<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Champion International Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Champion International Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1)Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[LOGO]
NOTICE OF 1994 ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1994
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of Champion International Corporation
will be held at One Champion Plaza, Stamford, Connecticut, on Thursday, May 19,
1994 at 9:30 a.m., for the following purposes:
1. To elect five directors to serve until the 1997 Annual Meeting of
Shareholders.
2. To consider and act upon a proposal to approve the appointment of
Arthur Andersen & Co. as auditors for 1994.
3. To consider and act upon the shareholder proposal set forth in the
following Proxy Statement.
4. To transact such other business as may come before the meeting or any
adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 31, 1994 as
the record date for the determination of the holders of Common Stock and
Preference Stock, $92.50 Cumulative Convertible Series, entitled to notice of
and to vote at the meeting.
Please mark, sign and return promptly the accompanying proxy so that your
shares may be represented at the meeting. A return envelope, which requires no
postage if mailed in the United States, is enclosed for your convenience.
By order of the Board of Directors,
Lawrence A. Fox
Vice President and Secretary
Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
April 14, 1994
<PAGE> 4
CHAMPION INTERNATIONAL CORPORATION
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy is being solicited by the Board of Directors of
Champion International Corporation (the "Company") for use at the Annual Meeting
of Shareholders to be held on May 19, 1994. A shareholder giving a proxy may
revoke it at any time before it is voted at the meeting by executing a
later-dated proxy, by voting by ballot at the meeting or by filing a revocation
with the inspectors of election.
The Company will pay the cost of this solicitation of proxies for the
meeting. In addition to using the mails, officers and other employees may
solicit proxies in person and by telephone and other methods of
telecommunication. The Company will reimburse brokers, banks and others who are
record holders of the Company's stock for their reasonable expenses incurred in
obtaining voting instructions from the beneficial owners of such stock. In
addition, Morrow & Co., Inc., which will assist the Company in soliciting
proxies, will be paid a fee estimated at $20,000.
This Proxy Statement and the accompanying proxy are scheduled to be sent to
shareholders commencing on April 14, 1994.
VOTING RIGHTS
Only holders of record at the close of business on March 31, 1994 of the
Company's Common Stock and Preference Stock, $92.50 Cumulative Convertible
Series (the "$92.50 Preference Stock"), are entitled to notice of and to vote at
the meeting or any adjournment thereof. At the close of business on the record
date, there were outstanding 93,102,383 shares of Common Stock and 300,000
shares of $92.50 Preference Stock.
As provided in the Restated Certificate of Incorporation, as amended, (i)
each share of Common Stock is entitled to one vote, and (ii) each share of
$92.50 Preference Stock is entitled to 26.31579 votes (which represents one vote
for each share of Common Stock issuable upon conversion of a share of $92.50
Preference Stock).
Voting is on a confidential basis except in certain limited circumstances.
The Company's confidential voting policy provides that all proxies, ballots,
voting instructions from employee benefit plan participants and voting
tabulations that identify the particular vote of a shareholder or benefit plan
participant be held permanently in confidence from the Company except (i) as
necessary to meet legal requirements or to pursue or defend legal actions; (ii)
to allow the inspectors of election to certify the results of the vote; (iii)
when expressly requested by a shareholder or benefit plan participant; or (iv)
in the event of a contested proxy solicitation. The Company's transfer agent,
Chemical Bank, will tabulate the vote, and employees of the transfer agent will
serve as inspectors of election. Proxies and benefit plan voting instructions
are returned in envelopes addressed to the transfer agent and, except in the
limited circumstances specified above, are not seen by or reported to the
Company.
Directors will be elected by a plurality of the votes cast in the election
of directors. Under New York law, votes withheld with respect to one or more of
the nominees will not be counted as votes cast for such individuals and,
accordingly, will have no effect on the outcome of the vote. Similarly, under
New York law, shares which brokers do not have the authority to vote in the
absence of timely instructions from the beneficial owners ("broker non-votes"),
if any, will not be counted and, accordingly, will have no effect on the outcome
of the vote.
