<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
March 31, 1996
--------------
Commission File Number 0-3730
------
Willamette Industries, Inc.
- ------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
State of Oregon 93-0312940
- ------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 S.W. Fifth Avenue, Suite 3800, Portland, Oregon 97201
- ------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (503) 227-5581
---------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, 50 cent par value: 55,238,977, May 9, 1996.
------------------------
<PAGE>
<TABLE>
<CAPTION>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS PART I
(dollar amounts, except per share amounts, in thousands) ITEM 1
March 31, December 31,
ASSETS 1996 1995
-------- ------------
<S> <C> <C>
Current assets:
Cash $ 44,925 17,961
Accounts receivable, net of allowance
for doubtful accounts of $5,557 and $5,446 312,537 314,070
Inventories (Note 2) 359,319 391,358
Prepaid expenses and timber deposits 42,147 51,448
--------- ---------
Total current assets 758,928 774,837
Timber, timberlands and related facilities, net (Note 3) 569,609 518,873
Property, plant and equipment, at cost less
accumulated depreciation of $1,551,468 and $1,494,383 2,098,204 2,054,868
Other assets 65,531 64,977
--------- ---------
$ 3,492,272 3,413,555
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments on long-term debt $ 3,588 29,598
Notes payable 70,000 51,000
Accounts payable, includes book overdrafts
of $52,674 and $58,158 154,489 180,176
Accrued expenses 143,744 130,269
Accrued income taxes 56,298 24,536
--------- ---------
Total current liabilities 428,119 415,579
Deferred income taxes 337,429 330,142
Other liabilities 30,279 30,734
Long-term debt, net of current installments 793,160 790,210
Stockholders' equity:
Preferred stock, cumulative, of $.50 par value.
Authorized 5,000,000 shares. - -
Common stock of $.50 par value. Authorized 75,000,000
shares; issued 55,226,339 and 55,223,706 shares. 27,613 27,612
Capital surplus 300,898 300,757
Retained earnings 1,574,774 1,518,521
--------- ---------
Total stockholders' equity 1,903,285 1,846,890
--------- ---------
$ 3,492,272 3,413,555
========= =========
</TABLE>
<PAGE>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF EARNINGS PART I
(dollar amounts, except per share amounts, in thousands) ITEM 1
Three Months Ended
March 31,
------------------------
1996 1995
----------- ---------
Net sales $ 866,112 900,638
Cost of sales 678,166 670,809
---------- ----------
Gross profit 187,946 229,829
Selling and administrative expenses 55,150 49,402
---------- ----------
Operating earnings 132,796 180,427
Other income (expense) 204 (115)
---------- ----------
133,000 180,312
Interest expense 14,086 19,201
---------- ----------
Earnings before taxes 118,914 161,111
Provision for income taxes 45,544 62,028
---------- ----------
Net earnings $ 73,370 99,083
========== ==========
Weighted average number of
shares outstanding 55,224,168 55,042,806
========== ==========
Per share information:
Net earnings $ 1.33 1.80
========== ==========
Dividends $ 0.31 0.27
========== ==========
<PAGE>
<TABLE>
<CAPTION>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS PART I
(dollar amounts in thousands) ITEM 1
Three Months Ended
March 31,
-------------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 73,370 99,083
Adjustments to reconcile net earnings to net cash
from operating activities:
Depreciation 58,570 51,653
Cost of fee timber harvested 3,618 5,528
Other amortization 1,202 1,239
Increase in deferred income taxes 7,287 24,191
Changes in working capital items:
Accounts receivable 1,533 (48,067)
Inventories 32,039 (18,265)
Prepaid expenses and timber deposits 9,301 (2,534)
Accounts payable and accrued expenses (12,212) 21,725
Accrued income taxes 31,762 30,805
--------- --------
Net cash from operating activities 206,470 165,358
--------- --------
Cash flows from investing activities:
Proceeds from sale of equipment 281 296
Expenditures for property, plant and equipment (102,194) (84,918)
Expenditures for timber and timberlands, net (4,736) (6,487)
Expenditures for roads and reforestation (2,311) (1,833)
Acquisition (Note 3) (50,796) -
Other 1,320 984
--------- --------
Net cash from investing activities (158,436) (91,958)
--------- --------
Cash flows from financing activities:
Debt borrowing 22,045 1,165
Proceeds from sale of common stock 107 638
Cash dividends paid (17,117) (14,857)
Payment on debt (26,105) (61,212)
--------- --------
Net cash from financing activities (21,070) (74,266)
--------- --------
Net change in cash 26,964 (866)
Cash at beginning of period 17,961 12,798
--------- --------
Cash at end of period $ 44,925 11,932
========= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 16,393 19,293
========= ========
Income taxes $ 6,495 7,032
========= ========
</TABLE>
<PAGE>
FORM 10-Q
PART I
ITEM 1
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
Note 1 The information furnished in this report reflects all adjustments
which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented.
Note 2 The components of inventories are as follows (thousands of
dollars):
March 31, December 31,
1996 1995
-------- -------
Finished product $ 109,681 98,055
Work in process 6,335 7,712
Raw material 170,563 212,651
Supplies 72,740 72,940
-------- -------
$ 359,319 391,358
======== =======
Note 3 On March 12, 1996 the Company announced an agreement to acquire
the timberland operations of Cavenham Forest Industries Inc., an
affiliate of Hanson plc, in Louisiana and the Pacific Northwest.
The purchase price for the properties is $1.588 billion. The
transaction is expected to close on May 15, 1996. The Company has
agreements with three parties to sell a substantial portion of the
properties but expects to retain assets with an approximate cost
of $950 million which will be financed with debt. In connection
with the purchase, the Company made a deposit of $50 million which
is reflected in timber and timberland assets.
Other notes have been omitted pursuant to Rule 10-01(a)(5) of
Regulation S-X.
<PAGE>
FORM 10-Q
PART I
ITEM 2
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
March 31, 1996
The Company's two basic businesses, paper products and building materials, are
affected by changes in general economic conditions. Paper product sales and
earnings tend to follow the general economy. Building materials activity is
closely related to new housing starts and to the availability and terms of
financing for construction. Both industry segments use timber as their basic
raw material. The cost of timber is sensitive to various supply and demand
factors including environmental issues affecting log supply.
RESULTS OF OPERATIONS
1st Quarter 1996 vs. 1st Quarter 1995
Net sales decreased 3.8% in the first quarter of 1996 compared with the first
quarter of 1995. Paper products sales increased 2.8%. The increase in paper
products sales was due to higher unit shipments and higher selling prices for
most fine paper products that were partially offset by declines in selling
prices for unbleached paper products lines. Unit shipments of the Company's
paper products exceeded levels from the first quarter of 1995 as several
capital expansion projects, including the acquisition of the Kingsport,
Tennessee fine paper mill, have come on-line since the first quarter of 1995.
