<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.:
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(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 20, 1999
----------------
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 20, 1999, at 10 a.m., to consider and vote
on the following matters:
1. The election of three Class B 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 22,
1999, 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 10, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction............................................................... 1
Holders of Common Stock.................................................... 1
Election of Directors...................................................... 4
Other Matters.............................................................. 5
Executive Compensation..................................................... 6
Compensation Committee Interlocks and Insider Participation................ 9
Report of the Compensation Committee....................................... 9
Performance Graph.......................................................... 12
Compensation of Directors.................................................. 12
Employment Agreements...................................................... 13
Section 16(a) Beneficial Ownership Reporting Compliance.................... 15
Relationship with Independent Public Accountants........................... 15
Shareholder Proposals for Annual Meeting in 2000........................... 15
Solicitation of Proxies.................................................... 15
</TABLE>
Printed on Willamette's 40# Clearfield Vellum
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 20, 1999. This Proxy
Statement and accompanying form of proxy were first sent or given to
shareholders on approximately March 10, 1999.
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 22, 1999, 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
110,991,728 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.
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 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 3.05%
Suite 600 4,749,873 Shared Voting and Disposition 4.28%
1211 S.W. Fifth Avenue 8,138,533 Total 7.33%
Portland, Oregon 97204
William Swindells*...... 2,376,884 Sole Voting and Disposition (c)(d) 2.14%
1300 S.W. Fifth Avenue 3,674,072 Shared Voting and Disposition 3.30%
Portland, Oregon 97201 6,050,956 Total 5.44%
The Prudential
Insurance Company 205,132 Sole Voting and Disposition 0.18%
of America**.......... 5,483,342 Shared Voting 4.94%
751 Broad Street 5,516,442 Shared Disposition 4.97%
Newark, New Jersey 5,721,574 Total 5.15%
07102-3777
Sanford C. Bernstein &
Co., Inc**............ 3,634,419 Sole Voting 3.27%
767 Fifth Avenue 735,859 Shared Voting 0.66%
New York, New York 10153 6,399,139 Sole Disposition 5.77%
6,399,139 Total 5.77%
Wells Fargo Bank,
N.A.**................ 3,710,970 Sole Voting 3.34%
404 California Street 14,600 Shared Voting 0.01%
San Francisco, 17,900 Sole Disposition 0.02%
California 94163 9,161,997 Shared Disposition 8.25%
9,188,797 Total 8.28%
</TABLE>
- --------
* As of January 31, 1999
** As of December 31, 1998
2
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF
BENEFICIALLY OWNED OUTSTANDING
NAME AT JANUARY 31, 1999(a) COMMON STOCK
---- ---------------------- ------------
<S> <C> <C>
Winslow H. Buxton.................. 832(b) 0.00%
Marvin D. Cooper................... 74,033(b)(c) 0.07%
Gerard K. Drummond................. 7,200(d) 0.01%
Kenneth W. Hergenhan............... 3,505(b)(d) 0.00%
William P. Kinnune................. 182,594(c)(e) 0.16%
Paul N. McCracken.................. 17,740(b)(d) 0.02%
Duane C. McDougall................. 59,204(b)(c) 0.05%
Michael R. Onustock................ 102,859(b)(c)(e) 0.09%
J. A. Parsons...................... 95,856(b)(c)(e) 0.09%
G. Joseph Prendergast.............. 4,233(d) 0.00%
Stuart J. Shelk, Jr................ 1,670,538(b)(d) 1.51%
Robert M. Smelick.................. 7,200(d) 0.01%
William Swindells.................. 6,050,956(b)(c)(d) 5.44%
Samuel C. Wheeler.................. 1,498,788(d)(f) 1.35%
Benjamin R. Whiteley............... 9,700(d) 0.01%
All directors and executive
officers as a group (16 persons).. 9,836,689(b)(c)(d)(e)(f) 8.81%
</TABLE>
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(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. Buxton, 13 shares; Mr. Cooper, 400 shares; Mr.
Hergenhan, 1,772 shares; Mr. McCracken, 8,460 shares; Mr. McDougall, 32
shares; Mr. Onustock, 4,862 shares; Mr. Parsons, 400 shares; Mr. Shelk,
18,120 shares; and Mr. Swindells, 3,674,072 shares.
(c) Includes shares subject to employee stock options exercisable within 60
days after January 31, 1999, 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. Cooper, 45,433
shares; Mr. Kinnune, 88,806 shares; Mr. McDougall, 38,633 shares; Mr.
Onustock, 47,313 shares; Mr. Parsons, 46,506 shares; Mr. Swindells,
300,210 shares; and all executive officers as a group, 586,708 shares.