Approval of each of the other proposals set forth in this Proxy Statement
requires the affirmative vote of a majority of the votes cast on such proposal.
Under New York law, in determining whether the proposal has received the
requisite number of affirmative votes, abstentions and any broker non-votes will
not be counted as votes cast and, accordingly, will have no effect on the
outcome of the vote.
1
<PAGE> 5
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to each
person who is known to the Company to be the beneficial owner of more than five
percent of any class of the Company's voting securities. The percent of the
class owned by each such person is based upon the total number of shares of the
class outstanding on the record date. Except as noted below, each such person
has sole voting and investment power with respect to all of the shares included
in the table.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial Ownership of Class
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Common Stock Loews Corporation
667 Madison Avenue 17,151,353 shares(1) 18.41%
New York, New York 10021(1)
Common Stock J. P. Morgan & Co. Incorporated
60 Wall Street 4,925,497 shares(2) 5.29%
New York, New York 10260(2)
Common Stock Sanford C. Bernstein & Co., Inc.
767 Fifth Avenue 4,909,281 shares(3) 5.27%
New York, New York 10153(3)
$92.50 Preference Berkshire Hathaway Inc.
Stock 1440 Kiewit Plaza 300,000 shares(4) 100%
Omaha, Nebraska 68131(4)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This information is as of January 31, 1994 and is based upon a Form 4 filed
with the Securities and Exchange Commission by Loews Corporation ("Loews").
In its report, Loews stated that such shares include 43,453 shares of
Common Stock issuable upon conversion of $1,510,000 principal amount of the
Company's 6 1/2% Convertible Subordinated Debentures due April 15, 2011
owned by a subsidiary of Loews.
Pursuant to an agreement dated February 2, 1994 between the Company and
Loews, the Company, at Loews's expense, filed a shelf registration
statement under the Securities Act of 1933, as amended, covering all
17,107,900 shares of the Company's Common Stock owned directly by Loews.
The registration statement was declared effective by the Securities and
Exchange Commission on February 9, 1994.
(2) This information is as of December 31, 1993 and is based upon a Schedule
13G filed with the Securities and Exchange Commission by J. P. Morgan & Co.
Incorporated. In its report, J. P. Morgan & Co. Incorporated stated that
(i) such shares are owned by two of its subsidiaries, Morgan Guaranty Trust
Company of New York and J. P. Morgan Investment Management Inc. (together,
the "Morgan Subsidiaries"), and are held for the accounts of various
clients; (ii) such shares include 73,381 shares which the Morgan
Subsidiaries have the right to acquire; and (iii) the Morgan Subsidiaries
have sole voting power with respect to 2,904,667 of such shares, shared
voting power with respect to 90,018 of such shares, sole dispositive power
with respect to 4,802,678 of such shares and shared dispositive power with
respect to 118,218 of such shares.
(3) This information is as of December 31, 1993 and is based upon a Schedule
13G filed with the Securities and Exchange Commission by Sanford C.
Bernstein & Co., Inc. In its report, Sanford C. Bernstein & Co., Inc.
stated that (i) such shares are held for the accounts of various clients,
and (ii) it has sole voting power with respect to 2,535,105 of such shares
and sole dispositive power with respect to all of such shares.
(4) This information is as of the record date. Such shares are owned by nine
subsidiaries of Berkshire Hathaway Inc. The shares are convertible at any
time into an aggregate of 7,894,737 shares of Common Stock, which would
have constituted approximately 7.82% of the Common Stock outstanding at the
close of business on the record date after giving effect to such
conversion.
2
<PAGE> 6
THE BOARD OF DIRECTORS
GENERAL
The Board of Directors, which is divided into three classes normally
elected for three-year terms, presently consists of 13 directors.
