation. The backlog on such date was 10% less
than December 31, 1997.
Backlog totals do not accurately represent the strength of the
Company's business activity as a significant volume of orders are
shipped out of inventory promptly upon order receipt. This portion of
the business is not reflected in the Company's backlog totals. The
entire backlog at December 31, 1998 is expected to be shipped during
fiscal 1999.
RESEARCH AND DEVELOPMENT
Expenditures for product development were approximately $3,309,000 in
1998, $1,577,000 in 1997 and $1,381,000 in 1996.
ENVIRONMENT
The Company has a strong commitment to protecting the environment.
Like its competitors in the paper industry, the Company faces
increasing capital investments and operating costs to comply with
expanding and more stringent environmental regulations. For example,
$2.8 million was spent on an electrostatic precipitator for the #5
boiler at the Mosinee mill in 1998 and $14 million to rebuild and
expand the wastewater treatment plant at the Brokaw mill in 1997. The
Company estimates that its capital expenditures for environmental
purposes will approximate $3.5 million in 1999.
The United States Environmental Protection Agency (EPA) has promulgated
rules under the Clean Water Act and the Clean Air Act which impose new
air and water quality standards for pulp and paper mills (the "Cluster
Rules"). The definitive Cluster Rules, promulgated in April 1998,
<PAGE>
require compliance by April 15, 2001. Another set of requirements in
the Cluster Rules must be implemented by April 15, 2006.
In response to these regulations, the Company has opted to adopt Total
Chlorine Free (TCF) technology for the pulp bleaching operations at the
Brokaw mill. This TCF technology must be in place and functioning by
April 15, 2001. In 1988, the Company installed an oxygen
delignification system which eliminated the use of elemental chlorine;
however, chlorine compounds are used in other stages of the bleaching
process at the Brokaw mill. Compliance with a TCF requirement for the
Brokaw mill will require an estimated capital expenditure of $8 to $12
million.
The Mosinee facility will be required to burn additional noncondensable
gases and treat foul condensates to comply with the Cluster
Rules. The majority of the required changes must be satisfied by April
15, 2001, while compliance with the balance of these new requirements
must be attained by April 15, 2006. The estimated capital expenditure
to comply with the Cluster Rules at the Mosinee facility is $8 million.
The costs for complying with the Cluster Rules will be spread over
1999, 2000, and 2001. Company-wide capital expenditures are estimated
to be in the range of $16-$20 million.
Compliance with the EPA's permitting process involves the consolidation
of all Company air discharge permits and is expected to involve an
additional $1 million in capital expenditures. This cost is expected
to be incurred in 1999 or 2000. Boiler upgrades in 2002 at the
Rhinelander and Mosinee facilities, required to comply with new
environmental rules, are expected to result in capital expenditures of
approximately $3 million, although the Wisconsin Paper
-7-
Council and certain Wisconsin utilities have challenged the
implementation of the new rules.
The Company believes that capital expenditures associated with
compliance with the Cluster Rules and other environmental regulations
will not have a material adverse effect on its competitive position,
consolidated financial condition, liquidity, or results of operation.
EMPLOYEES
On March 19, 1998, the Company announced and began implementation of a
workforce reduction program which was expected to reduce Company-wide
employment by over 8% from then current levels. Approximately 300
positions had been eliminated through December 31, 1998, almost all of
which were accomplished through early retirement incentives along with
voluntary separation arrangements. The Company anticipates an
additional reduction of 100 positions in connection with the program
during 1999.
The Company had approximately 3,400 employees at the end of 1998. Most
hourly mill employees are covered under collective bargaining
agreements. There were no new labor agreements negotiated during 1998.
<PAGE>
Current labor agreements expire in 1999 through 2001 at the various
mill sites. The Company expects that new multi-year contracts will be
negotiated at prevailing industry rates. The Company considers its
relationship with its employees to be good.
EXECUTIVE OFFICERS OF THE COMPANY
The following information relates to executive officers of the Company
as of March 19, 1999:
SAN W. ORR, JR. , 57
Chairman of the Board of the Company since 1989, Chief Executive
Officer (1994-1995), and a director since 1970. Also Advisor,
Estate of A. P. Woodson & Family, and a director of MDU Resources
Group, Inc. and Marshall & Ilsley Corporation. Previously,
Chairman of the Board (1987-1997) and director (1972-1997) of
Mosinee Paper Corporation.
RICHARD L. RADT, 67
Vice Chairman of the Board of the Company. Previously, Chairman
(1987-1988), and President and Chief Executive Officer and a
director (1977-1987) of the Company. Also Vice Chairman
(1993-1997), and President and Chief Executive Officer (1988-1993)
of Mosinee Paper Corporation.
DANIEL R. OLVEY, 50
President and Chief Executive Officer of the Company since
December, 1997. Previously, Vice President Finance, Secretary and
Treasurer (1985-1989). President and Chief Executive Officer and a
director of Mosinee Paper Corporation (1993-1997), Vice President
and Secretary and Treasurer (1989-1991), Group Vice President
(1991), and Executive Vice President and Chief Operating Officer
(1992) of Mosinee Paper Corporation.
GARY P. PETERSON, 50
Senior Vice President, Finance, Secretary and Treasurer since
December, 1997. Previously, Senior Vice President, Finance,
Secretary and Treasurer (1993-1997) and Vice President Finance
(1991-1993) of Mosinee Paper Corporation and partner, Wipfli
Ullrich Bertelson CPAs (1981-1991).
-8-
STUART R. CARLSON, 52
Senior Vice President, Specialty Paper Group. Previously, Senior
Vice President, Specialty Paper (1996-1997), and Senior Vice
President - Administration (1993-1996), and Vice President Human
Resources (1991-1993) of Mosinee Paper Corporation. Also Director
of Human Resources, Georgia Pacific, Inc (1990-1991) and Corporate
Director of Industrial Relations, Great Northern Nekoosa
Corporation (1989-1990).
THOMAS J. HOWATT, 49
Senior Vice President, Printing & Writing Group. Previously, Vice
President and General Manager, Printing & Writing Division
(1994-1997), Vice President and General Manager, Groveton
<PAGE>
(1993-1994), Vice President Operations, Brokaw Division
(1990-1993), and prior thereto, Vice President, Administration,
Brokaw Division.
DAVID L. CANAVERA, 49
Senior Vice President, Towel & Tissue Group. Previously, Senior
Vice President, Towel & Tissue (1996-1997) of Mosinee Paper
Corporation, and Vice President and General Manager (1994-1996) and
Vice President - Resident Manager (1993-1994), Bay West Paper.
DENNIS M. URBANEK, 54
Senior Vice President, Engineering and Environmental Services.
Previously, Vice President, Engineering and Environmental Services
(1996-1997) of Mosinee Paper Corporation, Vice President and
General Manager of Mosinee's Pulp & Paper Division (1992-1996), and
Vice President and General Manager, Sorg Paper Company (1990-1992).
MICHAEL L. MCDONALD, 50
Senior Vice President, Administration since February, 1999.
Previously, Vice President, Human Resources for the Company and
Mosinee Paper Corporation (1997 to 1999) and General Manager/Vice
President Human Resources, Mead Corporation Publishing Division.
YEAR 2000
The Company has implemented a Year 2000 plan designed to address
potential Year 2000 problems. The financial impact of making the
required system modifications and replacements to remedy Year 2000
issues prior to December 31, 1999, has not been and is not expected to
be material to the Company's consolidated financial condition,
liquidity, or results of operations. The Company expects its Year 2000
issues to be satisfactorily addressed on a timely basis. However, due
to the interdependent nature of computer systems, there can be no
assurance that the systems of other entities on which the Company's
systems rely will also be timely converted or that any such failure to
convert by another entity would not have an adverse effect on the
Company's systems. See Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Year 2000."
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K, each of the Company's annual reports to shareholders,
Forms 10-K, 8-K, and 10-Q, proxy statements, prospectuses, and any
other written or oral statement made by or on behalf of the Company
subsequent to the filing of this Form 10-K may include one or more
"forward-looking statements" within the meaning of sections 27A of the
Securities Act of 1933 and 21E of the Securities Exchange Act of 1934
as enacted in the Private Securities Litigation Reform Act of 1995
(the "Reform Act").
-9-
Forward-looking statements of the Company may be identified by, among
other things, expressions of the Company's or Company officers' beliefs
or expectations that certain events may occur or are anticipated, and
projections or statements of expectations with respect to (i) any
aspects of the Company's business (including, but not limited to, net
<PAGE>
income, the availability or price of raw materials, or customer demand
for Company products), (ii) the Company's plans or intentions, (iii)
the Company's stock performance, (iv) the industries within which the
Company operates, (v) the economy, and (vi) any other expressions of
similar import or covering other matters relating to the Company or its
operations. In making forward-looking statements within the meaning of
the Reform Act, the Company undertakes no obligation to publicly update
or revise any such statement.
Forward-looking statements are not guarantees of performance.
Forward-looking statements of the Company are based on information
available to the Company as of the date of such statements and reflect
the Company's expectations as of such date, but are subject to risks
and uncertainties that may cause actual results to vary materially.
Many of the factors that will determine these results are beyond the
Company's ability to control or predict. Shareholders and others are
cautioned not to put undue reliance on any forward-looking statements.
For those statements, the Company claims the protection of the
safe harbor for forward-looking statements contained in the Reform Act.
In addition to specific factors which may be described in connection
with any of the Company's forward-looking statements, factors which
could cause actual results to differ materially include, but are not
limited to, the following:
<circle> Increased competition from either domestic or foreign
paper producers or providers of alternatives to the
Company's products, including increases in competitive
production capacity resulting in sales declines from
reduced shipment volume and /or lower net selling prices
in order to maintain shipment volume.
<circle> Changes in customer demand for the Company's products due
to overall economic activity affecting the rate of
consumption of the Company's products, growth rates of the
end markets for the Company's products, technological or
consumer preference changes, or acceptance of the
Company's products by the markets served by the Company.
<circle> Changes in the price of raw materials, in particular,
pulp, wastepaper and linerboard. A substantial portion of
the Company's raw materials, including approximately
two-thirds of the Company's pulp needs, are purchased on
the open market and price changes could have a significant
impact on the Company's costs. Fiber represents a
substantial portion of the cost of making paper and
significant price increases for fiber could materially
affect the Company's financial condition. Raw material
prices will change based on supply and demand on a
worldwide spectrum. Pulp price changes can occur due to
worldwide consumption levels of pulp, pulp capacity
additions, expansions or curtailments of the supply of
pulp, inventory building or depletion at pulp consumer
levels which affect short-term demand, and pulp producer
cost changes related to wood availability, environmental
issues, or other variables.
<PAGE>
<circle> Unforseen operational problems at any of the Company's
facilities causing significant lost production and/or
cost increases.
-10-
<circle> Significant changes to the Company's strategic plans such
as a major acquisition or expansion, the failure to
successfully execute major capital projects, or other
strategic plans or to successfully integrate an
acquisition.
<circle> Unforseen business interruptions or operational failures
as a result of unanticipated Year 2000 readiness problems
encountered by the Company, its vendors, or customers.
<circle> Changes in laws or regulations which affect the Company.
The paper industry is subject to stringent environmental
laws and regulations and any changes required to comply
with such laws or regulations may increase the Company's
capital expenditures and operating costs.
-11-
ITEM 2. PROPERTIES.
The Company's headquarters are located in Mosinee, Wisconsin.
Executive officers and corporate staff who perform corporate
accounting, financial and human resource services are located in the
corporate headquarters, as are certain operating group personnel.
The Company's operating facilities consist of the following:
<PAGE>
<TABLE>
<CAPTION>
Number of
Paper Practical 1998
FACILITY PRODUCT MACHINES CAPACITY*(TONS) ACTUAL (TONS)
Specialty Paper
Group
<S> <C> <C> <C> <C>
Rhinelander Paper 4 165,000 155,000
Otis Paper 2 72,000 64,000
Mosinee Paper 4 114,000 109,000
Pulp 95,000 93,800
Sorg Paper 3 40,000 37,300
Printing &
Writing Group
Wausau Papers Paper 4 177,000 174,000
(Brokaw) Pulp 94,000 85,000
Wausau Papers Paper 2 111,000 107,000
(Groveton)
Wausau-Mosinee
Specialty Paper N/A 47,000 23,000
Mosinee Laminated/
Converted Coated Papers N/A 145,000 55,000
Products
Towel&Tissue
Group
Bay West
(Middletown, Towel 1(towel) 70,000 57,000
Ohio) Tissue 1(tissue) 35,000 33,000
Deink Pulp 110,000 92,000
(Harrodsburg,Converted Towel
Kentucky) & Tissue N/A 168,000 121,000
<FN>
* "Practical capacity" is the amount of product a mill can produce
with existing equipment and workforce and usually approximates
maximum, or theoretical, capacity. At the Company's converting
operations it reflects the approximate maximum amount of
-12-
product that can be made on existing equipment, but would
require additional days and/or shifts of operation to achieve.
</TABLE>
The company owns approximately 123,000 acres of timberland.
ITEM 3. LEGAL PROCEEDINGS.
In 1997, the Attorney General of the State of Florida filed a civil
complaint in the United States District Court for the Northern District
of Florida against ten manufacturers of commercial sanitary paper
products, including the Company's wholly owned subsidiary, Bay West
Paper Corporation. The lawsuit alleges a conspiracy to fix prices of
commercial sanitary paper products starting at least as early as 1993.
<PAGE>
Since the filing of this lawsuit, numerous class action suits have been
filed by private direct purchasers of commercial sanitary paper
products in various federal district courts throughout the country and
additional federal lawsuits have been filed by the Attorneys General of
the States of Kansas, Maryland, New York, and West Virginia. All of
these federal cases have been certified as class actions and
consolidated in a multi-district litigation proceeding in the United
States District Court for the Northern District of Florida in
Gainesville. Certain indirect purchasers of sanitary commercial paper
products have also filed class action lawsuits in various state courts
alleging a conspiracy to fix prices under state antitrust laws. No
class has been certified in the state actions. All of these actions
are in early stages. In the opinion of management, the Company has not
violated any antitrust laws. The Company is vigorously defending these
claims.
The Company is also involved from time to time in various other legal
and administrative proceedings or subject to various claims in the
normal course of its business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the consolidated financial condition, liquidity, or results
of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of shareholders during the fourth
quarter of 1998.
-13-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
Since March 26, 1998, the Company's common stock has been traded on the
New York Stock Exchange under the symbol "WMO". Prior to March 26,
1998, the Company's common stock was traded on the Nasdaq National
Market under the symbol "WSAU."
As of the record date of the annual meeting February 26, 1999, (the
"Record Date") there were approximately 3,200 holders of record of the
Company's common stock. The Company estimates that as of the Record
Date there were approximately 9,300 additional beneficial owners whose
shares were held in street name or in other fiduciary capacities. As
of the Record Date, there were 53,165,639 shares of common stock
outstanding.
The following table sets forth the range of high and low closing price
information of the Company's common stock and the dividends declared on
the common stock, for the calendar quarters indicated. The information
in the table has been adjusted to reflect retroactively all applicable
stock dividends and stock splits.
<PAGE>
<TABLE>
<CAPTION>
Market Price<dagger> Cash Dividend
CALENDAR QUARTER HIGH LOW DECLARED
1997
<S> <C> <C> <C>
First Quarter $20.50 $17.88 $.0625
Second Quarter $19.75 $17.55 $.0625
Third Quarter $25.38 $18.75 $.0625
Fourth Quarter $24.38 $19.69 $.0625
1998
First Quarter $24.00 $18.88 --*
Second Quarter $24.13 $20.13 $.14*
Third Quarter $22.75 $12.13 $.07
Fourth Quarter $18.50 $12.25 $.07
<FN>
*Due to the change in fiscal years from an August 31 year-end to a
December 31 year-end, no dividend was declared in the first
quarter of 1998. Two dividends were declared in the second
quarter.
<dagger>All prices through March 25, 1998 represent closing
quotations on the Nasdaq National Market and reflect inter-dealer
prices, without retail markup, mark-down or commission and may not
necessarily represent actual transactions. Prices after March 25,
1998 represent the high and low sales prices on the New York Stock
Exchange.
</TABLE>
-14-
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
For the years ended
DECEMBER 31, FOR THE YEARS ENDED AUGUST 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Net sales $ 946,127 $ 933,127 $ 857,159 $ 821,313 $ 693,211
Depreciation, depletion & amortization 49,825 47,259 41,204 36,573 33,319
Operating profit 72,145 120,828 119,049 82,460 95,961
Interest expense 7,683 8,103 7,198 7,754 6,968
Earnings before provision for income taxes 65,801 113,589 111,778 75,961 89,593
Earnings before cumulative effect of
accounting change and
restructuring/merger expense 67,339 78,601 68,128 46,436 55,093
Net earnings 40,801 65,398 68,128 46,436 55,343
Average number of shares outstanding 55,708,000 57,811,000 8,829,000 58,843,000 59,040,000
Cash dividends paid 15,494 13,134 11,162 9,922 8,864
Capital expenditures 77,023 66,062 82,489 81,220 61,144
FINANCIAL CONDITION
Working capital $ 81,406 $ 126,653 $ 87,536 $ 93,916 $ 86,190
Long-term debt 127,000 140,500 101,451 147,930 121,653
Stockholders' equity 396,586 440,160 388,608 337,881 303,669
Total assets 900,149 872,064 752,057 707,631 626,472
PER SHARE
Earnings before cumulative effect of
accounting change and
restructuring/merger expense $1.21 $1.36 $1.16 $0.79 $ 0.93
Net earnings-basic 0.73 1.13 1.16 0.79 0.94
Cash dividends declared 0.28 0.25 0.22 0.20 0.174
Stockholders' equity 7.12 7.61 6.61 5.74 5.14
Price range (low and high closing) 12.25-24.06 17.55-25.38 16.50-24.13 16.20-20.00 16.18-24.73
RATIOS/RETURNS
Return on sales before cumulative effect of
accounting change and
restructuring/merger expense 7.1% 8.4% 7.9% 5.7% 7.9%
Net return on sales 4.3% 7.0% 7.9% 5.7% 8.0%
Return on average stockholders' equity before
cumulative effect of accounting change
and restructuring/merger expense 16.1% 18.9% 18.8% 14.5% 19.5%
Net return on average stockholders' equity 9.8% 15.8% 18.8% 14.5% 19.6%
Current assets to current liabilities 1.5 2.2 1.8 2.0 2.0
% of long-term debt to total capital 24.3% 24.2% 20.7% 30.5% 28.6%
</TABLE>
-15-
<PAGE>
<TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OPERATIONS REVIEW
NET SALES
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Net sales $946,127 $933,127 $857,159
Percent increase 1% 9% 4%
</TABLE>
For the twelve months ended December 31, 1998, net sales were a record
$946.1 million, $13 million over 1997 net sales of $933.1 million.
Total shipments of the Company's three operating groups (Printing &
Writing, Specialty Paper, Towel & Tissue) were also a record 831,800
tons in 1998, an increase of 4.2% from the 798,500 tons shipped in
1997. Shipments were 679,100 tons in 1996. Revenue and shipment
growth in 1998 and 1997 was aided by the acquisitions of B&J Supply
and Otis Specialty Papers. Selling prices for the Company's products
declined in both 1998 and 1997 due to competitive pressures on several
products in the Company's printing and writing, specialty, and towel
and tissue grades.
Shipments at the Printing & Writing Group were similar for 1998 and
1997. B&J Supply and the Converted Products facilities recorded
increases in 1998 while the paper manufacturing facilities decreased
approximately 4%. A major portion of this decrease was a decision not
to participate in certain commodity grades due to poor selling prices.
Premium paper sales increased and enhanced overall product mix,
although, downward pressure on paper prices resulted in lower
sales dollars for the group. Overall group shipments were 13.8% higher
in 1997 compared to 1996. All operating facilities within the Group
recorded gains in 1997 over 1996. Continued mix improvement and volume
gains will be a focus for 1999.
Shipments were a record at the Specialty Paper Group for 1998. Total
tonnage of 367,700 increased 7% over 1997 tonnage of 344,600. The major
portion of the increase was attributable to the Otis facility, which
was acquired in May of 1997. Volume in 1997 was 23% greater than 1996
with the major portion of that increase also attributable to the Otis
acquisition. Competitive market pressures in both 1998 and 1997
resulted in lower selling prices on a year-over-year comparison. The
Specialty Paper Group experienced softening in demand in both 1998 and
1997, which resulted in limited downtime for both years. The focus for
1999 will be to improve product mix in particular for the Sorg and Otis
facilities where machine capabilities were or will be enhanced.
The Towel & Tissue Group continued its record volume growth in 1998.
Volume has increased 13%, 14%, and 14% for the last three years on a
year-over-year comparison. This volume growth has principally been
accomplished by increasing distributors and adding converting lines.
<PAGE>
Average pricing declined 5% in 1998 over the prior year's average while
1997 was slightly below 1996.
-16-
Order backlog at the end of 1998 approximated 30,000 tons for all
operating groups and was 10% less than in 1997. In 1997 backlogs had
increased 6% over 1996 principally due to acquisitions. Order backlog
totals do not necessarily indicate the business strength entirely since
a substantial percentage of orders are shipped directly from inventory
upon receipt.
<TABLE>
GROSS PROFIT ON SALES
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS 1998 1997 1996
<S> <C> <C> <C>
Gross profit on sales $175,051 $199,663 $183,291
Percent increase/(decrease) (12%) 9% 34%
Gross profit margin 19% 21% 21%
</TABLE>
Gross profit decreased to $175.1 million or 19% of net sales in 1998
compared to a 1997 gross profit of $199.7 million or 21% of net sales.
Gross profit was $183.3 million in 1996 or 21% of net sales. The
negative impact of reduced selling prices principally caused the margin
decline in 1998. While selling prices declined in 1997, gross margins
remained similar to 1996 due to offsetting lower raw material costs.
Market prices for pulp, the primary raw material used in manufacturing
paper, declined during 1998. In 1998, the average list price of
northern bleached softwood kraft, a frequently-used benchmark pulp
grade, decreased 20% from the 1997 level compared to an 18% and 8%
decrease in 1997 and 1996, respectively.
Wastepaper prices, the primary raw material used in the production of
toweling and tissue, increased 6% in 1998 over 1997 average prices and
had increased 10% in a comparison of 1997 to 1996.
The Printing & Writing Group's mills operated near capacity in 1998 and
total tons produced were similar for both 1998 and 1997. Paper
production increased 5% in 1997 and 3% in 1996 over the previous year.
Increases were principally attributable to capital and operational
improvements. Other facilities within the group reported year-over
-year increases for all years presented. Inventory levels increased
13% in 1998 due in part to stocking a new West Coast warehouse facility
in late 1998.
The Specialty Paper Group mills operated near capacity for all years
presented. Softening demand and poor market conditions resulted in
nominal downtime in both 1998 and 1997 at the Otis and Rhinelander
facilities. Overall production declined 5% in 1998 compared to 1997
principally due to product mix. This product mix was offset somewhat
due to the acquisition of the Otis facility. Production levels
increased both for 1997 and 1996 on a previous year comparison.
Product mix, capital improvements, and the Otis acquisition all were
factors contributing to the increases. Inventory levels declined
approximately 10% in 1998.
<PAGE>
Converting production at the Towel & Tissue group increased similarly
to its sales volume growth for all years presented. Inventory levels
approximated 7,000 tons at the end of 1998 and increased 1,200 tons
over 1997.
-17-
LABOR
A new five-year labor agreement with the United Paperworkers
International Union at the Groveton mill was successfully negotiated in
1997. The new agreement became effective April 1, 1997 and included a
general wage increase of 3.5% in 1997, 3.0% in both 1998 and 1999, 3.5%
in 2000 and 3.0% in 2001. A new four-year labor agreement was also
successfully negotiated in 1997 with the United Paperworkers
International Union at Sorg. The new agreement, which became effective
November 1, 1997, includes a general wage increase of 2.5% in 1997,
3.0% in both 1998 and 1999 and 2.5% in 2000. Labor agreements in other
facilities expire in 1999, 2000 and 2001.
The Company maintains good labor relations in all facilities.
<TABLE>
OPERATING EXPENSES
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Selling and administrative $ 60,103 $ 65,332 $ 64,242
Percent increase/(decrease) (8%) 2% 17%
Restructuring and merger 42,803 13,503 0
Total operating expense 102,906 78,835 64,242
Percent increase 31% 23% 17%
As a percent of net sales 11% 8% 7%
</TABLE>
Selling, administrative and research expenses, excluding the merger and
restructuring expenses discussed below were $60.1 million in 1998,
compared to $65.3 million in 1997 and $64.2 million in 1996. During
1998, decreases in the Company's stock price resulted in a net $1.5
million credit for stock appreciation rights, dividend equivalent and
stock option discount expense, compared to charges in 1997 and 1996 of
$2.1 million and $5.0 million, respectively. General inflationary costs
offset by fluctuations in incentive compensation and retirement plan
costs along with the acquisitions of the Otis and B&J facilities
accounted for a majority of the other changes.
In connection with the merger with Mosinee Paper Corporation (Mosinee),
the Company incurred pre-tax expenses related to the merger of $13.5
million, which were charged to operations in 1997. The costs include
professional fees and other transaction costs for executing the merger
as well as the costs of the severance benefits paid to the former CEO
of the Company. The merger costs on an after-tax basis were $13.2
million or $.23 per share. Restructuring and further merger costs were
recorded in 1998 of $42.8 million. Approximately 95% of these costs
were associated with the Company's early retirement incentives along
with voluntary separation arrangements, involuntary severance
agreements, and training costs for the Company's 1998 workforce
<PAGE>
reduction program. The balance of the restructuring costs were for
legal, consulting, and other miscellaneous costs. The after-tax charge
was $26.5 million or $.48 per share for 1998.
-18-
<TABLE>
OTHER INCOME AND EXPENSE
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C>
Interest expense $7,683 $8,103 $7,198
Percent increase/(decrease) (5%) 13% (7%)
Other 1,339 864 (73)
</TABLE>
Interest expense amounted to $7.7 million in 1998, compared to $8.1
million in 1997 and $7.2 million in 1996. Interest expense was lower in
1998 principally due to lower interest rates and lower average debt
levels. Interest expense in 1997 increased over 1996 due primarily to
higher debt levels associated with the acquisitions of the Otis and B&J
Supply facilities. Capitalized interest totaled $.7 million, $.5
million and $1.1 million in 1998, 1997 and 1996, respectively.
Fluctuations in capitalized interest are primarily dependent on varying
levels of capital expenditures qualifying for capitalized interest
criteria.
Other income includes interest income of $.4 million, $.1 million and
$.6 million in 1998, 1997 and 1996, respectively. The difference in
other income and expense is primarily due to fluctuations in the gain
or loss on asset sales and disposals.
INCOME TAXES
<TABLE>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<CAPTION>
<S> <C> <C>
Income tax provision $25,000 $48,191 $43,650
Percent increase/(decrease) (48%) 10% 48%
Effective tax rate 38.0% 42.4% 39.1%
</TABLE>
The tax provision in 1998 was $25.0 million, for an effective tax rate
of 38%. The effective tax rates for 1997 and 1996 were 42.4% and
39.1%, respectively. The increase in the 1997 tax rate was due
principally to the $13.5 million charge for merger-related expenses,
most of which was not tax deductible.
-19-
<TABLE>
NET EARNINGS
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Net earnings $40,801 $65,398 $68,128
Percent increase/(decrease) (38%) (4%) 47%
Net earnings per share basic 0.73 1.13 1.16
Percent increase/(decrease) (35%) (3%) 47%
</TABLE>
<PAGE>
For the year ended December 31, 1998, net earnings were $40.8 million
or $.73 per share compared to $65.4 million or $1.13 per share in 1997.
Net earnings were $68.1 million or $1.16 per share in 1996. Net
earnings for both 1998 and 1997 included restructuring and merger-
related pre-tax expense charges of $42.8 million and $13.5 million,
respectively. Excluding these charges, net earnings in 1998 were $67.3
million or $1.21 per share compared to $78.6 million or $1.36 per share
in 1997.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
CASH FLOW AND CAPITAL EXPENDITURES
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Cash provided by
operating activities $117,859 $99,724 $136,376
Percent increase/(decrease) 18% (27%) 74%
Working capital 81,406 126,653 87,536
Percent increase/(decrease) (36%) 45% (7%)
Current ratio 1.5:1 2.2:1 1.8:1
</TABLE>
Cash provided by operations was $117.9 million in 1998, an increase of
18% from 1997 operating cash flow of $99.7 million. Cash provided by
operations was $136.4 million in 1996. The increase in 1998 was
primarily due to a decrease in receivables, reduced changes for
investments in inventories and other assets, along with increases in
accounts payable and other liabilities, all offset by reduced net
earnings. The reduction in cash flow for 1997, compared to 1996, was
due mainly to an increase in working capital needs associated with
higher accounts receivable and a smaller increase in accounts payable
and other liabilities.
Capital expenditures were $77.0 million in 1998, compared to $66.1
million in 1997 and $82.5 million in 1996. The 17% increase in capital
spending in 1998 was due to general upgrades of pulp mills and paper
machines resulting from business expansion opportunities following the
merger with Mosinee.
-20-
In 1998, the Printing & Writing Group completed several projects at the
Groveton mill totaling $6.2 million. The projects consisted of paper
machine upgrades and a stock blending system which provides better
efficiency, faster and continuous furnish, less broke and a reduction
in usage of higher cost fiber. The Brokaw mill spent $6.1 million in
1998 on an $8.8 million pulp mill distributive control system to
improve pulp quality and reduce operating costs. The Specialty Paper
Group completed several major projects in its pulp and paper mills,
including spending $2.1 million for rebuilds of the #1 paper machines
at the Mosinee and Sorg mills, $2.1 million for a wet lap machine and
$2.8 million on a boiler precipitator at the Mosinee mill. The Otis
mill spent $5.4 million on a $25 million rebuild to its two paper
machines. The Towel & Tissue Group completed a building expansion
project totaling $6 million to increase operating plant and warehouse
space by 268,000 square feet, $2.6 million on additional towel and
<PAGE>
tissue converting lines and $5.7 million to rebuild the #1 paper
machine for added toweling production capacity to keep pace with
increasing sales volume.
The Board of Directors approved a number of major capital improvements
in 1998, on which spending will continue into 1999. A $25 million
rebuild to the Otis mill's two paper machines was approved. This
project will expand the production capacity of the machines and add
significant new manufacturing capabilities to give the Specialty Paper
Group an improved sales mix. Nearly $6 million was approved for the
Towel & Tissue Group to add converting lines for expanding sales
volume. Other major capital improvement projects approved by the Board
of Directors, include $3.6 million for a woodroom modernization and
$3.7 million for a boiler precipitator at the Mosinee mill, $8.8
million for an upgrade to the dry end of the paper machines at the
Brokaw mill, to include winder, reels, repulper and automated guided
vehicles for roll movement, and nearly $4 million at the Groveton mill
for general upgrades and conversions. At the end of 1998, the Company
was committed to spend $70 million to complete these capital projects
and others currently under construction.
<TABLE>
DEBT AND EQUITY
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Short-term debt $ 51,517 $ 6,207 $ 6,340
Long-term debt 127,000 140,500 101,451
Total debt 178,517 146,707 107,791
Stockholders' equity 396,586 440,160 388,608
Total capitalization 523,586 580,660 490,059
Long-term debt/capitalization ratio 24% 24% 21%
</TABLE>
During 1998, the Company obtained two separate lines of credit which
provided an additional $80 million of available funds to assist in the
authorized repurchase of Company stock. At December 31, 1998, $39
million was outstanding on these lines of credit.
The Company maintains a revolving credit facility with four banks of
$105 million. The agreement extends through March 29, 2001 at which
time, or earlier at the Company's option, the agreement converts to a
one-year term
-21-
loan. The Company also maintains a commercial paper placement
agreement, with one of its four major banks, which provides for the
issuance of up to $40 million of unsecured debt obligations. The
commercial paper placement agreement requires unused credit
availability under the Company's revolving credit agreement equal to
the amount of outstanding commercial paper. On December 31, 1998, the
Company had a combined total of $13.5 million available for borrowing
under its revolving credit and commercial paper placement agreements.
In August 1995, the Company obtained $19 million in industrial
development bond financing to fund an upgrade of the Brokaw mill
<PAGE>
wastewater treatment plant, the construction of a new landfill and
several other projects which qualify for this type of financing. Bond
proceeds were fully disbursed as of January 1997.
In September 1994, Mosinee entered into an unsecured five-year debt
arrangement with one of its banks for $20 million at a fixed rate of
7.83%. This debt arrangement was maintained subsequent to the Mosinee
merger. Principal is due in September 1999.
In June 1993, the Company borrowed $30 million through the issuance of
notes to Prudential Insurance Company of America and its subsidiaries.
Proceeds from the notes were used to reduce borrowings from the
revolving credit facility.
On August 31, 1998, the Company's Board of Directors authorized the
repurchase of 5,650,000 shares of the Company's common stock. The
repurchases may be made from time to time in the open market or through
privately negotiated transactions.
The Company repurchased 4,285,900 shares of its common stock in 1998
under the completed 1994 authorization and the 1998 authorization at
market prices ranging from $12.125 to $18.00. The Company did not
repurchase any shares of the Company's stock in 1997. Prior to merging
with the Company, Mosinee repurchased 478,807 shares of its common
stock in 1997. Based on the terms of the merger, 1.4 shares of the
Company's common stock were exchanged for each Mosinee share. The
stock repurchases were the equivalent of 670,330 shares of the
Company's common stock in 1997. As of the merger date of December 17,
1997, all Mosinee treasury stock was retired.
During 1998, the Board of Directors declared cash dividends of $.28 per
share, an increase of 12% from the $.25 per share cash dividend
declared in 1997.
The cash provided by operations, the revolving credit facility and the
available lines of credit are expected to meet capital needs and
dividend requirements. The Company plans to refinance the outstanding
debt obligations to secure longer term financing in 1999.
YEAR 2000
Year 2000 issues apply to the Company's computerized manufacturing
process controllers, environmental systems, order processing, inventory
management, the shipment of finished goods, and internal financial and
other information systems. Year 2000 issues also apply to the
Company's suppliers and customers. For purposes of this discussion,
the terms "Year 2000 issues" or "Year 2000 problems", or terms of
similar import, refer to the potential failure of
-22-
computer applications as a result of the failure of a program or
hardware to properly recognize the year 2000 and to properly handle
dates beyond the year 1999. The term "Year 2000 readiness", or terms
of similar import, mean that the particular equipment or processes
referred to have been modified or replaced and the Company believes
<PAGE>
that such modified or replaced equipment or processes will operate as
designed after 1999 without Year 2000 problems.
READINESS
The Company has developed a Year 2000 Plan intended to (1) upgrade its
information technology hardware and software and all software and
embedded technology applications in its equipment and facilities to be
Year 2000 ready, (2) assess the Year 2000 readiness of suppliers and
customers, and (3) develop contingency plans, if practical, for
critical systems and processes.
The Company has completed an inventory of mission critical information
systems, process equipment, and manufacturing facilities. The Company
continues to evaluate and test equipment, environmental controls, and
other core functions. Assessment and testing is expected to be
completed by May, 1999. The Company believes that the most critical
information systems, primarily the sales order processing, inventory,
and shipping systems, are already Year 2000 ready or, if not, that such
systems have been given first priority to be made Year 2000 ready and
will be ready by September, 1999. The Company's enterprise resource
planning system ("ERP") is intended to bring the remainder of the
Company's information systems to Year 2000 readiness by September,
1999. The broader, non-Year 2000 aspects of the ERP system will be
fully implemented in 2001.
COSTS
The costs of achieving Year 2000 readiness have not been material to
date and are not expected to be material. The cost of remediation for
key papermaking process controls and equipment is expected to be less
than $2 million. Internal costs for Year 2000 readiness are not being
tracked, but principally relate to payroll costs of Company personnel.
The implementation of the Company-wide ERP system is expected to
require a capital investment of approximately $5.5 million. Although
the ERP implementation timetable was not accelerated to address Year
2000 issues, those issues were considered in determining the overall
timetable for its implementation.
RISKS
The Company expects no material adverse effect on its consolidated
financial condition, liquidity or results of operations (collectively,
its "business") as a result of problems encountered in its own business
as a result of Year 2000 issues or as a result of the impact of Year
2000 problems on its customers or vendors. However, the risks to the
Company associated with Year 2000 issues are many.
The Company's assessment of possible Year 2000 related problems
depends, to some extent, on the assurances and guidance provided it by
the suppliers of the technology as to its Year 2000 readiness. In
addition, the Company has limited ability to independently verify the
possible effect of Year 2000 problems on its customers and vendors.
Therefore, the Company's assumptions
-23-
<PAGE>
concerning the effect of Year 2000 issues relies, in part, on its
ability to analyze the business and operations of each of its critical
vendors or customers. This process is, by the nature of the problem,
limited to such persons' public statements, their responses to the
Company's inquiries, and the information available to the Company from
third parties concerning the industries or particular vendors or
customers involved.
The Company expects that Year 2000 problems which cause customers to be
unable to place orders would have a material adverse impact on its
business only if the problem was widespread and long-lived. The
Company has a broad customer base, which would likely alleviate the
adverse effects of isolated customer Year 2000 problems.
Some risk also exists that, despite the Company's best efforts,
critical manufacturing systems may malfunction due to Year 2000
problems and curtail the manufacturing process. The Company does not
anticipate such interruptions and it is unlikely any such curtailment
would be lengthy. With eleven manufacturing facilities, a temporary
interruption at one facility is unlikely to have a material adverse
impact on the Company's business.
Interruption of raw material supply due to supplier problems caused by
Year 2000 issues are not expected to be material as the Company stocks
raw materials to protect against supply problems and alternative
sources of supply exist to meet the Company's raw material needs.
Similarly, although the Company faces potential disruptions in its
operations from Year 2000 problems as a result of the failure of the
power grid, telecommunications, or other abilities, it is not aware
that any material disruption in these infrastructures is reasonably
likely to occur and the number and widespread location of its
facilities is likely to minimize the impact of any disruption.
