<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
WILLAMETTE INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
WILLAMETTE INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
WILLAMETTE INDUSTRIES, INC.
3800 FIRST INTERSTATE TOWER
1300 S.W. FIFTH AVENUE
PORTLAND, OREGON 97201
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1995
----------------
The annual meeting of shareholders of Willamette Industries, Inc.
("Company"), will be held at the RiverPlace Alexis Hotel, 1510 S.W. Harbor Way,
Portland, Oregon, on Thursday, April 27, 1995, at 10 a.m., for the following
purposes:
1. To elect three Class A directors.
2. To approve an amendment of the Company's 1986 Stock Option and Stock
Appreciation Rights Plan to eliminate the provision accelerating the
expiration of exercisable stock options held by an employee whose
employment is terminated by reason of death, disability or retirement.
3. To approve the adoption of the Company's 1995 Long-Term Incentive
Compensation Plan.
4. To approve the appointment of KPMG Peat Marwick LLP, independent
certified public accountants, to examine the financial statements of the
Company for the year 1995.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record as of the close of business on February 22, 1995,
will be entitled to notice of and to vote at the meeting.
You are cordially invited to attend the meeting in person. Whether or not you
plan to attend, please date, sign and mail the enclosed proxy to avoid the
expense of further solicitation. A majority of the outstanding shares must be
represented at the meeting in order to transact business, and whether you own
few or many shares, your proxy is important in fulfilling this requirement.
If you attend the meeting, you may withdraw your proxy and vote in person.
By Order of the Board of Directors
J. A. Parsons
Secretary
Portland, Oregon
March 13, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.............................................................. 1
Holders of Common Stock................................................... 1
Election of Directors..................................................... 3
Executive Compensation.................................................... 5
Compensation Committee Interlocks and Insider Participation............... 7
Report of the Compensation Committee...................................... 8
Performance Graph......................................................... 11
Compensation of Directors................................................. 11
Employment Agreements..................................................... 12
Approval of Amendment of 1986 Stock Option and Stock Appreciation Rights
Plan..................................................................... 13
Approval of 1995 Long-Term Incentive Compensation Plan.................... 17
Approval of Appointment of Independent Public Accountants................. 21
Other Matters............................................................. 21
Shareholder Proposals..................................................... 21
Solicitation of Proxies................................................... 22
Annex A--Willamette Industries 1995 Long-Term Incentive Compensation Plan. A-1
</TABLE>
This Proxy Statement has been printed on Pennlite Opaque(R) paper produced by
the Company.
<PAGE>
PROXY STATEMENT
----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Willamette Industries, Inc., an Oregon
corporation ("Company"), of proxies in the accompanying form for use at the
annual meeting of shareholders to be held on April 27, 1995. This Proxy
Statement and accompanying form of proxy were first sent or given to
shareholders on approximately March 13, 1995.
When a proxy in the enclosed form is properly executed and returned, the
shares represented thereby will be voted at the meeting in accordance with the
instructions specified in the spaces provided in the proxy. If no instructions
are specified, the shares will be voted for items 1 through 4 of the
accompanying Notice of Annual Meeting of Shareholders. Shareholders may
expressly abstain from voting on items 2, 3 and 4 by so indicating on the
proxy. An abstention with respect to either item 2 or 3 will have the same
effect as a vote against the item. Abstentions with respect to item 4, approval
of the selection of independent auditors, will have no effect on the required
vote for the item. Shares represented by duly executed and returned proxies of
brokers and other nominees which are expressly not voted on any matter to be
presented at the annual meeting will have no effect on the required vote on the
matter.
A proxy given pursuant to this solicitation may be revoked by the person
giving the proxy at any time prior to its exercise (i) by delivering written
notice of revocation to the secretary of the Company, (ii) by executing a
subsequent proxy relating to the same shares which is delivered to the
secretary or (iii) by attending the annual meeting and voting in person
(although attendance at the meeting in itself will not constitute revocation of
a proxy).
HOLDERS OF COMMON STOCK
The close of business on February 22, 1995, has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
annual meeting. On the record date, the Company had outstanding 55,042,054
shares of $.50 par value common stock ("Common Stock"), each share of which is
entitled to one vote at the meeting. A majority of the shares entitled to vote,
represented in person or by proxy, will constitute a quorum at the meeting.
The following table gives certain information concerning the holdings of
Common Stock as of January 31, 1995, of each person known to the Company to be
the beneficial owner of more than 5 percent of the outstanding Common Stock, of
each of the directors and nominees, of each of the named executive officers
referred to in the Summary Compensation Table below and of the Company's
directors and executive officers as a group. The information as to beneficial
stock ownership is based on data furnished by the persons concerning whom such
information is given.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY NATURE OF PERCENT OF
OWNED AT BENEFICIAL OUTSTANDING
NAME JANUARY 31, 1995(1) OWNERSHIP(1) COMMON STOCK
- ---- ------------------- ------------ ------------
<S> <C> <C> <C>
C. M. Bishop, Jr. 2,000 Shared Voting and Disposition --
Maurie D. Clark(2) 1,717,980 Sole Voting and Disposition 3.12%
2,382,652 Shared Voting and Disposition 4.33%
Gerard K. Drummond 2,000 Sole Voting and Disposition --
E. B. Hart 746 Sole Voting and Disposition --
</TABLE>
(Table continued on following page)
1
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY NATURE OF PERCENT OF
OWNED AT BENEFICIAL OUTSTANDING
NAME JANUARY 31, 1995(1) OWNERSHIP(1) COMMON STOCK
---- ------------------- ------------ ------------
<S> <C> <C> <C>
William P. Kinnune(3) 43,533 Sole Voting and Disposition .08%
Sole Voting and Shared
3,243 Disposition .01%
30,770 Sole Disposition .05%
77,546 Total .14%
C. W. Knodell 63,866 Sole Voting and Disposition .12%
Paul N. McCracken 3,040 Sole Voting and Disposition .01%
230 Shared Voting and Disposition --
3,270 Total .01%
Michael R. Onustock(3) 24,607 Sole Voting and Disposition .05%
Sole Voting and Shared
2,554 Disposition --
23,170 Sole Disposition .04%
50,331 Total .09%
J. A. Parsons(3) 29,548 Sole Voting and Disposition .06%
Sole Voting and Shared
2,547 Disposition --
15,170 Sole Disposition .03%
47,265 Total .09%
Steven R. Rogel(3) 27,897 Sole Voting and Disposition .05%
Sole Voting and Shared
3,519 Disposition .01%
52,994 Sole Disposition .09%
84,410 Total .15%
Stuart J. Shelk, Jr. 492,642 Sole Voting and Disposition .90%
Robert M. Smelick 2,000 Sole Voting and Disposition --
William Swindells(3)(4) 1,096,766 Sole Voting 1.99%
1,830,528 Shared Voting 3.33%
1,183,867 Sole Disposition 2.15%
1,835,937 Shared Disposition 3.34%
3,019,804 Total 5.49%
Samuel C. Wheeler 1,033,225 Sole Voting and Disposition 1.88%
Benjamin R. Whiteley 2,000 Shared Voting and Disposition --
All directors and execu- 2,823,083 Sole Voting 5.13%
tive officers as a group 1,834,758 Shared Voting 3.33%
(15 persons), including 3,020,425 Sole Disposition 5.49%
persons listed above(3) 1,852,030 Shared Disposition 3.37%
4,883,205 Total 8.87%
</TABLE>
- --------
(1) Shares are included in the table as "beneficially owned" if the person
named has or shares the right to vote or direct the voting of or the right
to dispose or direct the disposition of such shares. Inclusion of shares in
the table does not necessarily imply that the persons named receive the
economic benefits of the shares so listed.
(2) Mr. Clark's address is Suite 600, 1211 S.W. Fifth Avenue, Portland, Oregon
97204.
(3) Includes shares subject to options exercisable within 60 days after January
31, 1995, under the Company's 1986 Stock Option and Stock Appreciation
Rights Plan ("1986 Plan") as follows: Mr. Kinnune, 30,770 shares; Mr.
Onustock, 23,170 shares; Mr. Parsons, 15,170 shares; Mr. Rogel, 52,994
shares; Mr. Swindells, 92,510 shares; and all executive officers as a
group, 279,071 shares.
(4) Mr. Swindells' address is 1300 S.W. Fifth Avenue, Portland, Oregon 97201.
2
<PAGE>
Under Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act"),
holders of more than 10 percent of the Common Stock and directors and certain
officers of the Company are required to file reports ("Section 16 Statements")
of beneficial ownership of Common Stock and changes in such ownership with the
Securities and Exchange Commission. The Company is required to identify in its
proxy statements those persons who to the Company's knowledge were required to
file Section 16 Statements and did not do so on a timely basis. Based solely on
a review of copies of Section 16 Statements furnished to the Company during and
with respect to its most recent fiscal year and on written representations from
reporting persons, the Company believes that each person who at any time during
the most recent fiscal year was a reporting person filed all required Section
16 Statements on a timely basis except Section 16 Statements were not filed on
a timely basis by Mr. Clark to report a gift of Common Stock in 1993 by a trust
of which he was trustee and by Mr. Shelk to report a gift of Common Stock in
1992 to a trust for his daughter's benefit and a purchase of Common Stock in
1993 by such a trust.
ELECTION OF DIRECTORS
The Board is divided into three classes serving staggered three-year terms.
The Board held four meetings during 1994. Each director attended at least 75
percent of the total of (i) the meetings of the Board and (ii) the meetings
held by all committees of the Board on which he served.
The three nominees named below for election as Class A directors are members
of the Board. The nominees elected as Class A directors will serve until the
1998 annual meeting of shareholders. The accompanying proxy when properly
executed and returned to the Company will be voted for the nominees named below
unless authority to vote is withheld. If a quorum is present, a nominee will be
elected if the nominee receives a plurality of the votes cast by the shares
entitled to vote in the election.
Under the Company's bylaws, a shareholder desiring to nominate a candidate
for election as a director must give written notice to the Company with
specified information not less than 90 days prior to any annual meeting and not
less than seven days after the giving of notice to the shareholders of any
special meeting at which directors are to be elected.
If for any reason any of the nominees named below should become unavailable
for election (an event that the Board does not anticipate), the proxy will be
voted for the election of such substitute nominee as may be designated by the
Board. Information with respect to each person nominated for election as a
director and each other person whose term of office as a director will continue
after the meeting is set forth below. Ages shown are as of December 31, 1994.
CLASS A (NOMINEES WHOSE TERMS OF OFFICE WILL EXPIRE IN 1998)
C. M. Bishop, Jr., age 70, has been a director of the Company since 1981. Mr.
Bishop has been vice chairman of Pendleton Woolen Mills, a fabric manufacturer,
since January 1993. Prior to that time he was president of Pendleton Woolen
Mills for more than five years. Mr. Bishop is also a director of First
Interstate Bank of Oregon, N.A., and PacifiCorp.(3)
Robert M. Smelick, age 52, has been a director of the Company since 1990. Mr.
Smelick has been a principal of Sterling Payot Company, an investment company,
since 1989. Prior to that time he was a managing director of The First Boston
Corporation, an investment banking company, for more than five years. Mr.
Smelick is also a director of Metricom, Inc.(3)
Benjamin R. Whiteley, age 65, has been a director of the Company since 1990.