Ten meetings of the Board were held in 1993. Ten regular meetings are
scheduled for 1994, one in each month except July and December. All directors
attended at least 75% of the Board meetings and meetings of committees on which
they served during 1993.
THE NOMINEES
In accordance with the recommendation of its Committee on Board Affairs,
the Board of Directors has chosen five persons as nominees for election to the
Board.
L. C. Heist, H. Barclay Morley, Walter V. Shipley and Richard E. Walton,
who previously have been elected by the shareholders and whose terms will expire
at the 1994 Annual Meeting of Shareholders, have been nominated for regular
three-year terms expiring at the 1997 Annual Meeting.
James S. Tisch was elected by the Board of Directors since the last Annual
Meeting. He now is a nominee for election by the shareholders for a regular
three-year term expiring at the 1997 Annual Meeting.
If, for any reason, any of the nominees should not be a candidate for
election at the meeting, the proxies may be voted for another person nominated
by the Board of Directors or the number of directors may be reduced accordingly.
The Committee on Board Affairs does not anticipate that any of the nominees will
be unavailable.
INFORMATION ON THE NOMINEES AND DIRECTORS
The following table sets forth the names of the nominees and the directors
continuing in office after the 1994 Annual Meeting, their terms of office, the
years in which they first became directors of the Company and their ages.
<TABLE>
<CAPTION>
Name Term Will Expire First Elected a Director Age
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Robert A. Charpie 1996 1975 68
Alice F. Emerson 1996 1993 62
Allan E. Gotlieb 1996 1989 66
L. C. Heist 1997 1987 62
Sybil C. Mobley 1995 1981 68
H. Barclay Morley 1997 1979 65
Kenwood C. Nichols 1996 1989 54
Lawrence G. Rawl 1995 1989 65
Walter V. Shipley 1997 1983 58
Andrew C. Sigler 1995 1973 62
James S. Tisch 1997 1993 41
Richard E. Walton 1997 1987 62
John L. Weinberg 1995 1989 69
-----------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 7
Mr. Charpie served as President of Cabot Corporation, a producer of
chemicals, metals, oil and gas, from 1969 to 1986 and as Chairman of the Board
of Cabot from 1986 to 1988. He is Chairman of Ampersand Venture Management
Corporation, a venture capital investment management firm. He also is a director
of Alliant Techsystems Inc., Ashland Coal, Inc., Cabot, Ceramics Process Systems
Corporation and Federated Department Stores, Inc.
Ms. Emerson is a Senior Fellow of The Andrew W. Mellon Foundation, a
philanthropic institution. From 1975 until joining the Mellon Foundation in
1991, she served as President of Wheaton College in Norton, Massachusetts. She
also is a director of AES Corporation, Bank of Boston Corporation and Eastman
Kodak Company.
Mr. Gotlieb was Canada's Ambassador to the United States from 1981 to 1989.
He is Chairman of Burson-Marsteller Canada, a public relations firm. He also is
a director of Alcan Aluminium Limited, Hollinger Inc. and Peoples Jewellers
Limited.
Mr. Heist was elected President, chief operating officer and a director of
the Company in 1987. He also is a director of The Ryland Group, Inc.
Mrs. Mobley has been Dean of the School of Business and Industry at Florida
Agricultural and Mechanical University since 1974. She also is a director of
Anheuser-Busch Companies, Inc., Dean Witter, Discover & Co., Hershey Foods
Corporation, Sears, Roebuck and Co. and Southwestern Bell Corporation.
Mr. Morley was chief executive officer of Stauffer Chemical Company from
1974 and Chairman of the Board of Stauffer from 1977 until its merger into
Chesebrough-Pond's Inc. in 1985. He is a director of American Maize-Products
Company, The Bank of New York Company, Inc. and its subsidiary, The Bank of New
York, Borden, Inc. and Schering-Plough Corporation.
Mr. Nichols was elected Vice Chairman and a director of the Company in
1989. He had been a Senior Vice President since 1983.
Mr. Rawl was Chairman of the Board and chief executive officer of Exxon
Corporation, the petroleum company, from 1987 until 1993. He is a director of
Texas Commerce Bancshares, Inc. and Warner-Lambert Company.