During the first quarter of 1996, prices for all paper products trended
downward and the Company took downtime at some of its paper mills as a result
of the inventory buildup in the market and continued excess capacity. Pricing
pressures in all paper products lines may continue if further corrections to
paper inventories are necessary.
Building materials sales decreased 18.6% compared with the first quarter of
1995 due to declines in both selling prices and unit shipments for all
building materials product lines. Selling prices and unit shipments for all
building
<PAGE>
FORM 10-Q
PART I
ITEM 2
materials product lines declined 11.8% and 9.6% respectively on a one-inch
basis compared with the first quarter of 1995. Poor weather conditions along
with the recent completion of several new structural panel and composite board
plants has created a supply and demand imbalance resulting in price decreases
in all building materials markets. Selling prices for building materials
product lines were also lower due to exceptionally strong pricing in the first
quarter of 1995.
Gross profit margins decreased to 21.7% in the first quarter of 1996 from
25.5% in the first quarter of 1995. Paper product gross margins decreased to
25.7% from 26.6% in the first quarter of 1995. While selling prices for
unbleached paper products were lower in the first quarter of 1996 compared
with the first quarter of 1995, gross margins improved slightly as old
corrugated container (OCC) costs decreased significantly (42.1%) in the first
quarter of 1996 compared with the first quarter of 1995. A decline in fine
paper products gross margins during the first quarter of 1996 more than offset
the slight increase in gross margins realized by unbleached paper products.
Gross margins for fine paper products declined mainly due to significantly
lower selling prices for hardwood market pulp. Prices for hardwood market
pulp decreased 35.9% in the first quarter of 1996 from the comparable period
in 1995.
Building materials gross margins declined to 10.5% compared with 23.2% in the
first quarter of 1995. The decrease in building materials gross margins is
mainly due to lower selling prices in all building materials product lines.
The cost of logs increased 3.8% in the first quarter of 1996 over levels from
the first quarter of 1995 exacerbating the decline in building materials gross
margins. Log costs increased primarily due to higher open market log prices
in the Company's southern operating regions. Building materials gross margins
<PAGE>
FORM 10-Q
PART I
ITEM 2
were also negatively affected by start-up costs for a new oriented strand
board plant and a medium density fiberboard plant that came on-line during the
first quarter of 1996.
Selling and administrative expenses increased $5.7 million or 11.6% mostly due
to expansion of Company operations. The ratio of selling and administrative
expenses to net sales increased to 6.4% for the first quarter of 1996 compared
with 5.5% for the first quarter of 1995. The increase in this ratio was due
to higher selling and administrative expenses coupled with a decline in net
sales.
Interest expense was $14.1 million in the first quarter of 1996 compared with
$19.2 million in the first quarter of 1995. The Company's average outstanding
debt decreased $180.6 million between the two periods which was the main
reason for the decline in interest expense. In addition, the Company's
effective interest rate on average outstanding debt was 7.79% in the first
quarter of 1996 compared with 7.99% for the first quarter of 1995.
FINANCIAL CONDITION AS OF MARCH 31, 1996
During the first three months of 1996, the Company had capital expenditures of
$109.2 million and made a deposit of $50.0 million in connection with the
asset purchase agreement with Hanson plc. These investments were funded with
internally generated cash flows. Cash flows from operating activities
increased $41.1 million or 24.9% in the first three months of 1996 from the
comparable period in 1995 mainly due to a reduction in the Company's
investment in working capital.
The total debt to capital ratio has decreased to 31.3% at March 31, 1996 from
<PAGE>
FORM 10-Q
PART I
ITEM 2
32.0% at December 31, 1995. Net working capital decreased to $330.8 million
at March 31, 1996 from $359.3 million at December 31, 1995.
On March 12, 1996 the Company announced an agreement with Cavenham Forest
Industries Inc. to acquire nearly 1.1 million acres of timberland and a
sawmill for $1.6 billion. The Company plans to retain approximately 546,000
acres of this timberland and the sawmill with an estimated value of $950
million which will be financed with debt. Willamette has agreements in
principle with three other companies to sell them the remaining assets of this
acquisition. The Company estimates that its total debt to capital ratio will
move from 31.3% at March 31, 1996 to approximately 51.0% at closing which is
planned for May 15, 1996. Willamette anticipates it can maintain its present
course of capital spending over the next three years and still bring its debt
to capital ratio back to current levels by 1999. Credit rating agencies have
shown a great deal of confidence in the Company's ability to do this by
maintaining the Company's credit ratings in the "A" range, thereby preserving
our cost of capital.
The Company believes it has the resources available to meet its liquidity
requirements. Resources include internally generated funds, short-term
borrowing agreements, revolving credit lines and term loans which could be
arranged with several banks as the Company has done in the past. In April of
1994, the Company registered under the Securities Act of 1933, senior debt
securities totaling $200.0 million. As of the date of this filing, none of
the debt securities have been issued.
On April 25, 1996, the Board of Directors of the Company voted to pay a
quarterly cash dividend of $.31 per share in the second quarter of 1996;
however, there is no assurance to future dividends as they are dependent upon
earnings, capital requirements and financial condition. Also, in August of
1995, the Board of
<PAGE>
FORM 10-Q
PART I
ITEM 2
Directors of the Company authorized the repurchase of up to $100.0 million of
the Company's common stock. As of March 31, 1996, the Company had purchased
50,000 shares of its common stock for $2.7 million.
<PAGE>
FORM 10-Q
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the Company's shareholders was held April 25, 1996.
The following directors were elected at the annual meeting for terms of office
expiring in 1999 by the vote indicated below:
Abstentions and
For Withheld Broker Non-votes
---------- ---------- ----------------
E. B. Hart 47,954,728 258,702 0
C. W. Knodell 47,958,838 254,592 0
Steven R. Rogel 47,960,333 253,097 0
William Swindells 47,959,513 253,917 0
The following individuals continue to serve as directors:
Expiration
Of Term
----------
Paul N. McCracken 1997
Stuart J. Shelk, Jr. 1997
Samuel C. Wheeler 1997
C. M. Bishop, Jr. 1998
Robert M. Smelick 1998
Benjamin R. Whiteley 1998
The amendment of the Company's Third Restated Articles of Incorporation
increasing the number of authorized shares of common stock, $.50 par value to
150,000,000 shares was approved at the annual meeting by the following vote:
43,609,881 for; 4,413,898 against and 189,651 abstentions and broker non-
votes.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
Exhibit No. Exhibit
----------- -------
3A Third Restated Articles of
Incorporation, as amended.
12 Computation of
Ratio of Earnings
to Fixed Charges.
