<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
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(4) Date Filed:
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Notes:
<PAGE>
WILLAMETTE INDUSTRIES, INC.
1300 S.W. FIFTH AVENUE, SUITE 3800
PORTLAND, OREGON 97201
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 21, 1998
----------------
The annual meeting of shareholders of Willamette Industries, Inc. (the
"Company"), will be held at the RiverPlace Alexis Hotel, 1510 S.W. Harbor Way,
Portland, Oregon, on Tuesday, April 21, 1998, at 10 a.m., to consider and vote
on the following matters:
1. The election of three Class A directors.
2. 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 23,
1998, 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 11, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction............................................................... 1
Holders of Common Stock.................................................... 1
Election of Directors...................................................... 3
Other Matters.............................................................. 5
Executive Compensation..................................................... 6
Compensation Committee Interlocks and Insider Participation................ 10
Report of the Compensation Committee....................................... 10
Performance Graph.......................................................... 13
Compensation of Directors.................................................. 13
Employment Agreements...................................................... 14
Section 16(a) Beneficial Ownership Reporting Compliance.................... 16
Relationship with Independent Public Accountants........................... 16
Shareholder Proposals for 1999............................................. 16
Solicitation of Proxies.................................................... 16
</TABLE>
i
<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 (the "Company"), of proxies in the accompanying form for use at
the annual meeting of shareholders to be held on April 21, 1998. This Proxy
Statement and accompanying form of proxy were first sent or given to
shareholders on approximately March 11, 1998.
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 the election of the nominees named
below except to the extent authority to vote for any or all of the nominees is
withheld. If a quorum is present, the three nominees who receive the greatest
number of votes cast for the election of directors by shares entitled to vote
and present in person or by proxy at the annual meeting will be elected
directors. In an uncontested plurality election, such as this, abstentions and
broker non-votes have no effect, as approval by a percentage of shares present
or outstanding is not required.
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 23, 1998, 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
111,358,956 shares of common stock, $.50 par value ("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, including proxies
reflecting broker nonvotes or abstentions, will constitute a quorum at the
meeting. All references to shares of Common Stock and per share prices in this
Proxy Statement have been adjusted for the two-for-one stock split paid in
September 1997.
1
<PAGE>
The following tables give certain information concerning the holdings of
Common Stock of (i) each person known to the Company to be the beneficial
owner of more than 5 percent of the outstanding Common Stock and (ii) each of
the directors and nominees, each of the named executive officers referred to
in the Summary Compensation Table below, and the Company's current 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.
FIVE PERCENT BENEFICIAL OWNERS
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK NATURE OF PERCENT OF
BENEFICIALLY BENEFICIAL OUTSTANDING
NAME AND ADDRESS OWNED OWNERSHIP (a) COMMON STOCK
---------------- ------------ ------------ ------------
<S> <C> <C> <C>
Maurie D. Clark* ....... 3,388,660 Sole Voting and Disposition 3.04%
Suite 600 4,764,966 Shared Voting and Disposition 4.28%
1211 S.W. Fifth Avenue 8,153,626 Total 7.32%
Portland, Oregon 97204
William Swindells*...... 2,376,854 Sole Voting and Disposition (c)(d) 2.13%
1300 S.W. Fifth Avenue 3,655,872 Shared Voting and Disposition 3.28%
Portland, Oregon 97201 6,032,726 Total 5.41%
The Prudential 292,632 Sole Voting and Disposition 0.26%
Insurance..............
Company of America** 5,414,940 Shared Voting 4.86%
751 Broad Street 5,485,640 Shared Disposition 4.93%
Newark, New Jersey 5,778,272 Total 5.19%
07102-3777
Wells Fargo Bank, 4,099,430 Sole Voting 3.68%
N.A.**.................