Mr. Whiteley has been chairman of the board of Standard Insurance Company, a
life insurance company, of which he is also a director, since August 1994. He
served as chairman and chief executive officer of Standard Insurance Company
from January 1993 until August 1994 and, prior to that time, as president and
chief executive officer for more than five years. Mr. Whiteley is also a
director of Northwest Natural Gas Company, U. S. Bancorp and The Greenbrier
Companies, Inc.(1)(2)
3
<PAGE>
CLASS B (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 1996)
E. B. Hart, age 70, has been a director of the Company since 1978. Prior to
his retirement in 1989, Mr. Hart had been chairman and chief executive officer
of Pay Less Drug Stores Northwest, Inc., a retail chain, for more than five
years. Prior to 1987, he was also president of that company.(3)
C. W. Knodell, age 67, has been a director of the Company since 1988. Prior
to his retirement from the Company in April 1989, Mr. Knodell was executive
vice president, chief financial officer, secretary and treasurer of the Company
for more than five years. Mr. Knodell is also a director of David Evans and
Associates, Inc.(1)(2)
William Swindells, age 64, has been a director of the Company since 1964. For
more than the past five years, Mr. Swindells has been chairman of the board and
chief executive officer of the Company. Prior to April 1991 he was also
president of the Company. Mr. Swindells is also a director of Standard
Insurance Company, Oregon Steel Mills, Inc. and Airborne Freight Corp.(1)
CLASS C (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 1997)
Gerard K. Drummond, age 57, has been a director since 1991. Since July 1993,
Mr. Drummond has been of counsel to the law firm of Stoel Rives Boley Jones &
Grey. For more than the prior five years, he was chairman of the board of
NERCO, Inc., a natural resources company, its chief executive officer (except
during the period February 1992 to November 1992), and an executive vice
president of PacifiCorp, a public utility holding company.(2)
Paul N. McCracken, age 66, has been a director of the Company since 1986. Mr.
McCracken has been chairman and chief executive officer of Tumac Lumber Co.,
Inc., a wood products broker, for more than the past five years.(1)(2)
Stuart J. Shelk, Jr., age 50, has been a director of the Company since 1983.
Mr. Shelk has been managing general partner of Ochoco Lumber Co., a lumber
manufacturer, for more than the past five years. Mr. Shelk is also a director
of United States National Bank of Oregon.(3)
Samuel C. Wheeler, age 66, has been a director of the Company since 1972. Mr.
Wheeler has been president of Wheeler Management Co., Inc., a wood products
manufacturer, for more than the past five years. Mr. Wheeler is also vice
president of Barclay Logging Company, a logging contractor.(1)(2)
- --------
(1) Member of the Company's executive committee.
(2) Member of the Company's compensation and nomination committee
("Compensation Committee"). The Compensation Committee, which held one
meeting during 1994, reviews the compensation of the Company's directors
and officers prior to consideration of such matters by the Board as a
whole. The Compensation Committee also administers the Company's 1986 Plan.
In addition, the Compensation Committee makes recommendations to the Board
concerning nominations of directors and selection of executive personnel.
The Compensation Committee will consider shareholder suggestions as to
nominees for directors; such suggestions should be addressed to the
secretary of the Company at its principal executive offices. In order to be
considered prior to next year's annual meeting, such suggestions should be
received by December 31 of this year.
(3) Member of the Company's audit committee. The audit committee, which met
twice during 1994, is responsible for: (i) nominating and recommending
independent auditors for selection by the Board, (ii) reviewing the scope
of audit proposed to be performed, (iii) reviewing the results of the past
year's audit with the auditors and (iv) reviewing the independent auditors'
suggestions and comments with respect to internal financial and operational
controls, including monitoring the steps taken to implement suggestions by
the independent auditors. J. A. Parsons, executive vice president and chief
financial officer, secretary and treasurer of the Company, is an ex officio
member of the audit committee.
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation of the Company's chief executive officer and each of its four
other most highly compensated executive officers (the "named executive
officers") during each of the years in the three-year period ended December 31,
1994.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION
COMPENSATION AWARDS
------------ -----------------------
RESTRICTED NUMBER OF
NAME AND STOCK SECURITIES
PRINCIPAL AWARDS UNDERLYING ALL OTHER
POSITION YEAR SALARY (1)(2) OPTIONS/SARS COMPENSATION(3)
--------- ---- ------------ ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
William Swindells 1994 $615,000 $31,263 15,740 $14,537
Chairman and Chief 1993 588,000 -- 16,350 14,150
Executive Officer 1992 575,000 -- 13,680 13,731
Steven R. Rogel 1994 507,500 26,272 12,500 14,537
President and Chief 1993 465,000 -- 12,800 14,150
Operating Officer 1992 426,667 -- 9,040 13,731
William P. Kinnune 1994 395,000 20,010 8,490 14,537
Executive Vice 1993 380,000 -- 8,770 14,150
President 1992 363,333 -- 6,940 13,731
Michael R. Onustock 1994 325,000 16,517 6,950 14,537
Executive Vice 1993 310,000 -- 7,110 14,150
President 1992 291,667 -- 5,460 13,731
J. A. Parsons 1994 319,500 16,199 6,850 14,537
Executive Vice 1993 307,000 -- 7,110 14,150
President and Chief 1992 291,667 -- 5,460 13,731
Financial Officer
</TABLE>
- --------
(1) The value of a restricted stock award is calculated by multiplying the
closing sale price of the Common Stock on The Nasdaq Stock Market on the
date of grant by the number of restricted shares of Common Stock awarded.
(2) The aggregate number of restricted shares of Common Stock held by each
named executive officer and the value of such shares on December 30, 1994
(based on the closing sale price of the Common Stock, $47 1/2, reported on
The Nasdaq Stock Market), are as follows:
<TABLE>
<CAPTION>
NO. OF
NAME SHARES VALUE
---- ------ --------
<S> <C> <C>
William Swindells 5,409 $256,928
Steven R. Rogel 3,519 167,152
William P. Kinnune 3,243 154,042
Michael R. Onustock 2,554 121,315
J. A. Parsons 2,547 120,982
</TABLE>
Dividends are paid on the restricted shares at the same rate as on other
shares of Common Stock.
(3) The amounts shown for 1994 are Company contributions to its Stock Purchase
Plan ("401(k) Plan"), a qualified plan under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), for the
benefit of each of the named executive officers and to its 1993 Deferred
Compensation Plan for the benefit of such officers to the extent
contributions would have been made to the 401(k) Plan had compensation
subject to such plan included deferred compensation and had the Internal
Revenue Code limits not been applicable.
5
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information as to options to purchase Common
Stock granted to the named executive officers during 1994 pursuant to the
Company's 1986 Plan. No SARs were granted during 1994.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)
-------------------------------------- -------------------
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(1) IN FISCAL YEAR PER SHARE(2) DATE 5% 10%
- ---- ---------- -------------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
William Swindells 15,740 6.07% $45.375 April 2004 $449,158 $1,138,255
Steven R. Rogel 12,500 4.82 45.375 April 2004 356,701 903,951
William P. Kinnune 8,490 3.27 45.375 April 2004 242,271 613,963
Michael R. Onustock 6,950 2.68 45.375 April 2004 198,326 502,597
J. A. Parsons 6,850 2.64 45.375 April 2004 195,472 495,365
</TABLE>
- --------
(1) Options were granted for the numbers of shares indicated at an exercise
price equal to the fair market value of the Common Stock on the date of
grant. The options, which have terms of ten years and two days, become
exercisable as follows: 33 1/3 percent after one year, an additional 33 1/3
percent after two years, and the remainder after three years. Additional
information respecting the options is set forth under "Approval of
Amendment of 1986 Stock Option and Stock Appreciation Rights Plan" below.
(2) Subject to certain conditions, the exercise price and tax withholding
obligations related to exercise may be paid by delivery of previously
acquired shares of Common Stock.
(3) The amounts shown are hypothetical gains based on the indicated assumed
rates of appreciation of the Common Stock compounded annually over the full
term of the options. There can be no assurance that the Common Stock will
appreciate at any particular rate or at all.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
Information regarding exercises of stock options and tandem SARs by the named
executive officers during 1994 and unexercised options and tandem SARs held by
them as of December 31, 1994, is summarized in the table set forth below.
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES DECEMBER 31, 1994 AT DECEMBER 31, 1994(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William Swindells 6,180 $203,940 92,510 31,200 $1,931,407 $162,703
Steven R. Rogel 2,200 62,700 52,994 24,046 1,069,216 122,946
William P. Kinnune 18,000 586,898 30,770 16,650 588,685 86,229
Michael R. Onustock -- -- 23,170 13,510 439,642 69,572
J. A. Parsons 17,350 558,280 15,170 13,410 269,642 69,359
</TABLE>
- --------
(1) Represents the difference between the fair market value of shares of the
Common Stock received on exercise of stock options or SARs at the date of
exercise and the option exercise price.
(2) Calculated based on the difference between the closing sale price of the
Common Stock, $47 1/2, reported on The Nasdaq Stock Market on December 30,
1994, and the aggregate exercise price of the unexercised options. All
options reflected in the table were granted at an exercise price equal to
the fair market value of a share of Common Stock on the date of grant.
6
<PAGE>
PENSION PLAN
The retirement plan that the Company maintains for its salaried and office
employees (including officers) provides for payment of retirement benefits
generally based upon an employee's years of service with the Company and
compensation level. Funding of the plan is actuarially determined. The
following table shows the estimated annual benefits payable upon retirement
(assuming normal retirement at age 65) for unmarried employees at specified
compensation levels (based upon the highest average of five consecutive years)
with various years of service (assuming continuous full-time employment with
the Company from date of hire to date of retirement):
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 15 20 25 30 35 40
------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$300,000 $ 72,306 $ 96,408 $120,510 $144,612 $168,714 $191,214
400,000 97,056 129,408 161,760 194,112 226,464 256,464
500,000 121,806 162,408 203,010 243,612 284,214 321,714
600,000 146,556 195,408 244,260 293,112 341,964 386,964
700,000 171,306 228,408 285,510 342,612 399,714 452,214
</TABLE>
Compensation used in determining retirement benefits consists of the
employee's regular fixed salary including amounts deferred at the election of
the employee and contributed to the Company's 401(k) Plan. With respect to the
named executive officers, such compensation is the amount shown for the
officers under "Salary" in the Summary Compensation Table above.
The credited years of service for each of the named executive officers is as
follows: Mr. Swindells, 41; Mr. Rogel, 22; Mr. Kinnune, 33; Mr. Onustock, 22;
and Mr. Parsons, 28.
The benefits payable upon retirement are single-life annuity amounts and are
not subject to any deduction for Social Security or other offset amounts. The
level of benefits is based in part upon the average of the Social Security wage
bases for the 35 years ending with Social Security retirement age. Amounts
shown in the table are based upon the Social Security covered compensation for
an employee attaining age 65 in 1995. Retirement benefits may be reduced from
the amounts shown in the case of early retirement (or other early termination
of employment), in the case of a married employee whose benefits are paid in
the form of a joint and survivor annuity and in the case of an employee whose
employment with the Company has not been continuous. Special provisions in the
plan may apply in the case of death or disability; there are also provisions
relating to the computation of years of service for vesting or benefit purposes
in the case of service with certain employers acquired by the Company at
various times in the past.