(d) Includes shares subject to options exercisable within 60 days after
January 31, 1999, under the nonemployee director provisions of the 1995
Plan as follows: Messrs. Drummond, McCracken, Shelk, Smelick, Wheeler, and
Whiteley, 3,200 shares each; Messrs. Hergenhan and Prendergast, 1,733
shares; Mr. Swindells, 1,200 shares; and all directors as a group, 23,866
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, 2,948 shares; Mr. Onustock, 2,444 shares;
Mr. Parsons, 2,400 shares; and all executive officers as a group, 7,792
shares.
(f) Includes 276,804 shares as to which Mr. Wheeler has sole voting and shared
dispositive power.
3
<PAGE>
ELECTION OF DIRECTORS
The Board is divided into three classes serving staggered three-year terms.
The Board held six meetings during 1998. 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 B
directors. The terms of the directors to be elected at the 1999 annual meeting
will expire at the annual meeting in 2002.
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, 1998.
CLASS B (NOMINEES WHOSE TERMS OF OFFICE WILL EXPIRE IN 2002)
Winslow H. Buxton, age 59, has been a director of the Company since February
1999. Mr. Buxton is chairman, president and chief executive officer and a
director of Pentair, Inc., a diversified manufacturing company which sells
general industrial equipment and specialty products, in which position he has
served for more than five years. He is also a director of Bemis Company, Inc.,
and The Toro Company.
G. Joseph Prendergast, age 53, has been a director of the Company since
1996. Mr. Prendergast has been senior executive vice president of Wachovia
Corporation, a bank holding company, 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)
William Swindells, age 68, 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 served as chief executive officer of the Company from November 1997
until December 1998, as well as 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)
CLASS C (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 2000)
Gerard K. Drummond, age 61, has been a director of the Company since 1991.
From July 1993 to June 1998, Mr. Drummond was of counsel to the law firm of
Stoel Rives LLP. Previously, 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 70, has been a director of the Company since 1986.
Mr. McCracken has been chairman of the board of directors and chief executive
officer of Tumac Lumber Co., Inc., a wood products broker, for more than the
past five years.(1)(2)
Stuart J. Shelk, Jr., age 54, has been a director of the Company since 1983.
Mr. Shelk is managing director 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)
4
<PAGE>
Samuel C. Wheeler, age 70, 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, until June 1996. (1)(2)
CLASS A (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 2001)
Kenneth W. Hergenhan, age 67, 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 56, 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 69, has been a director of the Company since 1990.
Mr. Whiteley retired as chairman of the board of Standard Insurance Company, a
life insurance company, of which he is also a director, in April 1998. 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. Mr. Whiteley is also a director of Northwest Natural
Gas Company and The Greenbrier Companies, Inc. (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 met twice
during 1998, 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 and met once during 1998.
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 1998, 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 1998 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, 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
---------------------
ANNUAL RESTRICTED NUMBER OF
COMPENSATION STOCK SECURITIES
------------ AWARDS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY (2)(3) OPTIONS(#) COMPENSATION(4)
------------------------------ ---- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
William Swindells (5) ... 1998 $935,000 $ 0 74,350 $15,000
Chairman and Chief 1997 85,000 0 1,200 0
Executive Officer
Duane C. McDougall (6)... 1998 525,000 0 23,690 18,142
President and Chief 1997 293,334 0 19,240 18,749
Executive Officer
William P. Kinnune....... 1998 481,333 0 22,840 29,180
Executive Vice President 1997 458,333 0 27,900 31,890
1996 429,000 65,270 17,560 34,071
Michael R. Onustock...... 1998 465,000 0 20,660 22,115
Executive Vice President 1997 403,667 0 23,160 23,627
1996 355,667 54,155 14,540 24,989
J. A. Parsons............ 1998 410,000 0 19,440 21,783
Executive Vice President 1997 385,000 0 22,780 23,146
and Chief Financial 1996 349,333 53,229 14,240 25,037
Officer
Marvin D. Cooper (7)..... 1998 333,333 0 14,580 20,373
Executive Vice President
</TABLE>
- --------
(1) Includes principal capacities in which each officer served during 1998.
(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.
(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, 1998
(based on the closing sale price of the Common Stock, $33.50, reported on
the New York Stock Exchange), are as follows:
<TABLE>
<CAPTION>
NAME NO. OF SHARES VALUE
---- ------------- -------
<S> <C> <C>
William Swindells................................... 0 $ 0
Duane C. McDougall.................................. 0 0
William P. Kinnune.................................. 2,948 98,758
Michael R. Onustock................................. 2,444 81,874
J. A. Parsons....................................... 2,400 80,400
Marvin D. Cooper.................................... 0 0
</TABLE>
Dividends are paid on the restricted shares at the same rate as on other
shares of Common Stock.