27 Financial Data Schedule.
99 Description of the registrant's
common stock, as amended
(b) Reports on Form 8-K
-------------------
On March 14, 1996 the Company filed a report on Form 8-K
reporting under Item 5 the execution of an agreement with
Hanson Natural Resources Company, Cavenham Energy Resources
Inc. and Cavenham Forest Industries Inc. providing for the
purchase by the Company of certain timberland operations
from Cavenham Forest Industries Inc. for $1.588 billion.
Such information is incorporated herein by reference.
<PAGE>
FORM 10-Q
PART II
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILLAMETTE INDUSTRIES, INC.
By /s/J. A. Parsons
-----------------------
J. A. Parsons
Executive Vice President
(Principal Financial Officer)
Date: May 10, 1996
<PAGE>
<PAGE>
EXHIBIT 3A
THIRD RESTATED ARTICLES OF INCORPORATION
OF
WILLAMETTE INDUSTRIES, INC.
As Amended Through April 25, 1996
Willamette Industries, Inc., pursuant to Oregon Revised Statutes,
Section 60.451, adopts the following Third Restated Articles of Incorporation
which shall supersede the heretofore existing restated articles of
incorporation and all amendments thereto.
ARTICLE I
The name of this corporation is Willamette Industries, Inc., and
its duration shall be perpetual.
ARTICLE II
The purpose or purposes for which the corporation is organized are:
(a) To manufacture, buy, sell, and otherwise deal in and with
particleboard, plywood, lumber, timber, paper and forest products of
every nature and description.
(b) To erect, install and operate lumber mills, sawmills, paper
mills, planing mills, pulp and plywood mills, box plants, and any other
forms of manufacturing operations to convert forest products into
manufactured materials of any nature.
(c) To purchase, sell, lease, mortgage, develop and otherwise
deal in timbered lands and all other forms of real estate and to engage
in the business of importing and exporting timber and timber products.
(d) To purchase, sell, manufacture, mine, exploit, refine,
distill, explore for, drill and in every way deal in and with natural
gas, petroleum products, other mineral products, plastics, chemicals and
chemical materials of every kind and combination produced or manufactured
therefrom and to erect, install and operate plants, machinery, equipment
and appliances of any nature for the production or manufacture of
chemical materials or combinations.
(e) To manufacture, purchase or otherwise acquire, invest in,
own, mortgage, pledge, sell, assign and transfer or otherwise dispose of,
trade, deal in and deal with goods, wares and merchandise and personal
property of every class and description.
(f) To become a partner (either general or limited, or both) or a
joint venturer and to enter into agreements of partnership or joint
venture with one or more other persons or corporations for the purpose of
carrying on any business whatsoever which this corporation may deem
proper or convenient in connection with any of the purposes herein set
forth or authorized or which may be calculated directly or indirectly to
promote the interests of this corporation or to enhance the value of its
property or business.
(g) To engage in any lawful activity for which corporations may
be organized under the Oregon Business Corporation Act.
ARTICLE III
A. Authorized Shares. The aggregate number of shares which the
corporation shall have authority to issue is 155,000,000, which shall be
divided into classes as follows:
<TABLE>
<CAPTION>
Title of Class No. of Shares
-------------- -------------
<S> <C>
Preferred Stock, 5,000,000
$.50 par value
Common Stock, 150,000,000
$.50 par value
</TABLE>
B. Preferences, Limitations and Relative Rights. The preferences,
limitations and relative rights of the shares of each class shall be as
follows:
(1) Preferred Stock.
(a) Division into Series. The Board of Directors shall
have authority to divide the Preferred Stock into as many series as the
Board of Directors shall from time to time determine, and to issue the
Preferred Stock in such series. The Board of Directors shall determine
the number of shares comprising each series which number may, unless
otherwise provided by the Board of Directors in creating such series, be
increased or decreased from time to time by action of the Board of
Directors. Each series shall be so designated as to distinguish the
shares thereof from the shares of all other series.
(b) Authority of Board of Directors to Determine
Preferences, Limitations and Relative Rights. The Board of Directors
shall have authority to determine, except as otherwise prescribed in this
Article III or by law, the preferences, limitations and relative rights
of the shares of Preferred Stock before the issuance of any shares of
such class or the preferences, limitations and relative rights of the
shares of any series of Preferred Stock before the issuance of any shares
of such series. All shares of any such series shall have preferences,
limitations and relative rights identical with those of other shares of
the same series and, except to the extent otherwise provided in the
description of such series, of those of other series of the Preferred
Stock.
(2) Common Stock. Subject to the preferences, limitations and
relative rights of the Preferred Stock, or any series thereof, the holders of
Common Stock shall have all rights of shareholders, including, without
limitation, (i) unlimited voting rights on all corporate matters on the basis
of one vote per share, except as such voting rights may be limited or required
to be shared with another class or series as provided by law or by any
preferences, limitations and relative rights established in respect of
Preferred Stock or any series thereof and (ii) the right to receive the net
assets of the corporation upon dissolution, subject to any prior right or
right to receive such net assets together with Preferred Stock pursuant to any
preference, limitation or relative right established in respect of Preferred
Stock, or any series thereof.
C. Series A Junior Participating Preferred Stock. The designation
and amount of a series of the Preferred Stock created by the Board of
Directors and the preferences, limitations and relative rights thereof shall
be as follows:
(1) Designation and Amount. There shall be a series of Preferred
Stock of the corporation which shall be designated as "Series A Junior
Participating Preferred Stock, $.50 par value" (the "Series A Preferred
Stock"), and the number of shares constituting such series shall be 500,000.
Such number of shares may be increased or decreased by Articles of Amendment
adopted by the Board of Directors without shareholder action; provided,
however, that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the shares outstanding plus the number
of shares issuable upon exercise of outstanding rights, options or warrants or
upon conversion of outstanding securities issued by the corporation.
(2) Dividends and Distributions.
(a) Amount. Subject to the prior and superior rights
of the holders of any shares of any series of Preferred Stock
ranking prior and superior to the Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred
Stock, in preference to the holders of shares of Common Stock of the
corporation and of any other junior stock which may be outstanding,
shall be entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available for the purpose, (i)
quarterly dividends payable in cash on the last day of March, June,
September and December in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 per share ($.01 per one one-hundredth of a share), or
(b) subject to the provision for adjustment hereinafter set forth,
100 times the aggregate per share amount of all cash dividends
declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock, and
(ii) subject to the provision for adjustment hereinafter set forth,
quarterly distributions (payable in kind) on each Quarterly Dividend
Payment Date in an amount per share equal to 100 times the aggregate
per share amount of all noncash dividends or other distributions
(other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock, by
reclassification or otherwise), declared on the Common Stock since
the immediately preceding Quarterly Dividend Payment Date, or with
respect to the first Quarterly Dividend Payment Date since the first
issuance of any share or fraction of a share of Series A Preferred
Stock. In the event the corporation shall at any time after
February 26, 1990 (the "Rights Declaration Date"), declare or pay
any dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares
of Series A Preferred Stock are entitled under clauses (i)(b) or
(ii) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(b) Mandatory Declaration. The corporation shall
declare a dividend or distribution on the Series A Preferred Stock
as provided in Section 2(a) immediately after it declares a dividend
or distribution on the Common Stock (other than a dividend payable
in shares of Common Stock); provided that, in the event no dividend
or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share ($.01 per one one-hundredth of a share) on the Series A
Preferred Stock shall nevertheless be payable, out of funds legally
available for such purpose, on such subsequent Quarterly Dividend
Payment Date.