464 California Street 1,789,160 Shared Voting 1.61%
San Francisco, 9,496,022 Shared Disposition 8.53%
California 94163
9,496,022 Total 8.53%
</TABLE>
- --------
* As of January 31, 1998
** As of December 31, 1997
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF
BENEFICIALLY OWNED OUTSTANDING
NAME AT JANUARY 31, 1998(a) COMMON STOCK
---- ---------------------- ------------
<S> <C> <C>
Gerard K. Drummond................ 5,733 (d) 0.01%
Kenneth W. Hergenhan.............. 2,439 (b)(d) --
William P. Kinnune................ 159,523 (c)(e) 0.14%
C. W. Knodell..................... 171,193 (b)(d) 0.15%
Paul N. McCracken................. 8,273 (b)(d) 0.01%
Duane C. McDougall................ 46,978 (b)(c) 0.04%
Michael R. Onustock............... 83,645 (b)(c)(e) 0.08%
J. A. Parsons..................... 78,433 (b)(c)(e) 0.07%
G. Joseph Prendergast............. 2,167 (d) --
Steven R. Rogel................... 211,783 (b) 0.19%
Stuart J. Shelk, Jr............... 1,660,363 (b)(d) 1.49%
Robert M. Smelick................. 5,733 (d) 0.01%
William Swindells................. 6,032,726 (b)(c)(d) 5.41%
Samuel C. Wheeler................. 1,501,311 (d)(f) 1.35%
Benjamin R. Whiteley.............. 7,733 (b)(d) 0.01%
All current directors and
executive officers as a group
(14 persons)(g).................. 9,766,250 (b)(c)(d)(e)(f) 8.74%
</TABLE>
2
<PAGE>
- --------
(a) 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.
(b) Includes shares as to which the individual shares voting and dispositive
power as follows: Mr. Hergenhan, 1,772 shares; Mr. Knodell, 41,728 shares;
Mr. McCracken, 460 shares; Mr. McDougall, 32 shares; Mr. Onustock, 4,428
shares; Mr. Parsons, 400 shares; Mr. Rogel, 1,530 shares; Mr. Shelk,
18,120 shares; Mr. Swindells, 3,655,872 shares; and Mr. Whiteley, 6,000
shares.
(c) Includes shares subject to options exercisable within 60 days after
January 31, 1998, under the Company's 1995 Long-Term Incentive
Compensation Plan (the "1995 Plan") and its 1986 Stock Option and Stock
Appreciation Rights Plan (the "1986 Plan") as follows: Mr. Kinnune, 67,186
shares; Mr. McDougall, 27,420 shares; Mr. Onustock, 29,414 shares; Mr.
Parsons, 28,927 shares; Mr. Swindells, 225,860 shares; and all executive
officers as a group, 378,807 shares.
(d) Includes shares subject to options exercisable within 60 days after
January 31, 1998, under the nonemployee director provisions of the 1995
Plan as follows: Messrs. Drummond, Knodell, McCracken, Shelk, Smelick,
Wheeler, and Whiteley, 1,733 shares each; Messrs. Hergenhan and
Prendergast, 667 shares; Mr. Swindells, 400 shares; and all directors as a
group, 13,865 shares.
(e) Includes restricted shares of Common Stock awarded pursuant to the 1995
Plan, as to which the individual has sole voting and shared dispositive
power, as follows: Mr. Kinnune, 3,512 shares; Mr. Onustock, 2,910 shares;
Mr. Parsons, 2,856 shares; and all executive officers as a group, 9,278
shares.
(f) Includes 276,804 shares as to which Mr. Wheeler has sole voting and shared
dispositive power.
(g) Includes persons listed in the table other than Mr. Rogel.
ELECTION OF DIRECTORS
The Board is divided into three classes serving staggered three-year terms.
The Board held five meetings during 1997. 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 nominees named below for election as directors are the three Class A
directors. The terms of the directors to be elected at the 1998 annual meeting
will expire at the 2001 annual meeting.
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, 1997.
3
<PAGE>
CLASS A (NOMINEES WHOSE TERMS OF OFFICE WILL EXPIRE IN 2001)
Kenneth W. Hergenhan, age 66, has been a director of the Company since 1997.