CONTINGENCY PLAN
The Company has evaluated various contingencies that may arise as a
result of Year 2000 issues. The Company anticipates that disruptions
in production, sales, the supply of raw materials, loss of customer
orders, and other foreseeable effects of the Year 2000 issues can be
addressed following normal business alternatives. The Company will
continue to analyze and develop contingency plans where possible and
not cost prohibitive.
-24-
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The company does not have a material market risk associated with
interest rate risk, foreign currency exchange risk, or commodity price
risk. The company does not hold or engage in transactions involving
derivative financial instruments. The company conducts U.S. dollar
denominated export transactions or immediately exchanges all foreign
currency attributable to export sales for U.S. dollars.
<PAGE>
The company maintains certain derivative commodity instruments as
hedges for anticipated transactions. Such instruments do not have a
material market risk and no such derivative commodity instrument is
held for trading. At December 31, 1998, these instruments consisted of
various futures contracts for the purchase of natural gas and fuel oil.
From time to time, the company may also purchase pulp futures contracts
as a hedge against pulp price increases. See Notes 1 and 14 of "Notes
to Consolidated Financial Statements" for additional information
relating to the company's derivative commodity instruments.
-25-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Wausau-Mosinee Paper Corporation
Mosinee, Wisconsin
We have audited the accompanying consolidated balance sheets of Wausau-
Mosinee Paper Corporation and Subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, cash flows and
stockholders' equity for the years ended December 31, 1998 and 1997 and
August 31, 1996, and the supporting schedule of valuation and
qualifying accounts. These financial statements and supporting
schedule are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements
and supporting schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and supporting schedule are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and supporting schedule.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Wausau-Mosinee Paper Corporation and Subsidiaries at December 31, 1998
and 1997, and the results of its operations and cash flows for the
years ended December 31, 1998 and 1997 and August 31, 1996, and the
supporting schedule presents fairly the information required to be set
forth therein, all in conformity with generally accepted accounting
principles.
January 29, 1999
Wausau, Wisconsin WIPFLI ULLRICH BERTELSON LLP
-26-
<PAGE>
<TABLE>
WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
As of December 31,
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,495 $ 2,584
Receivables, net 66,956 69,674
Refundable income taxes 3,282 2,799
Inventories 150,217 143,610
Deferred income taxes 18,344 15,152
Other current assets 832 1,110
Total current assets 242,126 234,929
Property, plant and equipment, net 625,065 604,930
Other assets 32,958 32,205
TOTAL ASSETS $ 900,149 $ 872,064
LIABILITIES
Current liabilities:
Notes payable to banks $ 45,466 $ -
Current maturities of long-term debt 6,051 6,207
Accounts payable 58,419 53,181
Accrued and other liabilities 50,784 48,888
Total current liabilities 160,720 108,276
Long-term debt 127,000 140,500
Deferred income taxes 94,911 92,947
Postretirement benefits 60,558 52,161
Pension 39,235 22,900
Other noncurrent liabilities 21,139 13,865
Total liabilities 503,563 430,649
Commitments and contingencies - -
Preferred stock of subsidiary - 1,255
STOCKHOLDERS' EQUITY
Preferred stock (75,000 shares authorized)
no par value - -
Common stock (100,000,000 shares authorized)
no par value 170,686 168,553
Retained earnings 315,711 290,541
Subtotals 486,397 459,094
Treasury stock at cost ( 85,136) ( 17,667)
Minimum pension liability (net of
deferred taxes) ( 4,675) ( 1,267)
Total stockholders' equity 396,586 440,160
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 900,149 $ 872,064
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
-27-
<TABLE>
WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
For the years ended For the year ended
December 31, August 31,
1998 1997 1996
<S> <C> <C> <C>
Net sales $946,127 $933,127 $857,159
Cost of products sold 771,076 733,464 673,868
Gross profit 175,051 199,663 183,291
Operating expenses:
Selling and administrative 60,103 65,332 64,242
Restructuring and merger expense 42,803 13,503 -
Operating profit 72,145 120,828 119,049
Other income (expense):
Interest expense ( 7,683) ( 8,103) ( 7,198)
Interest income 403 95 562
Other 936 769 ( 635)
Earnings before income taxes 65,801 113,589 111,778
Provision for income taxes 25,000 48,191 43,650
Net earnings $ 40,801 $ 65,398 $ 68,128
Net earnings per share basic $ .73 $ 1.13 $ 1.16
Net earning per share diluted $ .73 $ 1.13 $ 1.16
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
-28-
<PAGE>
<TABLE>
WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended For the year ended
December 31, August 31,
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 40,801 $ 65,398 $ 68,128
Provision for depreciation, depletion
and amortization 49,825 47,259 41,204
Recognition of deferred revenue (40) (40) (40)
Provision for losses (recoveries) on
accounts receivable 1,227 (282) 257
Loss (gain) on property, plant and
equipment disposals (782) (333) 1,482
Deferred income taxes (1,028) 12,458 14,652
Changes in operating assets and liabilities:
Receivables 1,491 (7,563) 7,081
Inventories (6,607) (10,114) (10,582)
Other assets (4,577) (11,129) (9,474)
Accounts payable and other liabilities 38,032 9,425 20,728
Accrued and refundable income taxes (483) (5,355) 2,940
Net cash provided by operating activities 117,859 99,724 136,376
Cash flows from investing activities:
Capital expenditures (77,023) (66,062) (82,489)
Acquisition of Otis Specialty Papers - (55,147) -
Acquisition of B&J Supply - (6,235) -
Proceeds from property, plant and
equipment disposals 9,550 693 542
Net cash used from funds
restricted for capital additions - 1,297 10,888
Net cash used in investing activities (67,473) (125,454) (71,059)
Cash flows from financing activities:
Net borrowings of short-term notes 25,466 - -
Net borrowings (repayments) under credit
agreements 12,551 58,117 (39,975)
Payment under capital lease obligation (207) (345) (500)
Repayment of long-term notes (6,000) (6,000) (6,000)
Dividends paid (15,494) (13,134) (11,162)
Payment for preferred stock of subsidiary (320)
Proceeds from stock option exercises 1,741 120 297
Payments for purchase of treasury stock (68,212) (10,927) (7,218)
Net cash provided by (used in) financing
activities (50,475) 27,831 (64,558)
Net increase (decrease) in cash and cash
equivalents (89) 2,101 759
Cash and cash equivalents at beginning
of year 2,584 483 4,763
Cash and cash equivalents at end of year $ 2,495 $ 2,584 $ 5,522
Supplemental cash flow information:
Interest paid - net of amount capitalized $ 7,629 $ 7,902 $ 7,503
Income taxes paid 26,511 41,882 26,126
<PAGE>
<FN>
Noncash investing and financing activities: A capital lease obligation
of $498 in 1996 was incurred when the Company entered into a lease for
new equipment. In connection with the acquisition of B&J Supply during
1997, the Company assumed $2,000 of debt.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
-29-
<PAGE>
<TABLE>
WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Accumulated
Other
Comprehensive
- Common Stock - - Treasury Stock - Income - Common
Minimum Stock- Total
Shares Retained Pension Shares Stockholders'
ISSUED AMOUNT EARNINGS SHARES AMOUNT LIABILITY OUTSTANDING EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances August 31, 1995 47,078,810 $197,462 $170,561 ( 6,607,087) ($29,354) ($ 788) 40,471,723 $337,881
Comprehensive earnings, 1996
Net earnings 68,128 68,128
Minimum pension liability
(net of $397 deferred tax) 595 595
Comprehensive
earnings,1996 68,723
Cash dividends declared (11,456) (11,456)
Five-for-four stock split 7,768,080 (402,343) 7,365,737
Four-for-three stock split 5,335,495 (1,666,218) 3,669,277
Purchases of treasury stock (411,458) (7,218) (411,458) (7,218)
Stock options exercised (10) 52,404 307 52,404 297
Tax benefit related to stock
options 351 351
Stock option discount
(net of deferred taxes) 30 30
Balances August 31, 1996 60,182,385 197,833 227,233 (9,034,702) (36,265) (193) 51,147,683 388,608
Net earnings for the four
months ended
December 31, 1996 - Wausau 13,820 13,820
Cash dividends declared (2,282) (2,282)
Stock option discount
(net of deferred taxes) 37 37
Balances December 31, 1996 60,182,385 197,870 238,771 (9,034,702) (36,265) (193) 51,147,683 400,183
Comprehensive earnings, 1997
Net earnings 65,398 65,398
Minimum pension liability
(net of $716 deferred tax) (1,074) (1,074)
Comprehensive earnings, 1997 64,324
Cash dividends declared (13,628) (13,628)
Three-for-two stock split 10,670,992 (3,353,416) 7,317,576
Purchases of treasury stock (670,330) (10,927) (670,330) (10,927)
Retire treasury stock (10,730,573) (29,471) 10,730,573 29,471
Fractional shares resulting
from merger paid in cash (606) (606)
Stock options exercised 66 7,444 54 7,444 120
Tax benefit related to
stock options 15 15
Stock option discount
(net of deferred taxes) 73 73
Balances December 31, 1997 60,122,198 168,553 290,541 (2,320,431) (17,667) (1,267) 57,801,767 440,160
Comprehensive earnings, 1998
Net earnings 40,801 40,801
</TABLE>
<PAGE>
<TABLE>
WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (cont)
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Accumulated
Other
Comprehensive
- Common Stock - - Treasury Stock - Income - Common
Minimum Stock- Total
Shares Retained Pension Shares Stockholders'
ISSUED AMOUNT EARNINGS SHARES AMOUNT LIABILITY OUTSTANDING EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minimum pension liability
(net of $2,047 deferred tax) (3,408) (3,408)
Comprehensive earnings, 1998 37,393
Cash dividends declared (15,631) (15,631)
Retirement of preferred
stock of subsidiary 935 935
Purchases of treasury stock (4,285,900) (68,200) (4,285,900) (68,200)
Stock options exercised 998 97,972 743 97,972 1,741
Tax benefit related to stock
options 200 200
Fractional shares added to
treasury (614) (12) (614) (12)
Balances December 31, 1998 60,122,198 $170,686 $315,711 (6,508,973) $85,136) ($4,675) 53,613,225 $396,586
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
-30-
<PAGE>
WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant
intercompany transactions, balances and profits have been eliminated in
consolidation. The consolidated statements give retroactive effect to
the merger with Mosinee Paper Corporation ("Mosinee").
On December 17, 1997, Wausau Paper Mills Company ("Wausau") completed a
merger with Mosinee ("the Mosinee merger") in which Mosinee became a
wholly owned subsidiary of Wausau. Simultaneous with the consummation
of the Mosinee merger, Wausau changed its name to Wausau-Mosinee Paper
Corporation ("the Company"). Prior to the merger, Wausau's fiscal
year-end was August 31 and Mosinee's was December 31. Subsequent to the
Mosinee merger, the Company adopted a calendar year-end. As a result of
the change in fiscal year and the merger accounted for as a pooling of
interests, the Company's 1997 financial statements have been recast to
a twelve-month period ending December 31, 1997. The financial
statements have been restated to retroactively combine Mosinee's
financial statements as if the merger had occurred at the beginning of
the earliest period presented.
The consolidated statements of income and cash flows for the year ended
August 31, 1996 reflect the results of operations and cash flows for
Wausau for the year then ended combined with Mosinee for the year ended
December 31, 1996. The consolidated balance sheet as of August 31,
1996 reflects the financial position of Wausau on that date combined
with the financial position of Mosinee as of December 31, 1996. As a
result of Wausau and Mosinee having different fiscal years and the
change in the Company's fiscal year, Wausau's results of operations for
the four-month period ended December 31, 1996, have been excluded from
the reported results of operations and, therefore, have been added to
the Company's retained earnings at January 1, 1997. Wausau had
net sales, expense, and net income of $179,075,000, $165,255,000, and
$13,820,000 for the four-month period ended December 31, 1996.
REVENUE RECOGNITION - Revenue is recognized upon shipment of goods and
transfer of title to the customer. The Company grants credit to
customers in the ordinary course of business. A substantial portion of
the Company's accounts receivable is with customers in various paper
converting industries or the paper merchant business. Concentrations
of credit risk with respect to trade receivables are limited due to the
large number of customers and their geographic dispersion.
USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS -
The preparation of the accompanying financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses. Actual results may differ
from these estimates.
CASH EQUIVALENTS - The Company defines cash equivalents as highly
liquid, short-term investments with an original maturity of three
months or less.
<PAGE>
INVENTORIES - Pulpwood, finished paper products and the majority of raw
materials are valued at the lower of cost, determined on the last-in,
first-out (LIFO) method, or market. All other inventories are valued at
the lower of average cost or market. Allocation of the LIFO reserve
among the components of inventories is impractical.
-31-
PROPERTY, PLANT AND EQUIPMENT - Plant and equipment are stated at cost
and are depreciated over the estimated useful lives of the assets using
the straight-line method for financial statement purposes. Land, water
power rights, and construction in progress are stated at cost. The
cost and related accumulated depreciation of all plant and equipment
retired or otherwise disposed of are removed from the accounts, and any
resulting gains or losses are included in the statements of income.
Buildings are depreciated over a 20 to 45-year period; machinery and
equipment over a 3 to 20-year period. Maintenance and repair costs are
charged to expense as incurred. Renewals and improvements which extend
the useful lives of the assets are added to the plant and equipment
accounts.
Equipment financed by long-term leases, which in effect are installment
purchases, have been recorded as assets and the related obligations as
debt. Depreciation expense includes amortization on capitalized
leases.
Timberlands are stated at net depleted value. Depletion expense is
calculated using the block and unit-of production methods. The block
method groups timberland into logical management areas called "blocks"
for which the cost basis is determinable. The annual depletion is
determined by multiplying the per unit cost basis of the block of
timber by the number of units harvested from the block during the year.
INCOME TAXES - Deferred income taxes have been provided under the
liability method. Deferred tax assets and liabilities are determined
based upon the estimated future tax effects of differences between the
financial statement and tax bases of assets and liabilities, as
measured by the current enacted tax rates. Deferred tax expense is the
result of changes in the deferred tax asset and liability.
EARNINGS PER SHARE - Basic earnings per common share are based on the
weighted average number of common shares outstanding. Diluted earnings
per common share are based on the weighted average number of common
shares and common stock equivalents (options) outstanding.
FUTURES CONTRACTS - The Company utilizes futures contracts to
periodically hedge the price risk of anticipated purchases of pulp and
other commodity products. Changes in the market value of the futures
contracts are included as part of the acquisition price of pulp and
other commodity products and are realized when the finished paper is
sold and the other commodity products are consumed. Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" will be adopted as of
January 1, 2000. The statement establishes accounting and reporting
standards for derivatives. The effect on the Company is not expected to
be material.
<PAGE>
CHANGES IN ACCOUNTING POLICIES - On January 1, 1998, the Company
adopted Statements of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," No. 131, "Disclosures about Segments
of an Enterprise and Related Information," and No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS No.
130 requires companies to report all changes in net assets, such as
minimum pension liability adjustments, as a component of comprehensive
income. SFAS No. 131 requires certain disclosures of the company's
segments including general information, segment profits and assets, and
a reconciliation of segment financial condition and results of
operations to the corresponding company amounts. SFAS No. 132 revises
employers' disclosures about pension and other postretirement benefit
plans.
-32-
NOTE 2. MERGERS AND ACQUISITIONS
On December 17, 1997, the Company completed the Mosinee merger. The
merger qualified as a tax-free exchange and was accounted for as a
pooling of interests. Wausau issued 1.4 shares of common stock for
each share of Mosinee outstanding common stock. A total of 21,281,795
shares (after adjustment for fractional shares) of the Company's common
stock was issued as a result of the merger, and Mosinee's outstanding
stock options were converted into options to purchase approximately
596,000 common shares. In connection with the merger, the Company
incurred $13,503,000 ($13,203,000 after taxes, or $ .23 per common
share) of merger-related costs which were charged to operations during
the year ended December 31, 1997.
The following table presents a reconciliation of net sales and net
earnings previously reported by the Company to those presented in the
accompanying consolidated financial statements.
<TABLE>
<CAPTION>
For the year For the year
ended December 31, ended August 31,
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1997 1996
<S> <C> <C>
Net sales:
Wausau $594,913 $542,669
Mosinee 338,214 314,490
Combined $933,127 $857,159
Net earnings:
Wausau $ 40,379 $ 41,229
Mosinee 25,019 26,899
Combined $ 65,398 $ 68,128
</TABLE>
On May 12, 1997, the Company acquired the business and assets of Otis
Specialty Papers ("Otis"). The acquisition was accounted for using the
purchase method of accounting. The financial statements reported herein
include the net sales, operating profit and net earnings of Otis from
the date of purchase. The following table presents unaudited pro forma
<PAGE>
condensed results of operations for the years ended December 31, 1997
and August 31, 1996, as if the acquisition were completed at the
beginning of the period:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS 1997 1996
IN THOUSANDS, UNAUDITED)
<S> <C> <C>
Net sales $ 965,982 $ 932,715
Operating profit 124,218 121,531
Net earnings 66,673 67,860
Net earnings per share basic $ 1.15 $ 1.15
</TABLE>
The unaudited pro forma financial information includes certain
assumptions or adjustments, not material in amount, which the Company
believes are necessary to fairly present such information. Historical
costs representing the seller's corporate allocations, interest expense
and one-time expenses related to the sale of Otis are included in the
pro forma information. The pro forma information does not purport to
represent what the Company's results of
-33-
operations would actually have been if this transaction had occurred at
the beginning of the earliest period presented.
On April 1, 1997, Mosinee acquired the business and assets of B&J
Supply, Inc. ("B&J"), a converter and nationwide supplier of school
papers. The acquisition was accounted for using the purchase method of
accounting. The results of operations of B&J from the date of purchase
have been included in the reported results of operations since the date
of acquisition. Had the purchase been consummated at the beginning of
fiscal 1997, operating results on a pro forma basis would not have been
significantly different.
NOTE 3. RESTRUCTURING
In March 1998, the Company began implementation of a workforce
reduction program. The purpose of the program was to reduce the number
of employees by 400 through early retirement incentives along with
voluntary separation arrangements, involuntary severance programs and
process automation. As a result of the program implementation, the
Company recorded a pre-tax restructuring charge of $37.7 million in the
first quarter of 1998. The charge was based on estimates of the cost
of the workforce reduction program, including special termination
benefits and settlement and curtailment losses related to pension and
postretirement benefit plans. In the fourth quarter of 1998, an
additional pre-tax expense of $5.1 million was recorded to recognize
adjustments to the previous estimates of the early retirement
incentives and to recognize additional expenses associated with
integration costs. Approximately 93% of the benefits under the program
have been paid or have been transferred as obligations of the Company's
retirement plans as of December 31, 1998.
-34-
<PAGE>
<TABLE>
NOTE 4. SUPPLEMENTAL BALANCE SHEET INFORMATION
<CAPTION>
December 31,
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
<S> <C> <C>
Receivables
Trade $ 73,950 $ 74,482
Other 3,068 3,931
77,018 78,413
Less: allowances ( 10,062) ( 8,739)
$ 66,956 $ 69,674
Inventories
Raw materials $ 58,547 $ 60,832
Work in process and
finished goods 75,906 76,260
Supplies 28,447 26,672
Inventories at cost 162,900 163,764
LIFO reserve ( 12,683) ( 20,154)
$ 150,217 $ 143,610
Property, plant and equipment
Buildings $ 124,855 $ 113,006
Machinery and equipment 882,836 838,932
Totals 1,007,691 951,938
Less: accumulated depreciation ( 427,954) ( 385,679)
Net depreciated value 579,737 566,259
Land 5,382 4,724
Timber and timberlands,
net of depletion 5,166 5,012
Water power rights 129 129
Construction in progress 34,651 28,806
$ 625,065 $ 604,930
Accrued and other liabilities
Payrolls $ 4,721 $ 6,559
Vacation pay 10,861 11,632
Employee retirement plans 6,942 4,619
Taxes other than income 4,978 3,999
Cash dividends declared 3,753 3,616
Stock appreciation rights 6,927 8,939
Other 12,602 9,524
$ 50,784 $ 48,888
</TABLE>
NOTE 5. DEBT
The Company's short-term notes payable consist of $20,000,000
outstanding under an unsecured debt arrangement with one financial
institution and $25,466,000 outstanding under two separate revolving
lines of credit.
-35-
The $20,000,000 unsecured debt arrangement was entered into by the
Company on September 30, 1994, at an interest rate of 7.83%. Interest
is paid monthly and the principal is due September 1999. At December
31, 1997, the $20,000,000 was classified as long-term debt.
<PAGE>
During 1998, two banks participating in the revolving credit
arrangement with the Company provided separate lines of credit. One
line of credit provides for borrowing up to $20,000,000. Specific rates
and terms of the loans are determined at the time of borrowing, with
maturity not to go beyond September 30, 1999. The line of credit does
not require a compensating balance or a commitment fee. At December
31, 1998, there was $17,000,000 borrowed against this line of credit at
a weighted average interest rate of 5.65%. The second line of credit
provides for borrowing up to $60,000,000 at rates and terms negotiated
at the time of borrowing, with maturity not to go beyond November 22,
1999. The line of credit agreement provides for a commitment fee
during the term of the agreement. The fee is based on a quarterly debt
to EBITDA ratio. Based on the debt to EBITDA ratio at December 31,
1998, the fee is .125% per annum on the unused portion of this line of
credit. At December 31, 1998, there was $22,000,000 borrowed against
this line of credit at a weighted average interest rate of 5.77%. As of
December 31, 1998, of the total borrowings against the lines of credit,
$25,466,000 is classified as short-term and $13,534,000 is classified
as long-term as the Company intends and has the ability to refinance
the obligations under the revolving credit agreement.
The Company's long-term debt, excluding current maturities as of
December 31, consists of the following:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
<S> <C> <C>
Long-term note $ - $ 20,000
Senior promissory notes 3,000 9,000
Line of credit 13,534 -
Industrial development bonds 19,000 19,000
Revolving credit facility agreements 75,000 70,500
Commercial paper 16,466 21,949
Capitalized leases - 51
Totals $127,000 $ 140,500
</TABLE>
The Company has outstanding $9 million in unsecured senior promissory
notes. Interest is payable quarterly on the outstanding balance at a
rate of 6.03% per annum. Principal is payable in equal semi-annual
installments, with the final payment due June 16, 2000.
During 1995, the Company borrowed $19 million related to industrial
development bonds issued by a local governmental unit. The variable
rate bonds require quarterly interest payments and had an interest rate
of 4.30% at December 31, 1998 and 4.45% at December 31, 1997. The
Company also pays fees for a bank letter of credit and remarketing
services related to the bonds which it includes in net interest
expense. The interest rate can be converted to a fixed rate, at the
Company's option, after which semi-annual interest payments will be
required. The bonds mature on July 1, 2023. At December 31,
1998 and December 31, 1997, all bond proceeds had been disbursed.
-36-
<PAGE>
The Company maintains an unsecured revolving credit facility of $105
million with four banks which continues through March 29, 2001 at which
time, or earlier at the Company's option, the revolving credit converts
to a term loan facility, and the loans then outstanding are payable in
four equal quarterly installments. The Company may elect the base for
interest from either domestic rate loans, eurodollar loans, adjusted CD
rate loans, offered loans or treasury rate loans. The weighted average
interest rate on borrowings under the revolving credit facility was
5.58% and 6.14% at December 31, 1998 and December 31, 1997,
respectively. The credit agreement provides for commitment fees during
the revolving loan period. Fees are based on quarterly funded debt to
equity levels. Based on debt and equity levels at December 31, 1998 and
December 31, 1997, the fees are .1% per annum.
The senior promissory notes, long-term note and the revolving credit
facility agreements require the Company to comply with certain
covenants, one of which requires the Company maintain minimum net
worth. At December 31, 1998, $242 million of retained earnings was
available for payment of cash dividends without violation of the
minimum net worth covenant related to the senior promissory notes.
The Company maintains a commercial paper placement agreement with a
bank to issue up to $40 million of unsecured debt obligations which
requires unused credit availability under its revolving credit
agreement equal to the amount of outstanding commercial paper. At
December 31, 1998 and December 31, 1997, $16,466,000 and $10,485,000
were outstanding, respectively. The weighted average interest rate on
outstanding commercial paper was 5.6% at December 31, 1998 and 6.2% at
December 31, 1997.
One of the Company's wholly owned subsidiaries had a commercial paper
placement agreement to issue up to $50 million of unsecured debt
obligations. At December 31, 1997, $11,464,000 was outstanding. The
weighted average interest rate on commercial paper outstanding at
December 31, 1997 was 6.1%. All commercial paper was retired in June
1998 and this agreement is no longer in effect.
The aggregate annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS
IN THOUSANDS) 1999 2000 2001 2002 2003 THEREAFTER
<S> <C> <C> <C> <C> <C>
$6,051 $3,000 $105,000 $ - $ - $19,000
</TABLE>
Annual maturities will be affected by future borrowings.
-37-
<PAGE>
NOTE 6. LEASE COMMITMENTS
The Company has various leases for real estate, mobile equipment and
machinery which generally provide for renewal privileges or for
purchase at option prices established in the lease agreements.
Property, plant and equipment includes the following amounts for
capitalized leases:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
<S> <C> <C>
Machinery and equipment $1,416 $1,416
Allowance for amortization (1,178) ( 854)
Net value $ 238 $ 562
</TABLE>
Lease amortization is included in depreciation expense.
Future minimum payments, by year and in the aggregate, under
capitalized leases and noncancelable operating leases with initial or
remaining terms of one year or more consisted of the following at
December 31, 1998:
<TABLE>
<CAPTION>
Capital Operating
(ALL DOLLAR AMOUNTS IN THOUSANDS) LEASES LEASES
<S> <C> <C>
1999 $ 51 $ 1,798
2000 1,600
2001 1,195
2002 697
2003 650
Thereafter 1,739
Total minimum payments $ 51 $ 7,679
</TABLE>
The future minimum payments for capitalized leases are reflected in the
aggregate annual maturities of long-term debt disclosure in Note 5.
Rental expense for all operating leases was as follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Rent expense $5,346 $5,154 $3,856
</TABLE>
Contingent rentals were not material.
-38-
<PAGE>
NOTE 7. INTEREST EXPENSE AND CAPITALIZED INTEREST
<TABLE>
<CAPTION>
Total Net
Interest Capitalized Interest
(ALL DOLLAR AMOUNTS IN THOUSANDS) EXPENSE INTEREST EXPENSE
<S> <C> <C> <C>
1998 $8,406 $ 723 $7,683
1997 8,595 492 8,103
1996 8,299 1,101 7,198
</TABLE>
NOTE 8. RETIREMENT AND OTHER POSTRETIREMENT BENEFIT PLANS
Substantially all employees are covered under retirement plans. The
defined benefit plans covering salaried employees provide benefits
based on final average pay formulas; the plans covering hourly
employees provide benefits based on years of service and fixed benefit
amounts for each year of service. The plans are funded in accordance
with federal laws and regulations.
The Company selected measurement dates of plan assets of September 30,
1998 and 1997.
In 1998, the Company offered a voluntary early retirement program to
encourage early retirements among certain salaried and hourly
employees. The program was part of the restructuring plan discussed in
Note 3 to the consolidated financial statements. As a result,
curtailment and settlement charges of $5.9 million and special
termination benefit charges of $23.3 million were recorded as a
component of the restructuring expense recognized in 1998.
The following are reconciliations of the projected benefit obligations
and the value of plan assets for 1998 and 1997:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
CHANGE IN BENEFIT OBLIGATION
<S> <C> <C>
Balance, beginning of year $ 119,379 $ 101,528
Service cost 4,687 4,079
Interest cost 8,421 7,743
Amendments to the plan 938 3,814
Actuarial loss 13,276 8,459
Benefits paid to participants ( 7,835) ( 6,244)
Curtailments ( 1,451) -
Settlements ( 48,170) -
Special termination benefits 20,561 -
Balance, end of the year $ 109,806 $ 119,379
</TABLE>
-39-
<PAGE>
<TABLE>
<CAPTION>
CHANGE IN PLAN ASSETS
<S> <C> <C>
Fair value, beginning of year $ 109,617 $ 87,081
Actual return on plan assets ( 3,844) 21,490
Company contributions 5,868 7,173
Benefits paid to participants ( 7,835) ( 6,197)
Settlements ( 48,170) -
Cash contributions to plans subsequent
to measurement date - 70
Fair value, end of year $ 55,636 $ 109,617
</TABLE>
At December 31, 1998 and 1997, the funded status of the plans were as
follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
<S> <C> <C>
Excess of the benefit obligation
over the value of the plan assets ($ 54,170) ($ 9,762)
Unrecognized net actuarial (gain) loss 12,626 ( 10,380)
Unrecognized prior service cost 15,559 16,928
Unrecognized transition asset ( 891) ( 1,588)
Net amount recognized at end of year ($ 26,876) ($ 4,802)
</TABLE>
For 1998 and 1997, the net amount recognized in the balance sheet was
classified as follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
<S> <C> <C>
Prepaid benefit cost $ - $ 3,085
Accrued benefit liability ( 48,334) ( 19,686)
Intangible asset 13,890 9,686
Accumulated other comprehensive income 7,568 2,113
Net amount recognized at end of year ($26,876) ($ 4,802)
</TABLE>
For 1998 and 1997, the following weighted average interest rates were
used to determine the projected benefit obligation:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Discount rate on the benefit plan 7.0% 7.25-7.50%
Rate of expected return on plan assets 9.0% 8.0-9.0%
Rate of employee compensation increase 5.0% 4.9-5.0%
</TABLE>
Plan assets consist principally of publicly traded stocks and fixed
income securities and include Wausau-Mosinee common stock with a market
value of $8,918,000 in 1998 and $10,512,000 in 1997.
-40-
<PAGE>
Net periodic pension cost was comprised of the following:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Service cost $ 4,687 $ 2,950 $ 3,295
Interest cost 8,421 5,435 6,443
Expected return on plan assets ( 7,576) (13,120) ( 15,460)
Amortization of:
Actuarial loss 201 8,408 8,585
Prior service cost 1,570 1,418 1,418
Transition asset ( 231) ( 236) ( 236)
Subtotal 7,072 4,855 4,045
Components charged to restructuring
expense:
Special termination benefit 20,561
Settlement and curtailment 310
Subtotal 20,871 _______ _______
Total net periodic pension cost $ 27,943 $ 4,855 $ 4,045
</TABLE>
The foregoing net amounts regarding the pension benefit obligation and
the value of plan assets are a combination of both overfunded and
underfunded plans. At December 31, 1998 and 1997, aggregate amounts
relating to underfunded plans are as follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
<S> <C> <C>
Projected benefit obligation $ 109,806 ($41,040)
Accumulated benefit obligation ( 98,482) ( 39,453)
Fair value of plan assets 55,636 24,557
</TABLE>
The Company also sponsors defined contribution pension plans, several
of which provide for Company contributions based on a percentage of
employee contributions. The cost of such plans totaled $3,066,000 in
1998, $3,872,000 in 1997 and $3,983,000 in 1996.
The Company has deferred compensation or supplemental retirement
agreements with certain present and past key officers, directors, and
employees. The principal cost of such plans is being or has been
accrued over the period of active employment to the full eligibility
date. The annual cost of the deferred compensation and supplemental
retirement agreements does not represent a material amount.
The Company sponsors unfunded defined benefit postretirement health and
life insurance plans that cover substantially all employees reaching
normal retirement age while working for the Company. Benefits and
eligibility for various employee groups vary by location and union
agreements. Generally, employees are eligible after reaching age 55 or
62 and meeting minimum service requirements. At age 65, the benefits
become coordinated with Medicare. The Company funds the benefit costs
on a current basis.
-41-
<PAGE>
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
CHANGE IN POSTRETIREMENT BENEFIT OBLIGATION
<S> <C> <C>
Balance, beginning of year $ 59,060 $ 49,294
Service cost 2,049 1,746
Interest cost 4,235 3,627
Plan participants' contributions 491 485
Amendments to the plan ( 2,025) -
Actuarial loss 2,035 7,390
Benefits paid for participants ( 3,657) ( 3,482)
Curtailments 5,594 -
Special termination benefits 2,723 -
Balance, end of year $ 70,505 $ 59,060
</TABLE>
At December 31, 1998 and 1997, the funded status of the plans was as
follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
<S> <C> <C>
Excess of the benefit obligation over
the value of plan assets ($70,505) ($59,060)
Unrecognized net actuarial loss 9,569 7,625
Unrecognized prior service cost ( 1,861) -
Accrued benefit cost ($62,797) ($51,435)
</TABLE>
The following weighted-average rates were used:
1998 1997
Discount rate on the benefit obligation 7.0% 7.25%
For 1998, the assumed health care cost trend rate used in measuring the
accumulated post-retirement benefit obligation was 7%, declining by 1%
annually for two years to an ultimate rate of 5%. For 1997, the assumed
health care cost trend rate used in measuring the accumulated
postretirement benefit obligation ranged from 8% to 9%, declining 1%
annually for three to four years to an ultimate rate of 5%.
-42-
<PAGE>
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Service cost $ 2,049 $ 1,746 $ 1,569
Interest cost 4,235 3,627 3,476
Amortization of:
Actuarial loss 91 117 169
Prior service cost ( 164)
Subtotal 6,211 5,490 5,214
Components charged to restructuring
expense:
Special termination benefits 2,723
Curtailments 5,594
Subtotal 8,317
Total net periodic cost $ 14,528 $ 5,490 $ 5,214
</TABLE>
Assumed health care cost trend rates significantly impact reported
amounts. The effect of a one-percentage-point change in the assumed
rates would alter the amounts of the benefit obligation and the sum of
the service cost and interest cost components of postretirement benefit
expense as follows for 1998:
<TABLE>
<CAPTION>
ONE-PERCENTAGE-POINT
(ALL DOLLAR AMOUNTS IN THOUSANDS) INCREASE DECREASE
<S> <C> <C>
Effect on the postretirement
benefit obligation $ 8,965 ($7,665)
Effect on the sum of the service cost
and interest cost components $ 1,076 ($ 874)
</TABLE>
NOTE 9. INCOME TAXES
Deferred tax assets and liabilities are determined based on the
estimated future tax effects of temporary differences between the
financial statement and tax bases of assets and liabilities, as
measured by the current enacted tax rates. Deferred tax expense
(benefit) is the result of changes in the deferred tax asset and
liability.
-43-
<PAGE>
<TABLE>
The provision for income taxes is comprised of the following:
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Current tax expense:
Federal $ 21,880 $ 33,208 $ 24,947
State 3,492 3,918 4,051
Total current 25,372 37,126 28,998
Deferred tax expense (benefit):
Federal ( 321) 9,623 14,042
State ( 51) 1,442 610
Total deferred ( 372) 11,065 14,652
Total provision for income taxes $ 25,000 $ 48,191 $ 43,650
</TABLE>
A reconciliation between taxes computed at the federal statutory rate
and the Company's effective tax rate follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Federal statutory tax rate $ 23,030 35.0% $ 39,763 35.0% $ 39,121 35.0%
State taxes (net of federal
tax benefits) 2,237 3.4 3,484 3.1 3,100 2.8
Nondeductible merger expenses 4,446 3.9
Other ( 267) ( .4) 498 0.4 1,429 1.3
Effective tax $ 25,000 38.0% $ 48,191 42.4% $ 43,650 39.1%
</TABLE>
At the end of 1998, $18,000,000 of unused state operating loss
carryovers existed which may be used to offset future state taxable
income in various amounts through the year 2010. Because separate
state tax returns are filed, the Company is not able to offset
consolidated income with the subsidiaries' losses. Under the provisions
of SFAS No. 109, the benefits of state tax losses are recognized as a
deferred tax asset, subject to appropriate valuation allowances.
-44-
<PAGE>
The major temporary differences that give rise to the deferred tax
assets and liabilities at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
Deferred tax asset:
<S> <C> <C>
Allowances on accounts receivable $ 2,213 $ 1,964
Accrued compensated absences 3,472 3,785
Stock appreciation rights plans 4,467 4,960
Pensions 12,401 1,050
Inventories 2,262 2,401
Postretirement benefits 24,534 20,187
Postemployment benefits 343 337
Other accrued liabilities 2,043 1,239
State net operating loss carryforward 1,902 2,062
Other 1,493 1,423
Gross deferred tax asset 55,130 39,408
Less: valuation allowance ( 1,636) ( 1,619)
Net deferred tax asset 53,494 37,789
Deferred tax liability:
Property, plant and equipment (124,117) ( 112,668)
Other ( 5,944) ( 2,916)
Gross deferred tax liability (130,061) ( 115,584)
Net deferred tax liability ($76,567) ($ 77,795)
</TABLE>
The total deferred tax liabilities (assets) as presented in the
accompanying consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997
<S> <C> <C>
Net long-term deferred tax liabilities $ 94,911 $ 92,947
Gross current deferred tax assets ( 19,980) ( 16,771)
Valuation allowance on deferred
tax assets 1,636 1,619
Net current deferred tax assets ( 18,344) ( 15,152)
Net deferred tax liability $ 76,567 $ 77,795
</TABLE>
A valuation allowance has been recognized for a subsidiary's state loss
carryforward as cumulative losses create uncertainty about the
realization of the tax benefits in future years.
-45-
<PAGE>
NOTE 10. STOCK OPTIONS AND APPRECIATION RIGHTS
The Company maintains the 1991 Employee Stock Option Plan. The plan
specifies purchase price, time and method of exercise. Payment of the
option price may be made in cash or by tendering an amount of common
stock having a fair market value equal to the option price.
Options are granted for terms up to 20 years, the option price being
equal to the fair market value of the Company's common stock at the
date of grant for incentive and non-qualified options.
The following table summarizes the activity relating to the Company's
stock option plans:
<TABLE>
<CAPTION>
STOCK OPTIONS: --- 1998 --- --- 1997 --- --- 1996 ---
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
SHARES PRICE SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 1,030,722 $14.19 949,791 $16.33 770,792 $14.79
Granted 162,000 17.16 115,500 18.13 231,886 19.00
Terminated ( 42,500) 23.56 ( 27,125) 17.78
Exercised ( 97,972) 16.50 ( 7,444) 16.19 ( 52,887) 5.61
Options outstanding at
end of year 1,052,250 $13.93 1,030,722 $14.19 949,791 $16.33
Options exercisable at
end of year 887,250 $13.32 1,027,722 $14.17 846,905 $15.97
</TABLE>
All shares and option prices have been restated to reflect the five-for
-four stock split occurring in 1996.