(c) Accrual and Accumulation; Record Date. Dividends
shall begin to accrue and be cumulative on outstanding shares of
Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue and be
cumulative from the date of issue of such shares, or unless the date
of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
cumulate but shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more
than 30 days prior to the date fixed for the payment thereof.
(3) Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Number of Votes Per Share; Adjustment. Subject to
the provision for adjustment hereinafter set forth, each share of
Series A Preferred Stock shall entitle the holder thereof to
100 votes (and each one one-hundredth of a share of Series A
Preferred Stock shall entitle the holder thereof to one vote) on all
matters submitted to a vote of the shareholders of the corporation.
In the event the corporation shall at any time after the Rights
Declaration Date declare or pay any dividend on Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes
per share to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(b) Voting With Common Stock as One Class. Except as
otherwise provided in these articles of incorporation or by law, the
holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all
matters submitted to a vote of the shareholders of the corporation.
(c) No Special Voting Rights. Except as otherwise
provided in these articles of incorporation or by law, holders of
Series A Preferred Stock shall have no special voting rights and
their consent shall not be required for taking any corporate action.
(4) Certain Restrictions.
(a) Dividend Arrearage. Whenever quarterly dividends
or other dividends or distributions payable on the Series A
Preferred Stock as provided in Section (2) are in arrears,
thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A
Preferred Stock outstanding shall have been paid in full, the
corporation shall not:
(i) declare or pay dividends on, make any
other distributions on any shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends on or make
any other distributions on any shares of stock ranking
on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred
Stock, provided that the corporation may at any time
redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the
corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or
any share of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates
and other relative rights and preferences of the
respective series and classes, shall determine in good
faith will result in fair and equitable treatment among
the respective series or classes.
(b) Purchases of Corporation Stock by Subsidiary. The
corporation shall not permit any subsidiary of the corporation to
purchase or otherwise acquire for consideration any shares of stock
of the corporation unless the corporation could, under Section 4(a),
purchase or otherwise acquire such shares at such time and in such
manner.
(5) Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. The
corporation shall take all such action as is necessary so that all such shares
shall after their cancellation become authorized but unissued shares of
Preferred Stock, without designation as to series, and may be reissued as part
of a new series of Preferred Stock to be created by Articles of Amendment
adopted by the Board of Directors without shareholder action, subject to the
conditions and restrictions on issuance set forth herein.
(6) Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the corporation, no distribution
shall be made (A) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received the higher of (i) $1.00 per share ($.01
per one one-hundredth of a share), plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, or (ii) an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate amount
to be distributed per share to holders of Common Stock; nor shall any
distribution be made (B) to the holders of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the corporation shall at
any time after the Rights Declaration Date declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock are entitled under clause (A)(ii) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(7) Consolidation, Merger, etc. In case the corporation shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, or otherwise changed, then in
any such case the shares of Series A Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the corporation shall at any time
after the Rights Declaration Date declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise) into a greater or lesser number of shares of Common Stock, then
in each such case the amount set forth in the preceding sentence with respect
to the exchange or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(8) No Redemption. The shares of Series A Preferred Stock shall
not be redeemable. Notwithstanding the foregoing, the corporation may acquire
shares of Series A Preferred Stock in any other manner permitted by law or the
articles of incorporation.
(9) Rank. Unless otherwise provided in the articles of
incorporation or an amendment thereof relating to a subsequent series of
Preferred Stock of the corporation, the Series A Preferred Stock shall rank
junior to all other series of the corporation's Preferred Stock as to the
payment of dividends and the distribution of assets on liquidation,
dissolution, or winding up, and senior to the Common Stock of the corporation.
(10) Amendment. The articles of incorporation shall not be
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least a
majority of the outstanding shares of Series A Preferred Stock, voting
separately as a class.
(11) Fractional Shares. Series A Preferred Stock may be issued in
one-hundredths of a share or other fractions of a share which shall entitle
the holder, in proportion to such holder's fractional shares, to exercise
voting rights, receive dividends, participate in distributions and to have the
benefit of all other rights of holders of Series A Preferred Stock.
ARTICLE IV
A. Preemptive Rights. No shareholder of the corporation shall, by
reason of his holding shares of any class, have any preemptive or preferential
rights to purchase or subscribe to any shares of the corporation now or
hereafter to be authorized or any notes, debentures, bonds or other securities
convertible into or carrying options or warrants to purchase shares of any
class now or hereafter to be authorized (whether or not the issuance of any
such shares or such notes, debentures, bonds or other securities would
adversely affect the dividend or voting rights of such shareholder) other than
such rights, if any, as the Board of Directors in its discretion from time to
time may grant and at such price as the Board of Directors may fix; and the
Board of Directors may issue shares of the corporation or any notes,
debentures, bonds or other securities convertible into or carrying options or
warrants to purchase shares without offering any such shares, either in whole
or in part, to the existing shareholders.
B. Purchase of Shares. The corporation may purchase its own
shares of Common Stock out of unreserved and unrestricted capital surplus
without a vote of the shareholders of the corporation upon such terms and
conditions as may be fixed by the Board of Directors.
ARTICLE V
A. Statutory Indemnification. Each person (an "Indemnified
Person") who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he or she is or was a director or officer of the corporation or,
while serving as a director or officer of the corporation, is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall, subject to Section F of this Article, be indemnified by the corporation
to the full extent authorized under ORS 57.255 and ORS 57.260 as now in effect
or as hereafter amended against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by such Indemnified Person, provided the Indemnified Person has met
the applicable standard of conduct required under ORS 57.255.
B. Standard of Conduct. The determination as to whether or not an
Indemnified Person has met the applicable standard of conduct required under
ORS 57.255 shall be made as promptly as practicable. Such determination shall
be made by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the Proceeding or, in case either such a
quorum is not obtainable or the Indemnified Person so requests, such
determination shall be made by independent legal counsel (who may be the
outside counsel regularly employed by the corporation) in a written opinion.