Mr. Hergenhan was a partner in the law firm of Miller, Nash, Wiener, Hager &
Carlsen LLP for more than five years prior to his retirement in December
1996. (1)
Robert M. Smelick, age 55, has been a director of the Company since 1990.
Mr. Smelick has been the managing principal of Sterling Payot Company, an
investment company, since 1989. (3)
Benjamin R. Whiteley, age 68, 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, The Greenbrier Companies, Inc., and
U.S. Bancorp. (1)(2)
CLASS B (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 1999)
G. Joseph Prendergast, age 52, has been a director of the Company since
1996. Mr. Prendergast has been senior executive vice president of Wachovia
Corporation since October 1997 and from October 1988 until October 1997 was
executive vice president of Wachovia Corporation. Mr. Prendergast has also
been chairman of Wachovia Bank of Georgia and Wachovia Bank of South Carolina
since April 1994. Mr. Prendergast is also a director of The Georgia Power
Company. (3)
C. W. Knodell, age 70, 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.(1)(2)
William Swindells, age 67, has been a director of the Company since 1964.
For more than the past five years, Mr. Swindells has served as chairman of the
Board. He has served as chief executive officer of the Company since November
1997 and for more than five years prior to September 1995. Mr. Swindells is
also a director of Oregon Steel Mills, Inc., Standard Insurance Company, and
Airborne Freight Corp.(1)
4
<PAGE>
CLASS C (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 2000)
Gerard K. Drummond, age 60, has been a director of the Company since 1991.
Since July 1993, Mr. Drummond has been of counsel to the law firm of Stoel
Rives LLP. 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 executive vice president
of PacifiCorp, a public utility company.(2)
Paul N. McCracken, age 69, has been a director of the Company since 1986. Mr.
McCracken has been chairman of the board of directors of Tumac Lumber Co.,
Inc., a wood products broker, for more than the past five years.(1)(2)
Stuart J. Shelk, Jr., age 53, has been a director of the Company since 1983.
Mr. Shelk is president of Ochoco Management, Inc., which is the managing
general partner of Ochoco Lumber Co., a lumber manufacturer. Mr. Shelk has been
responsible for managing Ochoco Lumber Co. for more than five years.(3)
Samuel C. Wheeler, age 69, has been a director of the Company since 1972. Mr.
Wheeler has been vice president of Barclay Logging Company, a logging
contractor, and served in that capacity for more than the past five years. Mr.
Wheeler was also president of Wheeler Management Co., Inc., a wood products
manufacturer, to June 1996 and for more than the five years previous.(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 four
meetings during 1997, reviews the compensation of the Company's directors
and officers prior to consideration of such matters by the Board as a whole
and administers the Company's 1986 Plan. A subcommittee of the Compensation
Committee consisting of Messrs. Drummond and Whiteley is responsible for
administration of the 1995 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 1997, 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.
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.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation of each of the individuals who served as chief executive officer
of the Company during 1997 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, 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
---------------------
ANNUAL
COMPENSATION RESTRICTED NUMBER OF
------------ STOCK SECURITIES
NAME AND PRINCIPAL AWARDS UNDERLYING ALL OTHER
POSITION(1) YEAR SALARY (2)(3) OPTIONS(#) COMPENSATION(4)
------------------ ---- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
William Swindells (5) ..
Chairman and Chief 1997 $ 85,000 $ 0 1,200 $ 0
Executive Officer 1995 547,078 40,016 34,960 14,922
Steven R. Rogel (5)..... 1997 768,833 0 76,960 182,212
President and Chief 1996 783,333 119,980 36,440 33,783
Executive Officer 1995 622,917 31,260 29,360 14,922
William P. Kinnune...... 1997 458,333 0 27,900 31,890
Executive Vice 1996 429,000 65,270 17,560 34,071
President 1995 411,333 20,858 19,400 14,922
Michael R. Onustock..... 1997 403,667 0 23,160 23,627
Executive Vice 1996 355,667 54,155 14,540 24,989
President 1995 340,000 17,252 16,000 14,922
J. A. Parsons...........
Executive Vice 1997 385,000 0 22,780 23,146
President and 1996 349,333 53,229 14,240 25,037
Chief Financial Officer 1995 333,333 16,892 15,720 14,922
Duane C. McDougall (6).. 1997 293,334 0 19,240 18,749
Executive Vice
President
</TABLE>
- --------
(1) Includes principal capacities in which each officer served in 1997.