The Company has adopted Statement of Financial Accounting Standard
(SFAS) No. 123, "Accounting for Stock-Based Compensation." As permitted
under SFAS No. 123, the company will continue to measure compensation
cost for stock option plans using the "intrinsic value based method"
prescribed under APB No. 25, "Accounting for Stock Issued to
Employees." Accordingly, no compensation cost has been recognized for
the stock option plans. If compensation cost had been determined
consistent with the provisions of SFAS No. 123, which prescribes the
"fair value based method" on the grant date, both basic and diluted
earnings per share would have been $.73, $1.12 and $1.14 for the years
ended December 31, 1998 and 1997 and August 31, 1996, respectively.
The weighted-average grant-date exercise prices and weighted-average
fair values for options granted are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Exercise price equals market price
Exercise price $17.16 $18.73
Fair value 5.41 7.91
Exercise price less than market price
Exercise price - $17.69
Fair value - 8.67
</TABLE>
<PAGE>
-46-
The fair value of each option grant has been estimated on the grant
date using the Black-Scholes option pricing model based on the
following weighted-average assumptions:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Risk-free interest rate 4.55% 6.48%
Expected life in years 6 5-10
Price volatility 29.6% 24.5%
Dividend yield* 1.63 0
<FN>
* In 1997 the dividend yield is assumed to be zero because dividend
equivalents were granted in tandem with the options granted. As
such, dividends do not reduce the economic value of the options.
</TABLE>
The 1988 Management Incentive Plan entitles certain management
employees the right to receive cash equal to the sum of the
appreciation in value of the stock and the hypothetical value of cash
dividends which would have been paid on the stock covered by the grant
assuming reinvestment in Company stock. The stock appreciation rights
granted may be exercised in whole or in such installments and at such
times as specified in the grant. In all instances, the rights lapse
if not exercised within 20 years of the grant date. Compensation
expense is recorded with respect to the rights based upon the quoted
market value of the shares and the exercise provisions.
The following table summarizes the activity relating to the Company's
stock appreciation rights plans:
<TABLE>
<CAPTION>
STOCK APPRECIATION RIGHTS:
1998 1997 1996
Rights outstanding at beginning of year
<S> <C> <C> <C>
(number of shares) 561,907 598,008 1,050,171
Granted 415,905
Terminated ( 6,159)
Exercised ( 24,821) ( 36,101) ( 446,004)
Rights outstanding at end of year
(number of shares) 952,991 561,907 598,008
Rights exercisable at end of year
(number of shares) 952,991 561,907 598,008
Price range of stock appreciation
rights exercised $4.46 $4.46-5.64 $ 4.46-9.70
Price range of outstanding
stock appreciation rights $4.06-19.06 $4.06-19.06 $ 4.45-9.70
</TABLE>
All shares and price ranges have been restated to reflect the
five-for-four stock split occurring in 1996.
The Company maintains the 1991 Dividend Equivalent Plan. Participants
are entitled to receive cash based on the hypothetical value of cash
dividends which would have been paid on the stock covered by the
grant assuming reinvestment in Company stock.
<PAGE>
-47-
<TABLE>
<CAPTION>
DIVIDEND EQUIVALENTS:
1998 1997 1996
<S> <C> <C> <C>
Equivalents outstanding at beginning
of year (number of shares) 296,778 276,347 142,999
Granted 70,000 143,125
Exercised ( 38,848) ( 25,569) ( 9,777)
Terminated ( 24,000)
Equivalents outstanding at end of year
(number of shares) 257,930 296,778 276,347
Equivalents exercisable at end of year
(number of shares) 257,930 293,778 276,347
</TABLE>
All shares have been restated to reflect the five-for-four stock split
occurring in 1996.
The provision (credit) for all stock option discounts, dividend
equivalents and stock appreciation rights for the years ended December
31, 1998 and 1997 and August 31, 1996 was ($1,520,000), $2,140,000 and
$4,980,000, respectively.
NOTE 11. RESEARCH EXPENSES
Research expenses charged to operations were $3,309,000 in 1998,
$1,577,000 in 1997 and $1,381,000 in 1996.
NOTE 12. COMMITMENTS AND CONTINGENCIES
In 1997, the Attorney General of the State of Florida filed a civil
complaint in the United States District Court for the Northern
District of Florida against ten manufacturers of commercial sanitary
paper products, including the Company's wholly owned subsidiary, Bay
West Paper Corporation. The lawsuit alleges a conspiracy to fix prices
of commercial sanitary paper products starting at least as early as
1993. Since the filing of this lawsuit, numerous class action suits
have been filed by private direct purchasers of commercial sanitary
paper products in various federal district courts throughout the
country and additional federal lawsuits have been filed by the
Attorneys General of the States of Kansas, Maryland, New York, and
West Virginia. All of these federal cases have been certified as class
actions and consolidated in a multi-district litigation proceeding in
the United States District Court for the Northern District of Florida
in Gainesville. Certain indirect purchasers of sanitary commercial
paper products have also filed class action lawsuits in various state
courts alleging a conspiracy to fix prices under state antitrust laws.
No class has been certified in the state actions. All of these actions
are in early stages. In the opinion of management, the Company has not
violated any antitrust laws. The Company is vigorously defending these
claims. The Company is also involved from time to time in various
other legal and administrative proceedings or subject to various claims
in the normal course of its business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the consolidated financial condition, liquidity, or results
of operations of the Company.
<PAGE>
As of December 31, 1998, the Company was committed to spend
approximately $70 million to complete capital projects which were
in various stages of completion.
-48-
The Company is a party to a natural gas transportation agreement with
the Portland Natural Gas Transmission System (PNGTS). Under the terms
of the agreement, PNGTS has constructed the necessary gas supply and
delivery equipment to the Company's Groveton, New Hampshire mill. The
Company is committed to the transportation of a fixed volume of natural
gas over a 20-year period which begins on the date transportation of
natural gas commences under the agreement. Capital improvements to the
Groveton mill's power plant, which the Company estimates will cost
approximately $1.5 million, will be required to take advantage of this
agreement. Transportation of natural gas to the Groveton mill is
expected to begin in the third quarter of 1999.
NOTE 13. PREFERRED SHARE PURCHASE RIGHTS PLAN
On October 21, 1998, the Board of Directors declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share
of common stock of the Company (the "Common Shares"). Each Right
entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred
Stock of the Company, without par value (the "Preferred Shares"), at a
price of $60 per one one-thousandth of a Preferred Share (the
"Purchase Price"), subject to adjustment. In the event that any person
or group (with certain exceptions) acquires beneficial ownership of 15%
or more of the outstanding Common Shares (an "Acquiring Person"), each
holder of a Right, other than the Acquiring Person, will thereafter
have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right. If
the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power
are sold after a person or group has become an Acquiring Person, each
holder of a Right, other than an Acquiring Person, will thereafter have
the right to receive that number of shares of common stock of the
acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right.
The Rights are not exercisable until the Distribution Date. Until a
Right is exercised, the holder thereof, as such, will have no rights as
a shareholder of the Company. The "Distribution date" is the earlier of
(i) 10 days following a public announcement that a person or group has
become an Acquiring Person; or (ii) 10 business days (or such later
date as may be determined by action of the Board of Directors)
following the commencement of, or announcement of an intention to make,
a tender offer or exchange offer which would result in any person
becoming an Acquiring Person. The Rights will expire on October 31,
2008 unless the expiration date is extended or unless the Rights are
redeemed or exchanged by the Company prior to expiration.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution in the event of stock
dividends, stock splits, reclassifications, or certain distributions with
<PAGE>
respect to the Preferred Shares. The number of outstanding Rights and
the number of one one-thousandths of a Preferred Share issuable upon
exercise of each Right are also subject to adjustment if, prior to the
Distribution Date, there is a stock split, a stock dividend in Common
Shares, or a subdivision or consolidation of the Common Shares.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $10 per share, but will be
entitled to an aggregate dividend of 1000 times the dividend declared
-49-
per Common Share. In the event of liquidation, the holders of the
Preferred Shares will be entitled to a minimum preferential liquidation
payment of $1000 per share, but will be entitled to an aggregate
payment of 1000 times the payment made per Common Share. Each
Preferred Share will have 1000 votes, voting together with the Common
Shares. Finally, in the event of any merger, consolidation or other
transaction in which Common Shares are exchanged, each Preferred Share
will be entitled to receive 1000 times the amount received per Common
Share. The value of the one one-thousandth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the
value of one Common Share.
At any time after any person or group becomes an Acquiring Person, and
prior to the acquisition by such person or group of 50% or more of the
outstanding Common Shares, the Board of Directors may exchange the
Rights, other than Rights owned by the Acquiring Person, in whole or in
part, at an exchange ratio of one Common Share, or one one-thousandth
of a Preferred Share (subject to adjustment). At any time prior to any
person or group becoming an Acquiring Person, the Board of Directors
may redeem the Rights in whole, but not in part, at a price of $ .01
per Right.
The terms of the Rights may be amended by the Board of Directors
without the consent of the holders of the Rights, including an
amendment to lower certain thresholds described above to not less than
the greater of (i) the sum of .001% and the largest percentage of the
outstanding Common Shares then known to the Company to be beneficially
owned by any person or group affiliated or associated persons (with
certain exceptions) and (ii) 10%, except that from and after such time
as any person or group becomes an Acquiring Person no such amendment
may adversely affect the interests of the holders of the Rights.
NOTE 14. FUTURES CONTRACTS
At December 31, 1998, the Company was party to various futures
contracts for the purchase of natural gas and fuel oil. The natural gas
contracts require the Company to purchase 575,000 decatherms of natural
gas during 1999. The delivered price of natural gas varies from $2.73
to $3.42 per decatherm. The fuel oil contracts require the Company to
purchase 146,000 barrels of oil during 1999. The delivered price of oil
varies from $13.95 to $17.19 per barrel. At December 31, 1998, the
Company's futures contracts have no carrying value. The fair value of
the contracts and the total deferred gain or loss on the contracts are
immaterial at December 31, 1998.
<PAGE>
NOTE 15. FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair value of the following financial instruments is not materially
different from the carrying value: cash and cash equivalents, long-term
debt, capital leases and futures contracts.
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments:
Cash and cash equivalents - The carrying amount approximates fair value
due to the relatively short period to maturity for these instruments.
Long-term debt - The fair value of the Company's long-term debt is
estimated based on current rates offered to the Company for debt of the
same remaining maturities.
Capital leases - The carrying amount reported in the balance sheets for
capital leases approximates fair value.
-50-
Futures contracts - The fair values of the Company's commodity products
futures contracts were estimated using the prices published by NYMEX,
the contract price and the remaining commodity products to be purchased
under the contracts.
NOTE 16. SEGMENT DATA
FACTORS USED TO IDENTIFY REPORTABLE SEGMENTS
The Company's operations are classified into three principal reportable
segments, the Specialty Paper Group, the Printing & Writing Group and
the Towel & Tissue Group, each providing different products. Separate
management of each segment is required because each business unit is
subject to different marketing, production and technology strategies.
PRODUCTS FROM WHICH REVENUE IS DERIVED
The Specialty Paper Group produces specialty papers at its
manufacturing facilities in Rhinelander, Wisconsin; Mosinee, Wisconsin;
Jay, Maine; and Middletown, Ohio. The Printing & Writing Group produces
a broad line of premium printing and writing grades at manufacturing
facilities in Brokaw, Wisconsin and Groveton, New Hampshire. The
Printing & Writing Group also includes two converting facilities which
produce wax-laminated roll wrap and related specialty finishing and
packaging products, and a converting facility which produces school
papers. The Towel & Tissue Group manufactures a complete line of
towel, tissue, soap and dispensing systems for the "away-from-home"
market. The Towel & Tissue Group operates a paper mill in Middletown,
Ohio and a converting facility in Harrodsburg, Kentucky.
MEASUREMENT OF SEGMENT PROFIT AND ASSETS
The Company evaluates performance and allocates resources based on
operating profit or loss. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies.
-51-
<PAGE>
RECONCILIATIONS
The following are reconciliations to corresponding totals in the
accompanying consolidated financial statements.
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
Net sales external customers
Specialty Paper $ 423,473 $ 415,893 $ 363,748
Printing & Writing 376,131 380,479 365,936
Towel & Tissue 146,523 136,755 127,475
$ 946,127 $ 933,127 $ 857,159
Net sales intersegment
Specialty Paper $ 13,737 $ 10,448 $ 4,680
Printing & Writing 1,595 1,078 1,341
Towel & Tissue 89 120 528
$ 15,421 $ 11,646 $ 6,549
Operating profit
Specialty Paper $ 47,261 $ 56,942 $ 46,886
Printing & Writing 53,613 60,972 54,754
Towel & Tissue 24,018 33,706 33,269
Total reportable segment
operating profit 124,892 151,620 134,909
Corporate and eliminations ( 9,944) ( 17,289) ( 15,860)
Restructuring/merger expense ( 42,803) ( 13,503)
Interest expense ( 7,683) ( 8,103) ( 7,198)
Other income/(expense) 1,339 864 ( 73)
Earnings before income taxes $ 65,801 $ 113,589 $ 111,778
Segment assets
Specialty Paper $ 371,986 $ 366,489
Printing & Writing 293,509 304,102
Towel & Tissue 176,303 166,146
Corporate & unallocated 58,351 35,327
$ 900,149 $ 872,064
</TABLE>
-52-
<PAGE>
<TABLE>
<CAPTION>
OTHER SIGNIFICANT ITEMS
Depreciation Expenditures
Interest and for Long-Lived
(ALL DOLLAR AMOUNTS IN THOUSANDS) INCOME AMORTIZATION ASSETS
1998
<S> <C> <C> <C>
Specialty Paper $ 166 $ 21,629 $ 25,713
Printing & Writing __ 15,549 22,972
Towel & Tissue __ 10,992 17,700
Corporate & unallocated 237 1,655 10,638
$ 403 $ 49,825 $ 77,023
1997
Specialty Paper $ 56 $ 19,712 $ 28,926
Printing & Writing - 15,156 21,086
Towel & Tissue - 11,730 15,156
Corporate & unallocated 39 661 894
$ 95 $ 47,259 $ 66,062
1996
Specialty Paper $ 10 $ 15,606 $ 33,910
Printing & Writing - 13,778 35,560
Towel & Tissue - 10,814 12,403
Corporate & unallocated 552 1,006 616
$ 562 $ 41,204 $ 82,489
</TABLE>
COMPANY GEOGRAPHIC DATA
The Company has no long-lived assets outside the United States. Net
sales to customers within the United States and other countries are as
follows:
<TABLE>
<CAPTION>
(ALL DOLLAR AMOUNTS IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
United States $887,267 $873,633 $808,067
All foreign countries 58,860 59,494 49,092
$946,127 $933,127 $857,159
</TABLE>
-53-
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
First Second Third Fourth
QTR.* QTR. QTR. QTR.** ANNUAL
<S> <C> <C> <C> <C> <C>
1998
Net sales $ 237,660 $ 243,636 $ 241,603 $ 223,228 $ 946,127
Gross profit 46,309 48,687 42,263 37,792 175,051
Operating profit (loss) ( 11,378) 35,009 33,453 15,061 72,145
Net earnings (loss) ( 8,238) 20,804 19,611 8,624 40,801
Net earnings (loss) per
share basic ($ 0.14) $ 0.36 $ 0.34 $ 0.16 $ 0.73
1997
Net sales $ 211,892 $ 234,481 $ 248,578 $ 238,176 $ 933,127
Gross profit 48,606 52,048 54,347 44,662 199,663
Operating profit 33,941 36,292 33,563 17,032 120,828
Net earnings 19,955 21,336 19,723 4,384 65,398
Net earnings per share
basic $ 0.34 $ 0.37 $ 0.34 $ 0.08 $ 1.13
1996
Net sales $ 218,080 $ 207,783 $ 221,207 $ 210,089 $ 857,159
Gross profit 37,790 41,131 54,045 50,325 183,291
Operating profit 21,370 25,545 38,664 33,470 119,049
Net earnings 11,987 14,336 22,373 19,432 68,128
Net earnings per share
basic $ 0.20 $ 0.25 $ 0.38 $ 0.33 $ 1.16
<FN>
1998 and 1997 figures are based on the years ending December 31, 1996
figures are for the year ending August 31, 1996.
* In 1998, includes an after-tax expense of $23.4 million ($37.7
million pre-tax) or $.40 per share for restructuring expenses
relating to a workforce reduction program and other merger-related
costs.
** In 1998, includes an after-tax expense of $3.2 million ($5.1
million pre-tax) or $.06 per share for restructuring expenses
relating to a workforce reduction program and other merger-related
costs and in 1997, includes an after-tax expense of $13.2 million
($13.5 million pre-tax) or $.23 per share for merger-related
expenses.
</TABLE>
-54-
<PAGE>
<TABLE>
MARKET PRICES FOR COMMON SHARES (UNAUDITED)
<CAPTION>
1998 1997 1996
Prices Prices Prices
QTR. HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st $24.00 $18.88 $ - * $20.50 $17.88 $0.0625 $23.50 $20.80 $0.055
2nd 24.13 20.13 0.14* 19.75 17.55 0.0625 24.13 19.75 0.055
3rd 22.75 12.13 0.07 25.38 18.75 0.0625 20.50 16.50 0.055
4th 18.50 12.25 0.07 24.38 19.69 0.0625 21.38 18.50 0.0625
<FN>
* Due to a change in fiscal years from an August 31 year-end to a December
31 year-end, no dividend was declared in the first quarter of 1998, and
two quarterly dividends were declared in the second quarter.
</TABLE>
All prices through March 25, 1998, represent the high and the low
closing prices reported on the Nasdaq National Market System and
reflect inter-dealer prices, without mark-up, mark-down or commission
and may not necessarily represent actual transactions. Prices after
March 25, 1998, represent the high and the low sales prices for the
common stock as reported on the New York Stock Exchange.
-55-
<PAGE>
<TABLE>
<CAPTION>
Schedule II - Valuation and Qualifying Accounts
($ thousands)
RECEIVABLE ALLOWANCES OTHER ALLOWANCES
Allowance
Allow for Allowance for
Doubtful for Pending Merger Restructure
TOTAL ACCOUNTS DISCOUNTS CREDITS ALLOWANCE ALLOWANCE
<S> <C> <C> <C> <C> <C> <C>
Balance August 31, 1995 $ 7,893 $ 2,923 $ 2,003 $ 2,967 $ 0 $ 0
Charges to cost and
expense 24,017 320 14,149 9,548 0 0
Deductions (23,010) (103) (14,374) (8,533) 0 0
Balance August 31, 1996 $ 8,900 $ 3,140 $ 1,778 $ 3,982 $ 0 $ 0
Charges to cost and
expense 28,221 765 9,462 17,994 13,503 0
Deductions (28,382) (984) (10,469) (16,929) (12,737) 0
Balance December 31, 1997 $ 8,739 $ 2,921 $ 771 $ 5,047 $ 766 $ 0
Charges to cost and
expense 21,180 1,296 8,391 11,493 0 42,803
Deductions (19,857) (97) (8,433) (11,327) (766) (39,651)
Balance December 31, 1998 $ 10,062 $ 4,120 $ 729 $ 5,213 $ 0 $ 3,152
</TABLE>
-56-
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES.
None.
-57-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to directors of the Company is incorporated into
this Form 10-K by this reference to the materials set forth in the
table on pages 4 and 5 under the caption "Election of Directors" in the
Company's proxy statement relating to the 1999 annual meeting of
shareholders (the "1999 Proxy Statement"). Information relating to the
identification of executive officers of the Company is found in Part I
of this Form 10-K. Information required under Rule 405 of Regulation
S-K is incorporated into this Form 10-K by this reference to the
material set forth under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 9 of the 1999 Proxy Statement.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to director compensation is incorporated into this
Form 10-K by this reference to the material set forth in the 1999 Proxy
Statement under the caption "Committees and Compensation of Board of
Directors - Director Compensation," on pages 6 and 7. Information
relating to the compensation of executive officers is incorporated into
this Form 10-K by this reference to (1) the material set forth under
the caption "Compensation of Executive Officers," page 9 through the
material set forth under the subcaption, "Pension Plan and Other
Benefits" in the 1999 Proxy Statement and (2) the material set forth
under the caption "Committee Interlocks and Insider Participation," on
page 16 of the 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information relating to security ownership of certain beneficial owners
and management is incorporated into this Form 10-K by this reference to
the material under the caption "Beneficial Ownership of Common Stock,"
pages 7, 8 and 9 of the 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
-58-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) Documents filed as part of this report.
(1) The following financial statements are filed as part of this
report:
(i) Consolidated Balance Sheets as of December 31, 1998 and 1997
(ii) Consolidated Statements of Income for the years ended
December 31, 1998 and 1997, and August 31, 1996
(iii) Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997, and August 31, 1996
(iv) Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998 and 1997, and August 31, 1996
(v) Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
The following financial statement schedule is filed as part of this
report:
(i) Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1998 and 1997, and August 31, 1996
(page 56)
<PAGE>
All other schedules prescribed by Regulation S-X are not submitted
because they are not applicable or not required, or because the
required information is included in the Consolidated Financial
Statements and Notes thereto.
-59-
(3) Exhibits
The following exhibits required by Item 601 of Regulation S-K are
filed as part of this report:
Exhibit
NUMBER DESCRIPTION
3.1 Restated Articles of Incorporation, as amended October 21,
1998 (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K dated October 21, 1998)
3.2 Restated Bylaws, as amended December 17, 1997 (incorporated
by reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-8 dated December 17, 1997)
4.1 Rights Agreement, dated as of October 21, 1998, between the
Company and Harris Trust and Savings Bank, including the Form
of Restated Articles of Incorporation as Exhibit A and the
Form of Rights Certificate as Exhibit B (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K dated October 21, 1998)
4.2 Summary of Rights to Purchase Preferred Shares, Exhibit C to
Rights Agreement filed as Exhibit 4.1 hereto (incorporated by
reference to Exhibit 4.2 to the Company's Registration
Statement on Form 8-A, filed on October 29, 1998)
10.1 Supplemental Retirement Plan as amended April 16, 1998,
as amended March 4, 1999
10.2 Incentive Compensation Plans (Printing and Writing Division
and Technical Specialty Division), as amended September 17,
1997 (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended November 30, 1997)*
10.3 Corporate Management Incentive Plan, as amended September 18,
1996 (incorporated by reference to Exhibit 10(c) to the
Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1996)*
10.4 1988 Stock Appreciation Rights Plan, as last amended March 4,
1999*
10.5 1988 Management Incentive Plan, as last amended March 4,
1999*
<PAGE>
10.6 1990 Stock Appreciation Rights Plan, as last amended March 4,
1999*
10.7 Deferred Compensation Agreement dated July 1, 1994, as last
amended March 4, 1999*
10.8 1991 Employee Stock Option Plan, as last amended March 4,
1999*
10.9 1991 Dividend Equivalent Plan, as last amended March 4, 1999*
-60-
10.10 Supplemental Retirement Benefit Plan dated January 16, 1992,
as last amended March 4, 1999*
10.11 Directors' Deferred Compensation Plan, as last amended March
4, 1999*
10.12 Directors Retirement Benefit Policy, as amended April 16,
1998 (incorporated by reference to Exhibit 10.12 to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998)*
10.13 Transition Benefit Agreement with former President and CEO
(incorporated by reference to Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the fiscal year ended August
31, 1997)*
10.14 Mosinee Paper Corporation 1985 Executive Stock Option Plan,
as last amended March 4, 1999*
10.15 Mosinee Paper Corporation 1988 Stock Appreciation Rights
Plan, as last amended March 4, 1999*
10.16 Mosinee Paper Corporation 1996 and 1997 Incentive
Compensation Plans for Corporate Executive Officers
(incorporated by reference to Exhibit 10.16 to the Company's
Transition Report on Form 10-Q for the transition period
ended December 31, 1997)*
10.18 Mosinee Paper Corporation Supplemental Retirement Benefit
Agreement dated November 15, 1991, as last amended March 4,
1999
10.19 Mosinee Paper Corporation 1994 Executive Stock Option Plan,
as last amended March 4, 1999*
10.20 Incentive Compensation Plan for Executive Officers (1998)
(incorporated by reference to Exhibit 10.20 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998)*
10.21 1999 Incentive Compensation Plan for Executive Officers*
21.1 Subsidiaries as of December 31, 1998
<PAGE>
23.1 Consent of Wipfli Ullrich Bertelson LLP
27.1 Financial Data Schedule
*Executive compensation plans or arrangements. All plans are
sponsored or maintained by the Company unless otherwise
noted.
-61-
(b) Reports on Form 8-K:
The Company filed one Form 8-K during the fourth quarter of
1998.
In a Current Report on Form 8-K dated October 21, 1998, the
Company announced the declaration of a dividend of one
preferred share purchase right (a "Right") for each
outstanding share of common stock, and summarized the terms
and conditions of the Rights. No financial statements were
filed in connection with the Report.
-62-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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-MOSINEE PAPER
CORPORATION
March 29, 1999 GARY P. PETERSON
Gary P. Peterson
Senior Vice President-Finance,
Secretary and Treasurer
(On behalf of the Registrant and as
Principal Financial Officer)
-63-
Pursuant to the requirement of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
March 29, 1999
SAN W. ORR, JR. RICHARD L. RADT
San W. Orr, Jr. Richard L. Radt
Chairman of the Board Vice Chairman of the Board
DANIEL R. OLVEY HARRY R. BAKER
Daniel R. Olvey Harry R. Baker
President and CEO Director
(Principal Executive Officer)
RICHARD G. JACOBUS WALTER ALEXANDER
Richard G. Jacobus Walter Alexander
Director Director
GARY W. FREELS DAVID B. SMITH, JR.
Gary W. Freels David B. Smith, Jr.
Director Director
-64-
<PAGE>
EXHIBIT INDEX<dagger>
TO
FORM 10-K
OF
WAUSAU-MOSINEE PAPER CORPORATION
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
Pursuant to Section 102(d) of Regulation S-T
(17 C.F.R. <section>232.102(d))
EXHIBIT 10.1 SUPPLEMENTAL RETIREMENT PLAN AS AMENDED APRIL 16, 1998,
AS AMENDED MARCH 4, 1999
EXHIBIT 10.4 1988 STOCK APPRECIATION RIGHTS PLAN, AS LAST AMENDED MARCH
4, 1999*
EXHIBIT 10.5 1988 MANAGEMENT INCENTIVE PLAN, AS LAST AMENDED MARCH 4,
1999*
EXHIBIT 10.6 1990 STOCK APPRECIATION RIGHTS PLAN, AS LAST AMENDED MARCH
4, 1999*
EXHIBIT 10.7 DEFERRED COMPENSATION AGREEMENT DATED JULY 1, 1994, AS
LAST AMENDED MARCH 4, 1999*
EXHIBIT 10.8 1991 EMPLOYEE STOCK OPTION PLAN AS LAST AMENDED MARCH 4,
1999*
EXHIBIT 10.9 1991 DIVIDEND EQUIVALENT PLAN AS LAST AMENDED MARCH 4,
1999*
EXHIBIT 10.10 SUPPLEMENTAL RETIREMENT BENEFIT PLAN DATED JANUARY 16,
1992, AS LAST AMENDED MARCH 4, 1999*
EXHIBIT 10.11 DIRECTORS' DEFERRED COMPENSATION PLAN, AS LAST AMENDED
MARCH 4, 1999*
EXHIBIT 10.14 MOSINEE PAPER CORPORATION 1985 EXECUTIVE STOCK OPTION
PLAN, AS LAST AMENDED MARCH 4, 1999*
EXHIBIT 10.15 MOSINEE PAPER CORPORATION 1988 STOCK APPRECIATION RIGHTS
PLAN, AS LAST AMENDED MARCH 4, 1999*
EXHIBIT 10.18 MOSINEE PAPER CORPORATION SUPPLEMENTAL RETIREMENT BENEFIT
AGREEMENT DATED NOVEMBER 15, 1991, AS LAST AMENDED MARCH
4, 1999
EXHIBIT 10.19 MOSINEE PAPER CORPORATION 1994 EXECUTIVE STOCK OPTION
PLAN, AS LAST AMENDED MARCH 4, 1999*
EXHIBIT 10.21 1999 INCENTIVE COMPENSATION PLAN FOR EXECUTIVE OFFICERS*
EXHIBIT 21.1 SUBSIDIARIES AS OF DECEMBER 31, 1998
EXHIBIT 23.1 CONSENT OF WIPFLI ULLRICH BERTELSON LLP
<PAGE>
EXHIBIT 27.1 FINANCIAL DATA SCHEDULE
<dagger> Exhibits required by Item 601 of Regulation S-K which have
previously been filed and are incorporated herein by reference are
set forth in Part IV, Item 14 of Form 10-K to which this Exhibit
Index relates.
*Executive compensation plans or arrangements. All plans are
sponsored or maintained by the Company unless otherwise noted.
-65-
<PAGE>
WAUSAU-MOSINEE SUPPLEMENTAL
RETIREMENT PLAN
(AS AMENDED MARCH 4, 1999)
WAUSAU-MOSINEE SUPPLEMENTAL
RETIREMENT PLAN
PAGE
ARTICLE I
PURPOSE AND ADMINISTRATION OF THE PLAN ....................2
1.1 PURPOSE ..............................................2
1.2 ADMINISTRATION .......................................2
1.3 EFFECTIVE DATE .......................................2
ARTICLE II
DEFINITIONS ...............................................3
2.1 DEFINITIONS ..........................................3
2.2 DEFINITIONS INCORPORATED BY REFERENCE ................4
ARTICLE III
PARTICIPATION .............................................5
3.1 PARTICIPATION ........................................5
3.2 SERVICE ..............................................5
3.3 TERMINATION OF PARTICIPATION AND REEMPLOYMENT ........5
ARTICLE IV
BENEFITS ..................................................6
4.1 NORMAL RETIREMENT BENEFITS OF CORPORATE OFFICERS .....6
4.2 NORMAL BENEFITS OF OTHER EXECUTIVE OFFICERS ..........6
4.3 MINIMUM RETIREMENT BENEFITS OF EXECUTIVE OFFICERS ....7
4.4 EARLY RETIREMENT BENEFITS OF EXECUTIVE OFFICERS ......7
4.5 SURVIVING SPOUSE BENEFITS ............................7
4.6 FORM, COMMENCEMENT AND DURATION OF PAYMENTS ..........8
4.7 CHANGE OF CONTROL ....................................9
4.8 FORFEITURE OF BENEFITS ..............................13
4.9 INALIENABILITY OF BENEFITS ..........................14
4.10 FACILITY OF PAYMENTS ...............................14
4.11 CLAIMS PROCEDURE ...................................14
ARTICLE V
PROVISION FOR BENEFITS ...................................15
5.1 ASSETS OF THE COMPANY ...............................15
ARTICLE VI
AMENDMENT AND TERMINATION OF THE PLAN ....................16
6.1 AMENDMENT ...........................................16
6.2 TERMINATION .........................................16
-i-
<PAGE>
ARTICLE VII
MISCELLANEOUS ............................................17
7.1 NONGUARANTEE OF EMPLOYMENT ..........................17
7.2 ACTION BY THE COMPANY ...............................17
7.3 AGREEMENT BINDING ON SUCCESSORS .....................17
7.4 CONSTRUCTION ........................................17
7.5 TITLES ..............................................17
7.6 GOVERNING LAW .......................................17
-ii-
WAUSAU-MOSINEE SUPPLEMENTAL RETIREMENT PLAN
Wausau-Mosinee Paper Corporation, a Wisconsin corporation, hereby
establishes the Wausau-Mosinee Supplemental Retirement Plan in
accordance with the terms and conditions herein contained.
-1-
ARTICLE I
PURPOSE AND ADMINISTRATION OF THE PLAN
1.1 PURPOSE. The Company hereby establishes the Plan for the
purpose of providing deferred compensation (within the meaning of
Section 201(2) of the Employee Retirement Income Security Act of 1974)
for executive officers of the Company.
1.2 ADMINISTRATION. The Plan shall be administered by the
Company.
1.3 EFFECTIVE DATE. The effective date of the Plan shall be
December 17, 1997.
-2-
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the meanings set
forth below:
(a) "Average Compensation" means (1) an aggregate amount
determined by the sum of (A) the Participant's salary for a
calendar year and earned bonus attributable to such calendar
year and (B) any compensation deferred under a plan qualified
under Section 401(k) of the Code or under a plan which
satisfies the requirements of Section 125 of the Code during
such calendar year, for the 5 calendar years of the Executive
Officer's most recent 10 years of Continuous Service as an
Executive Officer in which the largest aggregate amount of
such compensation was earned and/or deferred for him for
service as an Executive Officer for all or any portion of
each of such calendar years, divided by (2) 12; provided,
however, that if a Participant did not perform services for 5
calendar years as an Executive Officer, such determinations
shall be based on such earned and/or deferred compensation
for each complete calendar year in which the Participant
<PAGE>
was an Executive Officer. For purposes of determining a
Participant's Average Compensation, compensation from Wausau
Paper Mills Company and Mosinee Paper Corporation earned
prior to the Effective Date for performance of services as an
Executive Officer shall be included.
(b) "Company" means Wausau-Mosinee Paper Corporation, a Wisconsin
corporation.
(c) "Early Retirement Age" means the date on which an Executive
Officer has attained age 55 and completed 10 years of
Continuous Service as an Executive Officer.
(d) "Executive Officer" means any person employed by the Company
as its President or a Vice President but shall not include
any officer of any division or subsidiary of the Company.
Notwithstanding the foregoing, any person employed by the
Company on the Effective Date who was a participant in the
Mosinee Supplemental Retirement Plan or the Wausau Paper
Mills Company Executive Officers' Deferred Compensation
Retirement Plan on the date immediately preceding the
Effective Date shall be deemed to be an "Executive Officer"
for purposes of this Plan, regardless of whether such
individual would otherwise meeting the definition of
Executive Officer set forth in the preceding sentence, and
any service with the Company after the Effective Date by such
individual shall be considered service as an Executive
Officer of the Company.
(e) "Normal Retirement Age" means the date on which (1) an
Executive Officer has attained age 62 and completed 10 years
of Continuous Service as an Executive Officer or (2) an
Executive Officer has attained age 62 and had terminated
employment with the Company because of Disability.
-3-
(f) "Participant" means an Executive Officer of the Company who
has qualified to be a participant in the Plan in accordance
with Section 3.1.
(g) "Plan" means the Wausau-Mosinee Supplemental Retirement Plan
as herein set forth.
(h) "Retirement Plan" shall mean the principal defined benefit
retirement plan as now in effect or hereafter amended, or any
successor plan which is qualified under Section 401(a) of the
Code, and maintained for salaried employees of the Company.
2.2 DEFINITIONS INCORPORATED BY REFERENCE. Each of the following
terms shall have the meaning set forth in the Retirement Plan and the
definition of each such term by the Retirement Plan is hereby
incorporated by this reference to the extent not inconsistent with the
provisions of this Plan:
(a) "Actuarial Equivalent"
<PAGE>
(b) "Affiliated Employer"
(c) "Code"
(d) "Continuous Service"
(e) "Disability"
(f) "Retirement Benefit"
(g) "Surviving Spouse"
-4-
ARTICLE III
PARTICIPATION
3.1 PARTICIPATION. Each Executive Officer shall become a
Participant as of the later of the Effective Date or the first day of
his employment by the Company in the capacity of an Executive Officer.
3.2 SERVICE.
(a) All Continuous Service as an Executive Officer shall be
recognized for purposes of this Plan, whether or not such
Continuous Service was performed prior to the Effective Date
hereof.
(b) Continuous Service by an individual for the Company in any
capacity other than as an Executive Officer shall not be
recognized for any purpose under this Plan.
(c) In the event a Participant or former Participant is reemployed
by the Company as an Executive Officer, all periods of
Continuous Service with the Company as an Executive Officer
shall be aggregated for purposes of this Plan.
(d) Notwithstanding anything herein to the contrary, if a
Participant was a participant in the Wausau Paper Mills
Company Executive Officers' Deferred Compensation Retirement
Plan or the Mosinee Supplemental Retirement Plan on December
16, 1997, all Continuous Service recognized under such plans
as of such date shall be recognized for purposes of this Plan.
3.3 TERMINATION OF PARTICIPATION AND REEMPLOYMENT. A Participant
shall cease participation in the Plan on the later of (a) the earlier
of (1) the date his termination of employment with the Company and all
Affiliated Employers occurs or (2) the date he is no longer employed as
an Executive Officer by the Company or an Affiliated Employer, or (b)
the date the final benefit payment to which the Participant may be
entitled pursuant to this Plan is made.
-5-
<PAGE>
ARTICLE IV
BENEFITS
4.1 NORMAL RETIREMENT BENEFITS OF CORPORATE OFFICERS. Subject to
the limitations elsewhere contained in this Plan, an Executive Officer
who terminates his employment with the Company and each Affiliated
Employer on or after attaining his Normal Retirement Age and who was
the President or a corporate Vice President of the Company either (x)
on the Effective Date or (y) as of the most recent date on which he
performed service as an Executive Officer shall be entitled to a normal
retirement benefit payable in the form of a single life annuity equal
to the excess of:
(a) an amount equal to 50% of the Participant's Average
Compensation, over
(b) the amount of the Participant's accrued Retirement Benefit
under the Retirement Plan which would then be payable in the
form of a single life annuity;
provided, however, that (1) the normal retirement benefit payable in
the form of a single life annuity, as so calculated, of any Participant
who was a participant in the Mosinee Supplemental Retirement Plan on
the Effective Date shall be increased by an amount equal to such
participant's accrued normal retirement benefit under the Wausau Paper
Retirement Plan as of the Effective Date which would then be payable in
the form of a single life annuity and (2) the normal retirement benefit
payable in the form of a single life annuity, as so calculated, of any
Participant who was eligible for and elected to receive the increased
benefits provided under either Section 4.23 of the Mosinee Retirement
Plan ("Section 4.23") or Section 3.20 of the Wausau Paper Retirement
Plan (Section "3.20") shall be increased by an amount equal to the
excess of (A) the amount of the Participant's accrued Retirement
Benefit under the Retirement Plan, determined in accordance with the
increased benefits provided for in Section 4.23 or Section 3.20, as
applicable, which would then be payable in the form of a single life
annuity over (B) the amount of the Participant's accrued Retirement
Benefit under the Retirement Plan, determined without regard to the
increased benefits provided for in Section 4.23 or Section 3.20, as
applicable, which would then be payable in the form of a single life
annuity.