Mr. Shipley is Chairman of the Board and chief executive officer of
Chemical Banking Corporation and its subsidiary, Chemical Bank. He was President
and a director of each of those companies from December 31, 1991, the date of
the merger of Chemical Banking Corporation and Manufacturers Hanover
Corporation, until December 31, 1993. Prior thereto, he had been Chairman of the
Board and chief executive officer of Chemical Banking Corporation and its
subsidiary, Chemical Bank, since 1983. He also is a director of NYNEX
Corporation and The Reader's Digest Association, Inc.
Mr. Sigler has been chief executive officer of the Company since 1974 and
Chairman of the Board since 1979. He also is a director of AlliedSignal Inc.,
Bristol-Myers Squibb Company, Chemical Banking Corporation and its subsidiary,
Chemical Bank, and General Electric Company.
Mr. Tisch has been Executive Vice President and a director of Loews
Corporation, a diversified holding company, since 1986. He also is a director of
CNA Financial Corporation.
Mr. Walton is a professor at the Harvard Graduate School of Business
Administration. He joined the Harvard Business School faculty in 1968 and
specializes in organizational development and work innovation in industry.
Mr. Weinberg is Senior Chairman of Goldman, Sachs & Co. He is the former
senior partner of Goldman Sachs, having served as chairman of its Management
Committee from 1984 until 1990. He also is a director of Capital Holding
Corporation, E.I. du Pont de Nemours & Company, Knight-Ridder, Inc., The B.F.
Goodrich Company and The Seagram Company Ltd.
4
<PAGE> 8
COMMITTEES
The Board of Directors has four standing committees, each of which is
composed entirely of outside directors. The membership and principal
responsibilities of the Board committees are presented below.
<TABLE>
<S> <C>
Audit Committee Compensation and Stock Option Committee
Walter V. Shipley, Chairman Lawrence G. Rawl, Chairman
Alice F. Emerson Robert A. Charpie
Allan E. Gotlieb H. Barclay Morley
Sybil C. Mobley James S. Tisch
Richard E. Walton John L. Weinberg
Committee on Board Affairs Pension Funding and Investment Committee
Robert A. Charpie, Chairman Robert A. Charpie, Chairman
Lawrence G. Rawl Allan E. Gotlieb
Walter V. Shipley Sybil C. Mobley
James S. Tisch H. Barclay Morley
John L. Weinberg Richard E. Walton
</TABLE>
The Audit Committee recommends to the Board of Directors the firm of
independent auditors to be engaged to audit the annual consolidated financial
statements of the Company; reviews the annual audit plan as proposed by the
independent auditors and the fees to be paid for such services; reviews
management's engagement of independent auditors to perform non-audit services
and determines whether such engagement unduly influences the auditors'
independence; reviews and evaluates with the independent auditors the results of
the audit process; reviews and evaluates the organization, scope of activity and
effectiveness of the Company's internal audit function; discusses with senior
management, the independent auditors and the internal audit department their
observations with respect to the Company's system of internal accounting
control; performs other activities deemed by the committee to provide necessary
oversight of the Company's public financial reporting process; and performs
other duties assigned by the Board of Directors. The Audit Committee held two
meetings in 1993.
The Committee on Board Affairs advises the Board of Directors on possible
director nominees and on policy matters concerning the composition,
organization, work and affairs of the Board and its committees. Shareholders are
invited to submit matters of interest relating to the Company, including
possible director nominees, for the consideration of this committee by writing
to it at the Company's principal executive office. This committee also evaluates
the performance of the Company's directors and committee members. The Committee
on Board Affairs held seven meetings in 1993.