Such independent legal counsel shall be selected jointly by the corporation
and the Indemnified Person. In the event the parties are unable to agree on
such independent legal counsel, such independent legal counsel shall be
selected by lot by the outside counsel regularly employed by the corporation
from among the Portland, Oregon, law firms (other than the outside counsel's
firm or any other firm regularly employed by the corporation or by the
Indemnified Person) having more than 50 attorneys and having a rating of "av"
in the then current Martindale-Hubbell Law Directory. The selection by lot
shall be made in the presence of the Indemnified Person or his counsel. The
outside counsel regularly employed by the corporation and the Indemnified
Person or his counsel shall contact, in the order of their selection by lot,
such law firms requesting each such firm to accept engagement to make the
determination hereunder until one of such firms accepts the engagement. The
fees and expenses of such independent legal counsel shall be paid by the
corporation and, if requested by such independent legal counsel, the
corporation shall give such counsel an appropriate written agreement with
respect to the payment of such counsel's fees and expenses and such other
matters as may be reasonably requested by such counsel. An Indemnified Person
shall be deemed to have met the applicable standard of conduct unless the
Board of Directors or independent legal counsel, as the case may be,
determines on the basis of clear and convincing evidence that the Indemnified
Person did not meet such standard. Nothing in this Article shall limit or
prejudice an Indemnified Person in applying to a court pursuant to
ORS 57.260(l)(d) for a determination that indemnification is proper.
C. Expenses. The expenses incurred by the Indemnified Person in
defending a Proceeding shall be paid by the corporation in advance of the
final disposition of the Proceeding subject to the determination that the
Indemnified Person has met the applicable standard of conduct, if required
under ORS 57.260(2), made pursuant to Section B, and subject to the delivery
of the undertaking referred to in Section H, of this Article. The
determination of whether such expenses shall be paid in advance shall be made
promptly and in any event within 30 days after the Indemnified Person submits
to the corporation a written request to authorize such advance payments and
shall be made without regard to the Indemnified Person's ability to repay such
advance payments. The corporation shall cooperate in the defense of any such
Proceeding.
D. Nonstatutory Indemnification. Pursuant to ORS 57.260(3), the
corporation, in addition to its obligations under Section A of this Article
(but subject to Sections F and H of this Article), shall indemnify an
Indemnified Person against any and all claims, liability and expense
whatsoever by reason of or arising from the fact that the Indemnified Person
is or was a director or officer of the corporation, or is or was serving at
the request of the corporation as a director, officer, partner or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of or arising from any action taken or not taken in his or her
capacity as such director, officer, partner, trustee, employee or agent.
Without limiting the generality of the foregoing, the payments which the
corporation shall be obligated to make under this Section D shall include
damages, judgments, fines, settlements and costs, costs of investigation,
legal fees and other costs of defense of legal actions, claims or proceedings
and appeals therefrom, and costs of attachment or similar bonds.
E. Notice of Claim for Nonstatutory Indemnification. An
Indemnified Person, upon service upon him of a summons or other initial legal
process in any Proceeding in respect of which indemnity may be sought under
Section D of this Article, shall promptly give written notice (herein called
the "Notice") of such service to the corporation. No indemnification provided
for in Section D of this Article shall be available if the Indemnified Person
fails to give the Notice and if the corporation was unaware of the Proceeding
to which the Notice would have related and was prejudiced by the failure to
give the Notice. The corporation shall be entitled, if it so elects within a
reasonable time after receipt of the Notice by giving written notice (herein
called the "Notice of a Defense") to the Indemnified Person, to assume the
defense of the Proceeding, in which event such defense shall be conducted, at
the expense of the corporation, by counsel chosen by the corporation and
satisfactory to the Indemnified Person; provided, however, that:
(1) If the Indemnified Person shall reasonably conclude that
there may be a conflict between the positions of the Indemnified Person
and of the corporation (or of any other party to the Proceeding who is
indemnified by the corporation) in conducting the defense of such
Proceeding, or that there may be legal defenses available to the
Indemnified Person different from or in addition to those available to
the corporation (or to any other party to the Proceeding who is
indemnified by the corporation), then counsel chosen by the Indemnified
Person shall be entitled to conduct the defense of the Indemnified Person
at the expense of the corporation to the extent determined by such
counsel to be necessary or desirable to protect the interest of the
Indemnified Person, and
(2) In any event, the Indemnified Person shall be entitled
at his or her expense to have counsel chosen by him participate in, but
not conduct, the defense.
If, within a reasonable time after receipt of the Notice, the corporation
gives a Notice of Defense and the counsel chosen by it is satisfactory to the
Indemnified Person, the corporation will not be liable for any legal or other
expenses subsequently incurred by the Indemnified Person in connection with
the defense of the Proceeding except that (i) the corporation shall bear the
reasonable legal and other expenses incurred in connection with the conduct of
the defense referred to in clause (1) of the proviso to the preceding sentence
and (ii) the corporation shall bear such other expenses as it has authorized
the Indemnified Person to incur. If, within a reasonable time after receipt
of the Notice, no Notice of Defense has been given, the corporation shall bear
any reasonable legal or other expenses incurred by the Indemnified Person in
connection with the defense of the Proceeding. The corporation shall pay the
legal and other expenses for which it is responsible hereunder currently upon
receipt of a statement therefor.
F. Limitations on Indemnification. An Indemnified Person shall
not be entitled to any indemnification under this Article:
(1) Certain Conduct. To the extent liability or expense is
incurred by the Indemnified Person which is attributable to:
(a) Willful Misconduct, Etc. Conduct of the Indemnified
Person which is finally adjudged to have constituted willful misconduct
of a culpable nature, deliberate dishonesty or fraudulent conduct.
(b) Approval of Unlawful Distributions, Etc. The
Indemnified Person having voted for or assented to any of the following
in violation of ORS 57.231 (i) the declaration of a dividend or other
distribution to the shareholders of the corporation contrary to the
provisions of ORS Chapter 57 or these articles of incorporation, (ii) the
purchase by the corporation of its own shares contrary to the provisions
of ORS Chapter 57, (iii) the distribution of assets of the corporation to
its shareholders during its liquidation without the payment and discharge
of, or making adequate provision for, all known debts, obligations and
liabilities of the corporation or (iv) the making of a loan to a director
of the corporation without first obtaining approval of the shareholders
if required by ORS 57.226.
(c) Liability for Short-Swing Profits. Any purchase and
sale of securities of the corporation giving rise to liability under
Section 16(b) of the Securities Exchange Act of 1934, as amended.
(2) Final Adjudication of Unlawfulness. If a final decision by a
court having jurisdiction in the matter (including an appellate court) shall
determine that such indemnification is not lawful.
(3) Certain Settlements. For amounts paid in settlement of any
Proceeding effected without the corporation's written consent provided the
corporation does not unreasonably withhold such consent.