The Company has agreed that, to the extent a retirement benefit under its
retirement plan may not be paid because of limitations required by the Internal
Revenue Code, the Company will pay such benefit from a trust account which has
been funded by the Company as soon as the employee ceases employment and is at
least age 55 or on becoming totally and permanently disabled. The amounts shown
include amounts proposed to be paid under the agreement. Benefits to be paid
under the agreement are not funded by contributions to the plan.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
COMPENSATION COMMITTEE
During 1994, Messrs. Drummond, Knodell (who served as an executive officer of
the Company until his retirement in 1989), McCracken, Wheeler and Whiteley
served on the Company's Compensation Committee.
7
<PAGE>
Mr. McCracken is chairman and chief executive officer of Tumac Lumber Co.,
Inc., a wood products broker, which purchases building materials products from,
and sells such products to, the Company in the ordinary course of business at
prevailing market prices. During 1994, such transactions amounted to
approximately $48,653,000.
Mr. Wheeler is vice president of Barclay Logging Company and president of
Wheeler Management Co., Inc., which perform contract logging services for, and
purchase building materials from, the Company in the ordinary course of
business at prevailing market prices. During 1994, such transactions amounted
to less than $60,000. Mr. Wheeler served as a vice president of the Company
until his resignation in 1973.
Mr. Whiteley is chairman of the board and from January 1993 to August 1994
was chairman and chief executive officer of Standard Insurance Company. Mr.
Swindells is and during 1994 was a member of the board of directors of Standard
Insurance Company.
OTHER TRANSACTIONS
Ochoco Lumber Co., of which Mr. Shelk is managing general partner, sells wood
products to, and purchases such products from, the Company in the ordinary
course of business at prevailing market prices. During 1994, such transactions
aggregated approximately $2,543,000.
The Company purchases equipment in the ordinary course of business at
prevailing market prices from Rogers Machinery Co., Inc., in which members of
Mr. Parsons' immediate family own a majority interest. During 1994, such
purchases amounted to approximately $214,000.
REPORT OF THE COMPENSATION COMMITTEE
It is the responsibility of the Compensation Committee to oversee the
administration of salary, stock options and restricted stock awards to all
officers (22 persons). The Compensation Committee's salary recommendations,
when approved by the Board, set the level of compensation for all of these
officers. The Compensation Committee is also responsible for selecting the key
employees, including officers, to receive awards under the 1986 Plan and for
determining the types, amounts, and terms of such awards. In addition, the
Compensation Committee hears reports from Mr. Swindells, the Company's chairman
and chief executive officer, and considers the performance of individual
officers, planned succession and related matters.
The compensation policy of the Company recognizes that the Company's business
is the conversion of timber and wood fiber into products which are largely of a
commodity nature and that the Company is integrated "from the stump to the
customer" with only Mr. Swindells, as chief executive officer, and Mr. Rogel,
as president, responsible for all operations. For these two reasons--little
control of sales prices in commodity markets and little individual control over
material costs and transfer prices of specific business segments--the Company
does not compensate employees with bonuses or other forms of short-term
incentive compensation. All salaried employees, including all officers, are
paid base salaries only.
From time to time, the Compensation Committee has received reports from
compensation consultants regarding competitive industry salaries. The Company
also participates annually in industrywide salary surveys and conducts its own
review of compensation information in proxy statements of competing companies.
From these sources, the Compensation Committee evaluates compensation levels of
a peer group of seven other forest products companies which the Compensation
Committee, based on its general knowledge of the forest products industry,
believes
8
<PAGE>
are comparable to the Company. The Company uses these evaluations when
reviewing and approving management's recommendations regarding compensation.
The seven companies constituting the peer group include five of the fourteen
companies in the Standard & Poor's Paper & Forest Products Index referred to
under "Performance Graph" below and two other forest products companies. Each
of the peer group companies has total annual sales within approximately $1
billion of the Company's total annual sales and, as in the case with the
Company, its pulp and paper products sales typically account for more than 50
percent of its total annual sales.
The 1994 salaries recommended by the Compensation Committee for the Company's
executive officers, other than Mr. Swindells, were determined after comparison
with the cash compensation paid by the peer group to officers in comparable
positions and taking into account available information concerning comparable
levels of responsibility. In arriving at salary recommendations for individual
officers, the committee also compared their duties to the duties of other
officers and employees in the Company. Each recommended salary was within the
range of the cash compensation paid to the comparable peer group officers. Some
of the recommended salaries were near the high end of the range and others were
closer to the low end of the range. The salary recommended for Mr. Swindells
was based on comparing his duties and responsibilities to those of other senior
officers in the Company. In formulating its salary recommendations, the
Compensation Committee did not consider stock options and other noncash
compensation programs of the peer group companies or the stock options granted
to Company officers.
As an incentive to stock ownership by employees and as a form of long-term
incentive compensation, the Compensation Committee annually grants stock
options and occasionally awards shares of restricted Common Stock to selected
key employees.
Stock options are granted by the Compensation Committee based on a formula
relating to base salary and the Company's return on shareholder equity ("ROE").
Under the formula, a target number of options for each executive officer is
determined by dividing a percentage of the officer's salary (ranging from 80
percent to 120 percent based on level of responsibility) by the market price of
the Common Stock at the date of grant. The target number is subject to downward
adjustment based on the Company's ROE for its most recent fiscal year. No
adjustment is made if the Company's ROE exceeds by a specified margin the
composite ROE of 19 forest products companies, including the Company, as
reported by a nationally recognized financial publication (the "Composite
Group"). If the specified margin is not achieved, the options are reduced
proportionately by up to 30 percent of the target number. The Company's 1993
ROE exceeded the published industry composite by more than the specified
margin. Accordingly, option grants in 1994 were not adjusted. The formula does
not take into account the number of stock options previously granted to an
executive officer.
The Composite Group includes five of the seven peer group companies and other
companies that are substantially larger than the Company in terms of sales. The
Compensation Committee believes that the broader Composite Group is more
appropriate for measuring performance based on ROE, which is not related to a
Company's size, and the peer group is more appropriate for comparing
compensation levels which typically depend in part on a company's size.
Restricted stock is awarded to executive officers based upon the Compensation
Committee's subjective evaluation of the Company's performance. No restricted
stock awards were made in 1992 or 1993. In April 1994 restricted stock was
awarded to executive officers in an amount equal to five percent of the
officer's salary based on the market value of the Common Stock at the date of
the award.
The Compensation Committee determines Mr. Swindells' stock options and
restricted stock awards using the same principles as it uses in granting stock
options and restricted stock awards to other executive officers.
9
<PAGE>
The Company's 1995 Long-Term Incentive Compensation Plan (the "1995 Plan") to
be submitted for approval at the 1995 annual meeting is described under
"Approval of 1995 Long-Term Incentive Compensation Plan" below. The 1995 Plan
will replace the 1986 Plan, which expires in April 1996, and is intended to
provide the Company flexibility to qualify compensation attributable to awards
under the 1995 Plan as fully deductible under Section 162(m) of the Internal
Revenue Code.
Section 162(m) generally disallows a federal income tax deduction to the
Company for compensation over $1 million paid to any of the Company's chief
executive officer and four other most highly compensated executive officers
unless such compensation qualifies as performance based under Section 162(m).
The Company does not have a policy that will require or encourage the
committee administering the 1995 Plan to qualify awards to executive officers
for deduction under Section 162(m). However, the committee will consider the
net cost to the Company of any awards under the 1995 Plan.
COMPENSATION COMMITTEE
Gerard K. Drummond C. W. Knodell
Samuel C. Wheeler Benjamin R. Whiteley
Paul N. McCracken, Chairman
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the annual percentage change in the cumulative
total shareholder return on the Common Stock with the cumulative total return
of the Standard & Poor's 500 Stock Index and the cumulative total return of the
Standard & Poor's Paper & Forest Products Index, in each case assuming
investment of $100 on December 31, 1989, and reinvestment of dividends.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG WILLAMETTE INDUSTRIES, INC., S&P PAPER & FOREST PRODUCTS
INDEX AND S&P 500 INDEX
<CAPTION>
Measurement Period WILLAMETTE S&P PAPER & FOREST S&P
(Fiscal Year Covered) INDUSTRIES, INC. PRODUCTS INDEX 500 INDEX
- ------------------- ---------------- ------------------ ----------
<S> <C> <C> <C>
Measurement Pt-
12/31/90 $ 81 $ 90 $ 97
FYE 12/31/91 $116 $115 $126
FYE 12/31/92 $164 $131 $136
FYE 12/31/93 $201 $144 $150
FYE 12/31/94 $197 $150 $152
</TABLE>
COMPENSATION OF DIRECTORS
Directors of the Company, other than directors who are also officers of the
Company or a subsidiary, receive a retainer fee of $20,000 per year, plus
$1,200 for each Board meeting attended and $1,000 for each committee meeting
attended, except that the chairman of a committee receives an attendance fee of
$1,500. A director may elect to have these fees paid into a tax-deferred
account. See "Approval of 1995 Long-Term Incentive Compensation Plan" below for
information regarding options to purchase Common Stock that will be granted to
non-employee directors if the shareholders approve the 1995 Plan.
The Company maintains a retirement plan for nonemployee directors who serve
on the Board on or after September 1, 1989, and who complete five years of
service as nonemployee directors after January 31, 1980. Upon retirement, a
former director receives annual payments equal to the number
11
<PAGE>
of years he or she served as a nonemployee director after January 31, 1980.
Payments terminate on death. The amount of each annual payment equals the
annual retainer fee for directors at the time the director retires. Benefits
under the plan are not funded.
EMPLOYMENT AGREEMENTS
GENERAL
The Company has entered into agreements ("CIC Agreements") with certain of
its key employees, including each of the named executive officers, that provide
for severance compensation for the employees in the event their employment with
the Company is terminated subsequent to a Change in Control (as defined) of the
Company under the circumstances set forth in the CIC Agreements. Pursuant to
the CIC Agreements, each employee has agreed to remain in the Company's employ
following a tender offer or exchange offer for more than 30 percent of the
combined voting power of the Company's voting securities until such offer has
been abandoned or terminated or a Change in Control has occurred and unless the
Company reduces the employee's compensation.
If, within 36 months following a Change in Control, the employee's employment
with the Company is terminated by the Company without Cause (as defined) or by
the employee with Good Reason (as defined below), then the Company shall pay to
the employee, upon demand, his full base salary through the date of termination
at the rate in effect on the date the Change in Control occurred, plus
severance compensation in an amount equal to 2.99 times the sum of (a) his
annual base salary at the above-specified rate and (b) the average annual
incentive compensation (if any) paid or accrued for his benefit in respect of
the two fiscal years prior to the fiscal year in which the Change in Control
occurs.
The CIC Agreements further provide for the continuation of all noncash
employee benefit plans and arrangements, with certain exceptions, for a period
of one year following termination of employment after a Change in Control
except by death, by the Company for Cause or disability or by the employee
other than for Good Reason. The employee is also entitled to be reimbursed for
any reasonable legal fees and expenses he may incur in enforcing his rights
under the CIC Agreement.
In the event it is determined that any payment by the Company to or for the
benefit of the employee in connection with a Change in Control is not
deductible by the Company for federal income tax purposes, then amounts
otherwise payable or distributable under the agreement are reduced to the
maximum deductible amount.
The CIC Agreements are for one-year terms which extend annually for an
additional one-year term, unless either the Company or the employee gives
notice that the CIC Agreement shall not be extended. In the event of a Change
in Control while the CIC Agreements are in effect, the CIC Agreements are
automatically extended for 36 months from the date the Change in Control
occurs. The CIC Agreements terminate upon termination of employment prior to a
Change in Control.