The Compensation and Stock Option Committee has responsibility for the
compensation of officers and other key employees and for significant salary
increases proposed for other employees. This committee determines general
management compensation policies; makes awards under the Company's incentive
compensation plans; reviews the Company's management succession plan; and
authorizes the holding of outside directorships by Company executives. The
Compensation and Stock Option Committee held three meetings and took action by
unanimous written consent three times in 1993.
The Pension Funding and Investment Committee approves the actuarial methods
and assumptions used in funding the Company's pension plans, approves the
investment policy and guidelines of the plans and reviews the plans' investment
performance. In addition, it establishes and monitors policies with respect to
the voting of stock owned by the Company's pension plans. This committee also
reviews and makes recommendations on pension and employee benefit matters
submitted to the Board of Directors. The Pension Funding and Investment
Committee held two meetings in 1993.
5
<PAGE> 9
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company receives an annual
retainer of $25,000 for services as a director and a fee of $1,000 for each
Board meeting attended. In addition, each committee chairman receives an annual
retainer of $3,500, and committee members, including chairmen, receive a fee of
$750 for each committee meeting attended. The Company provides $50,000 of group
term life insurance and $200,000 of travel accident insurance to the
non-employee directors as well as director liability insurance for all
directors.
At the director's option, fees are paid quarterly in cash as earned or
converted into units equivalent to shares of the Company's Common Stock based on
the closing price of the Common Stock on the last day of the quarter. Payment in
respect of units is made in cash, at the election of the director, either in a
single lump sum on any June 1 within 10 years after retirement from the Board or
in up to 10 annual installments following retirement; payment is based on the
average closing price of the Common Stock during the two calendar months
preceding the lump sum payment or each installment payment. The number of units
accrued in 1993 was equivalent to 5,393 shares, and the total number of units
accrued for incumbent directors as of December 31, 1993 was 39,752.
The Company maintains an unfunded retirement plan for directors who are not
employees or former employees of the Company. Under the plan, each such director
who serves on the Board of Directors for at least seven years and retires from
the Board at or after age 65 receives an annual retirement benefit equal to the
annual director's retainer in effect at the time of his or her retirement. This
benefit is paid for a period equal to the number of years that the director
served on the Board. All payments cease upon the death of the director; there
are no survivor benefits.
6
<PAGE> 10
STOCK OWNERSHIP BY NOMINEES, DIRECTORS AND
NAMED EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
shares of the Company's Common Stock beneficially owned, as of March 1, 1994, by
each nominee and director, by each of the executive officers included in the
Summary Compensation Table presented later in this Proxy Statement and by all
directors and executive officers as a group.(1) The percent of the class is
based upon the total number of shares of the Company's Common Stock outstanding
on the record date.
<TABLE>
<CAPTION>
Name Shares(2),(3) Percent of Class
<S> <C> <C> <C>
- ------------------------------------------------------------------------
William H. Burchfield 20,283 (78,700) *
Robert A. Charpie 7,485 *
Alice F. Emerson 100 *
Allan E. Gotlieb 1,000 *
L. C. Heist 36,930 (298,000) *
Sybil C. Mobley 110 *
H. Barclay Morley 500 *
Kenwood C. Nichols 23,725 (132,000) *
Richard E. Olson 15,479 (53,300) *
Lawrence G. Rawl 1,500 *
Walter V. Shipley 1,000 *
Andrew C. Sigler 58,825 (525,000) *
James S. Tisch 17,107,900(4) (43,453)(4) 18.41%(4)
Richard E. Walton 1,900 *
John L. Weinberg 5,000 *
Directors and executive
officers as a group 17,360,578(4) (1,585,603)(4) 20.01%(4)
- ------------------------------------------------------------------------
</TABLE>
* Represents less than 1% of the outstanding Common Stock of the Company.
(1) This table does not include the 39,752 Common Stock equivalent units
accrued for various non-employee directors as of December 31, 1993, as
discussed above under "Directors' Compensation".
(2) Numbers in parentheses indicate additional shares deemed to be beneficially
owned because of the person's right to acquire beneficial ownership of such
shares.
