<PAGE>
Exhibit (e)(1)
Executive Compensation
Summary Compensation Table
The following table sets forth certain information concerning the
compensation of the Company's chief executive officer during 1999 and each of
its four other most highly compensated executive officers (the "named executive
officers") for each of the years in the three-year period ended December 31,
1999.
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
---------------------
Annual Number of
Compensation Restricted Securities
------------ Stock Underlying All Other
Name and Principal Position(1) Year Salary Awards(2) Options(#) Compensation(3)
------------------------------ ---- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Duane C. McDougall....... 1999 $866,667 $ 0 50,800 $26,936
President and Chief
Executive Officer 1998 525,000 0 23,690 18,142
1997 293,334 0 19,240 18,749
William P. Kinnune....... 1999 498,333 0 20,620 32,401
Executive Vice President 1998 481,333 0 22,840 29,180
1997 458,333 0 27,900 31,890
Michael R. Onustock...... 1999 497,667 0 20,530 24,607
Executive Vice President 1998 465,000 0 20,660 22,115
1997 403,667 0 23,160 23,627
J. A. Parsons(4)......... 1999 445,000 0 17,570 23,140
Executive Vice President
and 1998 410,000 0 19,440 21,783
Chief Financial Officer 1997 385,000 0 22,780 23,146
Marvin D. Cooper(4)...... 1999 383,333 0 14,820 22,728
Executive Vice President 1998 333,333 0 14,580 20,373
</TABLE>
--------
(1) Includes principal capacities in which each officer served during 1999.
(2) The aggregate number of restricted shares of Common Stock held by each
named executive officer and the value of such shares on December 31, 1999
(based on the closing sale price of the Common Stock, $46.4375, reported
on the New York Stock Exchange), are as follows:
<TABLE>
<CAPTION>
Name No. of Shares Value
---- ------------- -------
<S> <C> <C>
Duane C. McDougall.................................. 0 $ 0
William P. Kinnune.................................. 1,680 78,049
Michael R. Onustock................................. 1,394 64,762
J. A. Parsons....................................... 0 0
Marvin D. Cooper.................................... 0 0
</TABLE>
Dividends are paid on the restricted shares at the same rate as on other
shares of Common Stock.
(3) The amounts shown for 1999 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 1999 are as
follows: Mr. McDougall, $15,000, $11,936; Mr. Kinnune, $15,000, $17,401;
Mr. Onustock, $15,000, $9,607; Mr. Parsons, $15,000, $8,140; and Mr.
Cooper, $15,000, $7,728.
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<PAGE>
(4) Mr. Cooper became an executive officer of the Company on April 21, 1998;
the table reflects his compensation for all of 1998. Mr. Parsons retired
from the Company on December 31, 1999.
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 1999 pursuant to the
Company's 1995 Plan. No stock appreciation rights ("SARs") were granted to any
named executive officers during 1999.
<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>
Duane C. McDougall...... 50,800 9.14% $47.25 April 2009 $1,509,536 $3,825,460
William P. Kinnune...... 20,620 3.71% 47.25 April 2009 612,729 1,552,775
Michael R. Onustock..... 20,530 3.69% 47.25 April 2009 610,055 1,545,998
J. A. Parsons........... 17,570 3.16% 47.25 April 2009 522,097 1,323,097
Marvin D. Cooper........ 14,820 2.67% 47.25 April 2009 440,380 1,116,010
</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.
2
<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 1999 and unexercised options held by them as of December 31,
1999, is summarized in the table set forth below. The named executives did not
exercise any SARs during 1999 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, 1999 December 31, 1999(2)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Duane C. McDougall...... 14,020 $ 425,653 41,243 73,007 $ 672,407 $224,206
William P. Kinnune...... 48,400 1,204,152 63,174 45,146 1,028,902 265,635
Michael R. Onustock..... 13,900 325,350 52,867 42,023 855,767 229,291
J. A. Parsons........... 0 0 103,450 0 1,384,485 0
Marvin D. Cooper........ 7,800 290,063 49,813 29,267 983,735 150,362
</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, $46.4375, reported on the New York Stock Exchange on
December 31, 1999, 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.......... $ 71,618 $ 95,490 $119,363 $143,235 $167,108 $189,608
400,000.......... 96,368 128,490 160,613 192,735 224,858 254,858
500,000.......... 121,118 161,490 201,863 242,235 282,608 320,108
600,000.......... 145,868 194,490 243,113 291,735 340,358 385,358
700,000.......... 170,618 227,490 284,363 341,235 398,108 450,608
800,000.......... 195,368 260,490 325,613 390,735 455,858 515,858
900,000.......... 220,118 293,490 366,863 440,235 513,608 581,108
1,000,000.......... 244,868 326,490 408,113 489,735 571,358 646,358
</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.
3
<PAGE>
The credited years of service for each of the named executive officers is as
follows: Mr. McDougall, 20; Mr. Kinnune, 38; Mr. Onustock, 27; Mr. Parsons, 34;
and Mr. Cooper, 20.
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 1999, Messrs. Drummond, Hergenhan, McCracken, Wheeler and Whiteley
served on the Company's Compensation Committee.
Paul N. 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 1999, such transactions amounted to approximately
$6,087,000.
Samuel C. 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 1999, such transactions amounted
to approximately $643,000. 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 1999, such transactions amounted to approximately $2,033,000. 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 1999, such
purchases amounted to approximately $354,000.