CERTAIN DEFINITIONS
Lengthy definitions of Cause, Change in Control and Good Reason are included
in the CIC Agreements. Summaries of the definitions, which are necessarily
incomplete, are set forth below.
"Cause" with respect to the termination of an employee's employment by the
Company means termination because the employee committed an act of fraud,
embezzlement or theft constituting a felony, or an act intentionally against
the interest of the Company which causes it material harm, or because of his
repeated failure, after written notice, to perform his responsibilities under
the CIC Agreement.
12
<PAGE>
"Change in Control" means (i) a change in control required to be disclosed
pursuant to Regulation 14A under the Exchange Act, (ii) subject to certain
exceptions, the acquisition by a person or group of beneficial ownership of 20
percent or more of the outstanding Common Stock, (iii) a change in the
composition of the Board such that the directors at the beginning of any two-
year period cease to constitute at least a majority of the Board unless the
election or nomination of each new director was approved by two-thirds of the
directors still in office who were directors at the beginning of such period,
(iv) subject to certain exceptions, any consolidation or merger of the Company
or any sale or other transfer of substantially all its assets or (v) approval
by the shareholders of the Company of a plan or proposal for its liquidation or
dissolution.
"Good Reason" with respect to the termination by an employee of his
employment with the Company means (i) subject to certain exceptions, any change
in the employee's status or position with the Company which in his reasonable
judgment does not represent a promotion, (ii) a reduction in the employee's
base salary, (iii) the failure by the Company to continue in effect for the
employee certain benefit plans and policies, (iv) the transfer of the employee
to a different location, (v) the failure of any successor to the Company to
expressly assume the Company's obligations under the CIC Agreement, (vi) a
purported termination by the Company of the employee's employment which is not
effected in accordance with the CIC Agreement or (vii) a refusal by the Company
to allow the employee to continue to engage in certain activities not related
to the Company's business.
APPROVAL OF AMENDMENT OF 1986 STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
The Company's 1986 Plan was adopted by the Board in February 1986 and was
approved by the shareholders of the Company at the annual meeting held on April
15, 1986. The 1986 Plan provides for Common Stock-based awards consisting of
stock options, stock appreciation rights ("SARs") and restricted stock to key
employees of the Company and its subsidiaries, including employees who are also
directors of the Company or one of its subsidiaries. No awards may be made
under the 1986 Plan after April 14, 1996. At March 6, 1995, the closing sale
price of the Common Stock on The Nasdaq Stock Market was $51 3/4.
PROPOSED AMENDMENT
Options awarded under the 1986 Plan must be for a term (the "Stated Period")
of not more than ten years and two days from the date of grant. If an
employee's employment terminates by reason of death, disability or retirement
(as defined), any options held by the employee which are not then exercisable
expire immediately. However, an option may specify that it becomes exercisable
no later than upon termination of employment for particular reasons, such as
death, disability, or retirement. Any options held by the employee which are
exercisable expire on the earlier of (i) three years after termination of
employment or (ii) the expiration of the Stated Period.
In February 1995, the Board adopted, subject to shareholder approval at the
1995 annual meeting, an amendment of the 1986 Plan to eliminate the provision
accelerating the expiration of exercisable options held by an employee whose
employment is terminated by reason of death, disability or retirement.
Accordingly, if the amendment is approved, such options will remain exercisable
until the expiration of their Stated Periods.
RECOMMENDATION OF THE BOARD; VOTE REQUIRED
The Board recommends that shareholders vote FOR approval of the amendment of
the 1986 Plan. The affirmative vote of the holders of a majority of the shares
of Common Stock present, in person or by proxy, and entitled to vote on the
proposal at the 1995 annual meeting is required for approval of the amendment.
13
<PAGE>
DESCRIPTION OF 1986 PLAN
Administration. The 1986 Plan is administered by a committee of not less than
three members of the Board, each of whom is a "disinterested person" as defined
in Rule 16b-3 under the Exchange Act. The Board has appointed the members of
the Compensation Committee as the committee to administer the 1986 Plan and
determine the key employees of the Company and its subsidiaries who are to
receive awards under the 1986 Plan and the types, amounts and terms of the
awards.
Eligible Employees. The pool of key employees considered potentially eligible
to receive awards under the 1986 Plan presently numbers approximately 165,
including 22 Company officers. Under the 1986 Plan, SARs may be awarded only to
officers of the Company.
Shares of Common Stock Subject to the 1986 Plan. Subject to adjustment for
changes in capitalization, the maximum number of shares of Common Stock that
may be the subject of awards under the 1986 Plan is 3,000,000 of which 954,730
shares remained available for awards at December 31, 1994. Shares subject to
awards which expire or otherwise terminate become again available for awards.
Stock Options. The Compensation Committee determines the terms of stock
option awards under the 1986 Plan including the exercise price, the Stated
Period, the number of shares of Common Stock subject to the option and any
conditions on the exercise of the option, provided that the exercise price may
not be less than the fair market value of the Common Stock at the date of grant
and the Stated Period, as indicated above, may not be more than ten years and
two days from the date of grant. The Compensation Committee is authorized after
the grant of an option to accelerate the exercisability of the option. Upon the
exercise of an option, payment of the exercise price is made in cash or, at the
Compensation Committee's discretion, in whole or in part in any other form,
including by delivery of shares of previously acquired Common Stock. Options
are not intended to qualify as incentive options under Section 422 of the
Internal Revenue Code.
If an employee's employment terminates for a reason other than death,
disability or retirement and not following a Change in Control (as defined in
Section 9 of Annex A to this Proxy Statement but with the date in subsection
(b) of Section 9 changed to February 13, 1986), any options held by the
employee which are not then exercisable expire immediately. Any options held by
the employee which are then exercisable expire on the earlier of (i) 30 days
or, if the Compensation Committee so determines after considering the
circumstances of the termination, three years, after termination of employment
or (ii) the expiration of the Stated Period.
If an employee's employment terminates by reason of death, disability or
retirement, the employee's options expire as described above under "Proposed
Amendment."
Upon a Change in Control, all options outstanding under the 1986 Plan become
immediately exercisable in full and remain exercisable in full until the
earlier of (i) three years after the date the Change in Control occurs or (ii)
the expiration of the Stated Period. If an employee's employment terminates for
any reason within two years following a Change in Control (other than on
account of conduct which constitutes a felony), any options held by the
employee expire upon the earlier of (i) three years after termination of
employment or (ii) the expiration of the Stated Period. In addition, upon a
Change in Control, each option holder may make a "cash exercise" of all or any
portion of the holder's options. Upon a cash exercise, the option holder is
entitled to receive an amount in cash equal to the excess of the fair market
value of a share of Common Stock on the date of exercise over the option price
per share multiplied by the number of options exercised. A cash exercise may be
made only during a 45-day period beginning on the first day following the date
on which the Company has knowledge of an actual Change in Control, but may not
be made by an officer of the Company or its subsidiaries within six months of
the date of grant of the option.
14
<PAGE>
An option may not be transferred except by will or the laws of descent and
distribution and, during the lifetime of an employee to whom an option is
granted, such option may be exercised only by the employee or the employee's
guardian or legal representative.
Stock Appreciation Rights. The Compensation Committee may, at the time of the
grant of an option, or at a later date, award SARs in connection with the
option. SARs may only be awarded to officers of the Company. No SARs have been
awarded since 1990. The maximum number of SARs that may be awarded to an
officer is 50 percent of the number of shares of Common Stock covered by the
related option. When an officer exercises an option granted after 1987, a
portion of his related SARs are canceled, generally on the basis of one SAR for
each two shares purchased.
SARs generally have the same terms as the related options (subject to certain
restrictions related to the short-swing profit provisions of the Exchange Act)
except that they terminate immediately upon discharge for cause or voluntary
resignation.
SARs may be exercised only in conjunction with an exercise of the related
option, generally in a maximum number which is 50 percent of the shares to be
purchased at that time under the option. Upon exercise of a SAR, the officer
must surrender a portion of the related option unexercised, generally on the
basis of one share for each SAR granted before 1988 and two shares for each SAR
granted thereafter. Upon such exercise and surrender, the officer is entitled
to receive an amount in cash equal to the excess of the fair market value of a
share of Common Stock on the date of exercise over the option price per share
multiplied by the number of SARs exercised. The options surrendered on account
of the exercise of SARs are no longer available for regrant under the 1986
Plan.
Restricted Stock. The Compensation Committee may from time to time make
awards of restricted stock of up to an aggregate of 500,000 shares of Common
Stock to employees eligible to receive grants of options. At the time of award,
the Compensation Committee specifies the waiting period or periods during which
the shares are not vested. Vesting may be dependent on a period of subsequent
employment, the attainment of performance goals, or both. No restricted shares
which vest based on the attainment of performance goals have been awarded. The
Compensation Committee may accelerate vesting as to all or part of the shares
awarded at any time.
During the waiting period, the employee has all the rights of a shareholder
of the Company except that the restricted shares may not be sold, pledged, or
otherwise transferred. When the shares vest, they are delivered to the employee
free of restrictions. The Compensation Committee may, in its discretion,
provide that a portion of an award of restricted stock shall be paid in cash
rather than in shares of Common Stock.
Any nonvested shares vest upon the employee's death, disability or retirement
or upon a Change in Control. Upon termination of employment for any reason
other than death, disability or retirement, any nonvested shares are forfeited.
Any restricted shares which vest based on the attainment of performance goals
are also forfeited if such goals are not met within the specified time period.
Amendments. The Board may amend the 1986 Plan at any time, provided that no
such amendments shall adversely affect the rights of employees to whom grants
and awards have previously been made without the consent of the employees
affected thereby, and provided further that the Board may not, without the
approval of shareholders, (i) increase the number of shares of Common Stock
subject to the 1986 Plan (except in connection with a change in
capitalization), (ii) extend the period during which grants and awards under
the 1986 Plan may be made or, (iii) materially increase the benefits accruing
to participants under the 1986 Plan, (iv) modify the requirements as to
eligibility for participation in the 1986 Plan, or (v) establish a price at
which shares may be purchased upon exercise of an option at less than the fair
market value of the Common Stock at the time the option is granted.
15
<PAGE>
Federal Income Tax Aspects. In connection with the exercise of an option, an
employee will generally realize compensation income, for federal income tax
purposes, measured by the difference between the option price and the fair
market value of the shares acquired on the date of exercise.
Optionees may be permitted by the Compensation Committee to pay all or a
portion of the option price upon exercise of an option using previously
acquired shares of Common Stock. If an option is exercised and payment is made
in previously acquired shares, there is no gain or loss recognized to the
employee on the surrender of the previously acquired shares. The employee's
basis in the newly-acquired shares will be split so that (i) a number of shares
equal to the number of shares transferred to pay the option price will have a
cost basis equal to the basis of such transferred shares and (ii) the remainder
of the new shares will have a cost basis equal to the fair market value of
those shares on the exercise date.
An employee will not recognize any income for federal income tax purposes
upon the grant of SARs to the employee. Upon exercise of SARs, the employee
will recognize compensation income equal to the amount of cash payable to the
employee.