(3) Certain directors and executive officers share voting or investment power
with other persons with respect to 17,475 of such shares.
(4) These respective numbers include 17,107,900 shares owned by Loews
Corporation and 43,453 shares which a subsidiary of Loews Corporation has
the right to acquire, representing in the aggregate 18.41% of the
outstanding Common Stock of the Company. Mr. James S. Tisch disclaims
beneficial ownership of all such shares. He is Executive Vice President and
a director of Loews Corporation. His father, Mr. Laurence A. Tisch, is
Chairman of the Board and co-chief executive officer of Loews Corporation,
and his uncle, Mr. Preston R. Tisch, is President, co-chief executive
officer and a director of Loews Corporation. In the aggregate, Messrs.
Laurence and Preston Tisch own approximately 29% of the outstanding Common
Stock of Loews Corporation.
7
<PAGE> 11
EXECUTIVE COMPENSATION
To provide shareholders with an understanding of the Company's executive
compensation program, the following are presented below: (i) the Report on 1993
Executive Compensation by the Compensation and Stock Option Committee of the
Board of Directors; (ii) the Summary Compensation Table; (iii) the Option/SAR
Grant Table; (iv) the Option/SAR Exercise and Year-End Values Table; (v) the
Pension Plan Table; (vi) Employment and Severance Agreements; and (vii) the
Comparison of Five-Year Cumulative Total Return Graph.
REPORT ON 1993 EXECUTIVE COMPENSATION BY THE COMPENSATION AND STOCK OPTION
COMMITTEE OF THE BOARD OF DIRECTORS
General
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") has the responsibility for the design and implementation of the
Company's executive compensation program. The Committee is composed entirely of
independent directors.
The objective of the Company's executive compensation program is to attract
and retain outstanding senior managers and to provide meaningful incentives for
them to maximize long-term profitability and shareholder value. The program is
designed to accomplish this objective through plans that (i) motivate senior
managers and align their interests with those of the Company's shareholders by
tying incentive compensation to various measures of Company and individual
performance, and (ii) provide a base level of compensation that is competitive
with other large industrial companies, including those in the forest products
industry.
The four principal components of the Company's executive compensation
program, discussed in detail below, are salary, annual contingent compensation,
restricted performance shares and stock options. The Company had an outstanding
operating performance in 1993, including annual increases in production of 2.3%
and productivity (tons per mill employee) of 2.2% and an annual decrease in cash
cost per ton (before inflation) of 1.8% in its North American pulp and paper
operations. However, 1993 was a year of weak financial performance, primarily as
the result of low prices for pulp and certain paper grades attributable to slow
economic growth and industry overcapacity. The Committee believes that the
Company's operating performance and financial performance in 1993 were properly
reflected in the level of salary increases, the decline in annual contingent
compensation and the forfeiture of previously granted restricted performance
shares.
Comparative Groups
In making decisions regarding executive compensation, the Committee reviews
summaries of surveys prepared by outside compensation consultants with respect
to the compensation levels of two comparative groups. One of these groups (the
"Forest Products Group") consists of approximately 15 other large companies in
the forest products industry. The other group (the "General Industrial Group")
consists of approximately 300 industrial companies which are included in the
Standard & Poor's 500 Stock Index. The information with respect to the companies
in the General Industrial Group is adjusted to reflect their size (annual sales)
in relation to the Company. The membership of each of the comparative groups is
subject to modification from time to time as companies change the nature of
their business, grow, downsize or are sold.
The Committee uses the Forest Products and General Industrial Groups for
compensation comparison purposes because it believes that these are the groups
with which the Company competes for executive talent. The six companies that
comprise the peer group (the "Commodity Paper Group") used in the Comparison of
Five-Year Cumulative Total Return Graph in this Proxy Statement were selected by
the Board of Directors because it believes that they constitute the Company's
principal business competitors. While all of the members of the Commodity Paper
Group are included in the Forest Products Group and most are included in the
General Industrial Group, the Committee believes that executive compensation at
the Company must be competitive with the broader spectrum of companies.