(2) The value of a restricted stock award is calculated by multiplying the
number of shares of Common Stock awarded by the closing sale price of the
Common Stock on the date of grant as reported by the New York Stock
Exchange or, for grants prior to December 31, 1996, by The Nasdaq Stock
Market.
(3) The aggregate number of restricted shares of Common Stock held by each
named executive officer and the value of such shares on December 31, 1997
(based on the closing sale price of the Common Stock, $32.1875, reported
on the New York Stock Exchange), are as follows:
<TABLE>
<CAPTION>
NO. OF
NAME SHARES VALUE
---- ------ -------
<S> <C> <C>
William Swindells................................................ 0 $ 0
Steven R. Rogel.................................................. 0 0
William P. Kinnune............................................... 3,512 113,043
Michael R. Onustock.............................................. 2,910 93,666
J. A. Parsons.................................................... 2,856 91,928
Duane C. McDougall............................................... 0 0
</TABLE>
Dividends are paid on the restricted shares at the same rate as on other
shares of Common Stock.
6
<PAGE>
(4) The amounts shown for 1997 represent (i) 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 and (ii) the imputed
value to the named executives of a portion of the premiums paid for life
insurance policies under which they are to receive an interest in the cash
surrender value. The amounts attributable to (i) 401(k) Plan and 1993
Deferred Compensation Plan contributions and (ii) the imputed value of
premiums, respectively, for each of the named executives for 1997 are as
follows: Mr. Swindells, $0, $0; Mr. Rogel, $15,000, $16,827; Mr. Kinnune,
$15,000, $16,890; Mr. Onustock, $15,000, $8,627; Mr. Parsons, $15,000,
$8,146; and Mr. McDougall, $15,000, $3,749. In addition, Mr. Rogel
received $150,385 for accrued vacation pay in connection with his
resignation as an officer.
(5) Mr. Rogel served as chief executive officer of the Company from October 1,
1995, until his resignation in November 1997, at which time Mr. Swindells
was reappointed to this position, in which he had served until his
retirement on September 30, 1995.
(6) Mr. McDougall became an executive officer of the Company on February 11,
1997; the table reflects his compensation for the full year.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information as to options to purchase Common
Stock granted to the named executive officers during 1997 pursuant to the
Company's 1995 Plan. No SARs were granted during 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (3)
---------------------------------------------- ----------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO PRICE
OPTIONS EMPLOYEES PER EXPIRATION
NAME GRANTED(1) IN FISCAL YEAR SHARE(2) DATE 5% 10%
---- ---------- -------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
William Swindells....... 1,200(4) 0.15% $30.4375 April 2007 $ 23,065 $ 58,451
Steven R. Rogel......... 76,960 9.91 30.5625 April 2007 1,479,217 3,748,626
William P. Kinnune...... 27,900 3.59 30.5625 April 2007 536,255 1,358,974
Michael R. Onustock..... 23,160 2.98 30.5625 April 2007 445,149 1,128,095
J. A. Parsons........... 22,780 2.93 30.5625 April 2007 437,845 1,109,585
Duane C. McDougall...... 19,240 2.48 30.5625 April 2007 369,804 937,156
</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: one-third after one year, an additional one-third
after two years, and the remainder after three years. Upon a change in
control, all options under the 1995 Plan become and remain exercisable in
full until the earlier of three years after the date the change in control
occurs or the expiration of the stated term of the option. For purposes of
the 1995 Plan, a change in control is defined to include (i) a change in
composition of the Board during any 24-month period such that the
directors in office at the beginning of the period and any additional
directors elected with the approval of two-thirds of the directors cease
to constitute at least 70 percent of the Board and (ii) unless approved by
two-thirds of the directors, excluding directors employed by the Company,
(A) a merger, or sale of substantially all the assets, of the Company, (B)
the acquisition by a person or group (other than certain affiliates of the
Company) of 20 percent or more of the combined voting power of the
Company's outstanding securities or (C) the approval by the shareholders
of the Company of a plan of liquidation or dissolution of the Company.