Generally, an employee will not recognize any income for federal income tax
purposes upon issuance of any restricted stock which is not vested. Dividends
paid with respect to restricted stock prior to the vesting of such stock will
be taxable as compensation income to the employee. Generally, an employee will
recognize compensation income upon the vesting of restricted stock in an amount
equal to the fair market value of the shares of Common Stock on the date they
become vested. However, an employee may elect to recognize compensation income
upon the grant of restricted shares based on the fair market value of the
shares of Common Stock subject to such award at the date of grant. If an
employee makes such a special election, dividends paid with respect to such
restricted shares will not be treated as compensation, but rather as dividend
income, and the employee will not recognize additional income when the
restricted shares vest.
In the case of exercises of SARs and cash exercises of options, taxes will be
withheld from the cash amounts payable to the employee. Upon the exercise of an
option for Common Stock or the vesting of restricted stock, the employee may be
required to pay an amount for any taxes required to be withheld. The Company
may alternatively deduct any such taxes from the shares that would otherwise be
issued to or vest in the employee or, if the Compensation Committee so permits,
the employee may make the required withholding payment by delivering previously
acquired shares of Common Stock.
The Company and its subsidiaries will be entitled to receive a federal income
tax deduction at the same time and in the same amount as the amount which is
taxable to employees as compensation with respect to awards made under the 1986
Plan, subject to the limitations of Section 162(m) of the Internal Revenue
Code. Under Section 162(m), the Company may deduct certain qualified
compensation in full, but may not deduct other compensation in excess of $1
million paid in any year to the Company's chief executive officer or to any of
its other four most highly compensated executive officers. If an employee who
receives an award of restricted shares makes the special election described
above, the Company will not be entitled to deduct dividends paid with respect
to such restricted shares.
1986 PLAN BENEFITS
The following table summarizes as of December 31, 1994, the benefits of the
indicated persons and groups attributable to stock options and tandem SARs,
excluding those with an exercise price greater than the market price of the
Common Stock at December 30, 1994, and restricted stock outstanding under the
1986 Plan.
16
<PAGE>
1986 PLAN BENEFITS
1986 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
<TABLE>
<CAPTION>
RESTRICTED
OPTIONS/SARS STOCK
---------------------- ---------------
NO. OF
DOLLAR UNDERLYING DOLLAR NO. OF
NAME AND POSITION VALUE(1) SHARES VALUE(2) SHARES
- ----------------- ----------- ---------- -------- ------
<S> <C> <C> <C> <C>
William Swindells........................ $ 2,094,110 123,710 $256,928 5,409
Chairman and Chief
Executive Officer
Steven R. Rogel.......................... 1,192,162 77,040 167,152 3,519
President and Chief
Operating Officer
William P. Kinnune....................... 674,914 47,420 154,042 3,243
Executive Vice
President
Michael R. Onustock...................... 509,214 36,680 121,315 2,554
Executive Vice
President
J. A. Parsons............................ 339,001 28,580 120,982 2,547
Executive Vice President
and Chief Financial Officer
All executive officers
as a group.............................. 5,184,025 340,630 831,772 17,511
All nonexecutive officers and
other employees as a group.............. 11,475,546 892,181 -- --
</TABLE>
- --------
(1) Calculated based on the difference between the closing sale price of the
Common Stock, $47 1/2, on December 30, 1994, as reported on The Nasdaq
Stock Market and the exercise price of the options.
(2) Calculated by multiplying the closing sale price of the Common Stock, $47
1/2 on December 30, 1994, as reported on The Nasdaq Stock Market by the
indicated number of shares of restricted stock.
APPROVAL OF 1995 LONG-TERM INCENTIVE COMPENSATION PLAN
In February 1995, the Board adopted the 1995 Plan, subject to shareholder
approval at the 1995 annual meeting, to replace the 1986 Plan. The purpose of
the 1995 Plan is to motivate special achievement by officers and other key
employees of the Company and its subsidiaries, including employees who are also
directors, by encouraging them to acquire or increase an equity interest in the
Company and, in the case of non-employee directors, to align their interest
more closely to that of the Company. No awards may be made under the 1995 Plan
after April 27, 2005.
The 1995 Plan, like the 1986 Plan, provides for Common Stock-based awards
consisting of stock options, SARs and restricted stock. Options awarded under
the 1995 Plan are not intended to qualify as incentive options under Section
422 of the Internal Revenue Code. The Company does not intend to make any
further awards under the 1986 Plan if the 1995 Plan is approved at the 1995
annual meeting of shareholders.
17
<PAGE>
The full text of the 1995 Plan is attached as Annex A to this Proxy
Statement. The summary of the principal features of the 1995 Plan set forth
under "Description of 1995 Plan" below is qualified in its entirety by
reference to Annex A.
RECOMMENDATION OF THE BOARD; VOTE REQUIRED
The Board recommends that shareholders vote FOR approval of the adoption of
the 1995 Plan. The affirmative vote of the holders of a majority of the shares
of Common Stock present, in person or by proxy, and entitled to vote on the
proposal at the 1995 annual meeting is required for approval of the 1995 Plan.
The 1995 Plan will not be implemented unless it is approved at the 1995 annual
meeting.
DESCRIPTION OF 1995 PLAN
Administration. The 1995 Plan will be administered by a committee (the
"Committee") of the Board of not less than two members appointed by the Board.
Each member of the Committee must be a "disinterested person" as defined in
Rule 16b-3 under the Exchange Act and, unless the Board determines otherwise,
an "outside director" within the meaning of Section 162(m) of the Internal
Revenue Code. The Board intends to appoint the members of the Committee
following approval of the 1995 Plan by the shareholders.
The Committee will determine the key employees of the Company and its
subsidiaries who are to receive awards under the 1995 Plan and the types,
amounts, and terms of the awards, provided that no one employee may be awarded
stock options or SARs in respect of an aggregate of more than 350,000 shares of
Common Stock or restricted stock whose vesting is based on the attainment of
performance goals in excess of 50,000 shares. The 1995 Plan does not limit the
number of shares of restricted stock which may be awarded to any one employee
whose vesting is based on years of continuous employment.
Eligible Employees; Non-Employee Directors. The pool of key employees
considered eligible to receive awards under the 1995 Plan numbers approximately
175. If the 1995 Plan is approved at the 1995 annual meeting, members of the
Board who are not employees of the Company or a subsidiary ("Non-Employee
Directors") will receive automatic grants of stock options as described under
"Director Stock Options" below. Directors are not eligible for other awards
under the 1995 Plan. Nine of the ten members of the Board are Non-Employee
Directors.
Shares of Common Stock Subject to the 1995 Plan. Subject to adjustment for
changes in capitalization, the maximum number of shares of Common Stock that
may be the subject of awards under the 1995 Plan is 2,750,000. Shares subject
to awards which expire or otherwise terminate will again become available for
awards.
Employee Stock Options. The Committee will determine the terms of stock
option awards to key employees under the 1995 Plan, including the exercise
price, the Stated Period, the number of shares of Common Stock subject to the
option and any conditions on the exercise of the option, provided that the
exercise price may not be less than the fair market value of the Common Stock
at the date of grant and the Stated Period may not be more than ten years and
two days from the date of grant.
The Committee is authorized after the grant of an option to accelerate the
exercisability of the option. Upon the exercise of an option, payment of the
exercise price is made in cash or, at the Committee's discretion, in whole or
in part in any other form, including by delivery of shares of previously
acquired Common Stock.
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If an employee's employment terminates for a reason other than death,
disability or retirement and not following a Change in Control (as defined in
Section 9 of Annex A), any options held by the employee which are not then
exercisable will expire immediately. Any options held by the employee which are
then exercisable will expire on the earlier of (i) 30 days, or, if the
Committee so determines after considering the circumstances of the termination,
three years, after termination of employment or (ii) the expiration of the
Stated Period.
If an employee's employment terminates by reason of death, disability or
retirement, any options held by the employee which are not then exercisable
will expire immediately and any options which are then exercisable will remain
exercisable until the expiration of their Stated Periods. However, an option
may specify that it becomes exercisable no later than upon termination of
employment for particular reasons such as death, disability or retirement.
Upon a Change in Control, all options outstanding under the 1995 Plan will
become immediately exercisable in full and remain exercisable in full until the
earlier of (i) three years after the date the Change in Control occurs or (ii)
the expiration of their Stated Periods. If an employee's employment terminates
for any reason within two years following a Change in Control (other than on
account of conduct which constitutes a felony), any options held by the
employee will expire upon the earlier of (i) three years after termination of
employment or (ii) the expiration of their Stated Periods. In addition, upon a
Change in Control, each option holder may make a "cash exercise" of all or any
portion of the holder's options. Upon a cash exercise, the option holder will
be entitled to receive an amount in cash equal to the excess of the fair market
value of a share of Common Stock on the date of exercise over the option price
per share multiplied by the number of options exercised. A cash exercise may be
made only during a 45-day period beginning on the first day following the date
on which the Company has knowledge of an actual Change in Control, but may not
be made by an officer (as defined under Section 16 of the Exchange Act) of the
Company within six months of the date of grant of the option.
Unless the Committee specifies otherwise in an option at the time of grant,
an option may not be transferred except by will or the laws of descent and
distribution and, during the lifetime of an employee to whom an option is
granted, such option may be exercised only by the employee or the employee's
guardian or legal representative.
Director Stock Options. Upon approval of the 1995 Plan at the 1995 annual
meeting, each Non-Employee Director will automatically be granted an option to
purchase 1,000 shares of Common Stock (an "Initial Option"). Thereafter, each
person who becomes a Non-Employee Director, other than any former officer of
the Company or a subsidiary, also will automatically be granted an Initial
Option on the date such person becomes a member of the Board. In addition, on
the date of each annual meeting of shareholders commencing in 1996, an option
for 600 shares of Common Stock (an "Annual Option") will be automatically
granted to each person who is then a Non-Employee Director, including former
officers of the Company or its subsidiaries, and who is to continue to serve as
a director.
An option granted to a Non-Employee Director will have an exercise price
equal to the fair market value of the Common Stock at the date of grant, will
have a Stated Period of ten years and two days and will become exercisable 33
1/3 percent after one year, an additional 33 1/3 percent after two years and
the remainder after three years.
If a Non-Employee Director's service as a director terminates for a reason
other than death, disability or retirement (as defined), and not following a
Change in Control, any options held by the Non-Employee Director which are not
then exercisable will expire immediately. Any options held by the Non-Employee
Director which are then exercisable will expire on the earlier of (i) 30 days
from the date of termination of service or (ii) the expiration of the Stated
Period.
If a Non-Employee Director's service terminates on account of death,
disability or retirement or upon a Change in Control, any options held by the
Non-Employee Director will become immediately exercisable. In addition, upon a
Change in Control, a Non-Employee Director may make a "cash
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exercise" of such director's options as described under "Employee Stock
Options" above. The provisions of the 1995 Plan providing for the form of
payment of the exercise price and limiting the transfer of employee stock
options described under "Employee Stock Options" above will also apply to
options granted to Non-Employee Directors.
Stock Appreciation Rights. Upon the exercise of a SAR, the holder will be
entitled to receive an amount in cash equal to the excess of the fair market
value of a share of Common Stock on the date of exercise over the base price of
the SAR multiplied by the number of SARs exercised. The Committee will
determine the terms of SARs awarded under the 1995 Plan, including the base
prices, the Stated Periods, the number of SARs included in an award, and any
conditions on the exercise of the SARs. The base price of an SAR may be higher
than, equal to, or lower than the fair market value of a share of Common Stock
at the date of grant. The Stated Period of a SAR may not be more than ten years
and two days from the date of grant.