Consequently, the peer groups for executive compensation purposes are not the
same as the peer group for shareholder return purposes.
8
<PAGE> 12
Salary
Every salaried employee of the Company, including each executive officer,
is assigned a grade level with a salary range that is designed to reflect
competitive practice for his or her position. Potential annual salary increases
also are designed to reflect competitive practice. Salary ranges for executive
officer grade levels are targeted to approximate the 75th percentile of the
Forest Products Group and the median of the General Industrial Group.
In January 1993, the Committee approved a salary increase matrix for all
executive officers. This same matrix also was used for all other salaried
employees. One axis of this matrix relates to the individual's position (lower
third, middle third, upper third or over maximum) in the salary range for his or
her grade level, and the other axis consists of five individual performance
ratings. The lower an individual is in the salary range and the higher the
individual performance rating, the greater is the potential salary increase
percentage. The matrix sets forth a percentage salary increase (or no increase)
for each of the 20 points at which the two axes intersect. The potential salary
increase percentages included in the matrix are a function of competitive
practice as described above and, to a limited extent, the Committee's subjective
judgment concerning the Company's financial performance and cash requirements.
Thus, salary increases primarily are a function of individual performance and
position in the salary range; Company performance is not a significant factor.
In the case of the executive officers of the Company, in January of each
year the Committee determines the individual performance rating which, together
with the executive's position in his salary range, establishes his salary
increase for that year. This is a subjective determination that typically
includes the Committee's evaluation of the executive's leadership qualities and
his managerial and long-term strategic planning capabilities.
Mr. Sigler received a salary increase of 4.7% in 1993. This reflected his
individual performance rating and his position in the upper third of his salary
range. The Committee notes that Mr. Sigler's salary increase in 1993 followed a
year in which his salary and that of most of the other executive officers were
frozen. The Committee also notes that Mr. Sigler's overall salary level reflects
his many years of service with the Company.
Annual Contingent Compensation
Annual contingent compensation is designed to provide short-term (one-year)
incentives and rewards based upon Company and individual performance.
Approximately 200 key employees, including all of the executive officers,
participate in the annual contingent compensation plan.
The plan, which has been approved by the Company's shareholders, limits
awards to all participants in any year in accordance with a formula based upon
specified percentages of annual pre-tax income minus specified percentages of
shareholders' equity, but not exceeding the dividends paid on the Common Stock
during that year, plus any amounts generated under the formula but not awarded
as contingent compensation in prior years. The annual contingent compensation
that is paid to each participant from the total pool available for awards is
determined as described below.
In early 1993, the Committee approved an annual contingent compensation
matrix for each eligible grade level. Each such matrix provided a range of
potential award amounts designed to be competitive for individuals at that
level. Annual contingent compensation for executive officer grade levels is
targeted so that total annual cash compensation approximates the 75th percentile
of the Forest Products Group and the median of the General Industrial Group.
The annual contingent compensation award for each individual was determined
at the end of the year in accordance with the matrix for his or her grade level
based upon three performance measures, discussed below: the Company's
performance rating, the individual's performance rating and the Company's
earnings per share. In the case of the lowest executive officer grade level,
potential awards ranged from zero, to 48% of the salary range midpoint upon the
attainment of targeted performance for each of three performance measures, to a
maximum of 120% of the salary range midpoint. In the case of the highest
executive officer grade level, applicable to Mr. Sigler, potential awards ranged
from zero, to 66% of the salary range midpoint upon the attainment of targeted
performance for each of the three performance measures, to a maximum of 165% of
the salary range midpoint.