(4) Other Indemnification. For any liability or expense for which
the Indemnified Person is indemnified under any provision of law, other
article of these articles of incorporation, bylaw of the corporation, policy
of insurance, other agreement or otherwise, except to the extent payment is
not made thereunder.
(5) Proceedings Instituted by Indemnified Person. For any
liability or expense in connection with a Proceeding instituted by the
Indemnified Person whether attributable to a counterclaim or otherwise unless
the Board of Directors approved the institution of the Proceeding.
G. Contractual Right to Indemnification; Binding Effect. The
provisions of this Article are for the benefit of any person who serves as a
director or officer of the corporation, the rights to indemnification provided
in this Article shall be contract rights and such rights shall be enforceable
by or on behalf of any such person. Such rights shall inure to the benefit of
and be enforceable by the heirs and personal representatives of any such
person and the provisions of this Article shall be binding upon the
corporation and its successors and assigns. In the event the corporation
consolidates with or merges into any other corporation or liquidates,
dissolves or transfers substantially all its properties and assets to any
person, then, and in any such case, proper provision shall be made so that the
successors or assigns of the corporation assume the obligations of the
corporation under this Article to the maximum extent permitted under
applicable law.
H. Undertaking to Repay Expenses. The obligation of the
corporation to pay expenses of an Indemnified Person in advance of the final
disposition of a Proceeding shall be subject to the delivery to the
corporation of an undertaking by or on behalf of the Indemnified Person to
repay the corporation the amount of all expenses paid by the corporation in
defending the Proceeding in the event and only to the extent it shall be
ultimately determined that the Indemnified Person is not entitled to be
indemnified by the corporation for such expenses.
I. Limitation of Actions; Waiver. No legal action shall be
brought and no cause of action shall be asserted (other than legal actions or
causes of action with respect to matters described in Section F of this
Article) by or on behalf of the corporation or any of its affiliates (as that
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934)
against an officer or director of the corporation after the expiration of two
years from the date the officer or director ceases to serve in such capacity
or to serve at the corporation's request as a director, officer, partner or
agent of another corporation, partnership, joint venture, trust or other
enterprise; and any cause of action of the corporation or any of its
affiliates against an officer or director (other than a cause of action with
respect to a matter described in Section F of this Article) shall be
extinguished and deemed waived and released unless asserted by the filing of a
legal action within such two-year period.
J. Attorneys' Fees; Burden of Proof. In the event any action is
instituted to enforce any of the provisions of this Article, the party
prevailing in the action and any appeal therefrom shall be entitled to recover
from the other party reasonable attorneys' fees which shall be fixed by the
court in which the action shall be pending. The corporation shall have the
burden of proving by clear and convincing evidence that indemnification
(including advance payments) under this Article is improper. Neither the
failure of the corporation (including the Board of Directors or independent
legal counsel where applicable) to have made a determination as to whether
indemnification (including advance payments) under this Article is proper nor
an actual determination by the corporation (by the Board of Directors or by
independent legal counsel where applicable) that such indemnification is not
proper shall be a defense to any action by an Indemnified Person to enforce
the provisions of this Article or create any presumption that such
indemnification is not proper.
K. Indemnification of Other Employees and Agents; Cooperation;
Severability. The corporation may, by action of the Board of Directors,
provide indemnification to employees and agents of the corporation who are not
directors or officers with the same scope and effect as the indemnification
provided in this Article to directors and officers. The corporation shall
cooperate in the defense of any Proceeding other than a Proceeding by or in
the right of the corporation to procure a judgment in its favor. Each of the
provisions of this Article is separate and distinct and is independent of the
other provisions, so that if any provision hereof shall be held to be invalid
or unenforceable for any reason, such invalidity or unenforceability shall not
affect the validity or enforceability of the other provisions hereof.
L. Insurance; Other Indemnification. Nothing in this Article
shall limit the corporation's power to purchase and maintain insurance as
provided in ORS 57.260(4) or to otherwise indemnify its directors, officers,
employees and agents. This Article shall not be exclusive of any other right
of indemnification to which an Indemnified Person or any other employee or
agent of the corporation may be entitled under any provision of law, other
article of these articles of incorporation, bylaw of the corporation, policy
of insurance, other agreement or otherwise.
M. Statutory References. References in this Article to a section
of the Oregon Business Corporation Act shall include such section as
subsequently amended and, if such section is repealed and a successor section
with respect to the same subject matter is adopted, shall include such
successor section.
ARTICLE VI
A. Definitions. For purposes of this Article VI:
(1) The term "Beneficially Own," when used with respect to a
person's interest in shares of capital stock shall mean that said person has
or shares (or has the right to acquire under any option, warrant, conversion
right or other right), directly or indirectly, the power to vote, the power to
dispose of, the power to direct the voting or disposition of, or the right to
enjoy the economic benefits of such shares.
(2) The term "Interested Person" shall mean any individual,
corporation, partnership, joint venture, company, trust, association or entity
(including any group of such persons acting together) which, together with its
affiliates, Beneficially Owns in the aggregate 20 percent or more of the
outstanding shares of capital stock of the corporation.
(3) The term "Substantial Assets" shall mean assets with a fair
market value in excess of 5 percent of the total assets of the corporation as
reported in the consolidated financial statements of the corporation as of the
end of its most recent fiscal year ending prior to the time the determination
is made.
(4) The term "Business Combination" shall mean (a) any merger or
consolidation of the corporation or a subsidiary of the corporation with or
into an Interested Person (or an affiliate of an Interested Person), (b) any
sale, lease, exchange, transfer, encumbrance or other disposition of
Substantial Assets either of the corporation (including without limitation any
securities of a subsidiary) or of a subsidiary of the corporation, to an
Interested Person (or an affiliate of an Interested Person), (c) the issuance
of any securities of the corporation or a subsidiary of the corporation to an
Interested Person (or an affiliate of an Interested Person), but not
securities distributed pro rata as a dividend or distribution with respect to
the common stock of the corporation or securities issued in connection with
any bona fide benefit program for employees of the corporation or its
subsidiaries, (d) any reclassification, exchange of shares or other
recapitalization that would have the effect of increasing the proportion of
shares of common stock or other capital stock of the corporation or a
subsidiary of the corporation Beneficially Owned by an Interested Person (or
an affiliate of an Interested Person), and (e) any agreement, contract or
other arrangement providing for any of the foregoing transactions.
(5) The term "Continuing Director" shall mean a director who was
a member of the Board of Directors of the corporation immediately prior to the
time that the Interested Person involved in a Business Combination became an
Interested Person.