SARs, to the same extent as options granted under the 1995 Plan, will expire
on termination of employment, be exercisable upon a Change in Control and be
subject to restrictions on transfer.
Restricted Stock. The Committee will determine the terms and amounts of
restricted stock awards to key employees under the 1995 Plan. At the time of
the award, the Committee will specify the waiting period or periods during
which the shares are not vested. Vesting will depend on either a period of
continuous employment after the date of the award or the attainment of
performance goals set forth in the award. The performance goals will be one or
more of earnings per share, return on equity, return on assets, growth in
earnings, growth in sales revenue, corporate profitability or shareholders
returns. The goals may be measured in comparison to a group of peer companies
or based on the Company's results. The Committee may accelerate vesting as to
all or part of the shares which vest based upon continuous employment.
During the waiting period, the employee will have all the rights of a
shareholder of the Company except that the restricted shares may not be sold,
pledged or otherwise transferred. When the shares vest, they are delivered to
the employee free of restrictions. The Committee may, in its discretion,
provide that a portion of an award of restricted stock will be paid in cash
rather than in shares of Common Stock.
Any nonvested shares will vest upon a Change in Control or upon the
employee's death, disability or, if vesting is dependent on a period of
continuous employment, on retirement. At the time the Committee awards shares
of restricted stock which vest based on performance, the Committee may, in its
discretion, specify that such shares will vest on retirement. Except for shares
held at termination of employment on account of death or disability and shares
which vest on retirement, nonvested shares will be forfeited on termination of
employment. Any restricted shares which vest based on the attainment of
performance goals also will be forfeited if such goals are not met within the
specified time period.
Amendments. The Board may amend the 1995 Plan at any time, provided that (a)
the provisions relating to options to be granted to Non-Employee Directors may
not be amended more than once every six months other than to comport with
changes in the Internal Revenue Code or Rule 16b-3 under the Exchange Act, (b)
no amendment may adversely affect the rights of participants to whom grants and
awards have previously been made without the consent of the participants
affected thereby, and (c) the Board may not, without the approval of
shareholders, (i) increase the number of shares of Common Stock subject to the
1995 Plan or the number of shares that may be received by any one employee
(except in connection with a change in capitalization), (ii) extend the period
during which grants and awards under the 1995 Plan may be made, (iii)
materially increase the benefits accruing to participants under the 1995 Plan,
(iv) modify the requirements as to eligibility for participation in the 1995
Plan, or (v) establish a price at which shares may be purchased upon exercise
of an option at less than the fair market value of the Common Stock at the time
the option is granted.
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Federal Income Tax Aspects. The federal income tax aspects of awards under
the 1995 Plan are the same as for awards under the 1986 Plan as described under
"Approval of Amendment of 1986 Stock Option and Stock Appreciation Rights
Plan--Federal Income Tax Aspects." In addition, the 1995 Plan is intended to
provide the Company flexibility to qualify compensation attributable to
performance-based awards under the 1995 Plan for deduction in full pursuant to
Section 162(m) of the Internal Revenue Code.
1995 PLAN BENEFITS
The following table summarizes the benefits under the 1995 Plan that will be
received, subject to shareholder approval, by the groups indicated below to the
extent such benefits are determinable at the date of this Proxy Statement.
NEW PLAN BENEFITS
1995 LONG-TERM INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
NUMBER OF
GROUP DOLLAR VALUE OPTIONS
----- ------------ ---------
<S> <C> <C>
Non-Executive Director Group...................... (1) 9,000(2)
All Others........................................ (1) (1)
</TABLE>
- --------
(1) Not determinable at the date of this Proxy Statement.
(2) Includes Initial Options only. The receipt of Annual Options will depend on
continued service on the Board.
APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board has reappointed KPMG Peat Marwick LLP, independent certified public
accountants, to examine the financial statements of the Company for the year
1995. Although the selection and appointment of independent public accountants
is not required to be submitted to a vote of the shareholders, the Board has
decided to ask the shareholders to approve the appointment. If the shares voted
against approval exceed the shares voted in favor of approval, the Board will
reconsider the appointment. The members of the audit committee of the Board are
indicated in the table set forth under "Election of Directors."
The Company expects representatives of KPMG Peat Marwick LLP to be present at
the annual meeting and to be available to respond to appropriate questions from
shareholders. The accountants will have the opportunity to make a statement at
the annual meeting if they desire to do so.
OTHER MATTERS
Management knows of no matters to be brought before the meeting other than
those described above. However, should any other matters properly come before
the meeting, the persons named in the accompanying form of proxy will vote or
refrain from voting thereon in accordance with their judgment.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the next annual meeting of
shareholders of the Company must be received by the Company no later than
November 14, 1995, in order to be included in the proxy statement and proxy
card for such meeting.
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SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally, by telegram and by
telephone by regular employees of the Company without extra compensation for
their services. The Company will reimburse brokers and other persons holding
shares in their names, or in the names of nominees, for their reasonable
expenses in forwarding soliciting materials to their principals and obtaining
authorization for the execution of proxies.
By Order of the Board of Directors
J. A. Parsons
Secretary
Portland, Oregon
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ANNEX A
WILLAMETTE INDUSTRIES
1995 LONG-TERM INCENTIVE
COMPENSATION PLAN
1. General. Pursuant to the terms and conditions of the WILLAMETTE INDUSTRIES
1995 LONG-TERM INCENTIVE COMPENSATION PLAN (the "Plan"), hereinafter set forth,
the Committee specified in Article 2 may from time to time grant or award to
eligible employees of Willamette Industries, Inc. ("Company"), and of those
corporations ("Subsidiaries") in which Company owns at least 50 percent of the
total combined voting power of all classes of stock, options to purchase shares
of the $.50 par value common stock ("Stock") of Company, stock appreciation
rights, and restricted Stock. In addition, the Plan provides for the automatic
grant of options to Non-Employee Directors as defined in Article 8. Such
options, stock appreciation rights, and restricted Stock are sometimes referred
to collectively as "grants and awards." The purpose of the Plan is to motivate
special achievement by officers and other key employees of Company and its
Subsidiaries by assisting them in acquiring or increasing an equity interest in
Company, and, in the case of Non-Employee Directors, to align their interest
more closely to that of Company. The options shall be nonqualified stock
options subject to Section 83 of the Internal Revenue Code, and not incentive
stock options subject to Section 422A of the Internal Revenue Code.
2. Administration. The Board of Directors of Company ("the Board") shall
designate a Committee of not less than two members of the Board ("the
Committee") who shall administer the Plan and serve at the pleasure of the
Board. The number and identity of the members of, and any name given to the
Committee, may be changed by the Board at any time and from time to time. The
Committee may also have other duties, as would be the case if the Board should
designate the Company's Compensation and Nomination Committee (or a successor
thereto) to act as the Committee under the Plan. No person shall be eligible or
continue to serve as a member of the Committee unless such person is a
"disinterested person" within the meaning of Rule 16b-3 ("Rule 16b-3") of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any law, rule, regulation, or other provision
that may hereafter replace such rule. Also, unless the Board determines
otherwise, members of the Committee must be "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and
the rules thereunder. Subject to the express provisions of the Plan, the
Committee shall have full and final authority, acting in its sole discretion,
to interpret the Plan, to establish rules and regulations relating to the Plan,
and to take such action and make such determinations as the Committee may deem
necessary or advisable in the administration of the Plan. However, Committee
shall have no discretion as to any aspect of grants to Non-Employee Directors;
these grants shall be governed by Article 8. No member of the Committee shall
be liable for any action or determination made in good faith with respect to
the Plan or any grant or award made thereunder, nor be liable for any good
faith reliance upon any report or other information furnished to the Committee
by Company's officers, its independent public accountants, or by any other
person or entity.
3. Eligibility. Except as otherwise provided in Article 8, employees eligible
to receive grants and awards under the Plan shall be such key employees
(including officers, regardless whether they are directors) of Company and its
Subsidiaries as may be selected from time to time by the Committee. Except for
the provisions in Articles 5, 6, and 7 setting a per-employee maximum limit on
the number of stock options, stock appreciation rights, or shares of restricted
Stock whose vesting is based on attainment of one or more performance goals, no
provision of the Plan shall be construed to prohibit the Committee from making
additional grants or awards under the Plan to employees who have previously
received grants or awards. No provision of the Plan shall be construed as
automatically entitling an employee to a grant or award, regardless whether the
employee has received a grant or award in a prior year or has attained a
particular executive position or salary level.
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4. Shares Subject to the Plan. Subject to Article 16 hereof, the total number
of shares of Stock issuable under the Plan shall not exceed 2,750,000. For
purposes of this limitation, (a) any option or stock appreciation right which
terminates or expires without exercise shall thereafter be deemed not to have
been granted, and (b) shares of restricted Stock which are forfeited shall
thereafter be deemed not to have been issued. Shares of Stock available for
issue under the Plan shall be authorized and unissued shares or shares acquired
by Company and held in treasury.
5. Stock Options. The Committee may from time to time grant options to
eligible employees. Subject to appropriate adjustment pursuant to Article 16,
no employee may receive, under the Plan, stock options or stock appreciation
rights which in the aggregate would exceed 350,000 shares of Stock. The price
at which a share of Stock may be purchased on exercise of an option shall be
fixed by the Committee at the date of grant of such option and shall not be
less than the fair market value of a share of Stock at that date. Fair market
value, as used in this Article 5 and elsewhere in the Plan, shall, unless the
Committee shall determine otherwise, be the closing price of Stock on the date
the option is granted as reported on the NASDAQ national market system for such
date or, if such closing price is not available for a date (because the date is
not a trading day or otherwise), for the next preceding date for which such
closing price is available.
At the time an option is granted, the Committee shall specify the period
during which it is not exercisable, and whether the option is to be thereafter
exercisable in full or in installments. The Committee may also specify that all
the shares become exercisable no later than upon termination of employment for
certain reasons, such as death, disability, or retirement. The Committee may at
any time after the grant accelerate the exercisability of the option. Options
granted under the Plan shall expire not more than ten years and two days from
the date of the grant of the option as specified by the Committee (the "stated
period of the option") at date of grant.
No employee to whom an option is granted shall be entitled to any of the
rights of a shareholder of Company with respect to any shares covered by the
option until certificates representing such shares have been issued to the
employee.
No option may be transferred except by will or the laws of descent and
distribution and, during the lifetime of an employee to whom an option is
granted, such option may be exercised only by the employee, the employee's
guardian or legal representative. Notwithstanding the foregoing, the Committee,
in its sole discretion, may include in the agreement referred to in Article 12
evidencing the grant of an option to an employee a provision permitting the
employee to transfer such option upon the terms and conditions specified in
such agreement, provided that the foregoing provisions of this sentence shall
apply to any person subject to the reporting provisions of Section 16(a) of the
Exchange Act only to the extent that the exemption given by Rule 16b-3 shall
continue to be available to the grant of such option.
Upon termination of employment for any reason other than death, disability,
or retirement ("disability" and "retirement" are defined in Article 10) of an
employee to whom an option has been granted, the employee may, at any time
prior to the earlier of (a) 30 days after termination of employment or (b) the
expiration of the stated period of the option, exercise the option to the same
extent, if any, that the option was exercisable by the employee on the date of
termination of employment under the terms of the option. Notwithstanding the
foregoing, the Committee may in its discretion, after giving consideration to
the circumstances of the termination of employment of an employee to whom an
option has been granted, extend said 30-day period to a period of three years
after termination of employment. The option shall expire on the date of
termination of employment to the extent it was not then exercisable and
otherwise shall expire upon the earlier of 30 days (three years, if the
Committee has extended the period) after termination of employment or the
expiration of the stated period of the option.