(4) The amounts shown for 1998 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
6
<PAGE>
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 1998 are as
follows: Mr. Swindells, $15,000, $0; Mr. McDougall, $15,000, $3,142; Mr.
Kinnune, $15,000, $14,180; Mr. Onustock, $15,000, $7,115; Mr. Parsons,
$15,000, $6,783; and Mr. Cooper, $15,000, $5,373.
(5) Mr. Swindells was reappointed to this position in November 1997 and served
until his retirement on December 1, 1998. Mr. Swindells remains chairman of
the board of the Company.
(6) Mr. McDougall served as president and chief operating officer of the
Company until December 1, 1998, when he became president and chief
executive officer. Mr. McDougall did not serve as an executive officer of
the Company during 1996.
(7) Mr. Cooper became an executive officer of the Company on April 21, 1998;
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 1998 pursuant to the
Company's 1995 Plan. No stock appreciation rights ("SARs") were granted during
1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM (3)
OPTIONS EMPLOYEES PER EXPIRATION ---------------------
NAME GRANTED(1) IN FISCAL YEAR SHARE(2) DATE 5% 10%
---- ---------- -------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William Swindells....... 74,350 11.87% $38.6875 April 2008 $1,808,962 $4,584,266
Duane C. McDougall...... 23,690 3.78% 38.6875 April 2008 576,386 1,460,676
William P. Kinnune...... 22,840 3.65% 38.6875 April 2008 555,705 1,408,267
Michael R. Onustock..... 20,660 3.30% 38.6875 April 2008 502,665 1,273,852
J. A. Parsons........... 19,440 3.10% 38.6875 April 2008 472,982 1,198,630
Marvin D. Cooper........ 14,580 2.33% 38.6875 April 2008 354,737 898,972
</TABLE>
- --------
(1) Options were granted for the numbers of shares indicated at an exercise
price equal to the fair market value of the Common Stock on the date of
grant. The options, which have terms of ten years and two days, become
exercisable as follows: 33 1/3 percent after one year, an additional
33 1/3 percent after two years, and the remainder after three years;
provided that the options will become exercisable in full upon the
officer's death, disability or retirement. 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.
(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.
7
<PAGE>
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 1998 and unexercised options held by them as of December 31,
1998, is summarized in the table set forth below. The named executives did not
exercise any SARs during 1998 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
NUMBER OF OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William Swindells....... 0 $ 0 301,410 1,200 $3,543,837 $ 3,400
Duane C. McDougall...... 0 0 38,633 38,837 373,681 43,770
William P. Kinnune...... 0 0 88,806 47,294 830,549 70,004
Michael R. Onustock..... 0 0 47,313 40,947 322,415 58,078
J. A. Parsons........... 0 0 46,506 39,374 317,186 57,072
Marvin D. Cooper........ 0 0 45,433 26,627 512,882 34,577
</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, $33.50, reported on the New York Stock Exchange on December
31, 1998, 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.
PENSION PLAN
The retirement plan ("Retirement Plan") that the Company maintains for its
salaried 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.......... $ 71,771 $ 95,694 $119,618 $143,541 $167,465 $189,965
400,000.......... 96,521 128,694 160,868 193,041 225,215 255,215
500,000.......... 121,271 161,694 202,118 242,541 282,965 320,465
600,000.......... 146,021 194,694 243,368 292,041 340,715 385,715
700,000.......... 170,771 227,694 284,618 341,541 398,465 450,965
800,000.......... 195,521 260,694 325,868 391,041 456,215 516,215
900,000.......... 220,271 293,694 367,118 440,541 513,965 581,465
1,000,000.......... 245,021 326,694 408,368 490,041 571,715 646,715
</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.
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<PAGE>
The credited years of service for each of the named executive officers is as
follows: Mr. Swindells, 43; Mr. McDougall, 19; Mr. Kinnune, 37; Mr. Onustock,
26; Mr. Parsons, 33; and Mr. Cooper, 19.
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 1999. 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.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
COMPENSATION COMMITTEE
During 1998, Messrs. Drummond, C. W. 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 1998, such transactions amounted to approximately $43,540,000.
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 1998, such transactions amounted to
approximately $908,000. 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 1998, such transactions amounted to approximately $1,176,000. Mr. Shelk
is managing director 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 1998, such
purchases amounted to approximately $436,000.
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 a
senior executive vice president. During 1998, such paper sales amounted to
approximately $1,151,000, and the financial services amounted to approximately
$3,948,000.