4.2 NORMAL BENEFITS OF OTHER EXECUTIVE OFFICERS. Subject to the
limitations elsewhere contained in this Plan, an Executive Officer who
terminates his employment with the Company and each Affiliated Employer
on or after attaining his Normal Retirement Age and who was not the
President or a corporate Vice President of the Company either (x) on
the Effective Date or (y) as of the most recent date on which he
performed service as an Executive Officer, shall be entitled to a
retirement benefit payable in the form of a single life annuity
determined in accordance with the formula set forth in Section 4.1;
provided, however, that in making such determination, the term "40% of
the Participant's Average Compensation" shall be substituted for the
term "50% of the Participant's Average Compensation" in Section 4.1(a).
-6-
<PAGE>
4.3 MINIMUM RETIREMENT BENEFITS OF EXECUTIVE OFFICERS.
Notwithstanding anything herein to the contrary, the normal retirement
benefit determined under Section 4.1 or 4.2, as applicable, shall not
be less than the Participant's accrued normal retirement benefit
determined under (a) Section 4.1 or 4.2, as applicable, under the
Mosinee Supplemental Retirement Plan or (b) Section 4.1 or 4.2, as
applicable, under the Wausau Paper Mills Company Executive Officers'
Deferred Compensation Retirement Plan, determined under the terms of
such plans on December 16, 1997.
4.4 EARLY RETIREMENT BENEFITS OF EXECUTIVE OFFICERS. Subject to
the limitations elsewhere contained in this Plan, an Executive Officer
who terminates his employment with the Company and each Affiliated
Employer on or after attaining his Early Retirement Age, but prior to
attaining his Normal Retirement Age, shall be entitled to an early
retirement benefit in the form of a single life annuity equal to the
amount to which he would have been entitled to under Section 4.1 or
Section 4.2, as applicable, taking into consideration the provisions of
Section 4.3, if applicable, if he had then attained his Normal
Retirement Age; provided, however, that such benefit shall be reduced
by .4166% for each full calendar month, from and including the month in
which the Participant's 55th birthday occurs to the month in which his
62nd birthday occurs, by which the calendar month in which payment of
the early retirement benefit provided for in this Section 4.4 precedes
the date on which such Participant would have attained his Normal
Retirement Age.
4.5 SURVIVING SPOUSE BENEFITS. Subject to the limitations
elsewhere contained in this Plan, the Surviving Spouse of a Participant
who dies prior to commencement of any other benefit hereunder,
including the Surviving Spouse of a former Participant who terminated
employment because of Disability, shall be eligible for a Surviving
Spouse benefit commencing as of the last to occur of (1) the first day
of the first month following the month in which the Participant's death
occurs or (2) the date on which the Participant would have been
eligible to receive payment of a benefit under Section 4.4, or in the
case of a Participant who terminated employment because of Disability,
commencing as of the date on which the former Participant would have
attained age 55, and such Surviving Spouse benefit shall be equal to
50% of the monthly benefit which would have been payable to the
deceased Participant under this Plan if he had retired the day before
his death and payment of his benefit had commenced on such date
assuming, in the case of a former Participant who terminated employment
because of a Disability, that the benefit payable to such former
Participant at Normal Retirement Age under Section 4.1 or 4.2, as
applicable, would have been payable in reduced form at age 55 pursuant
to Section 4.4, and, assuming further, that in the case of a
Participant or former Participant who died prior to attaining age
55 or prior to the date on which the Participant or former Participant
had completed 10 years of Continuous Service, that a benefit would have
been payable to such deceased Participant or former Participant as of
the later of the dates described in (1) and (2), above; provided,
however, that the benefit payable to the Surviving Spouse of a
Participant or former Participant who died prior to the completion of 5
years of Continuous Service shall be reduced by 20% for each year of
Continuous Service less than 5 accrued by such deceased Participant or
former Participant.
<PAGE>
-7-
4.6 FORM, COMMENCEMENT AND DURATION OF PAYMENTS.
(a) A Participant may elect, subject to the approval of the Board
of Directors, (1) to receive the Actuarial Equivalent of the
benefit accrued by a Participant pursuant to Section 4.1, 4.2
or 4.4 in any form of annuity payment option then available
under the Retirement Plan or (2) to receive the value of the
benefit accrued by a Participant pursuant to Section 4.1, 4.2
or 4.4 in the form of a lump sum distribution. In the event a
Participant elects, with the approval of the Board of
Directors, to receive a lump sum distribution of the value of
the benefit otherwise provided for in Section 4.1, 4.2, or
4.4, the value of the lump sum distribution under this Plan
shall be determined in accordance with the provisions for
determining the value of a lump sum distribution of the
Participant's Retirement Benefit under the terms of the
Retirement Plan.
(b) Monthly benefit payments to the Participant (and, if
applicable, his Surviving Spouse) under Section 4.1, 4.2, 4.4
or 4.5, or a lump sum payment provided for under Section
4.5(a) with respect to a benefit accrued under Section 4.1,
4.2 or 4.4, shall commence on the first day of the month
following the Participant's termination of employment or, if
applicable, the date specified in Section 4.5 as the date on
which the Participant's Surviving Spouse became eligible for a
Surviving Spouse benefit, and shall continue, subject to the
provisions of Section 4.8, until the month in which the death
of the Participant (or, if applicable, his Surviving Spouse)
occurs; provided, however, that a Participant or Surviving
Spouse may elect to defer receipt of an early retirement
benefit or Surviving Spouse benefit, as applicable, for any
period of time not in excess of the date on which the
Participant would have attained his Normal Retirement Age.
Despite any other provision of this Plan, a Participant who
receives a benefit in the form of a lump sum distribution
shall not be entitled to any monthly benefit otherwise
provided for in this Plan.
(c) A Participant (or, if applicable, his Surviving Spouse) who
has begun to receive his accrued benefit in the form of an
annuity pursuant to Section 4.6(a), may, subject to the
consent of the Board of Directors, elect to receive the unpaid
value of his annuity in the form of a lump sum distribution.
The value of such lump sum distribution shall be determined in
accordance with the same actuarial assumptions and interest
rate then being used to determine the value of a lump sum
distribution of a participant's Retirement Benefit under the
terms of the Retirement Plan. The payment of such lump sum
distribution shall be made in accordance with the terms of the
consent of the Board of Directors to such payment.
-8-
<PAGE>
4.7 CHANGE OF CONTROL.
(a) In the event a Change of Control of the Company occurs, the
Company shall pay to each Participant a lump sum amount equal
to the present value of the Participant's accrued normal
retirement benefit, as determined under Section 4.1, as of the
first day of the first month following such Change of Control
of the Company on which such Participant is not an employee of
the Company, whether or not such Change of Control of the
Company occurred prior to the date on which such Participant
shall have ceased to be an employee of the Company. Upon
payment of the lump sum amount provided for in this Section
4.7(a), the Company shall have no further obligation to pay
any benefits under this Plan. Notwithstanding the foregoing,
if a Participant has less than five years of Continuous
Service as of the date of the Change of Control, the amount
paid to such Participant under this Section 4.7(a) shall equal
(i) the amount described in the first sentence of this Section
4.7(a) times (ii) a fraction, the numerator of which is the
number of years and fractions thereof of the Participant's
Continuous Service as of the date of the Change of Control and
the denominator of which is five.
(b) In the event a Change of Control of the Company occurs after
the Participant's death and whether or not a benefit shall
have then become payable to the Participant's Surviving
Spouse, the Company shall pay to such Participant's Surviving
Spouse, if then living, the present value of the unpaid
Surviving Spouse benefit. Upon payment of the lump sum amount
provided for in this Section 4.7(b), the Company shall have no
further obligation to pay any benefits under this Plan.
Notwithstanding the foregoing, if a Participant had less than
five years of Continuous Service as of the date of his or her
death before the Change of Control, the amount paid to such
Participant Surviving Spouse under this Section 4.7(b) shall
equal (i) the amount described in the first sentence of this
Section 4.7(a) times (ii) a fraction, the numerator of which
is the number of years and fractions thereof of the
Participant's Continuous Service as of the date of death and
the denominator of which is five.
(c) For purposes of this Plan, a "Change of Control of the
Company" shall mean:
(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934 (the "Exchange Act")
(a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (A) the then outstanding shares of
common stock of the Company (the "Outstanding Company
Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company
entitled to vote generally in the election of directors
-9-
<PAGE>
(the "Outstanding Company Voting Securities"); excluding,
however, the following: (i) any acquisition directly from
the Company other than an acquisition by virtue of the
exercise of a conversion privilege unless the security
being so converted was itself acquired directly from the
Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
entity controlled by the Company, (iv) any acquisition
pursuant to a transaction which complies with clauses
(A), (B), and (C) of paragraph (3) of this Section
4.7(c), (v) except as provided in paragraphs (4) and (5),
any acquisition by any of the Woodson Entities or any of
the Smith Entities, or (vi) any increase in the
proportionate number of shares of Outstanding Company
Common Stock or Outstanding Company Voting Securities
beneficially owned by a Person to 20% or more of the
shares of either of such classes of stock if such
increase was solely the result of the acquisition of
Outstanding Company Common Stock or Outstanding Company
Voting Securities by the Company; provided, however, that
this clause (vi) shall not apply to any acquisition of
Outstanding Company Common Stock or Outstanding Company
Voting Securities not described in clauses (i), (ii),
(iii), (iv), or (v) of this paragraph (1) by the Person
acquiring such shares which occurs after such Person had
become the beneficial owner of 20% or more of either the
Outstanding Company Common Stock or Outstanding Company
Voting Securities by reason of share purchases by the
Company; or
(2) A change in the composition of the Board of
Directors ("Board") such that the individuals who,
as of the Effective Date, constitute the Board (such
Board shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to
constitute at least a majority of the Board;
provided, however, for purposes of the Plan, that
any individual who becomes a member of the Board
subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of those
individuals who are members of the Board and who were
also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be deemed to be and shall
be considered as though such individual were a member of
the Incumbent Board, but provided, further, that any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board shall not be
so deemed or considered as a member of the Incumbent Board;
or
<PAGE>
-10-
(3) Consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of the assets or securities of any other
entity (a "Corporate Transaction"); excluding, however,
such a Corporate Transaction pursuant to which (A) all or
substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate
Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such Corporate Transaction (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all
of the Company's assets either directly or through one or
more subsidiaries) (the "Resulting Corporation") in
substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person
(other than the Company, any employee benefit plan (or
related trust) of the Company, any Woodson Entity, any
Smith Entity, or such Resulting Corporation) will
beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of
the Resulting Corporation or the combined voting power of
the then outstanding voting securities of such Resulting
Corporation entitled to vote generally in the election of
directors except to the extent that such ownership
existed with respect to the Company prior to the
Corporate Transaction, and (C) individuals who were
members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the
Resulting Corporation; or
(4) the Woodson Entities acquire beneficial ownership of
more than 35% of the Outstanding Company Common Stock or
Outstanding Company Voting Securities or of the
outstanding shares of common stock or the combined voting
power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the
case may be, of the Resulting Corporation; or
(5) the Smith Entities acquire beneficial ownership of
more than 35% of the Outstanding Company Common Stock or
Outstanding Company Voting Securities or of the
outstanding shares of common stock or the combined voting
power of the then outstanding voting securities entitled
-11-
<PAGE>
to vote generally in the election of directors, as the
case may be, of the Resulting Corporation; or
(6) The approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
For purposes of this Section 4.7(b), the term "Woodson
Entities" shall mean Aytchmonde P. Woodson, Leigh Yawkey
Woodson and Alice Richardson Yawkey, members of their
respective families and their respective descendants (the
"Woodson Family"), heirs or legatees of any of the Woodson
Family members, transferees by will, laws of descent or
distribution or by operation of law of any of the foregoing
(including of any such transferees) (including any executor or
administrator of any estate of any of the foregoing), any
trust established by any of Aytchmonde P. Woodson, Leigh
Yawkey Woodson, or Alice Richardson Yawkey, whether pursuant
to last will or otherwise, any partnership, trust or other
entity established primarily for the benefit of, or any other
Person the beneficial owners of which consist primarily of,
any of the foregoing or any Affiliates or Associates of any of
the foregoing or any charitable trust or foundation to which
any of the foregoing transfers or may transfer securities of
the Company (including any beneficiary or trustee, partner,
manager or director of any of the foregoing or any other
Person serving any such entity in a similar capacity).
For purposes of this Section 4.7(b), the term "Smith
Entities" shall mean David B. Smith and Katherine S. Smith,
members of their respective families and their respective
descendants (the "Smith Family"), heirs or legatees of any of
the Smith Family members, transferees by will, laws of descent
or distribution or by operation of law of any of the foregoing
(including of any such transferees) (including any executor or
administrator of any estate of any of the foregoing), any
trust established by either of David B. Smith or Katherine S.
Smith, whether pursuant to last will or otherwise, any
partnership, trust or other entity established primarily for
the benefit of, or any other Person the beneficial owners of
which consist primarily of, any of the foregoing or any
Affiliates or Associates of any of the foregoing or any
charitable trust or foundation to which any of the foregoing
transfers or may transfer securities of the Company (including
any beneficiary or trustee, partner, manager or director of
any of the foregoing or any other Person serving any such
entity in a similar capacity).
For purposes of this Section 4.7(b), the terms
"Affiliate" and "Associate" shall have the meanings
ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Exchange Act as in effect on
the date of this Plan.
-12-
<PAGE>
(d) For purposes of this Plan, the present value of a
Participant's retirement benefit or the Surviving Spouse
benefit shall be determined by reference to the 1983
Individual Annuity Mortality Table with an assumed interest
rate equal to the "immediate annuity rate" as then in effect
as determined by the Pension Benefit Guaranty Corporation and
promulgated in Appendix B to 29 C.F.R. <section>2619.65 or any
successor regulation adopted for the same or substantially
similar purpose.
4.8 FORFEITURE OF BENEFITS. Despite any other provision of this
Plan, a Participant's or Surviving Spouse's, as applicable, eligibility
for benefit payments under the Plan is expressly subject to the
following terms and conditions:
(a) The Company is and shall be entitled to the sole benefit and
exclusive ownership of any inventions or improvements in
plant, machinery and processes, and all patents for the same,
and all customer or price lists, trade secrets and other
things of similar type or nature used in the business of the
Company that may be made or discovered by a Participant while
he is employed by the Company, or, after the termination of
his employment period if arising out of his activities,
knowledge or experience gained while in the employment of the
Company. In the event that a Participant, during or after the
termination of his employment, discloses all or any portion of
the list of the Company's customers or the Company's pricing
structure or all or any portion of the Company's manufacturing
process or any other trade secrets or confidential information
to any person, firm, corporation, associations or other entity
for any reason or purpose whatsoever, no payment of any
benefit otherwise due the Participant or his Surviving Spouse
pursuant to this Plan shall be made by the Company.
(b) In the event a Participant, without the prior written consent
of the Company and within a period of two years beginning on
the first day following the Participant's termination of
employment with the Company, directly or indirectly owns,
manages, operates, joins, controls, is employed by or
participates in the ownership, management, operation or
control of, or is connected in any manner with, any business
of a type and character which, in the opinion of the Company,
results in the Participant then being engaged in the field of
activities in which he was engaged by the Company at the time
of termination (and within one year prior to said termination)
and such business is, in the opinion of the Company, in direct
or indirect competition in any market area served by the
Company with any business then conducted by the Company in
such market area, no payment of any benefit otherwise due the
Participant or his Surviving Spouse pursuant to this Plan
shall be made by the Company if the Participant fails to cease
such activity within fifteen days of the mailing to him by the
Company of the Company's opinion that he is in violation of
the restrictions contained in this Section 4.8(b).
-13-
<PAGE>
(c) The Company shall have sole discretion to stop payment of any
benefit or refuse to make payments otherwise due the
Participant or his Surviving Spouse pursuant to this Plan if
the Participant's termination of employment with the Company
or his appointment to a position with the Company as other
than an Executive Officer was by reason of or because of the
Participant's fraud, embezzlement, misappropriation or similar
offense against the Company or any other state or federal
felony offense.
(d) Subject to the provisions of Section 6.2, no benefit shall be
payable under this Plan to any Participant or Surviving Spouse
who, for any reason, is not eligible for and does not receive
a benefit under the provisions of the Retirement Plan.
4.9 INALIENABILITY OF BENEFITS. A Participant's right to a
benefit under the Plan shall not be subject to voluntary or
involuntary sale, pledge, hypothecation, transfer or assignment by the
Participant or by his personal representatives or heirs, or any other
person or persons or organization or organizations succeeding to any of
the Participant's rights and benefits hereunder.
4.10 FACILITY OF PAYMENTS. Any benefit payable hereunder to any
person who is legally incapacitated may be paid to a court appointed
legal representative of such person.
4.11 CLAIMS PROCEDURE. Each Participant or Surviving Spouse whose
claim for benefits is denied, in whole or in part, shall be provided
with a notice, written in a manner calculated to be understood by such
person, setting forth the specific reasons for such denial and
outlining the review procedure of the Company. Each such Participant
or Surviving Spouse shall be given a reasonable opportunity for a full
and fair review by the Company of the decision by which the claim was
denied.
-14-
ARTICLE V
PROVISION FOR BENEFITS
5.1 ASSETS OF THE COMPANY. Benefits which become payable under
the provisions of the Plan shall be paid directly by the Company out of
its assets. No assets of the Company shall be set aside or segregated
for the provision of such benefit payments. No Participant or
Surviving Spouse, nor any other potential or actual recipient of
benefits under the provisions of this Plan shall acquire any right,
title or interest in the assets of the Company by reason of the Plan
and, to the extent that the Participant, Surviving Spouse or such other
recipient shall acquire a right to receive payments from the Company
pursuant to the Plan, such right shall be no greater than the right of
any unsecured general creditor of the Company.
-15-
<PAGE>
ARTICLE VI
AMENDMENT AND TERMINATION OF THE PLAN
6.1 AMENDMENT. The Company reserves the right to amend the Plan
from time to time and at any time, effective as of any specified
current, prior or future date; provided, however, that no such
amendment shall modify or reduce a Participant's accrued benefit as of
the date such amendment is adopted.
6.2 TERMINATION. The Company reserves the right to terminate the
Plan at any time and for any reason; provided, however, that upon
termination, each Participant's accrued benefit shall be fully vested
subject only to the provisions of Section 4.8. A Participant's
"accrued benefit" shall mean the benefit which would be paid or payable
pursuant to this Plan following the Participant's termination of
employment if the Retirement Plan had terminated as of the same date on
which the termination of the Plan occurs (and provided for payment of
accrued Retirement Plan benefits upon the Participant's termination of
employment) multiplied by a fraction, the numerator of which is a
Participant's years of Continuous Service recognized under Section 3.2
and the denominator of which is ten.
-16-
ARTICLE VII
MISCELLANEOUS
7.1 NONGUARANTEE OF EMPLOYMENT. Nothing contained in this Plan
shall be construed as a contract of employment between the Company and
any employee, as a right of any employee to be continued in the
employment of the Company as an Executive Officer or in any other
capacity, or as a limitation of the right of the Company to discharge
any of its employees, with or without cause.
7.2 ACTION BY THE COMPANY. Any action by the Company under this
Plan may be by resolution of its Board of Directors, or by any officer
or officers duly authorized by resolution of said Board to act with
respect to the Plan.
7.3 AGREEMENT BINDING ON SUCCESSORS. This agreement shall be
binding upon all persons entitled to benefits hereunder, and upon their
respective heirs and legal representatives and upon the Company, its
successors and assigns.
7.4 CONSTRUCTION. Except when otherwise indicated by the context,
any masculine terminology herein shall also include feminine, and the
definition of any term herein in singular shall also include the
plural.
7.5 TITLES. Article and section titles are included for reference
purposes only and in the event of a conflict between a title and its
respective text the text shall control.
7.6 GOVERNING LAW. This Plan shall, to the extent not superseded
by the Employee Retirement Income Security Act of 1974, be governed by
the laws of the State of Wisconsin.
-17-
<PAGE>
WAUSAU-MOSINEE PAPER CORPORATION
1988 STOCK APPRECIATION RIGHTS PLAN
As amended March 4, 1999
WAUSAU-MOSINEE PAPER CORPORATION
1988 STOCK APPRECIATION RIGHTS PLAN
1. PURPOSE.
The purpose of the Wausau-Mosinee Paper Corporation 1988 Stock
Appreciation Rights Plan (the "Plan") is to attract and retain
outstanding individuals as officers and key employees of Wausau-Mosinee
Paper Corporation (the "Corporation") and its subsidiaries, and to
furnish incentives to such individuals through rewards based upon the
performance of the common stock of the Corporation. To this end, the
Committee hereinafter designated may grant stock appreciation rights to
officers and other key employees of the Corporation 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 Corporation and its subsidiaries as the Committee
in its sole discretion may select from time to time to receive stock
appreciation rights.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee (the "Committee") of
at least three members appointed by the Board of Directors of the
Corporation from among its members. No person shall be appointed a
member of the Committee if, during the one year prior to the date on
which such person's service as a member of the Committee is to
commence, such person was granted or awarded equity securities of the
Corporation (within the meaning of Securities and Exchange Commission
Rule 16a-1(d)) under the Plan or any other plan of the Corporation or
any subsidiary of the Corporation. Subject to the provisions of the
Plan, the Committee shall have authority (i) to determine which
employees of the Corporation and its
-1-
subsidiaries shall be eligible for participation in the Plan; (ii) to
select employees to receive grants under the plan; (iii) to determine
the number of stock appreciation rights subject to the grant, the time
and conditions of exercise or vesting, the fair market value of the
common stock of the Corporation for purposes of the Plan, and all other
terms and conditions of any grant; and (iv) to prescribe the form of
<PAGE>
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 rights 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 July 20, 1988, the date of its
approval by the Board of Directors of the Corporation. The Plan shall
terminate ten years after it becomes effective, unless terminated
sooner 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 paragraph 7 hereof, the
aggregate number of shares of common stock of the Corporation with
respect to which stock appreciation rights may be granted under the
Plan shall not exceed 25,000. Whenever a stock appreciation right
granted under the Plan can no
-2-
longer under any circumstances be exercised, the shares, if any, then
remaining subject to such stock appreciation right shall thereupon be
released from such stock appreciation right and shall thereafter be
available for additional grants of stock appreciation rights under the
Plan.
6. STOCK APPRECIATION RIGHTS.
(a) Grants. Stock appreciation rights entitling the grantee to
receive cash equal to the sum of (i) the appreciation in value of and
(ii) the value of the reinvested cash dividends which would have been
paid with respect to a stated number of shares of common stock of the
Corporation between the date of grant and the date of exercise (the
"hypothetical reinvested cash dividends") may be granted from time to
time to such officers and other key employees of the Corporation and
its subsidiaries as may be selected by the Committee.
(b) Terms of Grant. Stock appreciation rights shall be
exercisable in whole or in such installments and at such times as may
be determined by the Committee, provided that no stock appreciation
right shall be exercisable more than twenty years after the date of
grant. The Committee may at the time of grant or at any time
thereafter impose such additional terms and conditions on the exercise
of stock appreciation rights 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.
<PAGE>
(c) Termination of Employment or Death. If a grantee ceases to
be employed by the Corporation and any of its subsidiaries for any
reason other than death or attaining his Retirement Date, any stock
appreciation right held by such grantee may be exercised for a period
ending on the earlier of the 90th day following the date of such
cessation of employment
-3-
or the date of expiration of such stock appreciation right, but only
with respect to that number of shares of common stock for which such
right was exercisable immediately prior to the date of cessation of
employment.
If a grantee ceases to be employed by the Corporation or any of its
subsidiaries by reason of death prior to his Retirement Date, or dies
within 90 days after termination of his employment by the Corporation
or any of its subsidiaries prior to his having attained his Retirement
Date, any stock appreciation right held by such grantee may be
exercised, with respect to all or any part of the common stock of the
Corporation with respect to which such stock appreciation right was
exercisable by the grantee immediately prior to his death, for a period
ending on the first anniversary of the date of such grantee's death.
If a grantee attains his Retirement Date, any stock appreciation
right held by such grantee may be exercised for a period ending on the
second anniversary of such Retirement Date, but only with respect to
that number of shares of common stock for which such right was
exercisable immediately prior to the date of cessation of employment.
Notwithstanding any other provision of this Section 6(c), no stock
appreciation right shall be exercisable after the first to occur of (1)
the date specified in Section 6(b) or (2) the date specified by the
Committee in the grant evidencing such rights.
For purposes of this Plan, the term "Retirement Date" shall mean
the date on which the grantee's employment with the Corporation (and
any parent or subsidiary of the Corporation) terminates (including
termination because of death) if the Optionee had then attained age 55
and completed ten calendar years of service with the Corporation (or
any parent or subsidiary of the Corporation).
-4-
(d) Payment on Exercise. Upon exercise of a stock appreciation
right the grantee shall be paid within five business days an amount in
cash equal to the sum of (i) the amount by which the fair market value
of one share of the Corporation's common stock on the date of exercise
exceeds the date of grant value thereof multiplied by the number of
shares in respect of which the stock appreciation right is being
exercised and (ii) the value of the hypothetical reinvested cash
dividends associated therewith. The value of the hypothetical
reinvested cash dividends associated with a share in respect of which
the stock appreciation right is being exercised (the "exercised share")
shall be equal to the fair market value on the date of exercise of the
number of additional shares (or fraction thereof) of the Company's
common stock the grantee would have owned if it is assumed (1) that
<PAGE>
cash dividends which would have been paid with respect to the exercised
share if the exercised share had been outstanding from the time of
grant 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 (2)
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 Corporation's outstanding
common stock) which were reinvested in a similar manner.
For purposes of this paragraph, the fair market value of a share of
common stock of the Corporation means:
(A) The mean between the high and the low prices at
which the common stock of the Corporation was traded if the
common
-5-
stock of the Corporation was then listed for trading on a
national or regional securities exchange; or
(B) The mean between the published bid and asked prices
of the common stock of the Corporation if the common stock of
the Corporation was then traded on a bona fide over-the
-counter market; or
(C) If the common stock of the Corporation 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 the exercise of a stock appreciation
right is a date on which there is no trading of the common stock of the
Corporation on a national or regional securities exchange or is a date
for which there is no published bid and asked prices if the stock is
traded 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 or on which published prices are available.
(e) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such
other terms, provisions and conditions not inconsistent with the Plan
as may be determined by the Committee in its sole discretion.
7. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Stock appreciation rights shall be subject to adjustment by the
Committee in its sole discretion as to the number, kind and date of
grant value of shares or other consideration subject to such grants in
the event of changes in the outstanding common stock by reason of stock
dividends, stock splits, recapitalizations, reorganizations, mergers,
consolidations,
-6-
<PAGE>
combinations, exchanges or other relevant changes in corporate
structure or capitalization occurring after the date of the grant of
any stock appreciation right, provided that if the Corporation 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 rights 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 of in any stock appreciation right
granted under the Plan shall in any way prohibit the Corporation from
merging with or consolidating into another corporation, or from selling
or transferring all or 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, all outstanding stock appreciation
rights granted under the Plan shall be deemed to have been exercised at
the time of any 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
stock appreciation rights and the rights of such person or persons
entitled to exercise such stock appreciation rights.
9. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended or terminated by the Board of Directors of
the Corporation in any respect, provided, however, that the Board
shall not exercise such authority in a manner adversely and
significantly affecting rights previously granted unless the action
taken is required to comply with any applicable law or regulation.
-7-
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 stock appreciation right.
(b) Rights as Stockholder. No person shall have any rights as a
stockholder of the Corporation with respect to any shares covered by a
stock appreciation right.
(c) Employment. Nothing contained in this Plan shall be deemed to
confer upon any employee any right of continued employment with the
Corporation or any of its subsidiaries or to limit or diminish in any
way the right of the Corporation or any such subsidiary to terminate
his or her employment at any time with or without cause.
(d) Taxes. the Corporation 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 Corporation prior to and as a condition of
making such payment.
<PAGE>
(e) Nontransferability. No stock appreciation right shall be
transferable except by will or the laws of descent and distribution.
During the holder's lifetime, stock appreciation rights shall be
exercisable only by such holder.
11. CHANGE IN CONTROL.
(a) Definition of "Change in Control." For purposes of the Plan,
a "Change in Control" means the happening of any of the following
events:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
-8-
promulgated under the Exchange Act) of 20% or more of either (A)
the then outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (B) the combined voting
power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"); excluding, however,
the following: (1) any acquisition directly from the Corporation
other than an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself
acquired directly from the Corporation, (2) any acquisition by the
Corporation, (3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any
entity controlled by the Corporation, (4) any acquisition pursuant
to a transaction which complies with clauses (A), (B), and (C) of
paragraph (iii) of this Section 11(a), (5) except as provided in
paragraphs (iv) and (v), any acquisition by any of the Woodson
Entities or any of the Smith Entities, or (6) any increase in the
proportionate number of shares of Outstanding Corporation Common
Stock or Outstanding Corporation Voting Securities beneficially
owned by a Person to 20% or more of the shares of either of such
classes of stock if such increase was solely the result of the
acquisition of Outstanding Corporation Common Stock or Outstanding
Corporation Voting Securities by the Corporation; provided,
however, that this clause (6) shall not apply to any acquisition of
Outstanding Corporation Common Stock or Outstanding Corporation
Voting Securities not described in clauses (1), (2), (3), (4), or
(5) of this paragraph (i) by the Person acquiring such shares which
occurs after such Person had become the beneficial owner of 20%
-9-
or more of either the Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities by reason of share
purchases by the Corporation; or (ii) A change in the composition
of the Board such that the individuals who, as of the Effective
Date, constitute the Board (such Board shall be hereinafter
referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, for
purposes of the Plan, that any individual who becomes a member of
the Board subsequent to the Effective Date whose election, or
nomination for election by the Corporation's shareholders, was
<PAGE>
approved by a vote of at least a majority of those individuals who
are members of the Board and who were also members of the Incumbent
Board (or deemed to be such pursuant to this proviso) shall be
deemed to be and shall be considered as though such individual were
a member of the Incumbent Board, but provided, further, that any
such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board shall not be so deemed or considered as a member of the
Incumbent Board; or (iii) Consummation of a reorganization, merger
or consolidation, or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of the assets or securities of any other entity (a
"Corporate Transaction"); excluding, however, such a Corporate
Transaction pursuant to which (A) all or substantially all
-10-
of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares
of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction
owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) (the "Resulting Corporation") in substantially the
same proportions as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Corporation Common Stock
and Outstanding Corporation Voting Securities, as the case may be,
(B) no Person (other than the Corporation, any employee benefit
plan (or related trust) of the Corporation, any Woodson Entity, any
Smith Entity, or such Resulting Corporation) will beneficially own,
directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the Resulting Corporation or
the combined voting power of the then outstanding voting securities
of such Resulting Corporation entitled to vote generally in the
election of directors except to the extent that such ownership
existed with respect to the Corporation prior to the Corporate
Transaction, and (C) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of
the board of directors of the Resulting Corporation; or
-11-
(iv) The Woodson Entities acquire beneficial ownership of
more than 35% of the Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities or of the outstanding
shares of common stock or the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the Resulting
<PAGE>
Corporation; or (v) The Smith Entities acquire beneficial
ownership of more than 35% of the Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities or of the
outstanding shares of common stock or the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the Resulting
Corporation; or (vi) The approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
For purposes of this Section 11(a), the term "Woodson Entities" shall
mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice Richardson
Yawkey, members of their respective families and their respective
descendants (the "Woodson Family"), heirs or legatees of any of the
Woodson Family members, transferees by will, laws of descent or
distribution or by operation of law of any of the foregoing (including
of any such transferees) (including any executor or administrator of
any estate of any of the foregoing), any trust established by any of
Aytchmonde P. Woodson, Leigh Yawkey Woodson, or Alice Richardson
Yawkey, whether pursuant to last will or otherwise, any partnership,
trust or other entity established primarily for the benefit of, or any
other Person the beneficial owners of which consist primarily of, any
of the foregoing or any Affiliates or Associates of any
-12-
of the foregoing or any charitable trust or foundation to which any of
the foregoing transfers or may transfer securities of the Corporation
(including any beneficiary or trustee, partner, manager or director of
any of the foregoing or any other Person serving any such entity in a
similar capacity).
For purposes of this Section 11(a), the term "Smith Entities" shall
mean David B. Smith and Katherine S. Smith, members of their respective
families and their respective descendants (the "Smith Family"), heirs
or legatees of any of the Smith Family members, transferees by will,
laws of descent or distribution or by operation of law of any of the
foregoing (including of any such transferees) (including any executor
or administrator of any estate of any of the foregoing), any trust
established by either of David B. Smith or Katherine S. Smith, whether
pursuant to last will or otherwise, any partnership, trust or other
entity established primarily for the benefit of, or any other Person
the beneficial owners of which consist primarily of, any of the
foregoing or any Affiliates or Associates of any of the foregoing or
any charitable trust or foundation to which any of the foregoing
transfers or may transfer securities of the Corporation (including any
beneficiary or trustee, partner, manager or director of any of the
foregoing or any other Person serving any such entity in a similar
capacity).
For purposes of this Section 11(a), the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Plan.
(b) Effects of Change in Control.
<PAGE>
(i) In the event of a Change in Control,
-13-
(A) all stock appreciation rights ("SARs") outstanding
on the date on which such Change in Control has occurred (the
"Change in Control Date") shall, to the extent not then
exercisable or vested, immediately become exercisable in full,
and
(B) each grantee may elect, with respect to each SAR
held by such grantee on the Change in Control Date (the
grantee's "Election Right"), to surrender such SAR for an
immediate lump sum cash payment in an amount equal to the
product of (1) the number of shares of common stock of the
Corporation ("Shares") then subject to the SAR as to which the
election is being exercised, multiplied by (2) the excess, if
any, of (a) the greater of (i) the Change in Control Price or
(ii) the highest Fair Market Value of a Share on any day in
the 60-day period ending on the Change in Control Date, over
(b) the date of grant value of such SAR. Upon exercise of a
grantee's Election Right, the value of all hypothetical
reinvested cash dividends associated with such SAR shall also
be determined by the greater of (i) the Change in Control
Price or (ii) the highest Fair Market Value of a Share on any
day in the 60-day period ending on the Change in Control Date.
For purposes of this Section 11(b), the "Change in Control
Price" shall mean, if the Change in Control is the result of a
tender or exchange offer or a Corporate Transaction (as
defined in Section 11(a)(iii), the highest price per Share
paid in such tender or exchange offer or Corporate
Transaction. To the extent that the consideration paid in any
such transaction consists all or in part of securities or
other noncash consideration, the value of such securities or
-14-
other noncash consideration shall be determined in the sole
discretion of the Committee.
(ii) The exercise of an Election Right must be in writing,
specify the SAR or SARs and the number of Shares as to which the
election is being exercised, and be delivered to the Secretary of
the Corporation 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 Corporation's home office on or before the
60th day following the Change in Control Date.
(iii) All payments due an grantee pursuant to the provisions
of this Section 11(b) shall be made by the Corporation on or before
the first to occur of (A) the date provided in this Plan for
payment upon exercise of an SAR and (B) the 5th business day
following the date on which the grantee's election has been
delivered to the Corporation pursuant to Section 11(b)(ii).
(iv) Notwithstanding any other provision of this Section
11(b), if the grant or the exercise of a grantee's Election Right
<PAGE>
or payment of cash provided for in this Section 11(b)would make a
Change in Control transaction ineligible for pooling-of-interests
accounting treatment under APB No. 16, that, but for the nature of
such grant or exercise of Election Rights, would otherwise be
eligible for such pooling-of-interests accounting treatment, the
Committee shall have the right and authority to modify, eliminate,
or terminate the Election Right to the extent necessary to preserve
such pooling-of-interests accounting treatment.
-15-
WAUSAU-MOSINEE PAPER CORPORATION
1988 MANAGEMENT INCENTIVE PLAN
As amended March 4, 1999
WAUSAU-MOSINEE PAPER CORPORATION
1988 MANAGEMENT INCENTIVE PLAN
1. PURPOSE.
The purpose of the Wausau-Mosinee Paper Corporation 1988 Management
Incentive Plan (the "Plan") is to attract and retain outstanding
individuals as management employees of Wausau-Mosinee Paper Corporation
(the "Corporation") and its subsidiaries, and to furnish incentives to
such individuals through rewards based upon the performance of the
common stock of the Corporation. To this end, the Committee
hereinafter designated may grant stock appreciation rights to
management employees of the Corporation 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 management employees
of the Corporation and its subsidiaries as the Committee in its sole
discretion may select from time to time to receive stock appreciation
rights.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee (the "Committee") of
at least three members appointed by the Board of Directors of the
Corporation from among its members. No person shall be appointed a
member of the Committee if, during the one year prior to the date on
which such person's service as a member of the Committee is to
commence, such person was granted or awarded equity securities of the
Corporation (within the meaning of Securities and Exchange Commission
Rule 16a-1(d)) under the Plan or any other plan of the Corporation or
any subsidiary of the Corporation. Subject to the provisions of the
<PAGE>
-1-
Plan, the Committee shallhave authority (i) to determine which
employees of the Corporation and its subsidiaries shall be eligible for
participation in the plan; (ii) to select employees to receive grants
under the Plan; (iii) to determine the number of stock appreciation
rights subject to the grant, the time and conditions of exercise or
vesting, the fair market value of the common stock of the Corporation
for purposes of the Plan, and all other terms and conditions of any
grant; and (iv) 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 rights 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 August 15, 1988, the date of its
approval by the Board of Directors of the Corporation. The Plan shall
terminate ten years after it becomes effective, unless terminated
sooner 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 paragraph 7 hereof, the
aggregate number of shares of common stock of the Corporation with
respect to which stock appreciation rights may be granted under the
-2-
Plan shall not exceed 75,000. Whenever a stock appreciation right
granted under the Plan can no longer under any circumstances be
exercised, the shares, if any, then remaining subject to such stock
appreciation right shall thereupon be released from such stock
appreciation right and shall thereafter be available for additional
grants of stock appreciation rights under the Plan.