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Upon the termination of employment by reason of death, disability, or
retirement of an employee to whom an option has been granted, the employee (or,
in case of death, any person or persons, including the legal representative of
the employee's estate, to whom the option passes by will or by the laws of
descent and distribution) may, at any time prior to the expiration of the
stated period of the option, exercise the option to the same extent, if any,
that the option was exercisable by the employee on the date of termination of
employment under the terms of the option. The option shall expire on the date
of termination of employment to the extent it was not then exercisable and
otherwise shall expire upon the expiration of the stated period of the option.
Payment upon exercise of an option shall be made in cash, by certified check
or bank draft payable to the order of Company or, at the Committee's
discretion, in whole or in part in any other form, including by personal check
or by the delivery to Company of shares of Stock previously acquired by the
employee or by any combination of the foregoing.
6. Stock Appreciation Rights. The Committee may from time to time award stock
appreciation rights to eligible employees and determine the base price for each
stock appreciation right (which may be higher than, equal to, or less than the
fair market value of a share of Stock on the date of award). A "stock
appreciation right" is a right to receive cash as provided in this Article 6.
Subject to appropriate adjustment pursuant to Article 16, no employee may
receive, under the Plan, stock options or stock appreciation rights which in
the aggregate would exceed 350,000 shares of Stock.
Upon the exercise of a stock appreciation right, the optionee shall be
entitled to the excess of the fair market value of one share of Stock on the
date of such exercise over the base price specified in the award agreement for
the stock appreciation right.
Except as otherwise provided in this Article 6, the terms and conditions
relating to exercise and expiration of stock appreciation rights shall be as
determined by the Committee under the same rules as provided in Article 5 for
stock options and shall be subject to the same restraints on transferability,
except that the exercise of stock appreciation rights shall be subject to such
conditions as are required to prevent the employee from incurring liability
under Section 16(b) of the Exchange Act.
7. Awards of Restricted Stock. The Committee may from time to time make
awards of restricted Stock under the Plan to eligible employees. An award may
be either of two types:
(a) Stock whose vesting is based on years of continuous employment after
the date of award.
(b) Stock whose vesting is based on attainment of one or more performance
goals.
Years of Continuous Employment. At the time of an award of shares whose
vesting is based on years of continuous employment, the Committee shall specify
the number of continuous years of employment required for vesting, except that
full vesting shall occur no later than upon termination of employment by reason
of death, disability, or retirement ("disability" and "retirement" are defined
in Article 10). The Committee may at any time after the award accelerate the
vesting as to part or all the shares awarded. There is no per-employee maximum
limit on the number of shares of restricted Stock whose vesting is based on
years of continuous employment.
Attainment of Goals. At the time of an award of shares whose vesting is based
on attainment of performance goals, the Committee shall specify the performance
goal or goals which must be attained, and the date by which they must be
attained, in order to cause the shares to vest. The performance goal or goals
shall be one or more of earnings per share, return on equity, return on assets,
growth in earnings, growth in sales revenue, corporate profitability, or
shareholder returns. These can be measured in comparison to the performance of
a group of peer companies selected by the Committee or based on Company's
results. Notwithstanding the foregoing, full vesting shall occur upon death or
disability. Also, the Committee may, in its discretion, at the time an award is
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made, specify that the shares shall become fully vested upon retirement in the
event retirement occurs before the attainment of the performance goal or goals.
If the specified performance goal or goals are not met within the time
specified, the nonvested shares subject to such goal or goals shall be
forfeited. Furthermore, upon termination of employment for any reason other
than death, disability, or (in those cases where the Committee has specified
full vesting on retirement) retirement of an employee to whom an award has been
made, any nonvested shares shall be forfeited. Subject to appropriate
adjustment pursuant to Article 16, no employee may receive, under the Plan,
more than 50,000 shares of restricted Stock whose vesting is based on
attainment of performance goals.
General Provisions. While the shares are not vested, the employee shall have
all the rights of a shareholder of Company as to the nonvested shares, except
that the shares may not be sold, assigned, transferred, pledged, or otherwise
encumbered. Certificates representing awarded shares shall be registered in the
name of the employee but held (with a stock power endorsed in blank) by Company
until the shares have vested, at which time they shall be delivered to the
employee or legal representative free of restrictions.
The Committee may, in its discretion, provide that a portion of the award of
restricted Stock shall be made in cash rather than shares. Any such cash shall
be payable at the same time or times as the shares to which the cash relates
become vested. If shares are forfeited, the related amount of unpaid cash shall
also be forfeited.
8. Non-Employee Directors. Grants shall be made to members of the Board who
are not employees of Company or any Subsidiary ("Non-Employee Directors") only
under this Article 8. No person, including the members of the Board or the
Committee, shall have any discretion as to the selection of eligible recipients
or the determination of the type, amount, or terms of grants pursuant to this
Article 8. The persons eligible to receive grants pursuant to this Article 8
are all Non-Employee Directors.
Initial Options. Upon the date of approval of the Plan by Company's
shareholders (the "Approval Date"), each person who is then a Non-Employee
Director shall be automatically granted an option (a "Director Option") to
purchase 1,000 shares of Stock. Each person who becomes a Non-Employee Director
after the Approval Date shall be automatically granted, on the date such person
becomes a Non-Employee Director, an initial Director Option to purchase 1,000
Shares; provided, however, that a director who was at any time an officer of
Company or any Subsidiary shall not be entitled to a grant of the initial
Director Option.
Annual Options. On the date of each annual meeting of Company's shareholders
beginning with the meeting in 1996, each person who is then a Non-Employee
Director and who is to continue as a member of the Board following the annual
meeting, and without regard to how long the person has been a Non-Employee
Director or whether the person had ever been an officer of Company or any
Subsidiary, shall be automatically granted an annual Director Option to
purchase 600 shares of Stock.
Option Price. The option price for all Director Options shall be the fair
market value of a share of Stock at the date of grant.
Option Agreements. Each grant of Director Options made pursuant to this
Article 8 shall be governed by and shall be subject to the terms and conditions
set forth in an Option Agreement in the form attached to the Plan as Exhibit A.
Except to the extent otherwise provided in this Article 8 or in such Option
Agreement, each such grant shall be governed by the Plan's provisions relating
to the grant of options to, and the exercise of options by, employees.
9. Change in Control. For purposes of the Plan, "change in control" means the
occurrence of any of the following events without approval by the affirmative
vote of at least two thirds of those
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members of the Board who (i) are members of the Board immediately prior to the
event, and (ii) are not employees of Company or a Subsidiary:
(a) The merger or consolidation of Company with, or the sale of all or
substantially all the assets of Company to, any person or entity or group
of associated persons or entities.
(b) The attainment of direct or indirect beneficial ownership of
securities of Company which in the aggregate represent 20 percent or more
of the total combined voting power of Company's then issued and outstanding
securities by any person or entity or group of associated persons or
entities acting in concert who is not affiliated (within the meaning of the
Securities Act of 1933) with Company as of November 10, 1994; provided,
however, the Board may at any time in its discretion increase the 20
percent requirement but not beyond 40 percent.
(c) The approval by the shareholders of Company of any plan or proposal
for the liquidation or dissolution of Company.
A change in control shall also be deemed to occur upon a change in the
membership of the Board at any time during any consecutive 24-month period such
that the "continuity" directors cease for any reason to constitute at least 70
percent of the Board. The continuity directors are those members of the Board
who were either (i) members of the Board at the beginning of such consecutive
24-month period, or (ii) elected by, or on the nomination or recommendation of,
at least two thirds of the members of the Board.
If a change in control occurs, all options and stock appreciation rights
previously granted or awarded which are not fully exercisable shall become
exercisable in full upon the date of such occurrence and shall remain so
exercisable until the earlier of (a) three years after the date of such
occurrence, or (b) the expiration of the stated period of the option. After the
end of the three-year period, the options and rights shall revert to being
exercisable in accordance with their terms, although no option or rights which
have previously been exercised or otherwise terminated shall become
exercisable. Notwithstanding the foregoing, no stock appreciation rights may be
exercised within six months of the date of award of the rights.
Notwithstanding the provisions of Articles 5 and 6 relating to the expiration
of options and stock appreciation rights in connection with termination of
employment, upon termination of employment for any reason (other than by reason
of conduct which constitutes a felony under federal law or the law of the state
in which the employee resides) within the two-year period following the
occurrence of a change in control, the option and rights may be exercised at
any time prior to the earlier of (a) three years after termination of
employment or (b) the expiration of the stated period of the option.
If a change in control occurs, all shares of restricted Stock previously
awarded which are not vested shall become vested upon the date of such
occurrence.
10. Right to Receive Cash on Change in Control. If a change in control, as
defined in Article 9, occurs, each employee (including those who are not
officers) holding an unexercised option, and regardless whether the option is
then otherwise fully exercisable, may make a cash exercise of all or any
portion of the option in lieu of the purchase of Stock under the option. A cash
exercise may be made, without any payment to Company, by surrendering
unexercised the option or any portion thereof. Upon such exercise and
surrender, the optionee shall be entitled to receive cash (less applicable
withholding taxes) in an amount equal to the excess of the aggregate fair
market value of the shares of Stock covered by the option, or the relevant
portion thereof, on the date of such exercise and surrender over the aggregate
exercise price of such Stock under the option. The cash exercise may be made
only during the period beginning on the first day following the date on which
Company has actual knowledge of the actual occurrence of the change in control
and ending on the 45th day following such date. Notwithstanding the foregoing,
no cash exercise may be made by an officer (as
A-5
<PAGE>
defined under Section 16 of the Exchange Act) of Company within six months of
the date of grant of the option and no cash exercise may be made by any
optionee after the expiration of the stated period of the option.
11. Disability; Retirement. Except as otherwise provided in Exhibit A for
Non-Employee Directors, "disability" for purposes of this Plan shall have the
same meaning as "total and permanent disability" under the Willamette
Industries, Inc., and Associated Companies Salaried Employees' Retirement Plan
(regardless whether the employee is covered by such Retirement Plan), and
"retirement" shall mean:
(a) Termination of employment at or after attainment of age 62, provided
the employee has (or would have, if covered by such Retirement Plan) at
least ten vesting credits as defined under such Retirement Plan, or
(b) Termination of employment at or after attainment of age 65,
regardless of the number of such vesting credits, if any.
12. Agreement. Each employee to whom a grant or award is made under the Plan
shall execute an appropriate agreement with respect to such grant or award
referring to the terms and conditions thereof and of the Plan. The form of
agreements may be changed from time to time and need not be identical among
those receiving the grants or awards.
13. Withholding Taxes. Company shall have the right to deduct from all cash
payments made under the Plan any federal, state, or local taxes required by law
to be withheld with respect to such cash payments, and, in the event such cash
payments are insufficient to cover the required withholding, the employee or
other person receiving such payment may be required to pay to Company the
additional amount necessary for this purpose. In the case of an exercise of an
option or an award of restricted Stock, the employee or other person exercising
such option or taxable in connection with such award may be required to pay to
Company the amount of any such taxes that Company is required to withhold with
respect to such exercise or award. Company shall also have the right to deduct
any such taxes from the shares that would otherwise be issued to or vest in the
employee or other person.