REPORT OF THE COMPENSATION COMMITTEE
It is the responsibility of the Compensation Committee to oversee the
compensation of officers of the Company (23 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
9
<PAGE>
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 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 to the Board for individual officers
effective May 1, 1998, the Compensation Committee considered the industry
comparisons contained in the compensation analysis referred to above, adjusted
for inflationary pressures, recommendations by the Company's chief executive
officer, a tabulation of compensation paid by other forest products companies
compiled from data appearing in their 1998 proxy statements, 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. 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 November 1997, William Swindells, who served as chief executive officer
(CEO) of the Company until his retirement in September 1995, was reappointed
to that position following the resignation of Steven R. Rogel. 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 the former CEO prior to his resignation, and the
demands placed on Mr. Swindells in returning from retirement on short notice.
No adjustment was made to Mr. Swindells' salary in April 1998, when other
officers' salaries were reviewed and adjusted, in view of the recent
determination of his salary level and the indeterminate length of his tenure
as CEO. Mr. Swindells stepped down as CEO on December 1, 1998, returning to
his previous status as a retired employee.
In November 1998, Duane C. McDougall, who served as President and Chief
Operating Officer beginning in April 1998, was appointed Chief Executive
Officer effective December 1, 1998. The Board, based upon the recommendation
of the Compensation Committee, established the annual salary level for Mr.
McDougall at $800,000. In making its recommendation, the Compensation
Committee considered Mr. McDougall's prior salary, his increased
responsibility as CEO, and his experience.
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<PAGE>
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 1998, 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 200 percent for executive
vice presidents 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 17 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 1997 ROE did not exceed the published industry composite by the
specified margin. Accordingly, option grants in 1998 were reduced by 6
percent.
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 1998.
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
<TABLE>
<S> <C>
Gerard K. Drummond Samuel C. Wheeler
Benjamin R. Whiteley Paul N. McCracken, Chairman
</TABLE>
11
<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, 1993, and reinvestment of dividends.
[PERFORMANCE GRAPH APPEARS HERE]
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Willamette
Industries, Inc. $100 $ 98 $118 $149 $141 $149
S&P 500 100 101 139 171 229 294
S&P Paper &
Forest Products 100 104 115 127 136 139
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.
12
<PAGE>
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.
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 1998 annual meeting were granted at an exercise price of
$38.6875 per share, the fair market value of the Common Stock on that date.
The Initial Option granted to Mr. Buxton on February 11, 1999, was granted at
an exercise price of $32.8125, the fair market value of the Common Stock on
the date of grant.
CONSULTING AGREEMENT
The Company has entered into a consulting agreement with Mr. Swindells
effective upon his ceasing to be chief executive officer of the Company under
which Mr. Swindells has agreed to provide consulting services to the Company
for a one-year term commencing December 1, 1998. Under the consulting
agreement, Mr. Swindells receives consulting fees at the rate of $10,000 a
month, secretarial services and office space, and is reimbursed for certain
expenses including dues for a business club. The consulting agreement provides
that, while Mr. Swindells receives fees under the agreement, he will not
receive the annual retainer fees payable to other nonemployee directors of the
Company. The consulting agreement is renewable for three consecutive one-year
periods unless terminated by either party upon 30 days' notice prior to
renewal.
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.
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.
13
<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
14
<PAGE>
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.
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 except for a one-month delay in filing
a Form 4 for Mr. Stuart J. Shelk, Jr., to report his purchase of 2,000 shares
in July 1998.
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 1999. 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 ANNUAL MEETING IN 2000
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, 1999, in order to be included in the proxy statement and proxy
card for such meeting.
The persons named as proxies for the 2000 Annual Meeting of Shareholders
will have discretionary authority to vote on any matter presented by a
shareholder for action at such meeting unless the Company receives notice of
the matter by January 25, 2000, in which case such persons will not have
discretionary voting authority except as provided in the rules of the
Securities and Exchange Commission governing shareholder proposals.
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 $6,000 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
March 10, 1999
15
<PAGE>
WILLAMETTE INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
FOR ANNUAL MEETING ON APRIL 20, 1999
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 20, 1999, 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 20, 1999, 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 DETACH HERE .
<PAGE>
Please mark
your vote as [X]
indicated in
the 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:
Winslow H. Buxton WITHHELD
G. Joseph Prendergast FOR FOR ALL
William Swindells [ ] [ ]
WITHHELD FOR: (Write that nominee's name in the space provided below).
- -------------------------------------------------------------------------------
Signature(s) Date , 1999
------------------------------------------ -------------
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 .