6. STOCK APPRECIATION RIGHTS.
(a) Grants. Stock appreciation rights entitling the grantee to
receive cash equal to the sum of (i) the appreciation in value of and
(ii) the value of the reinvested cash dividends which would have been
paid with respect to a stated number of shares of common stock of the
Corporation between the date of grant and the date of exercise (the
"hypothetical reinvested cash dividends") may be granted from time to
time to such officers and other key employees of the Corporation and
its subsidiaries as may be selected by the Committee.
<PAGE>
(b) Terms of Grant. Stock appreciation rights shall be
exercisable in whole or in such installments and at such times and
subject to the attainment of such performance goals as may be
determined by the Committee, provided that no stock appreciation right
shall be exercisable more than twenty years after the date of grant.
The Committee may at the time of grant or at any time thereafter impose
such additional terms and conditions on the exercise of stock
appreciation rights 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.
(c) Termination of Employment or Death. If a grantee ceases to
be employed by the Corporation and any of its subsidiaries for any
reason other than death or attaining his Retirement Date, any stock
appreciation right held by such grantee may be exercised for a period
-3-
ending on the earlier of the 90th day following the date of such
cessation of employment or the date of expiration of such stock
appreciation right, but only with respect to that number of shares of
common stock for which such right was exercisable immediately prior to
the date of cessation of employment.
If a grantee ceases to be employed by the Corporation or any of its
subsidiaries by reason of death prior to his Retirement Date, or dies
within 90 days after termination of his employment by the Corporation
or any of its subsidiaries prior to his having attained his Retirement
Date, any stock appreciation right held by such grantee may be
exercised, with respect to all or any part of the common stock of the
Corporation with respect to which such stock appreciation right was
exercisable by the grantee immediately prior to his death, for a period
ending on the first anniversary of the date of such grantee's death.
If a grantee attains his Retirement Date, any stock appreciation
right held by such grantee may be exercised for a period ending on the
second anniversary of such Retirement Date, but only with respect to
that number of shares of common stock for which such right was
exercisable immediately prior to the date of cessation of employment.
Notwithstanding any other provision of this Section 6(c), no stock
appreciation right shall be exercisable after the first to occur of (1)
the date specified in Section 6(b) or (2) the date specified by the
Committee in the grant evidencing such rights.
For purposes of this Plan, the term "Retirement Date" shall mean
the date on which the grantee's employment with the Corporation (and
any parent or subsidiary of the Corporation) terminates (including
termination because of death) if the Optionee had then attained age 55
-4-
and completed ten calendar years of service with the Corporation (or
any parent or subsidiary of the Corporation).
<PAGE>
(d) Payment on Exercise. Upon exercise of a stock appreciation
right the grantee shall be paid within five business days an amount in
cash equal to the sum of (i) the amount by which the fair market value
of one share of the Corporation's common stock on the date of exercise
exceeds the date of grant value thereof multiplied by the number of
shares in respect of which the stock appreciation right is being
exercised and (ii) the value of the hypothetical reinvested cash
dividends associated therewith. The value of the hypothetical
reinvested cash dividends associated with a share in respect of which
the stock appreciation right is being exercised (the "exercised share")
shall be equal to the fair market value on the date of exercise of the
number of additional shares (or fraction thereof) of the Corporation's
common stock the grantee would have owned if it is assumed (1) that
cash dividends which would have been paid with respect to the exercised
share if the exercised share had been outstanding from the time of
grant had been paid in cash to the grantee and then immediately
reinvested by the grantee in the Corporation's common stock at the fair
market value thereof on the applicable dividend payment date, and (2)
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 Corporation's outstanding
common stock) which were reinvested in a similar manner.
For purposes of this paragraph, the fair market value of a share of
common stock of the Corporation means:
-5-
(A) The mean between the high and the low prices at which the
common stock of the Corporation was traded if the common stock of
the Corporation was then listed for trading on a national or
regional securities exchange; or
(B) The mean between the published bid and asked prices of
the common stock of the Corporation if the common stock of the
Corporation was then traded on a bona fide over-the-counter market;
or (C) If the common stock of the Corporation 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 the exercise of a stock appreciation
right is a date on which there is no trading of the common stock of the
Corporation on a national or regional securities exchange or is a date
for which there is no published bid and asked prices if the stock is
traded 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 or on which published prices are available.
(e) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such
other terms, provisions and conditions not inconsistent with the Plan
as may be determined by the Committee in its sole discretion.
<PAGE>
7. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Stock appreciation rights shall be subject to adjustment by the
Committee in its sole discretion as to the number, kind and date of
grant value of shares or other consideration subject to such grants in
the event of changes in the outstanding common stock by reason of stock
-6-
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 stock appreciation right, provided that if the Corporation
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 rights 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 stock appreciation right
granted under the Plan shall in any way prohibit the Corporation from
merging with or consolidating into another corporation, or from selling
or transferring all or 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, all outstanding stock appreciation
rights granted under the Plan shall be deemed to have been exercised,
to the extent then exercisable by the grantee, at the time of any 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 stock
appreciation rights and the rights of such person or persons entitled
to exercise such stock appreciation rights.
9. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended or terminated by the Board of Directors of
the Corporation in any respect, provided, however, that the Board shall
not exercise such authority in a manner adversely and significantly
-7-
affecting rights 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 stock appreciation right.
<PAGE>
(b) Rights as Stockholder. No person shall have any rights as a
stockholder of the Corporation with respect to any shares covered by a
stock appreciation right.
(c) Employment. Nothing contained in this Plan shall be deemed to
confer upon any employee any right of continued employment with the
Corporation or any of its subsidiaries or to limit or diminish in any
way the right of the Corporation or any such subsidiary to terminate
his or her employment at any time with or without cause.
(d) Taxes. The Corporation 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 Corporation prior to and as a condition of
making such payment.
(e) Nontransferability. No stock appreciation right shall be
transferable except by will or the laws of descent and distribution.
During the holder's lifetime, stock appreciation rights shall be
exercisable only by such holder.
11. CHANGE OF CONTROL.
(a) Definition of "Change in Control." For purposes of the Plan,
a "Change in Control" means the happening of any of the following
events:
-8-
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then outstanding shares of common stock of the
Corporation (the "Outstanding Corporation Common Stock") or (B)
the combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities");
excluding, however, the following: (1) any acquisition directly
from the Corporation other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Corporation, (2)
any acquisition by the Corporation, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Corporation or any entity controlled by the Corporation, (4)
any acquisition pursuant to a transaction which complies with
clauses (A), (B), and (C) of paragraph (iii) of this Section 11(a),
(5) except as provided in paragraphs (iv) and (v), any acquisition
by any of the Woodson Entities or any of the Smith Entities, or (6)
any increase in the proportionate number of shares of Outstanding
Corporation Common Stock or Outstanding Corporation Voting
Securities beneficially owned by a Person to 20% or more of the
shares of either of such classes of stock if such increase was
solely the result of the acquisition of Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities by the
Corporation; provided, however, that this clause (6) shall not
apply to any acquisition of Outstanding Corporation Common Stock
<PAGE>
-9-
or Outstanding Corporation Voting Securities not described in
clauses (1), (2), (3), (4), or (5) of this paragraph (i) by the
Person acquiring such shares which occurs after such Person had
become the beneficial owner of 20% or more of either the
Outstanding Corporation Common Stock or Outstanding Corporation
Voting Securities by reason of share purchases by the Corporation;
or
(ii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of the Plan, that any
individual who becomes a member of the Board subsequent to the
Effective Date whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be deemed to be and shall be
considered as though such individual were a member of the Incumbent
Board, but provided, further, that any such individual whose
initial assumption of office occurs as a result of either an actual
or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board shall not be so
deemed or considered as a member of the Incumbent Board; or
-10-
(iii) Consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of the assets or securities of any other entity (a
"Corporate Transaction"); excluding, however, such a Corporate
Transaction pursuant to which (A) all or substantially all
of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares
of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction
owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) (the "Resulting Corporation") in substantially the
same proportions as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Corporation Common Stock
and Outstanding Corporation Voting Securities, as the case may be,
(B) no Person (other than the Corporation, any employee benefit
plan (or related trust) of the Corporation, any Woodson Entity, any
Smith Entity, or such Resulting Corporation) will beneficially own,
<PAGE>
directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the Resulting Corporation or
the combined voting power of the then outstanding voting securities
of such Resulting Corporation entitled to vote generally in the
election of directors except to the extent that such
-11-
ownership existed with respect to the Corporation prior to the
Corporate Transaction, and (C) individuals who were members of the
Incumbent Board will constitute at least a majority of the members
of the board of directors of the Resulting Corporation; or
(iv) The Woodson Entities acquire beneficial ownership of
more than 35% of the Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities or of the outstanding
shares of common stock or the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the Resulting
Corporation; or (v) The Smith Entities acquire beneficial
ownership of more than 35% of the Outstanding Corporation Common
Stock or Outstanding Corporation Voting Securities or of the
outstanding shares of common stock or the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the Resulting
Corporation; or (vi) The approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
For purposes of this Section 11(a), the term "Woodson
Entities" shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson
and Alice Richardson Yawkey, members of their respective families
and their respective descendants (the "Woodson Family"), heirs or
legatees of any of the Woodson Family members, transferees by will,
laws of descent or distribution or by operation of law of any of
the foregoing (including of any such transferees) (including any
executor or administrator of any estate of any of the foregoing),
-12-
any trust established by any of Aytchmonde P. Woodson, Leigh Yawkey
Woodson, or Alice Richardson Yawkey, whether pursuant to last will or
otherwise, any partnership, trust or other entity established primarily
for the benefit of, or any other Person the beneficial owners of which
consist primarily of, any of the foregoing or any Affiliates or
Associates of any of the foregoing or any charitable trust or
foundation to which any of the foregoing transfers or may transfer
securities of the Corporation (including any beneficiary or trustee,
partner, manager or director of any of the foregoing or any other
Person serving any such entity in a similar capacity).
For purposes of this Section 11(a), the term "Smith Entities"
shall mean David B. Smith and Katherine S. Smith, members of their
respective families and their respective descendants (the "Smith
Family"), heirs or legatees of any of the Smith Family members,
transferees by will, laws of descent or distribution or by operation of
law of any of the foregoing (including of any such transferees)
<PAGE>
(including any executor or administrator of any estate of any of the
foregoing), any trust established by either of David B. Smith or
Katherine S. Smith, whether pursuant to last will or otherwise, any
partnership, trust or other entity established primarily for the
benefit of, or any other Person the beneficial owners of which consist
primarily of, any of the foregoing or any Affiliates or Associates of
any of the foregoing or any charitable trust or foundation to which any
of the foregoing transfers or may transfer securities of the
Corporation (including any beneficiary or trustee, partner, manager or
director of any of the foregoing or any other Person serving any such
entity in a similar capacity).
-13-
For purposes of this Section 11(a), the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Plan.
(b) Effects of Change in Control.
(i) In the event of a Change in Control,
(A) all stock appreciation rights ("SARs") outstanding on the
date on which such Change in Control has occurred (the "Change in
Control Date") shall, to the extent not then exercisable or vested,
immediately become exercisable in full, and
(B) each grantee may elect, with respect to each SAR held by
such grantee on the Change in Control Date (the grantee's "Election
Right"), to surrender such SAR for an immediate lump sum cash
payment in an amount equal to the product of (1) the number of
shares of common stock of the Corporation ("Shares") then subject
to the SAR as to which the election is being exercised, multiplied
by (2) the excess, if any, of (a) the greater of (i) the Change in
Control Price or (ii) the highest Fair Market Value of a Share on
any day in the 60-day period ending on the Change in Control Date,
over (b) the date of grant value of such SAR. Upon exercise of a
grantee's Election Right, the value of all hypothetical reinvested
cash dividends associated with such SAR shall also be determined by
the greater of (i) the Change in Control Price or (ii) the highest
Fair Market Value of a Share on any day in the 60-day period ending
on the Change in Control Date. For purposes of this Section
11(b), the "Change in Control Price" shall mean, if the Change in
Control is the result of a tender or exchange offer or a Corporate
Transaction (as defined in Section 11(a)(iii), the highest price
-14-
per Share paid in such tender or exchange offer or Corporate
Transaction. To the extent that the consideration paid in any such
transaction consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of the
Committee.
(ii) The exercise of an Election Right must be in writing,
<PAGE>
specify the SAR or SARs and the number of Shares as to which the
election is being exercised, and be delivered to the Secretary of
the Corporation 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 Corporation's home office on or before the
60th day following the Change in Control Date.
(iii) All payments due an grantee pursuant to the provisions
of this Section 11(b) shall be made by the Corporation on or before
the first to occur of (A) the date provided in this Plan for
payment upon exercise of an SAR and (B) the 5th business day
following the date on which the grantee's election has been
delivered to the Corporation pursuant to Section 11(b)(ii).
(iv) Notwithstanding any other provision of this Section
11(b), if the grant or the exercise of a grantee's Election Right
or payment of cash provided for in this Section 11(b) would make a
Change in Control transaction ineligible for pooling-of-interests
accounting treatment under APB No. 16, that, but for the nature of
such grant or exercise of Election Rights, would otherwise be
eligible for such pooling-of-interests accounting treatment, the
Committee shall have the right and authority to modify, eliminate,
-15-
or terminate the Election Right to the extent necessary to preserve
such pooling-of-interests accounting treatment.
-16-
WAUSAU-MOSINEE PAPER CORPORATION
1990 STOCK APPRECIATION RIGHTS PLAN
As amended March 4, 1999
WAUSAU-MOSINEE PAPER CORPORATION
1990 STOCK APPRECIATION RIGHTS PLAN
1. PURPOSE.
The purpose of the Wausau-Mosinee Paper Corporation 1990 Stock
Appreciation Rights Plan (the "Plan") is to attract and retain
outstanding individuals as officers and key employees of Wausau-Mosinee
Paper Corporation (the "Corporation") and its subsidiaries, and to
furnish incentives to such individuals through rewards based upon the
performance of the common stock of the Corporation. To this end, the
Committee hereinafter designated may grant stock appreciation rights to
officers and other key employees of the Corporation and its
subsidiaries, on the terms and subject to the conditions set forth in
this Plan.
<PAGE>
2. PARTICIPANTS.
Participants in the Plan shall consist of such officers and other
key employees of the Corporation and its subsidiaries as the Committee
in its sole discretion may select from time to time to receive stock
appreciation rights.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee (the "Committee") of
at least three members appointed by the Board of Directors of the
Corporation from among its members. No person shall be appointed a
member of the Committee if, during the one year prior to the date on
which such person's service as a member of the Committee is to
commence, such person was granted or awarded equity securities of the
Corporation (within the meaning of Securities and Exchange Commission
Rule 16a-1(d)) under the Plan or any other plan of the Corporation or
any subsidiary of the Corporation. Subject to the provisions of the
Plan, the Committee shall have authority (i) to determine which
-1-
employees of the Corporation and its subsidiaries shall be eligible for
participation in the Plan; (ii) to select employees to receive grants
under the Plan; (iii) to determine the number of stock appreciation
rights subject to the grant, the time and conditions of exercise or
vesting, the fair market value of the common stock of the Corporation
for purposes of the Plan, and all other terms and conditions of any
grant; and (iv) 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 rights 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 July 24, 1990, the date of its
approval by the Board of Directors of the Corporation. The Plan shall
terminate ten years after it becomes effective, unless terminated
sooner 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 paragraph 7 hereof, the
aggregate number of shares of common stock of the Corporation with
respect to which stock appreciation rights may be granted under the
Plan shall not exceed 250,000. Whenever a stock appreciation right
<PAGE>
-2-
granted under the Plan can no longer under any circumstances be
exercised, the shares, if any, then remaining subject to such stock
appreciation right shall thereupon be released from such stock
appreciation right and shall thereafter be available for additional
grants of stock appreciation rights under the Plan.
6. STOCK APPRECIATION RIGHTS.
(a) Grants. Stock appreciation rights entitling the grantee to
receive cash equal to the sum of (i) the appreciation in value of and
(ii) the value of the reinvested cash dividends which would have been
paid with respect to a stated number of shares of common stock of the
Corporation between the date of grant and the date of exercise (the
"hypothetical reinvested cash dividends") may be granted from time to
time to such officers and other key employees of the Corporation and
its subsidiaries as may be selected by the Committee.
(b) Terms of Grant. Stock appreciation rights shall be
exercisable in whole or in such installments and at such times as may
be determined by the Committee, provided that no stock appreciation
right shall be exercisable more than twenty years after the date of
grant. The Committee may at the time of grant or at any time
thereafter impose such additional terms and conditions on the exercise
of stock appreciation rights 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.
(c) Termination of Employment or Death. If a grantee ceases to be
employed by the Corporation and any of its subsidiaries for any reason
other than death or attaining his Retirement Date, any stock
appreciation right held by such grantee may be exercised for a period
ending on the earlier of the 90th day following the date of such
-3-
cessation of employment or the date of expiration of such stock
appreciation right, but only with respect to that number of shares of
common stock for which such right was exercisable immediately prior to
the date of cessation of employment.
If a grantee ceases to be employed by the Corporation or any of
its subsidiaries by reason of death prior to his Retirement Date, or
dies within 90 days after termination of his employment by the
Corporation or any of its subsidiaries prior to his having attained his
Retirement Date, any stock appreciation right held by such grantee may
be exercised, with respect to all or any part of the common stock of
the Corporation with respect to which such stock appreciation right was
exercisable by the grantee immediately prior to his death, for a period
ending on the first anniversary of the date of such grantee's death.
If a grantee attains his Retirement Date, any stock appreciation
right held by such grantee may be exercised for a period ending on the
second anniversary of such Retirement Date, but only with respect to
that number of shares of common stock for which such right was
exercisable immediately prior to the date of cessation of employment.
<PAGE>
Notwithstanding any other provision of this Section 6(c), no stock
appreciation right shall be exercisable after the first to occur of (1)
the date specified in Section 6(b) or (2) the date specified by the
Committee in the grant evidencing such rights.
For purposes of this Plan, the term "Retirement Date" shall mean
the date on which the grantee's employment with the Corporation (and
any parent or subsidiary of the Corporation) terminates (including
termination because of death) if the Optionee had then attained age 55
and completed ten calendar years of service with the Corporation (or
any parent or subsidiary of the Corporation).
-4-
(d) Payment on Exercise. Upon exercise of a stock appreciation
right the grantee shall be paid within five business days an amount in
cash equal to the sum of (i) the amount by which the fair market value
of one share of the Corporation's common stock on the date of exercise
exceeds the date of grant value thereof multiplied by the number of
shares in respect of which the stock appreciation right is being
exercised and (ii) the value of the hypothetical reinvested cash
dividends associated therewith. The value of the hypothetical
reinvested cash dividends associated with a share in respect of which
the stock appreciation right is being exercised (the "exercised share")
shall be equal to the fair market value on the date of exercise of the
number of additional shares (or fraction thereof) of the Corporation's
common stock the grantee would have owned if it is assumed (1) that
cash dividends which would have been paid with respect to the exercised
share if the exercised share had been outstanding from the time of
grant had been paid in cash to the grantee and then immediately
reinvested by the grantee in the Corporation's common stock at the fair
market value thereof on the applicable dividend payment date, and (2)
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 Corporation's outstanding
common stock) which were reinvested in a similar manner.
For purposes of this paragraph, the fair market value of a share
of common stock of the Corporation means:
(A) The mean between the high and the low prices at which the
common stock of the Corporation was traded if the common stock of
the Corporation was then listed for trading on a national or
regional securities exchange; or
-5-
(B) The mean between the published bid and asked prices of
the common stock, of the Corporation if the common stock of the
Corporation was then traded on a bona fide over-the-counter market;
or
(C) If the common stock of the Corporation 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.
<PAGE>
In the event that the date of the exercise of a stock appreciation
right is a date on which there is no trading of the common stock of the
Corporation on a national or regional securities exchange or is a date
for which there is no published bid and asked prices if the stock is
traded 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 or on which published prices are available.
(e) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such
other terms, provisions and conditions not inconsistent with the Plan
as may be determined by the Committee in its sole discretion.
7. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Stock appreciation rights shall be subject to adjustment by the
Committee in its sole discretion as to the number, kind and date of
grant value of shares or other consideration subject to such grants
in the event of changes in the outstanding common stock 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 stock appreciation right, provided that if the
-6-
Corporation shall change itscommon stock into a greater or lesser
number of shares through a stock dividend, stock split-up, or
combination of shares, outstanding rights 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 stock appreciation right
granted under the Plan shall in any way prohibit the Corporation from
merging with or consolidating into another corporation, or from selling
or transferring all or 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, all outstanding stock appreciation
rights granted under the Plan shall be deemed to have been exercised at
the time of any 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
stock appreciation rights and the rights of such person or persons
entitled to exercise such stock appreciation rights.
9. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended or terminated by the Board of Directors of
the Corporation in any respect, provided, however, that the Board shall
not exercise such authority in a manner adversely and significantly
affecting rights previously granted unless the action taken is required
to comply with any applicable law or regulation.
<PAGE>
-7-
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 stock appreciation right.
(b) Rights as Stockholder. No person shall have any rights as a
stockholder of the Corporation with respect to any shares covered by a
stock appreciation right.
(c) Employment. Nothing contained in this Plan shall be deemed to
confer upon any employee any right of continued employment with the
Corporation or any of its subsidiaries or to limit or diminish in any
way the right of the Corporation or any such subsidiary to terminate
his or her employment at any time with or without cause.
(d) Taxes. the Corporation 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 Corporation prior to and as a condition of
making such payment.
(e) Nontransferability. No stock appreciation right shall be
transferable except by will or the laws of descent and distribution.
During the holder's lifetime, stock appreciation rights shall be
exercisable only by such holder.
11. CHANGE OF CONTROL.
(a) Definition of "Change in Control." For purposes of the Plan,
a "Change in Control" means the happening of any of the following
events:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a "Person") of beneficial ownership (within the meaning of
-8-
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then outstanding shares of common stock of the
Corporation (the "Outstanding Corporation Common Stock") or (B) the
combined voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities");
excluding, however, the following: (1) any acquisition directly
from the Corporation other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Corporation, (2)
any acquisition by the Corporation, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Corporation or any entity controlled by the Corporation, (4)
any acquisition pursuant to a transaction which complies with
clauses (A), (B), and (C) of paragraph (iii) of this Section 11(a),
<PAGE>
(5) except as provided in paragraphs (iv) and (v), any acquisition
by any of the Woodson Entities or any of the Smith Entities, or (6)
any increase in the proportionate number of shares of Outstanding
Corporation Common Stock or Outstanding Corporation Voting
Securities beneficially owned by a Person to 20% or more of the
shares of either of such classes of stock if such increase was
solely the result of the acquisition of Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities by the
Corporation; provided, however, that this clause (6) shall not
apply to any acquisition of Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities not described in clauses
(1), (2), (3), (4), or (5) of this paragraph (i) by the Person
acquiring such shares which occurs after such Person had become the
-9-
beneficial owner of 20% or more of either the Outstanding
Corporation Common Stock or Outstanding Corporation Voting
Securities by reason of share purchases by the Corporation; or
(ii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of the Plan, that any
individual who becomes a member of the Board subsequent to the
Effective Date whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who
were also members ofthe Incumbent Board (or deemed to be such
pursuant to this proviso) shall be deemed to be and shall be
considered as though such individual were a member of the Incumbent
Board, but provided, further, that any such individual whose
initial assumption of office occurs as a result of either an actual
or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board shall not be so
deemed or considered as a member of the Incumbent Board; or
(iii) Consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of the assets or securities of any other entity
(a "Corporate Transaction"); excluding, however, such a Corporate
Transaction pursuant to which (A) all or substantially all
-10-
of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares
of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
<PAGE>
election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction
owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) (the "Resulting Corporation") in substantially the
same proportions as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Corporation Common Stock
and Outstanding Corporation Voting Securities, as the case may be,
(B) no Person (other than the Corporation, any employee benefit
plan (or related trust) of the Corporation, any Woodson Entity, any
Smith Entity, or such Resulting Corporation) will beneficially own,
directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the Resulting Corporation or
the combined voting power of the then outstanding voting securities
of such Resulting Corporation entitled to vote generally in the
election of directors except to the extent that such ownership
existed with respect to the Corporation prior to the Corporate
Transaction, and (C) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the
board of directors of the Resulting Corporation; or
-11-
(iv) The Woodson Entities acquire beneficial ownership of more
than 35% of the Outstanding Corporation Common Stock or Outstanding
Corporation Voting Securities or of the outstanding shares of common
stock or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the Resulting Corporation; or
(v) The Smith Entities acquire beneficial ownership of more
than 35% of the Outstanding Corporation Common Stock or Outstanding
Corporation Voting Securities or of the outstanding shares of
common stock or the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the Resulting Corporation; or
(vi) The approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
For purposes of this Section 11(a), the term "Woodson Entities"
shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice
Richardson Yawkey, members of their respective families and their
respective descendants (the "Woodson Family"), heirs or legatees of any
of the Woodson Family members, transferees by will, laws of descent or
distribution or by operation of law of any of the foregoing (including
of any such transferees) (including any executor or administrator of
any estate of any of the foregoing), any trust established by any of
Aytchmonde P. Woodson, Leigh Yawkey Woodson, or Alice Richardson
Yawkey, whether pursuant to last will or otherwise, any partnership,
trust or other entity established primarily for the benefit of, or any
other Person the beneficial owners of which consist primarily of, any
of the foregoing or any Affiliates or Associates of any of the
-12-
<PAGE>
foregoing or any charitable trust or foundation to which any of the
foregoing transfers or may transfer securities of the Corporation
(including any beneficiary or trustee, partner, manager or director of
any of the foregoing or any other Person serving any such entity in a
similar capacity).
For purposes of this Section 11(a), the term "Smith Entities" shall
mean David B. Smith and Katherine S. Smith, members of their respective
families and their respective descendants (the "Smith Family"), heirs
or legatees of any of the Smith Family members, transferees by will,
laws of descent or distribution or by operation of law of any of the
foregoing (including of any such transferees) (including any executor
or administrator of any estate of any of the foregoing), any trust
established by either of David B. Smith or Katherine S. Smith, whether
pursuant to last will or otherwise, any partnership, trust or other
entity established primarily for the benefit of, or any other Person
the beneficial owners of which consist primarily of, any of the
foregoing or any Affiliates or Associates of any of the foregoing or
any charitable trust or foundation to which any of the foregoing
transfers or may transfer securities of the Corporation (including any
beneficiary or trustee, partner, manager or director of any of the
foregoing or any other Person serving any such entity in a similar
capacity).
For purposes of this Section 11(a), the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Plan.
(b) Effects of Change in Control.
(i) In the event of a Change in Control,
-13-
(A) all stock appreciation rights ("SARs") outstanding on the
date on which such Change in Control has occurred (the "Change in
Control Date") shall, to the extent not then exercisable or vested,
immediately become exercisable in full, and
(B) each grantee may elect, with respect to each SAR held by
such grantee on the Change in Control Date (the grantee's "Election
Right"), to surrender such SAR for an immediate lump sum cash
payment in an amount equal to the product of (1) the number of
shares of common stock of the Corporation ("Shares") then subject
to the SAR as to which the election is being exercised, multiplied
by (2) the excess, if any, of (a) the greater of (i) the Change in
Control Price or (ii) the highest Fair Market Value of a Share on
any day in the 60-day period ending on the Change in Control Date,
over (b) the date of grant value of such SAR. Upon exercise of a
grantee's Election Right, the value of all hypothetical reinvested
cash dividends associated with such SAR shall also be determined by
the greater of (i) the Change in Control Price or (ii) the highest
Fair Market Value of a Share on any day in the 60-day period ending
on the Change in Control Date. For purposes of this Section
11(b), the "Change in Control Price" shall mean, if the Change in
<PAGE>
Control is the result of a tender or exchange offer or a Corporate
Transaction (as defined in Section 11(a)(iii), the highest price
per Share paid in such tender or exchange offer or Corporate
Transaction. To the extent that the consideration paid in any such
transaction consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of the
Committee.
-14-
(ii) The exercise of an Election Right must be in writing,
specify the SAR or SARs and the number of Shares as to which the
election is being exercised, and be delivered to the Secretary of
the Corporation 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 Corporation's home office on or before the
60th day following the Change in Control Date.
(iii) All payments due an grantee pursuant to the provisions
of this Section 11(b) shall be made by the Corporation on or before
the first to occur of (A) the date provided in this Plan for
payment upon exercise of an SAR and (B) the 5th business day
following the date on which the grantee's election has been
delivered to the Corporation pursuant to Section 11(b)(ii).
(iv) Notwithstanding any other provision of this Section
11(b), if the grant or the exercise of a grantee's Election Right
or payment of cash provided for in this Section 11(b)would make a
Change in Control transaction ineligible for pooling-of-interests
accounting treatment under APB No. 16, that, but for the nature of
such grant or exercise of Election Rights, would otherwise be
eligible for such pooling-of-interests accounting treatment, the
Committee shall have the right and authority to modify, eliminate,
or terminate the Election Right to the extent necessary to preserve
such pooling-of-interests accounting treatment.
-15-
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, dated July 1, 1994, by and between WAUSAU PAPER
MILLS COMPANY (herein referred to as the "Corporation") and SAN W.
ORR, JR., an individual (herein referred to as "Executive").
W I T N E S S E T H:
WHEREAS, the Corporation and Executive entered into a deferred
compensation agreement dated March 2, 1990 and now desire to amend and
clarify certain provisions of that agreement;
<PAGE>
NOW, THEREFORE, the parties agree as follows:
1. ELECTION TO DEFER. Executive may, in his discretion, elect to
defer all or any cash compensation (specified by amount or percentage
of such compensation) payable to him by the Corporation from time to
time for service to the Corporation as an employee by executing an
election in the form set forth in Exhibit A hereto (herein referred to
as an "Election") and filing such Election with the secretary of the
Corporation (herein referred to as the "Secretary"). An Election shall
be effective with respect to all cash compensation specified on the
election form filed with the Secretary by Executive which is accrued
and payable after the date the Election is received by the Secretary
and until the Election is amended or revoked. An Election hereunder
may be amended or revoked at any time by filing a subsequent Election
with the Secretary.
-1-
Such amendment or revocation shall be effective with respect to cash
compensation accrued and payable on and after receipt of such new
Election by the Secretary.
2. DEFERRED COMPENSATION ACCOUNT. The Corporation shall maintain
upon its corporate books a deferred compensation account (herein
referred to as the "Account") with respect to any compensation deferred
under this agreement. As of the first day of each calendar month, the
Corporation shall make the following adjustments to the Account: (a)
Subtract amounts paid from the Account during the immediately preceding
month; and (b) Add the amount of compensation Executive has elected to
defer under paragraph 1 which was otherwise payable to Executive during
the immediately preceding month. As of the first day of each calendar
year, the Corporation shall add to the Account simple interest,
calculated at a rate equal to average of the prime rate published in
THE WALL STREET JOURNAL on the first business day of each calendar
quarter in the preceding calendar year, minus one percentage point, on
the average daily balance in the Account during the preceding year.
The Account created hereunder shall not represent any specific assets
of the Corporation, and the Corporation is not obligated by this
provision to set aside any assets in respect of the Account.
3. DISTRIBUTION. Distribution of the amount reflected in the
Account shall be made in 5 annual installments with the first
installment payment to be made within the 60 day period following the
date on which Executive ceases to be a member of the Board of Directors
of the Corporation; provided, however, that in the event of a "Change
in Control" (defined below) or Executive's death, the remaining balance
in the Account shall be distributed within the 60 day period following
the date of such event in a single lump sum payment. The amount of
-2-
each annual installment distribution shall equal the balance in the
Account on the date set for payment of such installment divided by the
number of installment distributions remaining within the distribution
period (including such installment). Interest shall continue to be
credited under paragraph 2 during the installment distribution period.
For purposes of this paragraph 3, a "Change in Control" shall mean:
<PAGE>
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either
(i) the then outstanding shares of common stock of the Corporation
(the "Outstanding Corporation Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors
(the "Outstanding Corporation Voting Securities"); excluding,
however, the following: (A) any acquisition directly from the
Corporation other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was
itself acquired directly from the Corporation, (B) any acquisition
by the Corporation, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Corporation or any
entity controlled by the Corporation, (D) any acquisition pursuant
to a transaction which complies with clauses (i), (ii), and (iii) of
subparagraph (c) of this paragraph 3, (E) except as provided in
paragraphs (d) and (e), any acquisition by any of the Woodson
Entities or any of the Smith Entities, or (F) any increase in the
proportionate number of shares of Outstanding Corporation Common
Stock or Outstanding Corporation Voting
-3-
Securities beneficially owned by a Person to 20% or more of the
shares of either of such classes of stock if such increase was
solely the result of the acquisition of Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities by the
Corporation; provided, however, that this clause (F) shall not
apply to any acquisition of Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities not described in clauses
(A), (B), (C), (D), or (E) of this paragraph (a) by the Person
acquiring such shares which occurs after such Person had become the
beneficial owner of 20% or more of either the Outstanding
Corporation Common Stock or Outstanding Corporation Voting
Securities by reason of share purchases by the Corporation; or
(b) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of the Plan, that any
individual who becomes a member of the Board subsequent to the
Effective Date whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be deemed to be and shall be
considered as though such individual were a member of the Incumbent
Board, but provided, further, that any such individual whose
initial assumption of office occurs as a result of either an actual
or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under
-4-
<PAGE >
the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board shall not be so deemed or considered as a member of the
Incumbent Board; or
(c) Consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or substantially
all of the assets of the Corporation or the acquisition of the
assets or securities of any other entity (a "Corporate
Transaction"); excluding, however, such a Corporate Transaction
pursuant to which (i) all or substantially all of the individuals
and entities who are the beneficial owners, respectively, of the
Outstanding Corporation Common Stock and Outstanding Corporation
Voting Securities immediately prior to such Corporate Transaction
will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as
a result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either directly or
through one or more subsidiaries) (the "Resulting Corporation") in
substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities, as the
case may be, (ii) no Person (other than the Corporation, any
employee benefit plan (or related trust) of the Corporation, any
Woodson Entity, any Smith Entity, or such Resulting Corporation)
-5-
will beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the
Resulting Corporation or the combined voting power of the then
outstanding voting securities of such Resulting Corporation
entitled to vote generally in the election of directors except to
the extent that such ownership existed with respect to the
Corporation prior to the Corporate Transaction, and (iii)
individuals who were members of the Incumbent Board will constitute
at least a majority of the members of the board of directors of the
Resulting Corporation; or (d) The Woodson Entities acquire
beneficial ownership of more than 35% of the Outstanding
Corporation Common Stock or Outstanding Corporation Voting
Securities or of the outstanding shares of common stock or the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the Resulting Corporation; or (e) The Smith
Entities acquire beneficial ownership of more than 35% of the
Outstanding Corporation Common Stock or Outstanding Corporation
Voting Securities or of the outstanding shares of common stock or
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the Resulting Corporation; or (f) The approval by
the shareholders of the Corporation of a complete liquidation or
dissolution of the Corporation.
<PAGE>
4. RECIPIENT OF DISTRIBUTION. Each payment to be made by the
Corporation hereunder shall be made to Executive if he is living on the
date such payment is made, and, if he is not, to such person or persons
(the "Beneficiary" or "Beneficiaries") as Executive shall designate on
-6-
the form set forth in Exhibit A or in such other writing signed by the
Executive. Executive may change or revoke any such designation
previously made by filing a new designation with the Secretary. Such
new designation shall be effective for purposes of this paragraph
immediately upon filing. If no designation hereunder is in effect or
no designated Beneficiary is living when payment is to be made, payment
shall be made to the estate of the last to die of Executive or, if a
Beneficiary has been designated and such designation has not been
revoked, the Beneficiary.
5. MISCELLANEOUS.
(a) Neither Executive nor any Beneficiary shall have any
right or title to or interest in any specific assets of the
Corporation in respect of this agreement. Any person entitled to
payment under the agreement shall be an unsecured general creditor
of the Corporation in respect of such payment.
(b) Except as may otherwise be required by law, no amount
payable under this agreement may be alienated in any manner by
Executive or any Beneficiary or be subject to the debts or
liabilities of Executive or any Beneficiary. Any attempt by
Executive or any Beneficiary to alienate any amount payable under
the agreement shall be void.
(c) This agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legatees,
personal representatives and successors.
-7-
IN WITNESS WHEREOF, the parties hereto have caused this agreement
to be executed on the date and year first above written.
WAUSAU PAPER MILLS COMPANY
By: STEVEN A SCHMIDT
Steven A. Schmidt
Vice President Finance,
Treasurer & Secretary
SAN W. ORR JR.
San W. Orr, Jr., Executive
-8-
<PAGE>
EXHIBIT A
WAUSAU PAPER MILLS COMPANY
DEFERRED COMPENSATION AGREEMENT ELECTION
Date: _________________, 1994
Pursuant to the provisions of the Deferred Compensation Agreement
dated July 1, 1994 (the "Agreement"), I hereby elect to defer the
payment of the following compensation otherwise payable to me by Wausau
Paper Mills Company.
(1) The amount or percentage of such compensation to be deferred
under the Agreement shall be as follows:
Dollar Amount or
TYPE OF COMPENSATION DEFERRAL PERCENTAGE
Salary __________________________________
Bonus __________________________________
(2) This election shall remain in effect until I amend or revoke
it by subsequent election, or until the time set for distribution of
deferred amounts under the Agreement.
(3) In the event of my death before the amounts payable to me
under the Agreement have been distributed to me, I hereby direct that
such amounts be paid in a lump sum to:
(NOTE: If no beneficiary is named, any amounts payable will be paid to
your estate or personal representative. You must notify the Secretary
of the Corporation of any change in your beneficiary's address.)