B. Approval Required for Certain Transactions. In addition to any
vote or approval required by law, any Business Combination shall require the
affirmative vote of the holders of not less than 80 percent of the outstanding
shares of capital stock of the corporation; provided, however, that such
80 percent voting requirement shall not apply if:
(1) The Business Combination is a merger, consolidation or
exchange of shares involving the corporation which provides for the conversion
of the shares of common stock of the corporation into cash, securities or
other property with a fair market value per share of common stock not less
than the highest per share consideration (appropriately adjusted for stock
splits, stock dividends and other like changes) paid or given by the
Interested Person and any of its affiliates for any of their shares of common
stock of the corporation within one year prior to the date of the taking of
the vote with respect to such Business Combination; or
(2) The Business Combination was approved by the Board of
Directors of the corporation; provided that a majority of the Board of
Directors consisted of Continuing Directors and at least two-thirds of the
Continuing Directors voted to approve the Business Combination.
C. Removal of Directors. All or any number of the directors of
the corporation may be removed, with or without cause, at a meeting called
expressly for that purpose, by the affirmative vote of the holders of not less
than 80 percent of the outstanding shares of capital stock of the corporation.
Notwithstanding the foregoing, whenever the holders of one or more series of
Cumulative Preferred Stock or any other preferred stock of the corporation
shall have the right, voting separately as a class, to elect one or more
directors, the provisions of this Section C shall not apply with respect to
the director or directors elected by such holders.
D. Amendment of Bylaws. The Board of Directors of the corporation
shall have the power to alter, amend or repeal the bylaws of the corporation
or adopt new bylaws subject to repeal or change by the affirmative vote of the
holders of not less than 80 percent of the outstanding shares of capital stock
of the corporation.
E. Repeal and Amendment. The provisions set forth in this
Article VI may not be repealed or amended in any manner at a time when any
person is an Interested Person unless such repeal or amendment is approved by
the affirmative vote of the holders of not less than 80 percent of the
outstanding shares of capital stock of the corporation.
ARTICLE VII
A director of the corporation shall have no personal liability to
the corporation or its shareholders for monetary damages for conduct as a
director, provided this Article VII shall not eliminate or limit the liability
of a director for (a) any breach of the director's duty of loyalty to the
corporation or its shareholders; (b) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (c) any
unlawful distribution under ORS 60.367; or (d) any transaction from which the
director derived an improper personal benefit. This Article VII shall not
affect the liability of a director for any act or omission occurring prior to
the date its provisions became effective. No subsequent repeal of or
amendment to this Article VII shall adversely affect any right or protection
of a director of the corporation existing at the time of such repeal or
amendment.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
Three Months Ended
Year Ended December 31, March 31,
------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest cost $ 63,986 73,776 79,194 80,807 77,237 20,677 16,631
One-third rent
expense 3,725 4,495 4,819 5,227 5,976 1,374 1,612
------- ------- ------- ------- ------- ------- -------
Total Fixed Charges $ 67,711 78,271 84,013 86,034 83,213 22,051 18,243
======= ======= ======= ======= ======= ======= =======
Add (Deduct):
Earnings before
income taxes $ 73,609 129,452 189,168 288,923 823,804 161,111 118,914
Interest capitalized (723) (7,354) (15,904) (9,294) (6,187) (1,476) (2,545)
------- ------- ------- ------- ------- ------- -------
Earnings for
Fixed Charges $ 140,597 200,369 257,277 365,663 900,830 181,686 134,612
======= ======= ======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges 2.08 2.56 3.06 4.25 10.83 8.24 7.38
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEETS AND
RELATED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE PERIOD
ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 14,938
<SECURITIES> 29,987
<RECEIVABLES> 318,094
<ALLOWANCES> 5,557
<INVENTORY> 359,319
<CURRENT-ASSETS> 758,928
<PP&E> 4,219,281
<DEPRECIATION> 1,551,468
<TOTAL-ASSETS> 3,492,272
<CURRENT-LIABILITIES> 428,119
<BONDS> 793,160
0
0
<COMMON> 27,613
<OTHER-SE> 1,875,672
<TOTAL-LIABILITY-AND-EQUITY> 3,492,272
<SALES> 866,112
<TOTAL-REVENUES> 866,112
<CGS> 678,166
<TOTAL-COSTS> 678,166
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,086
<INCOME-PRETAX> 118,914
<INCOME-TAX> 45,544
<INCOME-CONTINUING> 73,370
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,370
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
<PAGE>
EXHIBIT 99
DESCRIPTION OF CAPITAL STOCK
(May 1, 1996)
The authorized capital stock of Willamette Industries, Inc. (the
"Company"), consists of 5,000,000 shares of cumulative preferred stock, $.50
par value ("Preferred Stock"), issuable in series, and 150,000,000 shares of
common stock, $.50 par value ("Common Stock").
The board of directors of the Company is authorized to divide the
Preferred Stock into series and to determine the preferences, limitations and
relative rights of each series. The board of directors has established a
series of Preferred Stock designated as Series A Junior Participating
Preferred Stock ("Series A Preferred Stock"), comprising 500,000 shares of
Preferred Stock. Subject to superior rights of any other outstanding
Preferred Stock, each share of Series A Preferred Stock is entitled to
receive, in preference to the Common Stock, quarterly cumulative dividends
equal to 100 times the quarterly dividend paid with respect to each share of
Common Stock, but not less than $1.00. Each share of Series A Preferred Stock
is entitled to 100 votes on all matters submitted to a vote of the
shareholders. In the event of liquidation of the Company, each share of
Series A Preferred Stock is entitled to receive, in preference to the Common
Stock, a liquidation payment of the greater of (i) $1.00 plus all accrued and
unpaid dividends and distributions and (ii) an amount equal to 100 times the
aggregate amount to be distributed per share of Common Stock. In the event of
any merger or other transaction in which Common Stock is to be exchanged, each
share of Series A Preferred Stock shall be entitled to receive 100 times the
amount received per share of Common Stock. The rights of holders of the
Series A Preferred Stock are subject to adjustment under certain circumstances
to prevent dilution. Series A Preferred Stock is not redeemable.
Shares of Common Stock and Series A Preferred Stock vote together
as a single class on all corporate matters (except for certain matters
affecting the Series A Preferred Stock or as otherwise required by law).
Shares of Common Stock are entitled to one vote per share. Voting for
directors is not cumulative. The board of directors is divided into three
classes serving staggered three-year terms.
Holders of Common Stock are entitled to dividends when, as, and if
declared by the board of directors out of funds legally available therefor
(subject to the rights of holders of any Preferred Stock). Common Stock is
not convertible into any other class of security, is not entitled to the
benefit of any sinking fund provision, and does not have any preemptive
rights. All outstanding shares of Common Stock are fully paid and
nonassessable. Upon liquidation of the Company, after payment or provision
for all liabilities and payment of any preferential amount in respect of
Preferred Stock, holders of Common Stock are entitled to receive liquidating
distributions of any remaining assets on a pro rata basis.