7
<PAGE>
(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.
(4) This option was granted to Mr. Swindells prior to his reappointment as an
executive officer. See "Compensation of Directors--Stock Options."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Information regarding exercises of stock options by the named executive
officers during 1997 and unexercised options held by them as of December 31,
1997, is summarized in the table set forth below. The named executives did not
exercise any SARs during 1997 and did not hold any in-the-money SARs at year-
end.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(2)
------------------------- -------------------------
NUMBER OF
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William Swindells....... 28,520 $ 816,820 226,260 2,000 $3,244,646 $ 3,000
Steven R. Rogel......... 177,400 2,301,918 0 0 0 0
William P. Kinnune...... 0 0 67,187 46,073 649,570 102,328
Michael R. Onustock..... 25,140 526,078 29,413 38,187 207,081 84,688
J. A. Parsons........... 25,140 520,854 28,927 37,513 203,848 83,207
Duane C. McDougall...... 2,320 56,985 27,420 26,360 293,546 53,319
</TABLE>
- --------
(1) Represents the difference between the fair market value of the shares of
Common Stock received on exercise of stock options 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, $32.1875, reported on the New York Stock Exchange on
December 31, 1997, 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.
8
<PAGE>
PENSION PLAN
The retirement plan ("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 Retirement Plan is
actuarially determined. The Company also maintains a supplemental retirement
plan ("Supplemental Plan") under which salaried employees (including officers)
receive retirement benefits substantially equal to those the Retirement Plan
would have provided but for certain limitations required by the Internal
Revenue Code.
The following table shows the aggregate estimated annual benefits payable
under the Retirement Plan and the Supplemental Plan 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............ $71,915 $95,887 $119,859 $143,831 $167,803 $190,303
400,000............ 96,665 128,887 161,109 193,331 225,553 255,553
500,000............ 121,415 161,887 202,359 242,831 283,303 320,803
600,000............ 146,165 194,887 243,609 292,331 341,053 386,053
700,000............ 170,915 227,887 284,859 341,831 398,803 451,303
800,000............ 195,665 260,887 326,109 391,331 456,553 516,553
900,000............ 220,415 293,887 367,359 440,831 514,303 581,803
1,000,000............ 245,165 326,887 408,609 490,331 572,053 647,053
</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, 42; Mr. Rogel, not applicable; Mr. Kinnune, 36; Mr.
Onustock, 25; Mr. Parsons, 31; and Mr. McDougall, 18.
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 1998. 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 Retirement 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.
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
COMPENSATION COMMITTEE
During 1997, 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.
Mr. McCracken is chairman 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 1997, such transactions amounted to approximately $55,299,000.
Mr. Wheeler is vice president of Barclay Logging Company, which performs
contract logging services for the Company in the ordinary course of business
at prevailing market prices. During 1997, such transactions amounted to
approximately $779,000. Mr. Wheeler served as a vice president of the Company
until his resignation in 1973.
OTHER TRANSACTIONS AND RELATIONSHIPS
Ochoco Lumber Co. sells wood products to, and purchases such products from,
the Company in the ordinary course of business at prevailing market prices.
During 1997, such transactions amounted to approximately $2,057,000. Mr. Shelk
is president of the managing general partner of Ochoco Lumber Co.
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 1997, such
purchases amounted to approximately $408,000.