___________________________________
San W. Orr, Jr.
WAUSAU-MOSINEE PAPER CORPORATION
1991 EMPLOYEE STOCK OPTION PLAN
As amended March 4, 1999
WAUSAU-MOSINEE PAPER CORPORATION
1991 EMPLOYEE STOCK OPTION PLAN
<PAGE>
Wausau-Mosinee Paper Corporation, a Wisconsin corporation (the
"Company"), hereby adopts the Wausau-Mosinee Paper Corporation 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
-1-
16 of the Securities Exchange Act of 1934 (the "Exchange Act") and the
definition of an "Outside Director" in the regulations under Section
162(m) of the Code. 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.
Section 4. ELIGIBLE EMPLOYEES.
<PAGE>
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.
-2-
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.
-3-
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 or Non-Qualified 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.
<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.
-4-
(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
-5-
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,
<PAGE>
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 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.
(i) Except as otherwise provided in Section 6.2(e)(ii), 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
-6-
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 (the "90-day
limit") shall be deemed to have been satisfied, and, provided
further, that the Committee may permit the exercise of a
Non-Qualified Stock Option without regard to "90-day limit"
if (A) the Optionee (or the Optionee's personal
representative or estate in the event of the Optionee's
death) is, in the sole discretion of the Committee, directly
or indirectly prevented from exercising such option by reason
of the application of federal securities laws within the
90-day limit or the Company or its shareholders would be
adversely affected by reason of the application of federal
securities laws to an exercise of such option within such
90-day limit, (B) the Optionee was not, at the time of his
termination of employment, a person with respect to whom
payment of compensation by the Company is then subject to (or
would be, but for an exemption from) the provisions of
Section 162(m) of the Code, and (C) such action by the
Committee would not adversely affect the tax or accounting
practices of the Company or otherwise adversely affect the
business or operations of the Company.
(ii) In the event an Optionee has attained his Retirement Date (as
defined herein), (A) the provisions of Section 6(e)(i) shall
not be applicable to such Optionee's Non-Qualified Stock
Options and (B) such Optionee's Non-Qualified Stock Options
shall not be exercisable after the second anniversary of such
-7-
Optionee's Retirement Date. For purposes of this Plan, the
term "Retirement Date" shall mean the date on which the
Optionee's employment with the Company (and any parent or
subsidiary of the Company) terminates (including termination
<PAGE>
because of death) if the Optionee had then attained age 55 and
completed ten calendar years of service with the Company (or
any parent or subsidiary of the Company).
(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
-8-
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.
(h) LIMITATION ON OPTION GRANTS. No Optionee may be granted
options under Section 5 of the Plan in any fiscal year with respect
to more than 50,000 Shares.
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 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
<PAGE>
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.
-9-
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 the day next
following the last day such option could be exercised by the Optionee
under Section 6.2(e); 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 on or before the last day such
option could be exercised by the Optionee under Section 6.2(e), 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
-10-
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) (A) for options subject to
Section 6.2(e)(i), the date which is twelve months after the date of
the Optionee's death, and (B) for options subject to Section
6.2(e)(ii), the second anniversary of the deceased Optionee's
Retirement Date.
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
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 constitutes a change in the
material terms of 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.
<PAGE>
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.
-11-
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
-12-
if the Plan and any options granted pursuant to it were not in effect.
Section 15. CHANGE IN CONTROL.
15.1 DEFINITION OF "CHANGE IN CONTROL." For purposes of the
Plan, a "Change in Control" means the happening of any of the
following events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
<PAGE>
either (i) the then outstanding Shares (the "Outstanding
Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however,
the following: (A) any acquisition directly from the Company
other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted
was itself acquired directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the
Company, (D) any acquisition pursuant to a transaction which
complies with clauses (i), (ii), and (iii) of paragraph (c) of
this Section 15.1, (E) except as provided in paragraphs (d)
and (e), any acquisition by any of the Woodson Entities or any
of the Smith Entities, or (F) any increase in the
proportionate number of shares of Outstanding Company Common
Stock or Outstanding Company Voting Securities beneficially
owned by a Person to 20% or more of the shares of either of
-13-
such classes of stock if such increase was solely the result
of the acquisition of Outstanding Company Common Stock or
Outstanding Company Voting Securities by the Company;
provided, however, that this clause (F) shall not apply to any
acquisition of Outstanding Company Common Stock or Outstanding
Company Voting Securities not described in clauses (A), (B),
(C), (D), or (E) of this paragraph (a) by the Person acquiring
such shares which occurs after such Person had become the
beneficial owner of 20% or more of either the Outstanding
Company Common Stock or Outstanding Company Voting Securities
by reason of share purchases by the Company; or
(b) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute
the Board (such Board shall be hereinafter referred to as
the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, for
purposes of the Plan, that any individual who becomes a
member of the Board subsequent to the Effective Date
whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at
least a majority of those individuals who are members of
the Board and who were also members of the Incumbent
Board (or deemed to be such pursuant to this proviso)
shall be deemed to be and shall be considered as though
such individual were a member of the Incumbent Board, but
provided, further, that any such individual whose initial
assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A
-14-
promulgated under the Exchange Act) or other actual or
<PAGE>
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board shall
not be so deemed or considered as a member of the Incumbent
Board; or
(c) Consummation of a reorganization, merger or consolidation, or
sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of the assets or
securities of any other entity (a "Corporate Transaction");
excluding, however, such a Corporate Transaction pursuant to
which (i) all or substantially all of the individuals and
entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) (the "Resulting
Corporation") in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (other
than the Company, any employee benefit plan (or related trust)
of the Company, any Woodson Entity, any Smith Entity, or such
Resulting Corporation) will beneficially own, directly or
indirectly, 20%
-15-
or more of, respectively, the outstanding shares of common
stock of the Resulting Corporation or the combined voting
power of the then outstanding voting securities of such
Resulting Corporation entitled to vote generally in the
election of directors except to the extent that such ownership
existed with respect to the Company prior to the Corporate
Transaction, and (iii) individuals who were members of the
Incumbent Board will constitute at least a majority of the
members of the board of directors of the Resulting
Corporation; or (d) The Woodson Entities acquire beneficial
ownership of more than 35% of the Outstanding Company Common
Stock or Outstanding Company Voting Securities or of the
outstanding shares of common stock or the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the Resulting Corporation; or
(e) The Smith Entities acquire beneficial ownership of more
than 35% of the Outstanding Company Common Stock or
Outstanding Company Voting Securities or of the outstanding
shares of common stock or the combined voting power of the
then outstanding voting securities entitled to vote generally
<PAGE>
in the election of directors, as the case may be, of the
Resulting Corporation; or
(f) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
For purposes of this Section 15.1, the term "Woodson Entities"
shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice
Richardson Yawkey, members of their respective families and their
respective descendants (the "Woodson Family"), heirs or legatees of
any of the
-16-
Woodson Family members, transferees by will, laws of descent or
distribution or by operation of law of any of the foregoing
(including of any such transferees) (including any executor or
administrator of any estate of any of the foregoing), any trust
established by any of Aytchmonde P. Woodson, Leigh Yawkey Woodson,
or Alice Richardson Yawkey, whether pursuant to last will or
otherwise, any partnership, trust or other entity established
primarily for the benefit of, or any other Person the beneficial
owners of which consist primarily of, any of the foregoing or any
Affiliates or Associates of any of the foregoing or any charitable
trust or foundation to which any of the foregoing transfers or may
transfer securities of the Company (including any beneficiary or
trustee, partner, manager or director of any of the foregoing or
any other Person serving any such entity in a similar capacity).
For purposes of this Section 15.1, the term "Smith Entities" shall
mean David B. Smith and Katherine S. Smith, members of their
respective families and their respective descendants (the "Smith
Family"), heirs or legatees of any of the Smith Family members,
transferees by will, laws of descent or distribution or by
operation of law of any of the foregoing (including of any such
transferees) (including any executor or administrator of any estate
of any of the foregoing), any trust established by either of David
B. Smith or Katherine S. Smith, whether pursuant to last will or
otherwise, any partnership, trust or other entity established
primarily for the benefit of, or any other Person the beneficial
owners of which consist primarily of, any of the foregoing or any
Affiliates or Associates of any of the foregoing or any charitable
trust or foundation to which
-17-
any of the foregoing transfers or may transfer securities of the
Company (including any beneficiary or trustee, partner, manager or
director of any of the foregoing or any other Person serving any
such entity in a similar capacity).
For purposes of this Section 15.1, the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act
as in effect on the date of this Plan.
Section 15.2 EFFECTS OF CHANGE IN CONTROL.
<PAGE>
(a) In the event of a Change in Control,
(i) all options outstanding on the date on which such Change in
Control has occurred (the "Change in Control Date") shall, to
the extent not then exercisable or vested, immediately become
exercisable in full, and
(ii) each Optionee may elect, with respect to each option held by
such Optionee on the Change in Control Date (the Optionee's
"Election Right"), to surrender such option for an immediate
lump sum cash payment in an amount equal to the product of (A)
the number of Shares then subject to the option as to which
the election is being exercised, multiplied by (B) the excess,
if any, of (1) the greater of (a) the Change in Control Price
or (b) the highest fair market value of a Share on any day in
the 60-day period ending on the Change in Control Date, over
(2) the option price of such option. For purposes of this
Section 15.2, the "Change in Control Price" shall mean, if the
Change in Control is the result of a tender or exchange offer
or a Corporate Transaction (as defined in Section 15.1(c), the
highest price per Share paid in such tender or exchange offer
or Corporate Transaction;
-18-
provided, however, that in the case of Incentive Stock
Options, the Change in Control Price shall be in all cases
the Fair Market Value of the Shares on the date such Incentive
Stock Option is exercised. To the extent that the
consideration paid in any such transaction consists all or in
part of securities or other noncash consideration, the value
of such securities or other noncash consideration shall be
determined in the sole discretion of the Committee.
(b) The exercise of an Election Right must be in writing, specify
the option or options and the number of Shares as to which the
election is being exercised, and be 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 on or
before the 60th day following the Change in Control Date.
(c) All payments due an Optionee pursuant to the provisions of
this Section 15.2 shall be made by the Company on or before
the 5th business day following the date on which the
Optionee's election has been delivered to the Company pursuant
to Section 15.2(b).
(d) Notwithstanding any other provision of this Section 15.2, if
the grant or the exercise of an Optionee's Election Right or
payment of cash provided for in Section 15.2(b) would make a
Change in Control transaction ineligible for
pooling-of-interests accounting treatment under APB No. 16,
that, but for the nature of such grant or exercise of Election
Rights or payment of cash, would otherwise be eligible for
-19-
<PAGE>
such pooling-of-interests accounting treatment, the
Committee shall have the right and authority to substitute for
the cash payments to be made to the Optionee pursuant to
Section 15.2(a), Common Stock with a fair market value,
determined as of the date of delivery of such Shares, equal to
the cash that would otherwise be payable to such Optionee in
connection with the exercise of an Optionee's Election Right
hereunder or, to the extent necessary to preserve such
pooling-of-interests accounting treatment, to otherwise
modify, eliminate, or terminate such Election Right.
-20-
WAUSAU-MOSINEE PAPER CORPORATION
DIVIDEND EQUIVALENT PLAN
As amended March 4, 1999
WAUSAU MOSINEE PAPER CORPORATION
DIVIDEND EQUIVALENT PLAN
1. PURPOSE.
The purpose of the Wausau-Mosinee Paper Corporation Dividend
Equivalent Plan (the "Plan") is to attract and retain outstanding
individuals as officers and key employees of Wausau-Mosinee Paper
Corporation (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
-1-
<PAGE>
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 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.
-2-
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.
<PAGE>
(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; provided, however, if the grantee's
termination occurred on his Retirement Date, the value of such dividend
equivalents shall be paid to the grantee (or his beneficiary in the
event of his death) on the first to occur of (i) his Retirement Date
-3-
if the grantee had exercised a stock option granted in tandem with the
grant of such dividend equivalents on or before such Retirement Date,
(ii) if the grantee had not exercised a stock option granted in tandem
with the grant of such dividend equivalents on or before such
Retirement Date, the first date after his Retirement Date on which the
grantee exercises such stock option granted in tandem with the grant of
such dividend equivalents, and (iii) the second anniversary of such
grantee's Retirement Date; provided, however, in each case, that only
the value of such proportion of the dividend equivalent as it
corresponds to the proportion of shares subject to such option as are
exercised shall be paid. 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 and (ii) the date on which the grantee exercises a stock
option granted in tandem with the grant of such dividend equivalents;
provided, however, if the grantee's termination occurred on his
Retirement Date, the value of such dividend equivalents shall be paid
to the grantee (or his beneficiary in the event of his death) on the
first to occur of (i) the first date after his Retirement Date on which
the grantee exercises a stock option granted in tandem with the grant
of such dividend equivalents and (ii) the second anniversary of such
grantee's Retirement Date; provided, however, in each case, 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. For purposes of this Plan, the term "Retirement Date"
shall mean the date on which the grantee's employment with the Company
(and any parent or subsidiary of the Company) terminates (including
termination because of death) if the grantee had
-4-
then attained age 55 and completed ten calendar years of service with
the Company (or any parent or subsidiary of the Company). 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
<PAGE>
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 payment of the value of such dividend equivalents is
provided for herein 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 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.
-5-
(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 substantially all of its assets, or from distributing all or
substantially all of its assets to its stockholders in liquidation, or
-6-
<PAGE>
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
-7-
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.
11. CHANGE IN CONTROL.
(a) Definition of "Change in Control." For purposes of the Plan,
a "Change in Control" means the happening of any of the following
events:
(i) The acquisition by any individual, entity or group
<PAGE>
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then outstanding Shares (the "Outstanding Company
Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); excluding, however, the following: (1) any
acquisition directly from the Company other than an acquisition by
virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the
Company, (2) any acquisition by the Company, (3) any acquisition by
any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company,
(4) any acquisition pursuant to a transaction which complies with
-8-
clauses (A), (B), and (C) of paragraph (iii) of this Section 11(a),
(5) except as provided in paragraphs (iv) and (v), any acquisition
by any of the Woodson Entities or any of the Smith Entities, or (6)
any increase in the proportionate number of shares of Outstanding
Company Common Stock or Outstanding Company Voting Securities
beneficially owned by a Person to 20% or more of the shares of
either of such classes of stock if such increase was solely the
result of the acquisition of Outstanding Company Common Stock or
Outstanding Company Voting Securities by the Company; provided,
however, that this clause (6) shall not apply to any acquisition of
Outstanding Company Common Stock or Outstanding Company Voting
Securities not described in clauses (1), (2), (3), (4), or (5) of
this paragraph (i) by the Person acquiring such shares which occurs
after such Person had become the beneficial owner of 20% or more of
either the Outstanding Company Common Stock or Outstanding Company
Voting Securities by reason of share purchases by the Company; or
(ii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of the Plan, that any
individual who becomes a member of the Board subsequent to the
Effective Date whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be deemed
-9-
to be and shall be considered as though such individual were a
member of the Incumbent Board, but provided, further, that any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board shall
not be so deemed or considered as a member of the Incumbent Board;
or
<PAGE>
(iii) Consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or substantially
all of the assets of the Company or the acquisition of the assets
or securities of any other entity (a "Corporate Transaction");
excluding, however, such a Corporate Transaction pursuant to which
(A) all or substantially all of the individuals and entities who
are the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than 60% of, respectively, the outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries)
(the "Resulting Corporation") in substantially the same proportions
as their ownership, immediately prior to such Corporate
-10-
Transaction, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (other than the Company, any employee benefit plan (or
related trust) of the Company, any Woodson Entity, any Smith
Entity, or such Resulting Corporation) will beneficially own,
directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the Resulting Corporation or
the combined voting power of the then outstanding voting securities
of such Resulting Corporation entitled to vote generally in the
election of directors except to the extent that such ownership
existed with respect to the Company prior to the Corporate
Transaction, and (C) individuals who were members of the
Incumbent Board will constitute at least a majority of the members
of the board of directors of the Resulting Corporation; or
(iv) The Woodson Entities acquire beneficial ownership of
more than 35% of the Outstanding Company Common Stock or
Outstanding Company Voting Securities or of the outstanding shares
of common stock or the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the Resulting
Corporation; or
(v) The Smith Entities acquire beneficial ownership of more
than 35% of the Outstanding Company Common Stock or Outstanding
Company Voting Securities or of the outstanding shares of common
stock or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the Resulting Corporation; or
-11-
(vi) The approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
<PAGE>
For purposes of this Section 11(a), the term "Woodson Entities"
shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice
Richardson Yawkey, members of their respective families and their
respective descendants (the "Woodson Family"), heirs or legatees of any
of the Woodson Family members, transferees by will, laws of descent or
distribution or by operation of law of any of the foregoing (including
of any such transferees) (including any executor or administrator of
any estate of any of the foregoing), any trust established by any of
Aytchmonde P. Woodson, Leigh Yawkey Woodson, or Alice Richardson
Yawkey, whether pursuant to last will or otherwise, any partnership,
trust or other entity established primarily for the benefit of, or any
other Person the beneficial owners of which consist primarily of, any
of the foregoing or any Affiliates or Associates of any of the
foregoing or any charitable trust or foundation to which any of the
foregoing transfers or may transfer securities of the Company
(including any beneficiary or trustee, partner, manager or director of
any of the foregoing or any other Person serving any such entity in a
similar capacity).
For purposes of this Section 11(a), the term "Smith Entities" shall
mean David B. Smith and Katherine S. Smith, members of their respective
families and their respective descendants (the "Smith Family"), heirs
or legatees of any of the Smith Family members, transferees by will,
laws of descent or distribution or by operation of law of any of the
foregoing (including of any such transferees) (including any executor
or administrator of any estate of any of the foregoing), any trust
established by either of David B. Smith or Katherine S. Smith, whether
-12-
pursuant to last will or otherwise, any partnership, trust or other
entity established primarily for the benefit of, or any other Person
the beneficial owners of which consist primarily of, any of the
foregoing or any Affiliates or Associates of any of the foregoing or
any charitable trust or foundation to which any of the foregoing
transfers or may transfer securities of the Company (including any
beneficiary or trustee, partner, manager or director of any of the
foregoing or any other Person serving any such entity in a similar
capacity).
For purposes of this Section 11(a), the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Plan.
(b) Effects of Change in Control. In the event of a Change in
Control,
(i) all dividend equivalents outstanding on the date on which
such Change in Control has occurred (the "Change in Control Date")
shall, to the extent not then vested, immediately become vested in
full, and
(ii) each grantee may elect, with respect to each dividend
equivalent held by such grantee on the Change in Control Date (the
<PAGE>
grantee's "Election Right"), to surrender such dividend equivalent
for an immediate lump sum cash payment in an amount 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; provided, however, that the value of such hypothetical
reinvested cash dividends shall be determined by the greater of (A)
the Change in Control Price or (B) the highest fair market value
-13-
of a share of common stock on any day in the 60-day period ending
on the Change in Control Date. For purposes of this Section 11(b),
the "Change in Control Price" shall mean, if the Change in Control
is the result of a tender or exchange offer or a Corporate
Transaction (as defined in Section 11(a)(iii)), the highest price
per share of common stock paid in such tender or exchange offer
or Corporate Transaction. To the extent that the consideration
paid in any such transaction consists all or in part of securities
or other noncash consideration, the value of such securities or
other noncash consideration shall be determined in the sole
discretion of the Committee.
-14-
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
This Supplemental Retirement Benefit Plan (the "Plan"), adopted
effective as of this 16th day of January, 1992, and amended November
13, 1995 and December 21, 1998, by Wausau-Mosinee Paper Corporation, a
Wisconsin corporation ("Wausau"), for the purposes of providing
deferred compensation in the form of supplemental retirement benefits
for San W. Orr, Jr. ("Mr. Orr") in recognition of his service to Wausau
as its Chairman of the Board of Directors and Chief Executive Officer
is hereby further amended effective as of this 4th day of March, 1999.
1. NORMAL SUPPLEMENTAL RETIREMENT BENEFIT. Beginning on the
first day of the first month following the last to occur of (a) Mr.
Orr's termination of employment with Wausau or (b) Mr. Orr's 60th
birthday, and continuing on the first day of each succeeding month,
Wausau shall pay to Mr. Orr, if he is then living, a monthly
supplemental retirement benefit (Mr. Orr's "Normal Supplemental
Retirement Benefit") in an amount equal to 50% of one-twelfth of
Mr. Orr's highest final average compensation. For purposes of this
Plan, "highest final average compensation" shall mean the annual
average of the sum of (a) all compensation paid to Mr. Orr and reported
on Form W-2 and (b) all amounts which would have been paid and reported
on Form W-2 but were deferred at Mr. Orr's election for the five
consecutive calendar year period which yields the highest aggregate
compensation so paid and deferred. Mr. Orr's Normal Supplemental
Retirement Benefit shall not be reduced or offset by the amount of any
<PAGE>
other payment then due him from Wausau or any other plan or program now
or hereafter maintained by Wausau.
-1-
2. SURVIVING SPOUSE BENEFIT. From and after the first day of the
first month following the later of (a) the month in which Mr. Orr's
death occurs or (b) the month in which Mr. Orr would have attained his
60th birthday if Mr. Orr's death occurs before he has attained age 60,
and continuing on the first day of each succeeding month, Wausau shall
pay to Mr. Orr's spouse, if then living (Mr. Orr's "Surviving Spouse"),
a monthly benefit (the "Supplemental Surviving Spouse Benefit") in an
amount equal to 50% of the Normal Supplemental Retirement Benefit to
which Mr. Orr would have then been entitled had he then been living.
3. CHANGE IN CONTROL OF WAUSAU.
(a) In the event a Change in Control of Wausau occurs prior
to Mr. Orr's death, Wausau shall pay to Mr. Orr a lump sum
amount equal to the present value of Mr. Orr's Normal
Supplemental Retirement Benefit, as determined hereunder, as
of the first day of the first month following such Change in
Control of Wausau on which Mr. Orr is neither an employee nor
a director of Wausau, whether or not such Change in Control
occurred prior to the date on which Mr. Orr shall have ceased
to be an employee or a director of Wausau. Upon payment
-2-
of the lump sum amount provided for in this subparagraph (a),
Wausau shall have no further obligation to pay any benefits under
this Plan.
(b) In the event a Change in Control occurs after Mr. Orr's
death and whether or not the Supplemental Surviving Spouse Benefit
shall have then become payable, Wausau shall pay to Mr. Orr's
Surviving Spouse, if then living, the present value of the unpaid
Supplemental Surviving Spouse Benefit. Upon payment of the lump
sum amount provided for in this subparagraph (b), Wausau shall have
no further obligation to pay any benefits under this Plan.
(c) For purposes of this plan, a "Change in Control of
Wausau" shall be mean the happening of any of the following events:
(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (A) the then outstanding shares of
common stock of Wausau (the "Outstanding Corporation Common
Stock") or (B) the combined voting power of the then
outstanding voting securities of Wausau entitled to vote
generally in the election of directors (the "Outstanding
Corporation Voting Securities"); excluding, however,
the following: (i) any acquisition directly from Wausau other
than an acquisition by virtue of the exercise of a conversion
<PAGE>
privilege unless the security being so converted was itself
acquired directly from Wausau, (ii) any acquisition by Wausau,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Wausau or any entity
controlled by Wausau, (iv) any acquisition pursuant to a
transaction which complies with clauses (A), (B), and (C) of
paragraph (3) of this Section 3(c), (v) except as provided in
paragraphs (4) and (5), any acquisition by any of the Woodson
Entities or any of the Smith Entities, or (vi) any increase in
the proportionate number of shares of Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities
beneficially owned by a Person to 20% or more of the shares of
either of such classes of stock if such increase was solely
the result of the acquisition of Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities by
Wausau; provided, however, that this clause (vi) shall not
apply to any acquisition of Outstanding Corporation Common
Stock or Outstanding Corporation Voting Securities not
described in clauses (1), (ii), (iii), (iv), or (v) of this
paragraph (1) by the Person acquiring such shares which occurs
after such Person had become the beneficial owner of 20% or
more of either the Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities by reason of share
purchases by Wausau; or
(2) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the
Board (such Board shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to constitute at least
a majority of the Board; provided, however, for purposes of
the Plan, that any individual who becomes a member of the
Board subsequent to the Effective Date whose election, or
nomination for election by Wausau's shareholders, was approved
by a vote of at least a
-3-
majority of those individuals who are members of the Board and
who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) shall be deemed to be and shall
be considered as though such individual were a member of the
Incumbent Board, but provided, further, that any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board shall not be so deemed or
considered as a member of the Incumbent Board; or
(3) Consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of Wausau or the acquisition
of the assets or securities of any other entity (a "Corporate
Transaction"); excluding, however, such a Corporate
Transaction pursuant to which (A) all or substantially all of
<PAGE>
the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding
shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a
result of such transaction owns or all or substantially all of
Wausau's assets either directly or through one or more
subsidiaries) (the "Resulting Corporation") in substantially
the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities, as
the case may be, (B) no Person (other than Wausau, any
employee benefit plan (or related trust) of Wausau, any
Woodson Entity, any Smith Entity, or such Resulting
Corporation) will beneficially own, directly or indirectly,
20% or more of, respectively, the outstanding shares of common
stock of the Resulting Corporation or the combined voting
power of the then outstanding voting securities of such
Resulting Corporation entitled to vote generally in the
election of directors except to the extent that such ownership
existed with respect to Wausau prior to the Corporate
Transaction, and (C) individuals who were members of the
Incumbent Board will constitute at least a majority of the
members of the board of directors of the Resulting
Corporation; or (4) the Woodson Entities acquire beneficial
ownership of more than 35% of the Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities or
of the outstanding shares of common stock or the combined
-4-
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the Resulting Corporation; or
(5) the Smith Entities acquire beneficial ownership of more
than 35% of the Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities or of the
outstanding shares of common stock or the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the Resulting Corporation; or
(6) The approval by the shareholders of Wausau of a complete
liquidation or dissolution of Wausau.
For purposes of this Section 3(c), the term "Woodson Entities"
shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice
Richardson Yawkey, members of their respective families and their
respective descendants (the "Woodson Family"), heirs or legatees of
<PAGE>
any of the Woodson Family members, transferees by will, laws of
descent or distribution or by operation of law of any of the
foregoing (including of any such transferees) (including any
executor or administrator of any estate of any of the foregoing),
any trust established by any of Aytchmonde P. Woodson, Leigh Yawkey
Woodson, or Alice Richardson Yawkey, whether pursuant to last will
or otherwise, any partnership, trust or other entity established
primarily for the benefit of, or any other Person the beneficial
owners of which consist primarily of, any of the foregoing or any
Affiliates or Associates of any of the foregoing or any charitable
trust or foundation to which any of the foregoing transfers or may
transfer securities of Wausau (including any beneficiary or
trustee, partner, manager or director of any of the foregoing or
any other Person serving any such entity in a similar capacity).
-5-
For purposes of this Section 3(c), the term "Smith Entities"
shall mean David B. Smith and Katherine S. Smith, members of their
respective families and their respective descendants (the "Smith
Family"), heirs or legatees of any of the Smith Family members,
transferees by will, laws of descent or distribution or by
operation of law of any of the foregoing (including of any such
transferees) (including any executor or administrator of any estate
of any of the foregoing), any trust established by either of David
B. Smith or Katherine S. Smith, whether pursuant to last will or
otherwise, any partnership, trust or other entity established
primarily for the benefit of, or any other Person the beneficial
owners of which consist primarily of, any of the foregoing or any
Affiliates or Associates of any of the foregoing or any charitable
trust or foundation to which any of the foregoing transfers or may
transfer securities of Wausau (including any beneficiary or
trustee, partner, manager or director of any of the foregoing or
any other Person serving any such entity in a similar capacity).
For purposes of this Section 3(c), the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act
as in effect on the date of this Plan.
(d) For purposes of this Plan, the present value of Mr. Orr's
Normal Supplemental Retirement Benefit or the Supplemental
Surviving Spouse Benefit shall be determined by reference to the
1983 Individual Annuity Mortality Table with an assumed interest
rate equal to the "immediate annuity rate" as then in effect as
determined by the Pension Benefit Guaranty Corporation and
promulgated in Appendix B to
-6-
29 C.F.R. <section> 2619.65 or any successor regulation adopted for
the same or substantially similar purpose.
4. SUPPLEMENTAL RETIREMENT BENEFITS IN ADDITION TO OTHER RIGHTS
AND BENEFITS. The rights and benefits conferred upon Mr. Orr (and Mr.
Orr's Surviving Spouse) pursuant to this Plan shall be in addition to
all other rights and benefits conferred upon Mr. Orr by Wausau by
reason of his employment.
<PAGE>
5. NATURE OF WAUSAU'S OBLIGATIONS AND MR. ORR'S RIGHTS. Neither
Mr. Orr nor his Surviving Spouse, if any, shall acquire any right,
title or interest in the assets of Wausau by reason of this Plan. To
the extent Mr. Orr or his Surviving Spouse shall acquire a right to
receive payments from Wausau pursuant to this Plan, such right shall be
no greater than the right of any unsecured general creditor of Wausau.
6. ASSIGNMENT BY MR. ORR PROHIBITED. This Plan and Mr. Orr's
rights and benefits hereunder (and the rights of his Surviving Spouse,
if any) shall not be subject to voluntary or involuntary sale, pledge,
hypothecation, transfer or assignment by Mr. Orr or such Surviving
Spouse, their personal representatives or heirs or any other person
or persons or organization or organizations succeeding to any of their
rights and benefits hereunder.
7. FUNDING. All benefits paid or payable pursuant to the terms
of this Plan shall be paid out of the general assets of Wausau.
8. CLAIMS PROCEDURE. The claims procedure set forth in the
Wausau Paper Retirement Plan or any successor to such plan is
incorporated herein by this reference as the claims procedure for
this Plan.
-7-
9. PLAN ADMINISTRATOR. The plan administrator and named
fiduciary of the Plan shall be Wausau.
10. BINDING EFFECT. This Plan shall be binding upon and inure to
the benefit of (1) Mr. Orr and his Surviving Spouse and their personal
representatives and heirs and any other person or persons or
organization or organizations succeeding to any of Mr. Orr's rights or
benefits hereunder, and (2) Wausau and its successors and assigns.
11. SEVERABILITY. The invalidity or unenforceability of any
provision of this Plan shall not invalidate or render unenforceable any
other provision of this agreement.
12. GOVERNING LAW. This Plan shall be governed by the Employee
Retirement Income Security Act of 1974, as amended, and to the extent
not preempted by such Act, by the laws of the State of Wisconsin.
IN WITNESS WHEREOF, Wausau has caused this amended agreement to be
executed by its President thereunto duly authorized as of this 4th day
of March, 1999.
WAUSAU-MOSINEE PAPER CORPORATION
By:________________________________
Daniel R. Olvey
As its President
-8-
<PAGE>
WAUSAU-MOSINEE PAPER CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
As amended March 4, 1999
WAUSAU-MOSINEE PAPER CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
1. ESTABLISHMENT OF PLAN. Wausau-Mosinee Paper Corporation (the
"Company") hereby amends and restates the Company's Directors' Deferred
Compensation Plan previously in effect and renames such plan, as herein
amended and restated, the Wausau-Mosinee Paper Corporation Directors'
Deferred Compensation Plan, all effective as of December 17, 1997 (the
"Plan").
2. PURPOSE. The purpose of the Plan is to provide an alternative
method of compensating members (the "Directors") of the Board of
Directors of the Company (the "Board"), 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
-1-
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
<PAGE>
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) A "CHANGE OF CONTROL OF THE COMPANY" shall mean the happening
of any of the following events:
(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then outstanding Common Stock (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); excluding, however, the following: (i) any
acquisition directly from the Company other than an acquisition by
virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the
-2-
Company, (iv) any acquisition pursuant to a transaction which
complies with clauses (A), (B), and (C) of subparagraph (3) of this
paragraph 3(b), (v) except as provided in paragraphs (iv) and (v),
any acquisition by any of the Woodson Entities or any of the Smith
Entities, or (vi) any increase in the proportionate number of
shares of Outstanding Company Common Stock or Outstanding Company
Voting Securities beneficially owned by a Person to 20% or more of
the shares of either of such classes of stock if such increase was
solely the result of the acquisition of Outstanding Company Common
Stock or Outstanding Company Voting Securities by the Company;
provided, however, that this clause (vi) shall not apply to any
acquisition of Outstanding Company Common Stock or Outstanding
Company Voting Securities not described in clauses (i), (ii),
(iii), (iv), or (v) of this paragraph (a) by the Person acquiring
such shares which occurs after such Person had become the
beneficial owner of 20% or more of either the Outstanding Company
Common Stock or Outstanding Company Voting Securities by reason of
share purchases by the Company; or (2) A change in the composition
of the Board such that the individuals who, as of the Effective
Date, constitute the Board (such Board shall be hereinafter
referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, for
purposes of the Plan, that any individual who becomes a member of
the Board subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of those individuals who are
members of the Board and who were also members of the Incumbent
Board (or deemed to be such pursuant to this proviso) shall be
-3-
<PAGE>
deemed to be and shall be considered as though such individual were
a member of the Incumbent Board, but provided, further, that any
such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board shall not be so deemed or considered as a member of the
Incumbent Board; or (3) Consummation of a reorganization, merger
or consolidation, or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition
of the assets or securities of any other entity (a "Corporate
Transaction"); excluding, however, such a Corporate Transaction
pursuant to which (A) all or substantially all of the individuals
and entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as
a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) (the "Resulting Corporation") in
substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be, (B) no Person (other than the Company,
-4-
any employee benefit plan (or related trust) of the Company, any
Woodson Entity, any Smith Entity, or such Resulting Corporation)
will beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the
Resulting Corporation or the combined voting power of the then
outstanding voting securities of such Resulting Corporation
entitled to vote generally in the election of directors except
to the extent that such ownership existed with respect to the
Company prior to the Corporate Transaction, and (C) individuals who
were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the Resulting
Corporation; or (4) The Woodson Entities acquire beneficial
ownership of more than 35% of the Outstanding Company Common Stock
or Outstanding Company Voting Securities or of the outstanding
shares of common stock or the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the Resulting
Corporation; or (5) The Smith Entities acquire beneficial
ownership of more than 35% of the Outstanding Company Common Stock
or Outstanding Company Voting Securities or of the outstanding
shares of common stock or the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the Resulting
<PAGE>
Corporation; or (6) The approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company.
For purposes of this paragraph 3(b), the term "Woodson Entities"
shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice
Richardson Yawkey, members of their respective families and their
-5-
respective descendants (the "Woodson Family"), heirs or legatees of any
of the Woodson Family members, transferees by will, laws of descent or
distribution or by operation of law of any of the foregoing (including
of any such transferees) (including any executor or administrator of
any estate of any of the foregoing), any trust established by any of
Aytchmonde P. Woodson, Leigh Yawkey Woodson, or Alice Richardson
Yawkey, whether pursuant to last will or otherwise, any partnership,
trust or other entity established primarily for the benefit of, or any
other Person the beneficial owners of which consist primarily of, any
of the foregoing or any Affiliates or Associates of any of the
foregoing or any charitable trust or foundation to which any of the
foregoing transfers or may transfer securities of the Company
(including any beneficiary or trustee, partner, manager or director of
any of the foregoing or any other Person serving any such entity
in a similar capacity).
For purposes of this paragraph 3(b), the term "Smith Entities"
shall mean David B. Smith and Katherine S. Smith, members of their
respective families and their respective descendants (the "Smith
Family"), heirs or legatees of any of the Smith Family members,
transferees by will, laws of descent or distribution or by operation
of law of any of the foregoing (including of any such transferees)
(including any executor or administrator of any estate of any of the
foregoing), any trust established by either of David B. Smith or
Katherine S. Smith, whether pursuant to last will or otherwise, any
partnership, trust or other entity established primarily for the
benefit of, or any other Person the beneficial owners of which consist
primarily of, any of the foregoing or any Affiliates or Associates of
any of the foregoing or any charitable trust or foundation to which any
of the foregoing transfers or may transfer securities of the Company
(including any beneficiary or trustee,
-6-
partner, manager or director of any of the foregoing or any other
Person serving any such entity in a similar capacity)
.
For purposes of this paragraph 3(b), the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as in
effect on the 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.
4. RIGHT TO DEFER DIRECTORS' FEES.
(a) Each Director may elect before January 1 of any fiscal year of
the Company to become a Participant and to defer the payment of all or
any portion 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
-7-
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 all or any portion of the
Directors' Fees earned and payable (1) from and after the date on which
he is elected a Director if an election is filed on or before the date
of such election or (2), if no election is filed pursuant to clause
(1), on the first day of the first month immediately following the
month in such fiscal year in which such election is made. An election
by a Director to defer Directors' Fees pursuant to this subparagraph
(b) shall remain in effect until the last day of 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.
-8-
5. ACCOUNTING AND ELECTIONS.
(a) The Company shall establish a Deferred Cash Account and a
Deferred Stock Account in the name of each Participant.
<PAGE>
(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. Each fiscal 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
-9-
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 pursuant to this
paragraph 5 which changes the Account to which Directors' Fees
deferred in a subsequent fiscal year are to be allocated or changes
the Account to which any balance in such Participant's Accounts
shall be allocated shall be effective (1) until such election has
been approved by the Board or (2) if it is made by a Participant
within six months of the immediately preceding election filed by
such Participant and any such election which shall not have been
approved by the Board or which occurs within the period described
in clause (2) 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
<PAGE>
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.
-10-
(d) Despite any other provision of this Plan, the most recent
election in effect on December 17, 1997 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 17, 1997 until changed by such Director for a future
fiscal year in accordance with the terms of the Plan.
(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.