The Committee may, in its discretion, allow the employee or other person to
make the required payment to Company by delivery of shares of previously
acquired Stock.
14. Employment. Nothing contained in the Plan or in any grant or award under
the Plan shall confer upon any employee any right with respect to the
continuation of employment with Company or its Subsidiaries or interfere in any
way with the right of Company or its Subsidiaries to terminate the employee's
employment at any time. Nothing contained in the Plan shall confer upon any
employee or other person any claim or right to any grant or award under the
Plan.
15. Governmental Compliance. Each grant and award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that the listing, registration, or qualification of any shares issuable
thereunder upon any securities exchange or under any federal or state law, or
the consent or approval of any governmental or self-regulatory body is
necessary or desirable as a condition thereof, or in connection therewith, no
such grant or award may be exercised or shares issued unless such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
16. Adjustments. The right and power of Company to provide for
reclassifications, reorganizations, recapitalizations, stock splits, stock
dividends, combination of shares, merger, consolidation, or any other change in
the capital structure or shares of Company shall not be affected by the Plan.
In the event of any such action, the Committee or the Board may make such
adjustments, if any, as it may deem appropriate in the number of shares
available for grants and awards under the Plan, that may be granted or awarded
to an individual employee or Non-Employee Director, and to grants and awards
made under the Plan.
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<PAGE>
17. Expenses. The expenses of administering the Plan shall be borne by
Company.
18. Termination. No grants or awards under the Plan shall be made after April
27, 2005, or such earlier date as the Board may determine.
19. Successors and Assigns. The provisions of the Plan (and interpretations
and determinations made by the Committee pursuant thereto) shall be conclusive
and binding upon Company and its Subsidiaries, their successors and assigns,
and upon each employee receiving grants or awards under the Plan and the
employee's heirs, successors, and assigns.
20. Amendment. The Plan may be amended by the Board as it deems advisable,
provided that no such amendments shall adversely affect the rights of
participants to whom grants and awards under the Plan shall have been made
without the consent of the participants affected thereby, nor shall the Board,
without approval of Company's shareholders:
(a) Except as provided in Article 16, increase the number of shares of
Stock that are subject to the Plan or the number of shares that may be
received by any one employee;
(b) Extend the period during which grants and awards under the Plan may
be made;
(c) Otherwise materially increase the benefits accruing to participants
under the Plan;
(d) Amend the requirements of the Plan in respect of eligibility to
receive grants and awards under the Plan; or
(e) Establish the price at which shares may be purchased on the exercise
of an option at less than the fair market value of the Stock at the time
the option is granted.
The provisions of Article 8 of the Plan shall not be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code or in Rule 16b-3 under the Exchange Act.
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<PAGE>
EXHIBIT A
OPTION AGREEMENT
FOR NON-EMPLOYEE DIRECTOR OPTION
THIS AGREEMENT, made this day of , 19 , by and between
WILLAMETTE INDUSTRIES, INC., hereinafter referred to as "Company," and
, hereinafter referred to as "Optionee,"
W I T N E S S E T H :
WHEREAS Article 8 of the Willamette Industries 1995 Long-Term Incentive
Compensation Plan (Plan) provides for the automatic grant of options to Non-
Employee Directors to purchase Company's $.50 par value common stock (Stock),
NOW, THEREFORE, the parties agree as follows:
1. Grant of Option.
Company hereby, on the date of this Agreement, grants Optionee the option to
purchase shares of Stock on the terms and conditions hereinafter
set forth and subject to the provisions of the Plan. The option price shall be
$ per share, which is the average of the best bid and the best ask
at closing on the date the option is granted, as reported on NASDAQ (or, if the
Stock is listed on one or more stock exchanges, as reported on the principal
stock exchange on which the Stock is listed) or, if such closing information is
not available for a date (because the date is not a trading day or otherwise),
for the next preceding date for which such closing information is available.
2. Exercise of Option.
(a) Except as otherwise provided in paragraph 3, the option shall become
exercisable according to the following schedule. Notwithstanding anything
in this Agreement to the contrary, neither the option nor any portion
thereof is exercisable after the expiration of ten years and two days (the
"stated period of the option") from the date this option is granted:
<TABLE>
<CAPTION>
YEARS OF CONTINUOUS SERVICE AS PERCENTAGE OF SHARES
A DIRECTOR FROM DATE OPTION GRANTED EXERCISABLE
----------------------------------- --------------------
<S> <C>
After one year Up to 33 1/3 percent of
the number of shares
subject to the option;
After two years Up to 66 2/3 percent;
After three years All the shares subject to
the option.
</TABLE>
Notwithstanding the foregoing schedule, all the shares subject to the
option shall become exercisable upon termination of service as a director
by reason of death, disability, or retirement or upon the date of
occurrence of a change in control as defined in the Plan. In this
Agreement, "disability" means the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months.
"Retirement" means termination of service as a director on or after
attaining age 72.
(b) Optionee shall, in the event he elects to exercise the option, give
Company written notice of exercise. The notice shall specify the number of
full shares to be purchased and shall be accompanied with the payment of
the purchase price in cash or by delivery of shares of
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<PAGE>
previously acquired Stock. Subject to paragraph 3(d), Company shall
thereupon promptly issue a certificate to Optionee representing the number
of full shares so purchased. No option shall be exercisable with respect to
a fractional share. Optionee shall have no obligation to exercise the
option.
(c) The option may be exercised by Optionee in whole or in part or parts;
provided, however, that no less than 100 shares shall be purchased under
any exercise unless the number purchased is the total number purchasable
under the option. All partial exercises shall be noted on Company's and on
Optionee's copy of this Agreement.
(d) The written notice of exercise must be accompanied by any amount
required under federal or state withholding laws or regulations, either in
cash or by delivery of shares of previously acquired Stock.
3. Limitations on exercise.
The option shall be subject to the following limitations on exercise:
(a) If Optionee's service as a director is terminated for any reason
other than death, disability, or retirement, the option may be exercised,
to the extent exercisable as of the date of termination of service, and to
the extent it has not previously been exercised, but not after the first to
occur of the expiration of the stated period of the option or the
expiration of 30 days from the date of termination of service.
(b) If Optionee's service as a director is terminated by reason of death,
disability, or retirement, the option may be exercised (in the case of
death, by the estate of the decedent or by a person who acquired the right
to exercise the option by bequest or inheritance) at any time thereafter,
to the extent it has not previously been exercised, but not after the
expiration of the stated period of the option.
(c) If Company at any time determines that registration or qualification
of the Stock covered by the option under state or federal law or the
consent or approval of any governmental or self-regulatory body is
necessary or desirable, the option may not be exercised in whole or in part
until such registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not acceptable to Company.
4. Nontransferability of option.
The option and all rights and privileges conferred thereby shall not be
transferable by Optionee otherwise than by will or the laws of descent and
distribution and shall be exercisable during Optionee's lifetime only by him.
The option and all rights and privileges conferred thereby shall also not be
assigned, pledged, or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate, or
otherwise dispose of the option or any right or privilege conferred thereby, or
upon the levy or any attachment or similar process upon the option or the
rights and privileges conferred thereby, the option and the rights and
privileges conferred thereby shall immediately terminate and become null and
void.
5. Adjustment.
In the event of payment of a dividend on Stock payable in Stock after the
option is granted, Stock then subject to the option shall be increased
proportionately without any change in the aggregate purchase price therefor. In
the event the outstanding Stock shall be changed into or exchanged for a
different number or class of shares of Company, or of another corporation,
whether through reorganization, recapitalization, stock split-up, combination
of shares, merger, or consolidation, then there shall be substituted for each
share of Stock then subject to the option the number and class of shares into
which each outstanding share of Stock shall be so exchanged, all without any
change in the aggregate purchase price for the shares then subject to such
option.
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<PAGE>
6. Right to Receive Cash on Change in Control.
If a change in control as defined in the Plan occurs, Optionee may,
regardless whether the option is then otherwise fully exercisable, make a cash
exercise of all or any portion of the option (to the extent not previously
exercised) in lieu of the purchase of Stock under the option. The cash exercise
may be made, without any payment to Company, by surrendering unexercised the
option or any portion thereof. Upon exercise and surrender, Optionee shall be
entitled to receive cash (less applicable withholding taxes, if any) in an
amount equal to the excess of the aggregate fair market value of the shares of
Stock covered by the option (or the relevant portion thereof) on the date of
the cash exercise and surrender over the aggregate purchase price of the shares
specified in the option. The cash exercise may be made only during the period
beginning on the first day following the date on which Company has actual
knowledge of the actual occurrence of the change in control and ending on the
45th day following that date. Notwithstanding the foregoing, no cash exercise
may be made by Optionee sooner than six months from the date the option is
granted or after the expiration of the stated period of the option.
7. Assignment.
This Agreement shall be binding upon the successors and assigns of Company.
Upon the sale of all or substantially all the assets of Company, or upon the
merger of Company with another corporation, this Agreement shall inure to the
benefit of and be binding on both Optionee and such purchaser or surviving
corporation, as the case may be.
IN WITNESS WHEREOF, Company has caused this Agreement to be executed by its
executive vice president and its assistant secretary, they being thereunto duly
authorized, and Optionee has set his hand hereto, on the date first hereinabove
written.
WILLAMETTE INDUSTRIES, INC.
By __________________________________
Executive Vice President
By __________________________________
Assistant Secretary
-------------------------------------
Optionee
3
<PAGE>
APPENDIX A
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
WILLAMETTE INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
William Swindells and J.A. Parsons, each with power of substitution, are hereby
authorized to represent and vote the common stock of Willamette Industries, Inc.
("Company"), which the undersigned may be entitled to vote at the annual meeting
of the Company's shareholders to be held April 27, 1995, or at any adjournment
thereof:
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED, OR, IF NO CHOICE IS SPECIFIED, WILL BE VOTED FOR ITEMS 1, 2, 3, AND
4. Both proxies named herein, or if only one be present then that one, shall
have all powers granted herein.
1. Election of Directors: [_] FOR all nominees listed [_] WITHHOLD AUTHORITY
C.M. Bishop, Jr., (except as marked to the to vote for all
Robert M. Smelick, contrary nominees
Benjamin R. Whiteley
(INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. A proposal to approve an [_] FOR [_] AGAINST [_] ABSTAIN
amendment to the Company's
1986 Stock Option and Stock
Appreciation Rights Plan.
3. A proposal to approve the [_] FOR [_] AGAINST [_] ABSTAIN
adoption of the Company's
1995 Long-Term Incentive
Compensation Plan.
4. A proposal to approve KPMG [_] FOR [_] AGAINST [_] ABSTAIN
Peat Marwick LLP to examine
Company's financial
statements for 1995.
5. In the discretion of the
proxies named herein upon
any other business which
may properly come before
the meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders to be held April 27, 1995, and accompanying proxy statement,
and revokes all prior proxies for said meeting.
Dated __________________, 1995 ________________________________________
________________________________________
Signature(s) of Shareholder(s)
PLEASE SIGN EXACTLY AS NAME APPEARS
HEREON. IN CASE OF JOINT OWNERSHIP, EACH
JOINT OWNER MUST SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEE, ETC., SHOULD GIVE
FULL TITLE. PLEASE MARK, SIGN,
DATE AND RETURN THIS PROXY
PROMPTLY.