In the ordinary course of business at prevailing market prices, the Company
has sold paper products to, and obtained credit and other banking and
financial services from, Wachovia Corporation, of which Mr. Prendergast is an
executive vice president. During 1997, such paper sales amounted to
approximately $1,024,000, and the financial services amounted to approximately
$2,543,000.
REPORT OF THE COMPENSATION COMMITTEE
It is the responsibility of the Compensation Committee to oversee the
compensation of officers of the Company (20 persons). The Compensation
Committee's salary recommendations, when approved by the Board, set the levels
of compensation for all officers. In addition, the Compensation Committee
hears reports from the Company's chief executive officer, and considers the
performance of individual officers, planned succession and related matters. In
1996, responsibility for the administration of the 1995 Plan, including
selecting the officers and other key employees to receive awards and for
determining types, amounts and terms of such awards, was assigned to the Long-
Term Incentive Compensation Committee (the "Awards Committee"), a subcommittee
of the Compensation Committee consisting of Messrs. Drummond and Whiteley.
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 the chief executive officer 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 ordinarily
compensate employees with bonuses or other forms of short-term incentive
compensation. The Company's policy is to pay salaried employees, including all
officers, base salaries only.
From time to time, the Compensation Committee receives reports from
compensation consultants regarding competitive industry salaries. In March
1997, the Compensation Committee received from a leading consultant
10
<PAGE>
an analysis of industry compensation data for a group of 13 other forest
products companies, including eight of the ten companies in the Standard &
Poor's Paper and Forest Products Index referred to under "Performance Graph"
below. The analysis was adjusted by the consultants to reflect differences in
the sizes of the companies included in the analysis. Further, the analysis
presented information regarding market compensation levels for 15 key
management positions, including the Company's most highly compensated
positions. Based upon a review of the analysis for the positions covered by
it, and on the relative responsibilities of those holding seven additional
positions not specifically covered in the analysis, in April 1997, management
prepared for the Compensation Committee's consideration salary recommendations
for 1997 for the Company's executive officers and key management positions.
In arriving at salary recommendations for individual officers, the
Compensation Committee considered the industry comparisons contained in the
compensation analysis referred to above, available information concerning
comparable levels of responsibility, relative responsibilities compared to
other officers and employees in the Company, and various other factors
including experience and performance.
Each recommended salary was intended to be within the range of and
competitive with the cash compensation paid to positions within the comparable
industry. Some of the recommended salaries were at or above the 75th
percentile of the industry five-year average total cash compensation and
others were at or below the 50th percentile. In formulating its salary
recommendations, the Compensation Committee did not consider stock options and
other noncash compensation programs of the companies in the industry analysis
or the stock options granted to Company officers.
In April 1997, based on the recommendation of the Compensation Committee,
the Board increased the annual salary level of Mr. Rogel, who served as chief
executive officer until November 1997, by 15 percent to $920,000. This amount
approximated the 50th percentile of the industry five-year average for CEO
total cash compensation. In recommending the increase in Mr. Rogel's salary,
the Compensation Committee considered Mr. Rogel's experience and performance
and was strongly influenced by the industry analysis referred to above.
In November 1997, William Swindells, who served as chief executive officer
of the Company until his retirement in September 1995, was reappointed to that
position following Mr. Rogel's resignation. In December 1997, the Board, based
on the recommendation of the Compensation Committee, established the annual
salary level for Mr. Swindells at $1,020,000. In making its recommendation,
the Compensation Committee considered Mr. Swindells' experience, the salary
being paid to Mr. Swindells prior to his retirement, the salary being paid to
Mr. Rogel prior to his resignation, and the demands placed on Mr. Swindells in
returning from retirement on short notice.