Article VI of the Company's articles of incorporation provides that
certain business combinations involving the Company and any shareholder which,
together with its affiliates, is the beneficial owner of 20 percent or more of
the Company's outstanding shares of capital stock, require the affirmative
vote of the holders of at least 80 percent of the outstanding shares of
capital stock. The 80 percent voting requirement does not apply (i) in the
case of a business combination which provides for conversion of Common Stock
into cash, securities or property having a fair market value not less than the
highest per-share price paid by such shareholder and its affiliates within one
year prior to the date of the vote, (ii) if the vote is required by the
statutory Business Combination Provisions discussed below or (iii) under
certain circumstances, if the transaction is approved by the board of
directors. The articles of incorporation also provide that directors of the
Company may be removed at a meeting called expressly for that purpose by the
affirmative vote of the holders of not less than 80 percent of the outstanding
shares of capital stock.
The Company has distributed to holders of Common Stock rights to
purchase shares of Series A Preferred Stock ("Rights") which are held on the
basis of .5 Right for each share of Common Stock held. The Rights are not
exercisable and are attached to and trade with shares of Common Stock until
the earlier of (i) 10 days following a public announcement that a person or
group has acquired beneficial ownership (as defined) of 20 percent or more of
the outstanding Common Stock (other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or any subsidiary of the
Company, any entity holding shares of Common Stock for or pursuant to the
terms of any such plan, or a person who acquires shares in a tender offer
sanctioned by the board of directors) and (ii) 10 business days following the
commencement or announcement of certain offers to acquire beneficial ownership
of 30 percent or more of the outstanding Common Stock. Upon such an event,
the Rights will trade separately and will become exercisable. Until a Right
is exercised, the holder thereof will have no rights as a shareholder of the
Company, including, without limitation, the right to vote or to receive
dividends.
When the Rights first become exercisable, one Right will entitle
the holder to buy from the Company one one-hundredth of a share of Series A
Preferred Stock at a price of $175. Upon acquisition of beneficial ownership
of 20 percent or more of the outstanding Common Stock by a person or group
described above, each Right will entitle the holder (other than such person or
group) to buy from the Company for $175 shares of Common Stock having a market
value of $350. If the Company is acquired in a business combination, or a
majority of its assets is acquired, after a person or group described above
acquires beneficial ownership of 20 percent or more of the outstanding Common
Stock, each Right will thereafter entitle the holder (other than such person
or group) to acquire for $175 shares of common stock of the acquiring or
surviving person with a market value of $350. Following the occurrence of any
of the events described in the preceding two sentences, any Rights that are or
(under certain circumstances) were beneficially owned by any such person or
group shall immediately become null and void. The purchase price for Series A
Preferred Stock and the number of Series A Preferred Stock shares or other
securities issuable upon exercise of Rights are subject to adjustment to
prevent dilution.
Outstanding Rights expire at the close of business on February 25,
2000. The Rights will also expire upon consummation of a business combination
with a person who acquires shares of Common Stock in a tender offer sanctioned
by the board of directors if shareholders receive the same consideration as
was paid in the tender offer. Until the close of business on the tenth day
following public announcement that a person or group described above has
acquired beneficial ownership of 20 percent or more of the outstanding shares
of Common Stock, the Rights may be redeemed, in whole but not in part, at the
Company's election at a price of $.01 per right. After a person or group
described above acquires beneficial ownership of 20 percent or more of the
outstanding Common Stock, but before the person or group acquires beneficial
ownership of 50 percent or more of the outstanding Common Stock, the Company
may exchange some or all of the then outstanding Rights for one share of
Common Stock per Right, subject to adjustment in certain circumstances.
The Rights Agreement dated as of February 26, 1990, between the
Company and First Interstate Bank of Oregon, N.A., as Rights Agent, specifies
the terms of the Rights. Before the Rights become exercisable, the Company
may amend the Rights Agreement in any manner without the approval of the
holders of Common Stock and thereafter the Company may, subject to certain
limitations, amend the Rights Agreement without the approval of the holders of
Rights. The foregoing description of the Rights is subject to and qualified
by reference to the Rights Agreement which is Exhibit 2 to the Company's
registration statement on Form 8-A dated February 26, 1990, and which is
incorporated herein by reference.
The Company is subject to the Oregon Control Share Act (the
"Control Share Act"). The Control Share Act provides in essence that a person
(an "Acquiring Person") who acquires voting stock in a transaction which
results in its holding more than 20 percent, 33-1/3 percent or 50 percent of
the total voting power of the Company (a "Control Share Acquisition") cannot
vote the shares it acquires in the Control Share Acquisition ("control
shares") unless voting rights are accorded to such control shares by the
holders of a majority of the outstanding voting shares, excluding the
Acquiring Person and the Company's officers and inside directors. The term
Acquiring Person is broadly defined to include persons acting as a group.
An Acquiring Person may, but is not required to, submit to the
Company an "Acquiring Person Statement" which delineates certain information
about the Acquiring Person and its plans for acquiring the Company's stock and
requests the Company to call a special meeting of shareholders to act on the
question of its voting rights. If an Acquiring Person does not request a
special meeting of shareholders, the matter shall be considered at the next
annual or special meeting of shareholders otherwise held. If an Acquiring
Person's control shares are accorded voting rights and its shares represent a
majority or more of all voting power, shareholders who do not vote in favor of
the restoration of voting rights will have the right to receive the appraised
"fair value" for their shares, which may not be less than the highest price
paid per share by the Acquiring Person for its shares in the Control Share
Acquisition.
The Company is also subject to provisions of the Oregon Business
Corporation Act (the "Business Combination Provisions) which restrict the
ability of an Oregon corporation to engage in any business combination with an
interested shareholder ("Interested Shareholder"), as defined, for three years
after the shareholder becomes an Interested Shareholder, with certain
exceptions. An Interested Shareholder is defined to include a shareholder
owning 15 percent or more of a corporation's stock. "Business combination" is
defined to include any merger with, any transfer of assets to and certain
transactions involving the issuance of shares to, the Interested Shareholder.
A corporation may, however, engage in a business combination with an
Interested Shareholder if (i) the corporation's board of directors approved
the combination or the transaction by which the shareholder became an
Interested Shareholder before the shareholder became an Interested
Shareholder, (ii) the Interested Shareholder acquired at least 85 percent of
the voting stock (excluding shares held by directors, officers, or certain
employee share plans) when becoming an Interested Shareholder, or (iii) the
board of directors and shareholders holding 66-2/3 percent of the voting stock
not owned by the Interested Shareholder approve the business combination. A
corporation's articles of incorporation may not require a greater vote of
shareholders than that specified in the Business Combination Provisions for
any vote required by the Business Combination Provisions.