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 the president
and chief operating officer. During 1999, such paper sales amounted to
approximately $860,000, and the financial services amounted to approximately
$256,000.
Report of the Compensation Committee
It is the responsibility of the Compensation Committee to oversee the
compensation of officers of the Company (24 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.
4
<PAGE>
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. The Company
also participates in industry-wide salary surveys and conducts its own annual
review of compensation information in proxy statements of competing companies.
From these sources, the Compensation Committee evaluates compensation levels of
a peer group of twelve other forest products companies which the Compensation
Committee, based on its general knowledge of the forest products industry,
believes are comparable to the Company. The Company uses these evaluations when
reviewing and approving management's recommendations regarding compensation.
The twelve companies constituting the peer group include seven of the other
nine companies in the Standard & Poor's Paper & Forest Products Index referred
to under "Performance Graph" below and five other forest products companies.
In arriving at salary recommendations to the Board for individual officers
effective May 1, 1999, the Compensation Committee considered cash compensation
paid by the peer group to officers in comparable positions and taking into
account available information concerning comparable levels of responsibility,
recommendations by the Company's chief executive officer, 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 non-cash compensation programs of the peer group companies or
the stock options granted to Company officers.
In April 1999, based on the recommendation of the Compensation Committee,
the Board increased Mr. McDougall's annual salary level by 12.5 percent to
$900,000. In recommending the increase in Mr. McDougall's salary, the
Compensation Committee considered the additional responsibilities Mr. McDougall
assumed when he was appointed chief executive officer in November 1998.
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 1999, 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 does not take into account the number
of stock options previously granted to an officer. Under the formula, a target
number of options for each officer is determined by dividing a percentage of
the officer's salary (ranging, based on level of responsibility, from 110
percent for 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 the weighted-
average ROE of 16 forest products companies by 5 percentage points 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 1998 ROE exceeded the published industry composite
by more than the specified margin. Accordingly, option grants in 1999 were not
adjusted.
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 1999.
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
5
<PAGE>
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
Kenneth W. Hergenhan Samuel C. Wheeler
Paul N. McCracken Benjamin R. Whiteley
Gerard K. Drummond, Chairman
Performance Graph
The following graph compares the annual 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, 1994, and reinvestment of dividends.
[LINE CHART]
6
<PAGE>
Compensation of Directors
Fees
Each director of the Company who is not also an employee of the Company or a
subsidiary (a "non-employee 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 non-employee director receives a retainer fee of $24,000 per year.
In November 1999, the Company adopted the 1999 Deferred Compensation Plan
for non-employee directors pursuant to which they may elect to defer directors'
fees. The 1999 plan, which is unfunded, replaces a prior deferred compensation
plan; amounts deferred under the prior plan have been transferred to accounts
under the new plan. Deferred amounts accrue increases or decreases as if they
were invested in one or more of the investment funds available under the
Company's 401(k) Plan as specified by a participating director.
In conjunction with adoption of the 1999 Deferred Compensation Plan, the
Company terminated its retirement plan for non-employee directors. For active
directors, effective January 1, 2000, the present value of the benefits accrued
under the prior retirement plan was transferred to accounts under the deferred
compensation plan and are treated as invested as described above. For retired
directors, under the retirement plan, a retired director received a number of
annual payments equal to the number of years he or she served as a non-employee
director after January 31, 1980, provided that the director served for a
minimum of five years. The amount of each annual payment equaled the annual
retainer fee for directors at the time the director retired.
Stock Options
Under the 1995 Plan, each person who was a non-employee 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 non-employee 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 non-employee director and who
is to continue to serve as a director, including former officers of the Company
or its subsidiaries.
Options granted to non-employee 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 non-employee directors on
the date of the 1999 annual meeting were granted at an exercise price of $47.25
per share, the fair market value of the Common Stock on that date. The Initial
Options granted to Messrs. Buxton and Thorne in February 1999 and February
2000, were granted at exercise prices of $32.8125 and $38.125, respectively,
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 ceasing to be chief executive officer of the Company under which Mr.
Swindells agreed to provide consulting services to the Company for a one-year
term commencing December 1, 1998. Under the consulting agreement, Mr. Swindells
received consulting fees equal to $120,000 during 1999 as well as certain
secretarial services and office space, and was 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 non-employee directors of the Company.
The consulting agreement was renewed in December 1999 and is renewable for
three additional one-year periods unless terminated by either party upon 30
days' notice prior to renewal.
7
<PAGE>
Employment Agreements
General
The Company has agreements ("CIC Agreements") with certain of its key
employees, including the named executive officers (other than Mr. Parsons, who
has retired), that provide for severance compensation for the employees in the
event their employment with the Company is terminated subsequent to a Change in
Control (as defined) of the Company under the circumstances set forth in the
CIC Agreements. Pursuant to the CIC Agreements, each employee has agreed to
remain in the Company's employ following a tender offer or exchange offer for
more than 30 percent of the combined voting power of the Company's voting
securities until such offer has been abandoned or terminated or a Change in
Control has occurred and unless the Company reduces the employee's
compensation.
If, within 36 months following a Change in Control, the employee's
employment with the Company is terminated by the Company without Cause (as
defined) or by the employee with Good Reason (as defined), 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 non-cash
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 that 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.
8
<PAGE>
"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.
9