As an incentive to stock ownership by employees and as a form of long-term
incentive compensation, annual grants of stock options are awarded to selected
key employees. During 1997, stock options were granted by the Awards Committee
based on a formula relating to base salary and the Company's return on
shareholders' equity ("ROE"). The formula was adjusted by the Awards Committee
in 1997 with the goal of placing the Company's employees nearer to, but still
under, the industry five-year average at the 50th percentile level as
reflected in the analysis referred to above. The formula does not take into
account the number of stock options previously granted to an executive
officer. Under the formula, a target number of options for each executive
officer is determined by dividing a percentage of the officer's salary
(ranging, based on level of responsibility, from 110 percent to 300 percent
for the chief executive officer) 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 weighted-average ROE of 18
forest products companies as determined from published financial reports. If
the specified margin is not achieved, the options are reduced proportionately
by up to 30 percent of the target number. The Company's 1996 ROE did not
exceed the published industry composite by the specified margin. Accordingly,
option grants in 1997 were reduced by 2 percent.
11
<PAGE>
Restricted stock has been awarded in past years to executive officers based
upon the Compensation Committee's subjective evaluation of the Company's
performance. No restricted stock awards were granted during 1997.
Section 162(m) of the Internal Revenue Code generally disallows a federal
income tax deduction to the Company for compensation over $1 million paid to
the Company's chief executive officer or any of its four other most highly
compensated executive officers unless such compensation is payable only on
account of the attainment of one or more performance goals as determined by a
Board committee comprised solely of two or more outside directors and
otherwise qualifies as performance based pursuant to Section 162(m). The
Company does not have a policy favoring awards to executive officers that
qualify as performance based pursuant to Section 162(m). However,
responsibility for the administration of the 1995 Plan was assigned to the
Awards Committee, which is comprised solely of outside directors, so that
awards under the 1995 Plan may qualify as performance based within the meaning
of Section 162(m). Stock options granted by the Awards Committee, as well as
awards of restricted stock that vest based upon the attainment of performance
goals established by the Awards Committee, will qualify as performance based
pursuant to Section 162(m).
COMPENSATION COMMITTEE
Gerard K. Drummond C. W. Knodell
Samuel C. Wheeler Benjamin R. Whiteley
Paul N. McCracken, Chairman
12
<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, 1992, and reinvestment of dividends.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P Paper
Measurement Period Willamette S&P 500 & Forest
(Fiscal Year Covered) Industries, Inc. Index Products Index
- --------------------- ---------------- ------- --------------
<S> <C> <C> <C>
Measurement Pt - 12/92 $100 $100 $100
FYE 12/93 123 110 110
FYE 12/94 120 112 115
FYE 12/95 145 153 126
FYE 12/96 183 189 140
FYE 12/97 172 252 150
</TABLE>
COMPENSATION OF DIRECTORS
FEES
Each director of the Company who is not also an employee of the Company or a
subsidiary (a "nonemployee director") receives a fee of $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. In addition,
each nonemployee director receives a retainer fee of $24,000 per year.
The payment of directors' fees may be deferred at the election of a director
pursuant to the Company's director deferred compensation plan. Such deferred
payments accrue interest at a rate equal to the rate on seven-year U.S.
treasury obligations in effect as of the beginning of each calendar quarter.
13
<PAGE>
RETIREMENT BENEFITS
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 a number of annual payments equal to the number 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.
STOCK OPTIONS
Under the 1995 Plan, each person who was a nonemployee director at the date
of the 1995 annual meeting of shareholders was granted an option to purchase
2,000 shares of Common Stock (an "Initial Option") and each person who
subsequently becomes a nonemployee director, other than a former officer of
the Company or a subsidiary, will also be granted an Initial Option. In
addition, on the date of each annual meeting of shareholders, commencing with
the 1996 annual meeting, an option for 1,200 shares of Common Stock (an
"Annual Option") is granted to each person who is then a nonemployee director,
including former officers of the Company or its subsidiaries, and who is to
continue to serve as a director.