(f) Effective as of March 31, 1998, each participant in the
Mosinee Paper Corporation Deferred Compensation Plan for Directors as
in effect on March 31, 1998 (the "Mosinee Plan") shall become a
Participant in the Plan (a "Mosinee Participant") and (1) the Deferred
Cash Account created in the name of each such Mosinee Participant
pursuant to paragraph 5(a) shall be credited with the balance, if any,
of such Mosinee Participant's Deferred Cash Account in the Mosinee Plan
as of March 31, 1998 and such Mosinee Participant's Deferred Cash
Account in the Mosinee Plan shall thereafter be represented by the
Deferred Cash Account established hereunder and shall be subject to all
terms and conditions of this Plan and (2) the Deferred Stock Account
created in the name of each such Mosinee Participant pursuant to
paragraph 5(a) shall be credited with the balance, if any, of such
Mosinee Participant's Deferred Stock Account in the Mosinee Plan as of
March 31, 1998 and such Mosinee Participant's Deferred Stock Account in
the Mosinee Plan shall thereafter be represented by the Deferred Stock
Account established hereunder and shall be subject to all terms and
conditions of this Plan. The Deferred Cash Account and the Deferred
Stock Account of any Mosinee Participant who is, on March 31,
-11-
1998, or who thereafter becomes, a Participant by virtue of being a
Director shall be combined with and maintained as one account with,
respectively, the Deferred Cash Account and the Deferred Stock Account
maintained for such Director with respect to his Directors' Fees.
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.
<PAGE>
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
-12-
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).
-13-
(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
<PAGE>
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:
(A) fiscal quarter in which distribution of the Participant's
Accounts shall begin (but in no event (i) earlier than the
Director's Termination of Service or (ii) later than the earlier
of (a) the Director's 70th birthday or (b) the date five years
after the date of the Director's Termination of Service; and
(B) 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 (1) such election has been made
and (2) such election has been approved by the Board.
(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
-14-
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
<PAGE>
the Fair Market Value of the Common Stock taken into account for
purposes of clause (A) of the preceding sentence.
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.
-15-
(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 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, 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, be paid to the Participant's legal representative, or to any
other person for his benefit and in such case, the Board 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.
(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, or
to be re-elected to the Board.
-16-
(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 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
<PAGE>
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 shall be final as to any Participant under this Plan.
(f) The Board 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.
-17-
MOSINEE PAPER CORPORATION
1985 EXECUTIVE STOCK OPTION PLAN
As amended March 4, 1999
MOSINEE PAPER CORPORATION
1985 EXECUTIVE STOCK OPTION PLAN
1. PURPOSE. The Mosinee Paper Corporation 1985 Executive
Stock Option Plan (the "Plan") is intended to attract and retain key
executive employees by permitting such employees of Mosinee Paper
Corporation (the "Company") or any parent or subsidiary of the Company
to acquire authorized and unissued, or reacquired, shares of common
stock, $2.50 par value, of the Company ("Stock") pursuant to purchase
options. The availability of the options and grants thereof will
furnish additional inducements to such employees to continue employment
with the Company, or any parent or subsidiary of the Company, and
encourage them, by giving them an opportunity to acquire a greater
stake in the Company's success, to increase their efforts to promote
the best interests of the Company and its stockholders. Subject to the
provisions of the Plan, there may be granted options containing such
terms and conditions as shall be requisite to constitute them
"nonqualified stock options," i.e., options which are not "incentive
stock options" within the meaning of Section 422A of the Internal
Revenue Code of 1954, as amended (the "Code"). A key employee may be
granted and may hold one or more nonqualified stock options under this
Plan.
2. ELIGIBLE EMPLOYEES. The persons eligible to receive
options under the Plan shall be key executive employees (who may also
be officers or directors) of the Company or any parent or subsidiary of
the Company and who are selected by the Executive Compensation & Bonus
-1-
<PAGE>
Committee (the"Committee") designated by the Board of Directors of the
Company (the "Board"). Directors of the Company or any parent or
subsidiary of the Company who are not also employees of the Company
or any parent or subsidiary of the Company shall not be eligible to
receive options under the Plan.
3. TIME AND MANNER OF GRANTING OPTIONS. From and after the
Effective Date of the Plan (as defined in Section 16 hereof) and
continuing to the close of business on the tenth anniversary of such
Effective Date, the Committee may, at such time or times as the
Committee may determine, grant to any one or more eligible employees
("Optionees") nonqualified stock options, each such option to cover the
purchase of such number of shares of Stock upon such terms and
conditions not inconsistent with the Plan as the Committee shall from
time to time determine.
No person shall have any right to an option or any other right
under the Plan unless and until an option shall be granted to such
person by the Committee. Subject to the provisions of Section 9
hereof, no more than 90,000 shares of Stock shall be sold pursuant to
the exercise of all options granted hereunder. Any shares for which an
option is granted hereunder which for any reason are released from such
option by expiration or termination thereof or otherwise shall be
available for reoptioning under this Plan. The Company shall,
forthwith upon the granting of an option, mail or deliver to the
Optionee a copy of the Plan and an option certificate evidencing such
option. Option certificates shall be in such
-2-
form and shall contain such terms and provisions not inconsistent with
the Plan as the Committee shall deem appropriate.
4. TERM OF OPTIONS. In no event shall any stock option
granted under the Plan be exercisable after the expiration of twenty
years from the date such option is granted.
5. TERMS AND CONDITIONS.
(a) Nonqualified stock options granted under this Plan
shall contain such provisions, not inconsistent with this Plan, as
may be deemed advisable by the Committee.
(b) The option price per share of Stock under any
nonqualified stock option granted hereunder shall be not less than one
hundred per cent (100%) of the fair market value of one share of Stock
on the date such option is granted.
6. MANNER OF EXERCISE OF OPTIONS.
(a) Subject to the provisions of Section 8 hereof, each
option granted hereunder shall become exercisable on the date specified
in the option agreement but in no event earlier than six months after
the date of grant. Any shares with respect to which an option becomes
exercisable shall remain available for purchase by exercise of the
option in accordance with its terms at any time or from time to time
before the option expires.
<PAGE>
(b) Exercise shall be effected only by delivery to the
Company of an irrevocable written notice of the Optionee's election
to exercise the option with respect to a specified whole number of
shares of Stock. Such exercise must be followed within five (5)
-3-
business days by payment in cash to the Company of (i) the amount of
the option purchase price for the number of shares of Stock as to which
the option is then being exercised and (ii) the amount of any
applicable federal or state withholding taxes. The Optionee's failure
to so pay shall result in the forfeiture of his rights under the Plan
for the number of shares specified in the notice. No option may be
exercised with respect to a fractional share of Stock.
7. NON-TRANSFERABILITY. Options granted hereunder shall not
be transferable by an Optionee otherwise than by will or the laws of
descent and distribution and may, during the lifetime of an Optionee,
be exercised only by such Optionee.
8. EXERCISE AFTER TERMINATION OF EMPLOYMENT.
(a) For purposes of the Plan and each option granted under
the Plan, an Optionee's employment shall be deemed to have terminated
at the close of business on the day preceding the first date on which
he is no longer for any reason whatsoever employed by the Company or
by any parent or subsidiary of the Company, provided that the Committee
may determine in one or more particular cases that a leave of absence
granted by the employing corporation shall not result in the
termination of an Optionee's employment.
(b) If an Optionee's employment is terminated by his
voluntary resignation or if he is discharged for cause, any option held
by the Optionee shall expire on the date of such termination. For
purposes of this section, "for cause" shall mean affirmative acts in
-4-
violation of federal, state, or local criminal law.
(c) If an Optionee dies while such Optionee is an employee of
the Company or any parent or subsidiary of the Company or within three
months after his termination of employment for a reason other than
voluntary resignation or discharge for cause, any option held by such
Optionee at the date of the Optionee's death may be exercised by such
Optionee's estate or the person to whom such option is transferred by
will or the applicable laws of descent and distribution with respect to
all or any part of that number of shares of Stock as to which such
option was exercisable by the Optionee immediately before his death but
only if the date of exercise is both within 20 years from the Date of
Grant (or such shorter period in which the option would have expired if
the Optionee had lived and remained in the Company's employ) and within
one year after the date of the Optionee's death. In the event an
Optionee has attained his Retirement Date (as defined herein), (i) the
provisions of Section 8(b) and of the preceding sentence shall not be
applicable to such Optionee's nonqualified stock options and (ii) any
nonqualified stock option held by such Optionee at the date of the
<PAGE>
Optionee's death may be exercised by such Optionee's estate or the
person to whom such option is transferred by will or the applicable
laws of descent and distribution with respect to all or any part of
that number of shares of Stock as to which such option was exercisable
by the Optionee immediately before his death but only if the
-5-
date of exercise is both within 20 years from the Date of Grant (or
such shorter period in which the option would have expired if the
Optionee had lived and remained in the Company's employ) and on or
before the second anniversary of the Optionee's Retirement Date. For
purposes of this Plan, the term "Retirement Date" shall mean the date
on which the Optionee's employment with the Company (and any parent or
subsidiary of the Company) terminates (including termination because of
death) for a reason other than cause if the Optionee had then attained
age 55 and completed ten calendar years of service with the Company
(or any parent or subsidiary of the Company).
(d) If an Optionee's employment is terminated for any reason
other than voluntary resignation, discharge for cause or death, any
option held by the Optionee may be exercised at any time which is both
before the time the option would otherwise expire and within three
months after the date of such cessation of employment, but only with
respect to that number of shares of Stock which the Optionee would have
been permitted to purchase under his option immediately before the date
of termination of such Optionee's employment. In the event an Optionee
has attained his Retirement Date, (i) the provisions of Section 8(b)
and of the preceding sentence shall not be applicable to such
Optionee's nonqualified stock options and (ii) such Optionee's
nonqualified stock options may be exercised at any time which is both
before the time the option would
-6-
otherwise expire and on or before the second anniversary of the
Optionee's Retirement Date, but only with respect to that number of
shares of Stock which the Optionee would have been permitted to
purchase under his option immediately before the date of termination of
such Optionee's employment.
9. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC. If the
Company shall, after the Effective Date, change its Stock into a
greater or lesser number of shares through a stock dividend, stock
split-up or combination of shares, then
(i) the number of shares of Stock then subject to the Plan but
which are not then subject to any outstanding option;
(ii) the number of shares of Stock subject to each then
outstanding option or (to the extent not previously
exercised); and
(iii) the price per share payable upon exercise of each then
outstanding option, shall all be proportionately
increased or decreased as of the record date for such
stock dividend, stock split-up or combination of shares
<PAGE>
in order to give effect thereto. Notwithstanding any
such proportionate increase or decrease, no fraction of a
share of Stock shall be issued upon the exercise of an
option. If any split-up or combination of shares shall
involve a change of par value, the shares of Stock
subject to options theretofore or
-7-
thereafter granted shall be the shares of Stock as so
changed.
If, after the Effective Date, there shall be any change in the
Stock of the Company other than through a stock dividend, stock
split-up or combination of shares, then if (and only if) the Committee
shall determine that such change equitably requires an adjustment in
the number or kind or option price of shares of Stock then subject to
an option, or the number or kind of shares remaining subject to the
Plan, such adjustment as the Committee shall determine is equitable
and as shall be approved by the Board shall be made and shall be
effective and binding for all purposes of such option and the Plan.
If any member of the Board shall, at the time of such approval, be an
Optionee, he shall not participate in action in connection with such
adjustment.
10. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee, which
shall consist of three or more persons selected by the Board from its
members. The Committee shall have authority to determine who are, from
time to time, eligible employees, to construe the Plan, to prescribe,
amend and rescind rules and regulations for the administration of the
Plan, to amend or modify the Plan in such manner as the Committee deems
required to make the Plan conform to the provisions of any federal or
state laws, or regulations issued thereunder, or practically workable,
and to take any other action necessary or advisable for the effective
-8-
administration of the Plan; provided, however, that no such amendment
or modification of the Plan shall affect the provisions of any option
granted before such amendment or modification to the detriment of any
Optionee unless such amendment or modification is required to comply
with any applicable law or regulation, and provided, further, that any
such amendment of the Plan extending the period within which options
may be granted under the Plan, or increasing the number of shares of
Stock to be optioned under the Plan (except as provided in Section 9
hereof), or reducing the minimum purchase price per share provided in
the Plan (except as provided in Section 9 hereof), or changing the
class of employees to whom options may be granted under the Plan shall,
in each case, be subject to approval by the Board. Decisions of the
Committee shall be final. Members of the Committee may be removed by
the Board. Vacancies in the Committee may be filled, and additional
members may be appointed from time to time by the Board. The decision
of a majority in number of the members of the Committee, from time to
time acting, shall be deemed to be the decision of the Committee, and a
<PAGE>
majority in number of members of the Committee, from time to time
acting, shall constitute a quorum of the Committee for the transaction
of any business. No member of the Committee may be an individual who
is or has been for at least one year prior to selection to the
Committee, eligible for participation in the Plan.
(b) The authority granted the Board of Directors in this
section of the Plan shall be exercised solely by those directors who
-9-
are not, and have not been for at least one year prior to such
exercise, eligible for participation in the Plan.
11. STOCKHOLDERS' RIGHTS UPON EXERCISE. An Optionee shall
not, by reason of the Plan or any option granted pursuant to the Plan,
have any rights of a stockholder of the Company; however, upon each
exercise of an option under the Plan, the Optionee shall have, with
respect to the number of shares of Stock as to which such option is
then being exercised, all rights of a stockholder of record from the
date of such exercise, irrespective of whether certificates to evidence
the shares of Stock with respect to which the option was exercised
shall have been issued on such date.
12. THE RIGHT OF EMPLOYER TO TERMINATE EMPLOYMENT. Nothing
contained in the Plan or in any option granted pursuant to the Plan
shall confer upon any Optionee any right to be continued in the
employment of the Company, or any parent or subsidiary of the Company,
or interfere in any way with the right of such Optionee's employer to
terminate his employment at any time with or without cause.
13. GOVERNMENT APPROVALS. If at any time the Company shall
be advised by its counsel that the exercise of any option or the
delivery of shares of Stock upon the exercise of an option is required
to be approved, registered or qualified under any applicable law, or
must be accompanied or preceded by a prospectus or similar circular
meeting the requirements of any applicable law, the Company will use
-10-
its best efforts to obtain such approval, to effect such registrations
and qualifications, or to provide such prospectus or similar circular
within a reasonable time, but exercise of the options or delivery by
the Company of certificates for shares of Stock may be deferred until
such approvals, registrations or qualifications are effected, or until
such prospectus or similar circular is available.
14. DISCONTINUANCE OF THE PLAN. The Board may decrease the
number of shares issuable under the Plan or discontinue and terminate
the Plan at any time, but no such decrease, discontinuance or
termination shall affect any options granted before such decrease,
discontinuance or termination.
15. MERGER, REORGANIZATION OR CHANGE IN CONTROL.
(a) Nothing contained in this Plan or in any option granted
under the Plan shall in any way prohibit the Company from merging with
<PAGE>
or consolidating into another corporation, or from selling or
transferring all or 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 (other than a merger in which the
Company is the surviving corporation and after which the Company
remains an independent, publicly held corporation), the Company or any
surviving party to any such merger, consolidation, or sale or transfer
of assets may provide by resolution of its Board of Directors that all
rights of the person or persons entitled to exercise then outstanding
options granted under the Plan, and such options, shall wholly and
completely terminate at the time of any such
-11-
merger, consolidation, sale or transfer of assets, liquidation, or
dissolution, except that adequate provision for such person or persons
shall be made in accordance with paragraph (b) below.
(b) In the event that (i) any individual, corporation,
partnership or other person or group of persons or entities becomes the
beneficial owner, directly or indirectly, of 45% or more of the
Company's then outstanding Common Stock ("Change in Control") or (ii)
any merger, consolidation, liquidation, dissolution or termination
after which the Company will not survive as an independent,
publicly-owned corporation or any sale or transfer of all or
substantially all of the Company's assets ("Reorganization") occurs,
then the Company shall pay with respect to each outstanding option
under this Plan an amount equal to (x) the difference between the Fair
Market Value (as defined in (c) below) and exercise price of the
option, multiplied by (y) the number of shares of Stock subject to
such option. Such payment shall be made in cash within 30 days after,
in the case of a Reorganization requiring approval by the Company
stockholders, the date of such approval and, in the case of a Change in
Control, the date upon which such change occurs.
(c) Solely for purposes of (b) above, "Fair Market Value"
shall mean the greater of (i) the highest price per share of the
Company's Common Stock (x) paid by the acquiring person within twelve
months of the occurrence of the Change in Control to effect such change
-12-
or (y) provided for in any agreement for the Reorganization or
(ii) fair market value determined in accordance with Section 17
of this Plan.
16. EFFECTIVE DATE OF PLAN, The Plan has been adopted by the
Board on June 27, 1985, and the Plan shall be deemed to have become
effective on such date.
17. MISCELLANEOUS.
(a) The transfer of an employee from the Company to a parent
or subsidiary of the Company or from a parent or subsidiary of the
Company to the Company or another parent or subsidiary of the Company
shall not be a termination of employment or an interruption of
continuous employment for the purposes of the Plan.
<PAGE>
(b) As used in the Plan, the terms "parent" and "subsidiary"
shall have the meanings ascribed to them in Sections 421, 422A and 425
of the Code.
(c) Except as otherwise provided, for purposes of this Plan,
the fair market value of a share of Stock on a specified day shall be
the mean between the high and low sale price per share as reported for
such day (or if such day is not a business day, for the immediately
preceding business day) on a national stock exchange, or if the Stock
is not listed on such an exchange, on the NASDAQ national market
system.
(d) No option or shares of Stock issuable under the Plan shall
be transferable or assignable either by the voluntary or involuntary act
of the Optionee or by operation of law, or be liable for any debts or
-13-
liabilities of the Optionee, except as provided herein.
Section 18. Notwithstanding any other provision of this Plan or of
any option agreement relating to any option granted hereunder, the
consummation of the transactions contemplated by that certain Agreement
and Plan of Merger, dated as of August 24, 1997, by and among Wausau
Paper Mills Company, WPM Holdings, Inc. and the Company on
substantially the terms and conditions set forth therein as of August
24, 1997 shall not be deemed to constitute a "Change in Control" or any
other transaction described in Section 11(b) of this Plan and of any
corresponding or similar provision of any such option agreement.
Without limiting the generality of the foregoing, the consummation of
such transactions shall not result in the payment of any cash to any
holder of an option granted under this Plan.
-14-
AMENDMENT TO
MOSINEE PAPER CORPORATION
1985 EXECUTIVE STOCK OPTION PLAN
Amendment adopted March 4, 1999, replacing the provisions of Section 15
in its entirety with the following:
15. CHANGE IN CONTROL.
(a) For purposes of the Plan, a "Change in Control" means the
happening of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A) the
then outstanding common stock (the "Outstanding Company Common Stock")
of Wausau-Mosinee Paper Corporation (the "Corporation") or (B) the
combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors
<PAGE>
(the "Outstanding Corporation Voting Securities"); excluding, however,
the following: (1) any acquisition directly from the Corporation other
than an acquisition by virtue of the exercise of a conversion privilege
unless the security being so converted was itself acquired directly
from the Corporation, (2) any acquisition by the Corporation, (3) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any entity controlled by the
Corporation, (4) any acquisition pursuant to a transaction which
complies with clauses (A), (B), and (C) of paragraph (iii) of this
Section 15(a), (5) except as provided in paragraphs (d) and (e), any
acquisition by any of the Woodson Entities or any of the Smith
Entities, or (6) any increase in the proportionate number of shares of
Outstanding Corporation Common Stock or Outstanding Corporation Voting
Securities beneficially owned by a Person to 20% or more of the shares
of either of such classes of stock if such increase was solely the
result of the acquisition of Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities by the Corporation; provided,
however, that this clause (6) shall not apply to any acquisition of
Outstanding Corporation Common Stock or Outstanding Corporation Voting
Securities not described in clauses (1), (2),(3),(4), or(5) of this
paragraph (i) by the Person acquiring such shares which occurs after
such Person had become the beneficial owner of 20% or more of either
the Outstanding Corporation Common Stock or Outstanding Corporation
Voting Securities by reason of share purchases by the Corporation; or
-15-
(ii) A change in the composition of the Board of Directors of the
Corporation (for purposes of this Section 15, the "Board")such that the
individuals who, as of the Effective Date, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, for purposes of the Plan, that any individual who
becomes a member of the Board subsequent to the Effective Date whose
election, or nomination for election by the Corporation's shareholders,
was approved by a vote of at least a majority of those individuals who
are members of the Board and who were also members of the Incumbent
Board (or deemed to be such pursuant to this proviso) shall be deemed
to be and shall be considered as though such individual were a member
of the Incumbent Board, but provided, further, that any such individual
whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board shall not be so deemed or
considered as a member of the Incumbent Board; or
(iii) Consummation of a reorganization, merger or consolidation,
or sale or other disposition of all or substantially all of the assets
of the Corporation or the acquisition of the assets or securities of
any other entity (a "Corporate Transaction"); excluding, however, such
a Corporate Transaction pursuant to which (A) all or substantially all
of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock
<PAGE>
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) (the "Resulting Corporation") in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (B) no
Person (other than the Corporation, any employee benefit plan (or
related trust) of the Corporation, any Woodson Entity, any Smith
Entity, or such Resulting Corporation) will beneficially own, directly
or indirectly, 20% or more of, respectively, the outstanding shares of
common stock of the Resulting Corporation or the combined voting power
of the then outstanding voting securities of such Resulting Corporation
-16-
entitled to vote generally in the election of directors except to the
extent that such ownership existed with respect to the Corporation
prior to the Corporate Transaction, and (C) individuals who were
members of the Incumbent Board will constitute at least a majority of
the members of the board of directors of the Resulting Corporation; or
(iv) The Woodson Entities acquire beneficial ownership of more
than 35% of the Outstanding Corporation Common Stock or Outstanding
Corporation Voting Securities or of the outstanding shares of common
stock or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the Resulting Corporation; or
(v) The Smith Entities acquire beneficial ownership of more than
35% of the Outstanding Corporation Common Stock or Outstanding
Corporation Voting Securities or of the outstanding shares of common
stock or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the Resulting Corporation; or
(vi) The approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
For purposes of this Section 15(a), the term "Woodson Entities"
shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice
Richardson Yawkey, members of their respective families and their
respective descendants (the "Woodson Family"), heirs or legatees of
any of the Woodson Family members, transferees by will, laws of descent
or distribution or by operation of law of any of the foregoing
(including of any such transferees) (including any executor or
administrator of any estate of any of the foregoing), any trust
established by any of Aytchmonde P. Woodson, Leigh Yawkey Woodson, or
Alice Richardson Yawkey, whether pursuant to last will or otherwise,
any partnership, trust or other entity established primarily for the
benefit of, or any other Person the beneficial owners of which consist
primarily of, any of the foregoing or any Affiliates or Associates of
any of the foregoing or any charitable trust or foundation to which any
of the foregoing transfers or may transfer securities of the
<PAGE>
Corporation (including any beneficiary or trustee, partner, manager or
director of any of the foregoing or any other Person serving any such
entity in a similar capacity).
For purposes of this Section 15(a), the term "Smith Entities" shall
mean David B. Smith and Katherine S. Smith, members of their respective
families and their respective descendants (the "Smith Family"), heirs
-17-
or legatees of any of the Smith Family members, transferees by will,
laws of descent or distribution or by operation of law of any of the
foregoing (including of any such transferees) (including any executor
or administrator of any estate of any of the foregoing), any trust
established by either of David B. Smith or Katherine S. Smith, whether
pursuant to last will or otherwise, any partnership, trust or other
entity established primarily for the benefit of, or any other Person
the beneficial owners of which consist primarily of, any of the
foregoing or any Affiliates or Associates of any of the foregoing or
any charitable trust or foundation to which any of the foregoing
transfers or may transfer securities of the Corporation (including
any beneficiary or trustee, partner, manager or director of any of the
foregoing or any other Person serving any such entity in a similar
capacity).
For purposes of this Section 15(a), the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Plan.
(b)
(i) In the event of a Change in Control,
(A) all options outstanding on the date on which such Change
in Control has occurred (the "Change in Control Date") shall, to
the extent not then exercisable or vested, immediately become
exercisable in full, and
(B) each Optionee may elect, with respect to each option held
by such Optionee on the Change in Control Date (the Optionee's
"Election Right"), to surrender such option for an immediate lump
sum cash payment in an amount equal to the product of (1) the
number of shares of common stock of the Corporation (for purposes
of this Section 15(b), "Shares") then subject to the option as to
which the election is being exercised, multiplied by (2) the
excess, if any, of (a) the greater of (i) the Change in Control
Price or (ii) the highest fair market value of a Share on any day
in the 60-day period ending on the Change in Control Date, over (b)
the option price of such option. For purposes of this Section
15(b), the "Change in Control Price" shall mean, if the Change in
Control is the result of a tender or exchange offer or a Corporate
Transaction (as defined in Section 15(a)(iii), the highest price
per Share paid in such tender or exchange offer or Corporate
Transaction. To the extent that the consideration paid in any such
transaction consists all or in part of securities or other noncash
<PAGE>
consideration, the value of such securities or other noncash
-18-
consideration shall be determined in the sole discretion of the
Committee.
(ii) The exercise of an Election Right must be in writing, specify
the option or options and the number of Shares as to which the election
is being exercised, and be delivered to the Secretary of the
Corporation 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 Corporation's home office on or before the 60th day
following the Change in Control Date.
(iii) All payments due an Optionee pursuant to the provisions of
this Section 15(b) shall be made by the Corporation on or before the
5th business day following the date on which the Optionee's election
has been delivered to the Corporation pursuant to Section 15(b)(ii).
(iv) Notwithstanding any other provision of this Section 15(b), if
the grant or the exercise of an Optionee's Election Right or payment of
cash provided for in Section 15b)(i) would make a Change in Control
transaction ineligible for pooling-of-interests accounting treatment
under APB No. 16, that, but for the nature of such grant or exercise of
Election Rights or payment of cash, would otherwise be eligible for
such pooling-of-interests accounting treatment, the Committee shall
have the right and authority to substitute for the cash payments to be
made to the Optionee pursuant to Section 15(b)(ii), Shares with a fair
market value, determined as of the date of delivery of such Shares,
equal to the cash that would otherwise be payable to such Optionee in
connection with the exercise of an Optionee's Election Right hereunder
or, to the extent necessary to preserve such pooling-of-interests
accounting treatment, to otherwise modify, eliminate, or terminate such
Election Right.
-19-
MOSINEE PAPER CORPORATION
1988 STOCK APPRECIATION RIGHTS PLAN
As amended March 4, 1999
MOSINEE PAPER CORPORATION
1988 STOCK APPRECIATION RIGHTS PLAN
1. PURPOSE.
The purpose of the Mosinee Paper Corporation 1988 Stock
Appreciation Rights Plan (the "Plan") is to attract and retain
outstanding individuals as officers and key employees of Mosinee Paper
<PAGE>
Corporation (the "Corporation") and its subsidiaries, and to furnish
incentives to such individuals through rewards based upon the
performance of the common stock of the Corporation. To this end,
the Committee hereinafter designated may grant stock appreciation
rights to officers and other key employees of the Corporation 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 Corporation and its subsidiaries as the
Committee in its sole discretion may select from time to time to
receive stock appreciation rights.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee (the
"Committee") of at least three members appointed by the Board of
Directors of the Corporation from among its members. No person shall
be appointed a member of the Committee if, during the one year prior to
the date on which such person's service as a member of the Committee is
to commence, such person was granted or awarded equity securities of
the Corporation (within the meaning of Securities and Exchange
Commission Rule 16a-1(d)) under the Plan or any other plan of the
Corporation or any subsidiary of the Corporation. Subject to the
provisions of the Plan, the Committee shall
-1-
have authority (i) to determine which employees of the Corporation and
its subsidiaries shall be eligible for participation in the Plan; (ii)
to select employees to receive grants under the Plan; (iii) to
determine the number of stock appreciation rights subject to the grant,
the time and conditions of exercise or vesting, the fair market value
of the common stock of the Corporation for purposes of the Plan, and
all other terms and conditions of any grant; and (iv) 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 rights 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 16, 1988, the date of
its approval by the Board of Directors of the Corporation. The Plan
shall terminate ten years after it becomes effective, unless terminated
sooner 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.
<PAGE>
5. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in paragraph 7 hereof, the
aggregate number of shares of common stock of the Corporation with
respect to which stock appreciation rights may be granted under the
-2-
Plan shall not exceed 350,000. Whenever a stock appreciation right
granted under the Plan can no longer under any circumstances be
exercised, the shares, if any, then remaining subject to such stock
appreciation right shall thereupon be released from such stock
appreciation right and shall thereafter be available for additional
grants of stock appreciation rights under the Plan.
6. STOCK APPRECIATION RIGHTS.
(a) GRANTS. Stock appreciation rights entitling the grantee
to receive cash equal to the sum of (i) the appreciation in value of
and (ii) the value of the reinvested cash dividends which would have
been paid with respect to a stated number of shares of common stock of
the Corporation between the date of grant and the date of exercise (the
"hypothetical reinvested cash dividends") may be granted from time to
time to such officers and other key employees of the Corporation and
its subsidiaries as may be selected by the Committee.
(b) TERMS OF GRANT. Stock appreciation rights shall be
exercisable in whole or in such installments and at such times as may
be determined by the Committee, provided that no stock appreciation
right shall be exercisable more than twenty years after the date of
grant. The Committee may at the time of grant or at any time
thereafter impose such additional terms and conditions on the exercise
of stock appreciation rights 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.
(c) TERMINATION OF EMPLOYMENT OR DEATH. If a grantee ceases
to be employed by the Corporation and any of its subsidiaries for any
reason other than death or attaining his Retirement Date, any stock
appreciation right held by such grantee may be exercised for a period
-3-
ending on thee arlier of the 90th day following the date of such
cessation of employment or the date of expiration of such stock
appreciation right, but only with respect to that number of shares of
common stock for which such right was exercisable immediately prior to
the date of cessation of employment.
If a grantee ceases to be employed by the Corporation or any of
its subsidiaries by reason of death prior to his Retirement Date, or
dies within 90 days after termination of his employment by the
Corporation or any of its subsidiaries prior to his having attained
his Retirement Date, any stock appreciation right held by such grantee
may be exercised, with respect to all or any part of the common stock
of the Corporation with respect to which such stock appreciation right
<PAGE>
was exercisable by the grantee immediately prior to his death, for a
period ending on the first anniversary of the date of such grantee's
death.
If a grantee attains his Retirement Date, any stock appreciation
right held by such grantee may be exercised for a period ending on the
second anniversary of such Retirement Date, but only with respect to
that number of shares of common stock for which such right was
exercisable immediately prior to the date of cessation of employment.
Notwithstanding any other provision of this Section 6(c), no stock
appreciation right shall be exercisable after the first to occur of (1)
the date specified in Section 6(b) or (2) the date specified by the
Committee in the grant evidencing such rights.
For purposes of this Plan, the term "Retirement Date" shall mean
the date on which the grantee's employment with the Corporation (and
any parent or subsidiary of the Corporation) terminates (including
termination because of death) if the Optionee had then attained age 55
-4-
and completed ten calendar years of service with the Corporation (or
any parent or subsidiary of the Corporation).
(d) PAYMENT ON EXERCISE. Upon exercise of a stock
appreciation right the grantee shall be paid within five business days
an amount in cash equal to the sum of (i) the amount by which the fair
market value of one share of the Corporation's common stock on the date
of exercise exceeds the date of grant value thereof multiplied by the
number of shares in respect of which the stock appreciation right is
being exercised and (ii) the value of the hypothetical reinvested cash
dividends associated therewith. The value of the hypothetical
reinvested cash dividends associated with a share in respect of which
the stock appreciation right is being exercised (the "exercised share")
shall be equal to the fair market value on the date of exercise of the
number of additional shares (or fraction thereof) of the Corporation's
common stock the grantee would have owned if it is assumed (1) that
cash dividends which would have been paid with respect to the exercised
share if the exercised share had been outstanding from the time of
grant had been paid in cash to the grantee and then immediately
reinvested by the grantee in the Corporation's common stock at the fair
market value thereof on the applicable dividend payment date, and (2)
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 Corporation's outstanding
common stock) which were reinvested in a similar manner.
For purposes of this paragraph, the fair market value of a
share of common stock of the Corporation means:
-5-
(A) The mean between the high and low prices at which
the common stock of the Corporation was traded if the common stock
of the Corporation was then listed for trading on a national or regional
<PAGE>
securities exchange; or
(B) The mean between the published high and low prices
of the common stock of the Corporation if the common stock of the
Corporation was then traded on a bona fide over-the-counter market;
or (C) If the common stock of the Corporation 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 the exercise of a stock appreciation
right is a date on which there is no trading of the common stock of the
Corporation on a national or regional securities exchange or is a date
for which there is no published bid and asked prices if the stock is
traded 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 or on which published prices are available.
(e) ADDITIONAL TERMS AND CONDITIONS. The agreement or
instrument evidencing the grant of stock appreciation rights may
contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Committee in its sole
discretion.
7. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Stock appreciation rights shall be subject to adjustment by
the Committee in its sole discretion as to the number, kind and date
-6-
of grant value of shares or other consideration subject to such
grants in the event of changes in the outstanding common stock 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 stock appreciation right,
provided that if the Corporation 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 rights 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 stock appreciation
right granted under the Plan shall in any way prohibit the Corporation
from merging with or consolidating into another corporation, or from
selling or transferring all or 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, all outstanding stock appreciation
rights granted under the Plan shall be deemed to have been exercised at
the time of any 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
<PAGE>
dissolution is effected, shall make specific provision to continue such
stock appreciation rights and the rights of such person or persons
entitled to exercise such stock appreciation rights.
9. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended or terminated by the Board of
Directors of the Corporation in any respect, provided, however, that
-7-
the Board shall not exercise such authority in a manner adversely and
significantly affecting rights 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 stock appreciation right.
(b) RIGHTS AS STOCKHOLDER. No person shall have any rights
as a stockholder of the Corporation with respect to any shares covered
by a stock appreciation right.
(c) EMPLOYMENT. Nothing contained in this Plan shall be
deemed to confer upon any employee any right of continued employment
with the Corporation or any of its subsidiaries or to limit or
diminish in any way the right of the Corporation or any such subsidiary
to terminate his or her employment at any time with or without cause.
(d) TAXES. The Corporation 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 Corporation prior to and as a condition of
making such payment.
(e) NONTRANSFERABILITY. No stock appreciation right shall be
transferable except by will or the laws of descent and distribution.
During the holder's lifetime, stock appreciation rights shall be
exercisable only by such holder.
11. CHANGE IN CONTROL.
(a) Definition of "Change in Control." For purposes of the
Plan, a "Change in Control" means the happening of any of the following
events:
-8-
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then outstanding shares of common stock (the
"Outstanding Company Common Stock") of Wausau-Mosinee Paper
Corporation (the "Company") or (B) the combined voting power of the
<PAGE>
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); excluding, however, the following: (1) any
acquisition directly from the Company other than an acquisition by
virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the
Company, (2) any acquisition by the Company, (3) any acquisition by
any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company,
(4) any acquisition pursuant to a transaction which complies with
clauses (A), (B), and (C) of paragraph (iii) of this Section 11(a),
(5) except as provided in paragraphs (iv) and (v), any acquisition
by any of the Woodson Entities or any of the Smith Entities, or (6)
any increase in the proportionate number of shares of Outstanding
Company Common Stock or Outstanding Company Voting Securities
beneficially owned by a Person to 20% or more of the shares of
either of such classes of stock if such increase was solely the
result of the acquisition of Outstanding Company Common Stock or
Outstanding Company Voting Securities by the Company; provided,
however, that this clause (6) shall not apply to any acquisition of
-9-
Outstanding Company Common Stock or Outstanding Company Voting
Securities not described in clauses (1), (2), (3), (4), or (5) of
this paragraph (i) by the Person acquiring such shares which occurs
after such Person had become the beneficial owner of 20% or more of
either the Outstanding Company Common Stock or Outstanding Company
Voting Securities by reason of share purchases by the Company; or
(ii) A change in the composition of the Board of Directors of
the Company (for purposes of this Section 11, the "Board") such
that the individuals who, as of the Effective Date, constitute the
Board (such Board shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, for purposes of the Plan,
that any individual who becomes a member of the Board subsequent to
the Effective Date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be deemed to be and shall be
considered as though such individual were a member of the Incumbent
Board, but provided, further, that any such individual whose
initial assumption of office occurs as a result of either an actual
or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board shall not be so
deemed or considered as a member of the Incumbent Board; or
-10-
(iii) Consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or substantially
all of the assets of the Company or the acquisition of the assets
or securities of any other entity (a "Corporate Transaction");
<PAGE>
excluding, however, such a Corporate Transaction pursuant to which
(A) all or substantially all of the individuals and entities who
are the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than 60% of, respectively, the outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries)
(the "Resulting Corporation") in substantially the same proportions
as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (other than the Company, any employee benefit plan (or
related trust) of the Company, any Woodson Entity, any Smith
Entity, or such Resulting Corporation) will beneficially own,
directly or indirectly, 20% or more of,
-11-
respectively, the outstanding shares of common stock of the
Resulting Corporation or the combined voting power of the then
outstanding voting securities of such Resulting Corporation
entitled to vote generally in the election of directors except
to the extent that such ownership existed with respect to the
Company prior to the Corporate Transaction, and (C) individuals
who were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the Resulting
Corporation; or
(iv) The Woodson Entities acquire beneficial ownership of more
than 35% of the Outstanding Company Common Stock or Outstanding
Company Voting Securities or of the outstanding shares of common
stock or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the Resulting Corporation; or
(v) The Smith Entities acquire beneficial ownership of more
than 35% of the Outstanding Company Common Stock or Outstanding
Company Voting Securities or of the outstanding shares of common
stock or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the Resulting Corporation; or
(vi) The approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
For purposes of this Section 11(a), the term "Woodson Entities"
shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice
Richardson Yawkey, members of their respective families and their
respective descendants (the "Woodson Family"), heirs or legatees of
any of the Woodson Family members, transferees by will, laws of
descent or distribution or by operation of law of any of the
<PAGE>
foregoing (including of any such transferees) (including any
executor or administrator of any estate of any of the foregoing),
any trust established by any of Aytchmonde P. Woodson, Leigh Yawkey
Woodson, or Alice Richardson Yawkey, whether pursuant to last will
or otherwise, any partnership, trust or other entity established
primarily for the benefit of, or any other Person the beneficial
owners of which consist primarily of, any of the foregoing or any
Affiliates or Associates of any of the foregoing or any charitable
trust or foundation to which any of the foregoing transfers or may
transfer securities of the Company (including any beneficiary or
trustee, partner, manager or director of any of the foregoing or any
other Person serving any such entity in a similar capacity).