Options granted to nonemployee directors under the 1995 Plan are granted at
an exercise price equal to the fair market value of the Common Stock on the
date of grant, have terms of ten years and two days, and are exercisable as
specified in note (1) to the table under "Option Grants in Last Fiscal Year"
above. Accordingly, the Annual Options granted to the nonemployee directors on
the date of the 1997 annual meeting were granted at an exercise price of
$30.4375 per share, the fair market value of the Common Stock on that date.
The Initial Option granted to Mr. Hergenhan on February 13, 1997, was granted
at an exercise price of $31.50, the fair market value of the Common Stock on
the date of grant.
CONSULTING AGREEMENT
The Company entered into a consulting agreement with Mr. Swindells effective
upon his retirement as chief executive officer of the Company under which Mr.
Swindells agreed to provide consulting services to the Company for a two-year
term expiring September 30, 1997. A replacement agreement entered into by the
Company and Mr. Swindells on the same terms effective October 1, 1997, was
terminated effective December 1, 1997, due to Mr. Swindells' reappointment as
chief executive officer of the Company. Under the consulting agreement, Mr.
Swindells received consulting fees at the rate of $10,000 a month, secretarial
services and office space, and was reimbursed for certain expenses including
dues for a business club. The consulting agreement provided that, while Mr.
Swindells was receiving fees under the agreement, he would not receive the
annual retainer fees payable to other nonemployee directors of the Company.
EMPLOYMENT AGREEMENTS
GENERAL
The Company has entered into agreements ("CIC Agreements") with certain of
its key employees, including the named executive officers (other than Mr.
Rogel, whose CIC Agreement terminated upon his resignation as an officer in
November 1997, and Mr. Swindells), 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.
14
<PAGE>
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), 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.
"Change in Control" means (i) a change in control required to be disclosed
pursuant to Regulation 14A under the Securities Exchange Act of 1934 (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.
15
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16 of 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 and
the New York Stock Exchange. 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.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP, independent public accountants, has
audited the accounts of the Company for a number of years and has been
selected to do so for 1998. Representatives of KPMG Peat Marwick LLP are
expected to be present at the annual shareholders meeting with the opportunity
to make a statement if they desire to do so and to be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS FOR 1999
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 11, 1998, in order to be included in the proxy statement and proxy
card for such meeting.
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 in person or by telephone or
other means of communication by certain directors, officers, and other
employees of the Company without extra compensation for their services. The
Company has retained D.F. King & Co., Inc., to assist in the solicitation of
proxies at an estimated fee of $5,500 plus expenses. 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
16
<PAGE>
- -------------------------------------------------------------------------------
WILLAMETTE INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
FOR ANNUAL MEETING ON APRIL 21, 1998
The undersigned hereby appoints William Swindells and J. A. Parsons, and
either of them, proxies with power of substitution, 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 on
April 21, 1998, or at any adjournment thereof with all powers the undersigned
would possess if personally present. The proxies, or if only one proxy is
present, then that one, shall have all the powers granted herein.
By signing on the reverse, the undersigned acknowledges receipt of the Notice
of Annual Meeting to be held April 21, 1998, and accompanying proxy statement,
and revokes all prior proxies for said meeting.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- -------------------------------------------------------------------------------
. FOLD AND DETATCH HERE .
<PAGE>
- -------------------------------------------------------------------------------
Please mark
your vote as [X]
indicated in
this example
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH THE CHOICE
SPECIFIED, OR, IF NO CHOICE IS SPECIFIED, WILL BE VOTED FOR ITEM 1. IF ANY
OTHER BUSINESS PROPERLY COMES BEFORE THE MEETING, THIS PROXY WILL BE VOTED
THEREON IN THE DISCRETION OF THE PROXIES NAMED HEREIN.
- -----------------------------------
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR
- -----------------------------------
Item 1-Election of directors: WITHHELD
Kenneth W. Hergenhan, Robert M. FOR FOR ALL
Smelick, Benjamin R. Whiteley [_] [_]
WITHHELD FOR: (Write that nominee's name in the
space provided below).
- --------------------------------------------------
Signature(s) _______________________________________ Date ____________, 1998
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