For purposes of this Section 11(a), the term "Smith Entities" shall
mean David B. Smith and Katherine S. Smith, members of their respective
families and their respective descendants (the "Smith Family"), heirs
or legatees of any of the Smith Family members, transferees by will,
laws of descent or distribution or by operation of law of any of the
foregoing (including of any such transferees) (including any executor
or administrator of any estate of any of the foregoing), any trust
-12-
established by either of David B. Smith or Katherine S. Smith, whether
pursuant to last will or otherwise, any partnership, trust or other
entity established primarily for the benefit of, or any other Person
the beneficial owners of which consist primarily of, any of the
foregoing or any Affiliates or Associates of any of the foregoing or
any charitable trust or foundation to which any of the foregoing
transfers or may transfer securities of the Company (including any
beneficiary or trustee, partner, manager or director of any of the
foregoing or any other Person serving any such entity in a similar
capacity).
-13-
For purposes of this Section 11(a), the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as
in effect on the date of this Plan.
(b) Effects of Change in Control.
(i) In the event of a Change in Control,
(A) all stock appreciation rights ("SARs") outstanding on the
date on which such Change in Control has occurred (the "Change in
Control Date") shall, to the extent not then exercisable or vested,
immediately become exercisable in full, and
(B) each grantee may elect, with respect to each SAR held by
such grantee on the Change in Control Date (the grantee's "Election
Right"), to surrender such SAR for an immediate lump sum cash
payment in an amount equal to the product of (1) the number of
shares of common stock of the Company ("Shares") then subject to
the SAR as to which the election is being exercised, multiplied by
(2) the excess, if any, of (a) the greater of (i) the Change in
<PAGE>
Control Price or (ii) the highest Fair Market Value of a Share on
any day in the 60-day period ending on the Change in Control Date,
over (b) the date of grant value of such SAR. Upon exercise of a
grantee's Election Right,the value of all hypothetical reinvested
cash dividends associated with such SAR shall also be determined by
the greater of (i) theChange in Control Price or (ii) the highest
Fair Market Value of a Share on any day in the 60-day period ending
on the Change in Control Date. For purposes of this Section
11(b), the "Change in Control Price" shall mean, if the Change in
Control is the result of a tender or exchange offer or a Corporate
Transaction (as defined in Section
-14-
11(a)(iii), the highest price per Share paid in such tender or
exchange offer or Corporate Transaction. To the extent that the
consideration paid in any such transaction consists all or in part
of securities or other noncash consideration, the value of such
securities or other noncash consideration shall be determined in
the sole discretion of the Committee.
(ii) The exercise of an Election Right must be in writing,
specify the SAR or SARs and the number of Shares as to which the
election is being exercised, and be 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 on or before the 60th
day following the Change in Control Date.
(iii) All payments due an grantee pursuant to the provisions
of this Section 11(b) shall be made by the Company on or before the
first to occur of (A) the date provided in this Plan for payment
upon exercise of an SAR and (B) the 5th business day following the
date on which the grantee's election has been delivered to the
Company pursuant to Section 11(b)(ii).
(iv) Notwithstanding any other provision of this Section
11(b), if the grant or the exercise of a grantee's Election Right
or payment of cash provided for in this Section 11(b)would make a
Change in Control transaction ineligible for pooling-of-interests
accounting treatment under APB No. 16, that, but for the nature of
such grant or exercise of Election Rights, would otherwise be
eligible for such pooling-of-interests accounting treatment, the
Committee shall have
-15-
the right and authority to modify, eliminate, or terminate the
Election Right to the extent necessary to preserve such pooling-of-
interests accounting treatment.
-16-
<PAGE>
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
This Supplemental Retirement Benefit Plan (the "Plan") adopted
effective as of November 12, 1991, and amended August 24, 1997, by
Mosinee Paper Corporation, a Wisconsin corporation, ("Mosinee") for the
purposes of providing deferred compensation in the form of supplemental
retirement benefits for San W. Orr, Jr. ("Mr. Orr") in recognition of
his service to Mosinee as its Chairman of the Board of Directors is
hereby further amended effective as of this 4th day of March, 1999.
1. NORMAL SUPPLEMENTAL RETIREMENT BENEFIT. Beginning on the
first day of the first month following the last to occur of (a) Mr.
Orr's termination of employment with each of Mosinee and its parent,
Wausau-Mosinee Paper Corporation ("Wausau") or (b) Mr. Orr's 60th
birthday, and continuing on the first day of each succeeding month,
Mosinee shall pay to Mr. Orr, if he is then living, a monthly
supplemental retirement benefit (Mr. Orr's "Normal Supplemental
Retirement Benefit") in an amount equal to 50% of one-twelfth of Mr.
Orr's highest final average W-2 compensation for the five consecutive
calendar year period in which such compensation was paid. Mr. Orr's
Normal Supplemental Retirement Benefit shall not be reduced or offset
by the amount of any other payment then due him from Mosinee or any
other plan or program now or hereafter maintained by Mosinee.
2. SURVIVING SPOUSE BENEFIT. From and after the first day of the
first month following the later of (a) the month in which Mr. Orr's
death occurs or (b) the month in which Mr. Orr would have attained his
60th birthday if Mr. Orr's death occurs before he has attained age 60,
and continuing on the first day of each succeeding month, Mosinee shall
pay to Mr. Orr's spouse, if then living (Mr. Orr's "Surviving Spouse"),
a monthly benefit (the "Supplemental Surviving Spouse Benefit") in an
amount equal to 50% of the Normal Supplemental Retirement Benefit to
which Mr. Orr would have then been entitled had he then been living.
3. CHANGE IN CONTROL OF WAUSAU-MOSINEE.
(a) In the event a Change in Control of Wausau occurs prior
to Mr. Orr's death, Mosinee shall pay to Mr. Orr a lump sum amount
equal to the present value of Mr. Orr's Normal Supplemental
Retirement Benefit, as determined hereunder, as of the first day of
the first month following such Change in Control of Wausau on which
Mr. Orr is neither an employee nor a director of Wausau, whether
or not such Change in Control occurred prior to the date on which
Mr. Orr shall have ceased to be an employee or a director of
Wausau. Upon payment of the lump sum amount provided for in this
subparagraph (a), Mosinee shall have no further obligation to pay
any benefits under this Plan.
(b) In the event a Change in Control of Wausau occurs after
Mr. Orr's death and whether or not the Supplemental Surviving
Spouse Benefit shall have then become payable, Mosinee shall pay to
Mr. Orr's Surviving Spouse, if then living, the present value of
the unpaid Supplemental Surviving Spouse Benefit. Upon payment of
the lump sum amount provided for in this subparagraph (b), Mosinee
shall have no further obligation to pay any benefits under this
Plan.
<PAGE>
-1-
(c) For purposes of this plan, a "Change in Control of
Wausau" shall be mean the happening of any of the following events:
(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (A) the then outstanding shares of
common stock of Wausau (the "Outstanding Corporation Common
Stock") or (B) the combined voting power of the then
outstanding voting securities of Wausau entitled to vote
generally in the election of directors (the "Outstanding
Corporation Voting Securities"); excluding, however, the
following: (i) any acquisition directly from Wausau other
than an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself
acquired directly from Wausau, (ii) any acquisition by Wausau,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Wausau or any entity
controlled by Wausau, (iv) any acquisition pursuant to a
transaction which complies with clauses (A), (B), and (C) of
paragraph (3) of this Section 3(c), (v) except as provided in
paragraphs (4) and (5), any acquisition by any of the Woodson
Entities or any of the Smith Entities, or (vi) any increase in
the proportionate number of shares of Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities
beneficially owned by a Person to 20% or more of the shares of
either of such classes of stock if such increase was solely
the result of the acquisition of Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities by
Wausau; provided, however, that this clause (vi) shall not
apply to any acquisition of Outstanding Corporation Common
Stock or Outstanding Corporation Voting Securities not
described in clauses (1), (ii), (iii), (iv), or(v) of this
paragraph (1) by the Person acquiring such shares which occurs
after such Person had become the beneficial owner of 20% or
more of either the Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities by reason of share
purchases by Wausau; or
(2) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the
Board (such Board shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, for purposes
of the Plan, that any individual who becomes a member of the
Board subsequent to the Effective Date whose election, or
nomination for election by Wausau's shareholders, was approved
by a vote of at least a majority of those individuals who are
members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this
proviso) shall be deemed to be and shall be considered as
though such individual were a member of the Incumbent Board,
but provided, further, that any such individual whose initial
assumption of office occurs as a result of either an actual or
<PAGE>
threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board shall not be so deemed or considered as a member of the
Incumbent Board; or
(3) Consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of Wausau or the acquisition
of the assets or securities of any other entity (a "Corporate
Transaction"); excluding, however, such a Corporate
Transaction pursuant to which (A) all or substantially all of
the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding
shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of
the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a
result of such transaction owns or all or substantially all
of Wausau's assets either directly or through one or more
subsidiaries) (the "Resulting Corporation") in substantially
the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities, as
the case may be, (B) no Person (other than Wausau, any
employee benefit plan (or related trust) of Wausau, any
Woodson Entity, any Smith Entity, or such Resulting
Corporation) will beneficially own, directly or indirectly,
20% or more of, respectively, the outstanding shares
of common stock of the Resulting Corporation or the combined
voting power of the then outstanding voting securities of such
Resulting Corporation entitled to vote generally in the
election of directors except to the extent that such ownership
existed with respect to Wausau prior to the Corporate
Transaction, and (C) individuals who were members of the
Incumbent Board will constitute at least a majority of the
members of the board of directors of the Resulting
Corporation; or
(4) The Woodson Entities acquire beneficial ownership of more
than 35% of the Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities or of the
outstanding shares of common stock or the combined voting
power of the then outstanding voting securities entitled to
vote generally in the
-3-
election of directors, as the case may be, of the Resulting
Corporation; or
<PAGE>
(5) The Smith Entities acquire beneficial ownership of more
than 35% of the Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities or of the
outstanding shares of common stock or the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the Resulting Corporation; or
(6) The approval by the shareholders of Wausau of a complete
liquidation or dissolution of Wausau.
For purposes of this Section 3(c), the term "Woodson Entities"
shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice
Richardson Yawkey, members of their respective families and their
respective descendants (the "Woodson Family"), heirs or legatees of
any of the Woodson Family members, transferees by will, laws of
descent or distribution or by operation of law of any of the
foregoing (including of any such transferees) (including any
executor or administrator of any estate of any of the foregoing),
any trust established by any of Aytchmonde P. Woodson, Leigh Yawkey
Woodson, or Alice Richardson Yawkey, whether pursuant to last will
or otherwise, any partnership, trust or other entity established
primarily for the benefit of, or any other Person the beneficial
owners of which consist primarily of, any of the foregoing or any
Affiliates or Associates of any of the foregoing or any charitable
trust or foundation to which any of the foregoing transfers or may
transfer securities of Wausau (including any beneficiary or
trustee, partner, manager or director of any of the foregoing or
any other Person serving any such entity in a similar capacity).
For purposes of this Section 3(c), the term "Smith Entities"
shall mean David B. Smith and Katherine S. Smith, members of their
respective families and their respective descendants (the "Smith
Family"), heirs or legatees of any of the Smith Family members,
transferees by will, laws of descent or distribution or by
operation of law of any of the foregoing (including of any such
transferees) (including any executor or administrator of any estate
of any of the foregoing), any trust established by either of David
B. Smith or Katherine S. Smith, whether pursuant to last will or
otherwise, any partnership, trust or other entity established
primarily for the benefit of, or any other Person the beneficial
owners of which consist primarily of, any of the foregoing or any
Affiliates or Associates of any of the foregoing or any charitable
trust or foundation to which any of the foregoing transfers or may
transfer securities of Wausau (including any beneficiary or
trustee, partner, manager or director of any of the foregoing or
any other Person serving any such entity in a similar capacity).
-4-
For purposes of this Section 3(c), the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act
as in effect on the date of this Plan.
(e) For purposes of this Plan, the present value of Mr. Orr's
<PAGE>
Normal Supplemental Retirement Benefit or the Supplemental
Surviving Spouse Benefit shall be determined by reference to the
1983 Individual Annuity Mortality Table with an assumed interest
rate equal to the "immediate annuity rate" as then in effect as
determined by the Pension Benefit Guaranty Corporation and
promulgated in Appendix B to 29 C.F.R. <section>2619.65 or any
successor regulation adopted for the same or substantially
similar purpose.
4. SUPPLEMENTAL RETIREMENT BENEFITS IN ADDITION TO OTHER RIGHTS
AND BENEFITS. The rights and benefits conferred upon Mr. Orr (and Mr.
Orr's Surviving Spouse) pursuant to this Plan shall be in addition to
all other rights and benefits conferred upon Mr. Orr by Mosinee by
reason of his employment.
5. NATURE OF MOSINEE'S OBLIGATIONS AND MR. ORR'S RIGHTS. Neither
Mr. Orr nor his Surviving Spouse, if any, shall acquire any right,
title or interest in the assets of Mosinee by reason of this Plan.
To the extent Mr. Orr or his Surviving Spouse shall acquire a right to
receive payments from Mosinee pursuant to this Plan, such right shall
be no greater than the right of any unsecured general creditor
of Mosinee.
6. ASSIGNMENT BY MR. ORR PROHIBITED. This Plan and Mr. Orr's
rights and benefits hereunder (and the rights of his surviving spouse,
if any) shall not be subject to voluntary or involuntary sale, pledge,
hypothecation, transfer or assignment by Mr. Orr or such Surviving
Spouse, their personal representatives or heirs or any other person or
persons or organization or organizations succeeding to any of their
rights and benefits hereunder.
7. FUNDING. All benefits paid or payable pursuant to the terms
of this Plan shall be paid out of the general assets of Mosinee.
8. CLAIMS PROCEDURE. The claims procedure set forth in the
Wausau-Mosinee Paper Corporation Retirement Plan or any successor to
such plan is incorporated herein by this reference as the claims
procedure for this Plan.
9. PLAN ADMINISTRATOR. The plan administrator and named
fiduciary of this Plan shall be Mosinee.
10. BINDING EFFECT. This Plan shall be binding upon and inure to
the benefit of (1) Mr. Orr and his Surviving Spouse and their personal
representatives and heirs and any other person or persons or
organization or organizations succeeding to any of Mr. Orr's rights
or benefits hereunder, and (2) Mosinee and its successors and assigns.
-5-
11. SEVERABILITY. The invalidity or unenforceability of any
provision of this Plan shall not invalidate or render unenforceable any
other provision of this agreement.
12. GOVERNING LAW. This Plan shall be governed by the Employee
Retirement Income Security Act of 1974, as amended, and to the extent
not preempted by such Act, by the laws of the State of Wisconsin.
<PAGE>
IN WITNESS WHEREOF, Mosinee has caused this agreement to be
executed by its President thereunto duly authorized as of the 4th
day of March, 1999.
MOSINEE PAPER CORPORATION
By:
Daniel R. Olvey
As its President and Chief Executive
Officer
-6-
MOSINEE PAPER CORPORATION
1994 EXECUTIVE STOCK OPTION PLAN
As last amended effective
March 4, 1999
MOSINEE PAPER CORPORATION
1994 EXECUTIVE STOCK OPTION PLAN
Mosinee Paper Corporation, a corporation with its principal place
of business located in Mosinee, Wisconsin (the "Company"), hereby
adopts the Mosinee Paper Corporation 1994 Executive Stock Option Plan
(the "Plan"), as set forth herein.
Section 1. PURPOSE. The Plan is intended to attract and retain
key executive employees by permitting such employees of Mosinee Paper
Corporation (the "Company") or any parent or subsidiary of the Company
to acquire authorized and unissued, or reacquired, shares of common
stock of the Company pursuant to purchase options. The availability
of the options and grants thereof will furnish additional inducements
to such employees to continue employment with the Company, or any
parent or subsidiary of the Company, and encourage them, by giving them
an opportunity to acquire a greater stake in the Company's success, to
increase their efforts to promote the best interests of the Company
and its stockholders.
It is the express intent of the Company that, subject to Section
6.2(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
-1-
<PAGE>
hereunder designated "Non-Qualified Stock Options" shall not meet the
requirements of Section 422 of the Code. A key employee may be granted
and may hold one or more options under this Plan.
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 100,000.
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
-2-
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.
Section 4. ELIGIBLE EMPLOYEES.
Section 4.1 DEFINITION OF ELIGIBLE EMPLOYEES. Subject to the
limitations of Section 4.2, key employees (who may also be officers or
directors) of the Company (or any parent or subsidiary of the Company)
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.
-3-
Section 4.2 LIMITATIONS ON ELIGIBILITY. Directors of the Company
<PAGE>
(or its parent or subsidiary) who are not also employees of such entity
shall not be eligible to receive options under the Plan. 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." Options to purchase Shares which are granted
prior to the approval of the Plan by the Company's stockholders shall
be expressly conditioned upon such approval.
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
-4-
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 October
19, 2004.
(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 either an
Incentive Stock Option or Non-Qualified Stock Option will be not less
-5-
<PAGE>
than one hundred percent of the fair market value of the Share on the
date the option is granted. 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 October 31, 1996 to
-6-
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 the 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
-7-
<PAGE>
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 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 October 31, 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. Except as otherwise provided in the next
sentence, no option shall be exercisable unless the Optionee
shall have been employed by the Company (or any present or
future parent or subsidiary of
-8-
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
(and subject to Section 10 herein); 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. In
the event an Optionee has attained his Retirement Date (as defined
herein), (i) the provisions of the preceding sentence shall not be
applicable to such Optionee's Non-Qualified Stock Options and (ii) such
Optionee's Non-Qualified Stock Options shall not be exercisable after
the second anniversary of such Optionee's Retirement Date. For
purposes of this Plan, the term "Retirement Date" shall mean the date
on which the Optionee's employment with the Company (and any parent or
subsidiary of the Company) terminates (including termination because of
death) if the Optionee had then attained age 55 and completed ten
calendar years of service with the Company (or any parent or subsidiary
of the Company).
(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
-9-
<PAGE>
exercised as the Committee may deem desirable or necessary in order to
carry out the purposes and requirements of the Plan.
(g) LIMITATION ON OPTION GRANTS. No Optionee may be granted
options in any calendar year with respect to more than 50,000 shares.
(h) 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.
-10-
Section 7.1 EXERCISE OF OPTIONS. Options shall be exercised as to
all or a portion of the Shares by delivery of an irrevocable 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 minimum required tax withholding).
The date of exercise shall be the date such written 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. No option may be exercised with respect to a fractional share
of stock. 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
minimum required tax withholding) may be made by (a) tendering cash (in
the form of a check or otherwise) in such amount, or (b) with the
consent of the Committee, 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.
-11-
<PAGE>
Section 8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. If the
Company shall, after the Effective Date, change its common stock into a
greater or lesser number of shares through a stock dividend, stock
split-up or combination of shares, then
(i) the number of Shares then subject to the plan but which are
not then subject to any outstanding option;
(ii) the number of Shares subject to each then outstanding option
(to the extent not previously exercised); and
(iii) the price per Share payable upon exercise of each then
outstanding option.
shall all be proportionately increased or decreased as of the record
date for such stock dividend, stock split-up or combination of shares
in order to give effect thereto. Notwithstanding any such
proportionate increase or decrease, no fraction of a Share shall be
issued upon the exercise of an option. If any split-up or combination
of shares shall involve a change of par value, the Shares subject to
options theretofore or thereafter granted shall be the Shares as so
changed.
If, after the Effective Date, there shall be any change in the
stock of the Company other than through a stock dividend, stock
split-up or combination of shares, or other change listed in Section 9
herein, then if (and only if) the Committee shall determine that such
change equitably requires an adjustment in the number or kind or option
price of Shares then subject to an option, or the number or kind of
Shares remaining subject to the Plan, such adjustment as the Committee
shall determine is
-12-
equitable and as shall be approved by the Board shall be made and shall
be effective and binding for all purposes of such option and the Plan.
If any member of the Board shall, at the time of such approval, be an
Optionee, he shall not participate in action in connection with such
adjustment.
Section 9. MERGER, REORGANIZATION, OR CHANGE IN CONTROL.
(a) Nothing contained in this Plan or in any option granted under
the Plan shall in any way prohibit the Company from merging with or
consolidating into another corporation, or from selling or transferring
all or 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 (other than a merger in which the Company is the surviving
corporation and after which the Company remains an independent,
publicly held corporation), the Company or any surviving party to any
such merger, consolidation, or sale or transfer of assets may provide
by resolution of its Board of Directors that all rights of the person
or persons entitled to exercise then outstanding options granted under
the Plan, and such options, shall wholly and completely terminate at
the time of any such merger, consolidation, sale or transfer of assets,
liquidation, or dissolution, except that adequate provision for such
person or persons shall be made in accordance with paragraph (b) below.
<PAGE>
(b) In the event that (i) any individual, corporation, partnership
or other person or group of persons or entities becomes the beneficial
-13-
owner, directly or indirectly, of 45% or more of the Company's then
outstanding common stock ("Change in Control" or (ii) any merger,
consolidation, liquidation, dissolution or termination after which the
Company will not survive as an independent, publicly-owned corporation
or any sales or transfer of all or substantially all of the Company's
assets ("Reorganization") occurs, then the Company shall pay with
respect to each outstanding option under this Plan an amount equal to
(x) the difference between the Fair Market Value (as defined in (c)
below) and exercise price of the option, multiplied by (y) the number
of Shares subject to such option. Such payment shall be made in cash
within 30 days after, in the case of a Reorganization requiring
approval by the Company stockholders, the date of such approval and, in
the case of a Change in Control, the date upon which such change
occurs.
(c) Solely for purposes of (b) above, "Fair Market Value" shall
mean the greater of (i) the highest price per share of the Company's
common stock paid by the acquiring person within twelve months of the
occurrence of the Change in Control to effect such change or provided
for in any agreement for the Reorganization, or (ii) fair market value
determined in accordance with Section 6.2(c) of this Plan.
Section 10. 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
-14-
date set forth in Section 6.2(b), (c) the date of the Optionee's
voluntary resignation or termination for cause, or (d) the date which
is ninety days after the date of the Optionee's other termination of
employment with the Company or any present or future parent or
subsidiary of the Company; 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 designee by will, or, if
applicable, the transferee of such option pursuant to Section 6.2(d)
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) (A) for options subject to the first sentence of Section 6.2(e),
the date which is twelve months after the date of the Optionee's death,
and (B) for options subject to the second sentence of Section 6.2(e),
the second anniversary of the deceased Optionee's Retirement Date. For
purposes of this section, "for cause" shall mean affirmative acts in
violation of federal, state, or local criminal law.
-15-
<PAGE>
Section 11. AMENDMENT AND TERMINATION OF PLAN.
Section 11.1 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
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 11.2 TERMINATION OF PLAN. The Plan shall terminate on the
first to occur of (a) October 19, 2004 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 12. EFFECTIVE DATE. The Effective Date of the Plan shall
be October 20, 1994, 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
-16-
approved at the annual meeting of the Company's stockholders next
following such date by the majority of the shares entitled to vote
at such meeting.
Section 13. 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 14. 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
-17-
<PAGE>
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 15. 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,
regardless of the Plan and any options granted pursuant to it.
Section 16. MISCELLANEOUS.
(a) The transfer of an employee from the Company to a parent or
subsidiary of the Company or from a parent or subsidiary of the Company
to the Company or another parent or subsidiary of the Company shall not
be a termination of employment or an interruption of continuous
employment for the purpose of the Plan.
(b) As used in the Plan, the term "parent" and "subsidiary" shall
have the meanings ascribed to them in Sections 421, 422A and 425 of the
Code.
Section 17. GOVERNMENT APPROVALS. If at any time the Company
shall be advised by its counsel that the exercise of any option or the
-18-
delivery of shares of Stock upon the exercise of an option is required
to be approved, registered or qualified under any applicable law, or
must be accompanied or preceded by a prospectus or similar circular
meeting the requirements of any applicable law, the Company will use
reasonable efforts to obtain such approval, to effect such
registrations and qualifications, or to provide such prospectus or
similar circular within a reasonable time, but exercise of the options
or delivery by the Company of certificates for shares of Stock may be
deferred until such approvals, registrations or qualifications are
effected, or until such prospectus or similar circular is available.
Section 18. Notwithstanding any other provision of this Plan or of
any option agreement relating to any option granted hereunder, the
consummation of the transactions contemplated by that certain Agreement
and Plan of Merger, dated as of August 24, 1997, by and among Wausau
Paper Mills Company, WPM Holdings, Inc. and the Company on
substantially the terms and conditions set forth therein as of August
24, 1997 shall not be deemed to constitute a "Change in Control" or any
other transaction described in Section 11(b) of this Plan and of any
corresponding or similar provision of any such option agreement.
Without limiting the generality of the foregoing, the consummation of
such transactions shall not result in the payment of any cash to any
holder of an option granted under this Plan.
-19-
<PAGE>
AMENDMENT TO
MOSINEE PAPER CORPORATION
1994 EXECUTIVE STOCK OPTION PLAN
Amendment adopted March 4, 1999, replacing the provisions of Section 9
in its entirety with the following:
Section 9. CHANGE IN CONTROL.
Section 9.1 DEFINITION OF "CHANGE IN CONTROL." For purposes of
the Plan, a "Change in Control" means the happening of any of the
following events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (i) the
then outstanding shares of common stock the "Outstanding Corporation
Common Stock")of Wausau-Mosinee Paper Corporation(the "Corporation") or
(ii) the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the
election of directors (the "Outstanding Corporation Voting
Securities"); excluding, however, the following: (A) any acquisition
directly from the Corporation other than an acquisition by
-20-
virtue of the exercise of a conversion privilege unless the security
being so converted was itself acquired directly from the Corporation,
(B) any acquisition by the Corporation, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Corporation or any entity controlled by the Corporation, (D) any
acquisition pursuant to a transaction which complies with clauses (i),
(ii), and (iii) of paragraph (c) of this Section 15.1, (E) except as
provided in paragraphs (d) and (e), any acquisition by any of the
Woodson Entities or any of the Smith Entities, or (F) any increase in
the proportionate number of shares of Outstanding Corporation Common
Stock or Outstanding Corporation Voting Securities beneficially owned
by a Person to 20% or more of the shares of either of such classes of
stock if such increase was solely the result of the acquisition of
Outstanding Corporation Common Stock or Outstanding Corporation Voting
Securities by the Corporation; provided, however, that this clause (F)
shall not apply to any acquisition of Outstanding Corporation Common
Stock or Outstanding Corporation Voting Securities not described in
clauses (A), (B), (C), (D), or (E) of this paragraph (a) by the Person
acquiring such shares which occurs after such Person had become the
beneficial owner of 20% or more of either the Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities by reason of
share purchases by the Corporation; or
(b) A change in the composition of the Board of Directors of the
Corporation (for purposes of this Section 9, the "Board") such that the
-21-
<PAGE>
individuals who, as of the Effective Date, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, for purposes of the Plan, that any individual who
becomes a member of the Board subsequent to the Effective Date whose
election, or nomination for election by the Corporation's shareholders,
was approved by a vote of at least a majority of those individuals who
are members of the Board and who were also members of the Incumbent
Board (or deemed to be such pursuant to this proviso) shall be deemed
to be and shall be considered as though such individual were a member
of the Incumbent Board, but provided, further, that any such individual
whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board shall not be so deemed or
considered as a member of the Incumbent Board; or
(c) Consummation of a reorganization, merger or consolidation, or
sale or other disposition of all or substantially all of the assets of
the Corporation or the acquisition of the assets or securities of any
other entity (a "Corporate Transaction"); excluding, however, such a
Corporate Transaction pursuant to which (i) all or substantially all
-22-
of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) (the "Resulting Corporation") in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (ii) no
Person (other than the Corporation, any employee benefit plan (or
related trust) of the Corporation, any Woodson Entity, any Smith
Entity, or such Resulting Corporation) will beneficially own, directly
or indirectly, 20% or more of, respectively, the outstanding shares of
common stock of the Resulting Corporation or the combined voting power
of the then outstanding voting securities of such Resulting Corporation
entitled to vote generally in the election of directors except to the
extent that such ownership existed with respect to the Corporation
-23-
prior to the Corporate Transaction, and (iii) individuals who were
members of the Incumbent Board will constitute at least a majority
of the members of the board of directors of the Resulting Corporation;
or
<PAGE>
(d) The Woodson Entities acquire beneficial ownership of more than
35% of the Outstanding Corporation Common Stock or Outstanding
Corporation Voting Securities or of the outstanding shares of common
stock or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the Resulting Corporation; or
(e) The Smith Entities acquire beneficial ownership of more than
35% of the Outstanding Corporation Common Stock or Outstanding
Corporation Voting Securities or of the outstanding shares of common
stock or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the Resulting Corporation; or
(f) The approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
For purposes of this Section 9.1, the term "Woodson Entities" shall
mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice Richardson
Yawkey, members of their respective families and their respective
-24-
descendants (the "Woodson Family"), heirs or legatees of any of the
Woodson Family members, transferees by will, laws of descent or
distribution or by operation of law of any of the foregoing (including
of any such transferees) (including any executor or administrator of
any estate of any of the foregoing), any trust established by any of
Aytchmonde P. Woodson, Leigh Yawkey Woodson, or Alice Richardson
Yawkey, whether pursuant to last will or otherwise, any partnership,
trust or other entity established primarily for the benefit of, or any
other Person the beneficial owners of which consist primarily of, any
of the foregoing or any Affiliates or Associates of any of the
foregoing or any charitable trust or foundation to which any of the
foregoing transfers or may transfer securities of the Corporation
(including any beneficiary or trustee, partner, manager or director of
any of the foregoing or any other Person serving any such entity in a
similar capacity).
For purposes of this Section 9.1, the term "Smith Entities" shall
mean David B. Smith and Katherine S. Smith, members of their respective
families and their respective descendants (the "Smith Family"), heirs
or legatees of any of the Smith Family members, transferees by will,
laws of descent or distribution or by operation of law of any of the
foregoing (including of any such transferees) (including any executor
or administrator of any estate of any of the foregoing), any trust
-25-
established by either of David B. Smith or Katherine S. Smith, whether
pursuant to last will or otherwise, any partnership, trust or other
entity established primarily for the benefit of, or any other Person
the beneficial owners of which consist primarily of, any of the
foregoing or any Affiliates or Associates of any of the foregoing or
any charitable trust or foundation to which any of the foregoing
transfers or may transfer securities of the Corporation (including any
<PAGE>
beneficiary or trustee, partner, manager or director of any of the
foregoing or any other Person serving any such entity in a similar
capacity).
For purposes of this Section 9.1, the terms "Affiliate" and
"Associate" shall have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as
in effect on the date of this Plan.
Section 9.2 EFFECTS OF CHANGE IN CONTROL.
(a) In the event of a Change in Control,
(i) all options outstanding on the date on which such Change in
Control has occurred (the "Change in Control Date") shall, to
the extent not then exercisable or vested, immediately become
exercisable in full, and
-26-
(ii) each Optionee may elect, with respect to each option held by
such Optionee on the Change in Control Date (the Optionee's
"Election Right"), to surrender such option for an immediate
lump sum cash payment in an amount equal to the product of (A)
the number of shares of common stock of the Corporation (for
purposes of this Section 9.2, "Shares") then subject to the
option as to which the election is being exercised, multiplied
by (B) the excess, if any, of (1) the greater of (a) the
Change in Control Price or (b) the highest fair market value
of a Share on any day in the 60-day period ending on the
Change in Control Date, over (2) the option price of such
option. For purposes of this Section 9.2, the "Change in
Control Price" shall mean, if the Change in Control is the
result of a tender or exchange offer or a Corporate
Transaction (as defined in Section 9.1(c), the highest price
per Share paid in such tender or exchange offer or Corporate
Transaction; provided, however, that in the case of Incentive
Stock Options, the Change in Control Price shall be in all
cases the fair market value of the Shares on the date such
Incentive Stock Option is exercised. To the extent that the
consideration paid in any such transaction consists all or in
part of securities or other noncash consideration, the value
-27-
of such securities or other noncash consideration shall be
determined in the sole discretion of the Committee.
(b) The exercise of an Election Right must be in writing, specify
the option or options and the number of Shares as to which the
election is being exercised, and be delivered to the Secretary
of the Corporation 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 Corporation's home office
on or before the 60th day following the Change in Control
Date.
<PAGE>
(c) All payments due an Optionee pursuant to the provisions of
this Section 9.2 shall be made by the Corporation on or before
the 5th business day following the date on which the
Optionee's election has been delivered to the Corporation
pursuant to Section 9.2(b).
(d) Notwithstanding any other provision of this Section 9.2, if
the grant or the exercise of an Optionee's Election Right or
payment of cash provided for in Section 9.2(b) would make a
Change in Control transaction ineligible for
pooling-of-interests accounting treatment under APB No. 16,
that, but for the nature of such grant or exercise of Election
Rights or payment of cash, would otherwise be eligible for
such pooling-of-interests accounting treatment, the Committee
shall have the right and authority to
-28-
substitute for the cash payments to be made to the Optionee
pursuant to Section 9.2(a), Shares with a fair market value,
determined as of the date of delivery of such Shares, equal to
the cash that would otherwise be payable to such Optionee in
connection with the exercise of an Optionee's Election Right
hereunder or, to the extent necessary to preserve such
pooling-of-interests accounting treatment, to otherwise modify,
eliminate, or terminate such Election Right.
-29-
WAUSAU-MOSINEE PAPER CORPORATION
INCENTIVE COMPENSATION PLANS
FOR
EXECUTIVE OFFICERS
(1999)
The President and CEO's bonus opportunity for 1999 ranges from 0%
of base salary if 1999 earnings per share are at or below $.94 to 100%
if the 1999 earnings per share are at least $1.40 per share.
The Senior Vice President, Finance, Senior Vice President,
Administration, and Senior Vice President, Engineering and
Environmental Services each have a bonus opportunity equal to 75% of
their base salary based upon the same $.94 to $1.40 range of earnings
per share and will also be entitled to a maximum bonus of 25% of base
salary upon satisfaction of individual performance objectives
established at the beginning of the year by the President and CEO.
<PAGE>
Each Senior Vice President charged with the management of an
operating group will participate in an incentive compensation plan
under which 75% of his bonus will be based on the operating profits of
his group and 25% on satisfaction of individual performance objectives
established at the beginning of the year by the President and CEO. In
each case, achievement of the minimum targeted operating profit will
pay 20% of base salary with a pro rata increase of up to 100% of base
salary based upon achievement of operating profit goals.
Earnings per share will be adjusted for accruals on SARs, bonus
expense and extraordinary items. Outstanding shares used to calculate
the range were 52,482,000 shares. If the actual average shares
outstanding for 1999 is more or less, actual earnings per share
will be adjusted to 52,482,000 shares with a corresponding plus or
minus to interest expense for the actual effect of debt used to
repurchase stock as compared to the plan, which assumed even purchases
throughout the year.
SUBSIDIARIES OF WAUSAU-MOSINEE PAPER CORPORATION
January 20, 1998
1. Rhinelander Paper Company, Inc., a Wisconsin corporation
2. Wausau Papers Export Corporation, a Wisconsin corporation
3. Wausau-Mosinee International, Inc., a U.S. Virgin Islands
corporation
4. Wausau Papers of New Hampshire, Inc., a Delaware corporation
5. Wausau Papers Otis Mill Inc., a Delaware corporation
6. Mosinee Paper Corporation, a Wisconsin corporation
Subsidiaries of Mosinee Paper Corporation:
(a) The Sorg Paper Company, an Ohio corporation
(i) The Middletown Hydraulic Company, an Ohio
corporation
(b) Dickson Forest Products, Inc.<dagger>, a South Dakota
corporation
(c) Mosinee Holdings, Inc., a Wisconsin corporation
<PAGE>
(d) Bay West Paper Corporation, a Wisconsin corporation
<dagger>On January 11, 1986, substantially all the
assets of Dickson Forest Products, Inc. were
sold.
-66-
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in:
(i) Post-Effective Amendment No. 1 to Registration Statement No.
33-44922 on Form S-8 pertaining to the Wausau-Mosinee Paper
Corporation 1991 Employee Stock Option Plan;
(ii) Post-Effective Amendment No. 2 to Registration Statement No.
333-02845 on Form S-8 pertaining to the Wausau-Mosinee Paper
Corporation Savings and Investment Plan;
(iii) Registration Statement No. 333-42445 on Form S-8 pertaining
to the Mosinee Paper Corporation 1985 Executive Stock Option
Plan;
(iv) Registration Statement No. 333-42447 on Form S-8 pertaining
to the Mosinee Paper Corporation 1994 Executive Stock Option
Plan;
of our report, dated January 29, 1999, on our audits of the
consolidated financial statements of Wausau-Mosinee Paper Corporation
as of December 31, 1998 and 1997, and for each of the three fiscal
years ended December 31, 1998 and 1997, and August 31, 1996, which is
included in this Annual Report on Form 10-K.
Wausau, Wisconsin WIPFLI ULLRICH BERTELSON LLP
March 29, 1999
<PAGE>
-67-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
</LEGEND>
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 5,297
<SECURITIES> 0
<RECEIVABLES> 52,779
<ALLOWANCES> 5,875
<INVENTORY> 84,112
<CURRENT-ASSETS> 149,419
<PP&E> 575,435
<DEPRECIATION> 188,969
<TOTAL-ASSETS> 555,615
<CURRENT-LIABILITIES> 62,305
<BONDS> 83,510
<COMMON> 139,284
0
0
<OTHER-SE> 164,270
<TOTAL-LIABILITY-AND-EQUITY> 555,615
<SALES> 570,258
<TOTAL-REVENUES> 570,258
<CGS> 456,239
<TOTAL-COSTS> 456,239
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,520
<INCOME-PRETAX> 78,399
<INCOME-TAX> 29,500
<INCOME-CONTINUING> 48,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,899
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.34
</TABLE>