9
<PAGE> 13
The Company's performance rating - performance in relation to plan: At the
beginning of 1993, each of the Company's four principal business units adopted
various performance objectives for the year. At the end of the year, actual
performance in relation to the established objectives resulted in a
below-target, target or above-target rating for each of the business units and
for the Company as a whole. The following performance measures had the indicated
relative weights in determining the Company's performance rating: cost
containment - 27.5%; productivity - 25%; product quality and organizational
development - 18.5%; profit from operations - 17.5%; and safety - 11.5%.
Reflecting the Company's outstanding operating performance, the Company's
performance rating for purposes of the executive officer annual contingent
compensation matrices for 1993 was target. Actual performance exceeded the
established objectives for safety and met the established objectives for all of
the other performance measures.
The individual's performance rating: At the end of the year, the Committee
determined the individual performance rating, on a scale from one to five, for
each of the executive officers. This is a subjective determination that
typically includes the Committee's evaluation of the executive's leadership
qualities and his managerial and long-term strategic planning capabilities.
At the end of the year, a preliminary dollar amount (which may be zero) was
determined for each plan participant in accordance with the annual contingent
compensation matrix for his or her grade level based upon the individual's
performance rating and the Company's (or, in the case of certain participants
who are not executive officers, their respective business unit's) performance
rating. While the relative weights of these two performance measures in
determining the preliminary dollar amount varied from grade level to grade level
and from point to point within the matrix for each grade level, in general the
two measures had approximately equal weight for executive officer grade levels.
However, only the lowest individual performance rating could result in the
payment of no award at all.
The earnings per share adjustment: The annual contingent compensation
award paid to the participant was equal to the preliminary dollar amount,
determined as described above, multiplied by an adjustment percentage that was a
function of earnings per share for the year. Prior to 1993, the adjustment
percentages ranged from 75% to 125%. At the beginning of 1993, the Committee
established a wider range of adjustment percentages - from 50% to 150%,
corresponding to a wider range of earnings per share levels, in order to make
annual contingent compensation even more sensitive to Company financial
performance. Reflecting results for the year, the actual adjustment percentage
for 1993 was 50%.
Annual contingent compensation awards for all of the executive officers for
1993 declined, substantially in most cases, from the already sharply reduced
levels of 1992. In the case of Mr. Sigler, his 1993 award declined 25% from 1992
and 67.5% from the Company's record-earnings year of 1988. Further, awards for
executive officers for 1993 were substantially lower than those that may be
earned upon the attainment of stronger Company performance. Mr. Sigler's award
represented 29% of the salary range midpoint for his grade level, well below his
targeted performance award of 66% of the salary range midpoint and his maximum
potential award of 165% of the salary range midpoint.
The Committee approved individual performance ratings for the chief
executive officer and each of the other four most highly compensated executive
officers (collectively, the "named executives") which, together with the
Company's target performance rating and the 50% earnings per share adjustment
percentage, resulted in the awards set forth in the bonus column of the Summary
Compensation Table below. Mr. Sigler's award for 1993 was $220,000. The annual
contingent compensation awards reflected the accomplishments of the executives
from an operations perspective, which were not evident in the Company's
financial performance due primarily to the low product prices referred to above.
In this regard, the Committee notes that the Company completed its multiyear
capital improvement program in the third quarter of 1993. Largely as the result
of management's implementation of that program and of the Company's employee
training and development efforts, operating performance has improved
substantially. While the Committee believes that annual contingent compensation
should decline significantly in times of weak financial performance, the
Committee also believes that it is proper to recognize successful long-term
strategic planning and outstanding operating performance with the payment of
some, albeit reduced, annual contingent compensation awards.
10
<PAGE> 14
Restricted Performance Shares
The Company's Restricted Share Performance Plan is designed to provide
medium-term (five-year) incentives and rewards based upon Company financial
performance. In addition, by compensating executives in the form of stock, the
plan is intended to further align the interests of the Company's senior managers
with those of its shareholders. Twenty-nine senior managers, including all of
the named executives and most of the other executive officers, participated in
the most recent five-year performance period under the plan.
Under the plan, at the beginning of a performance period determined by the
Committee, participants are granted restricted performance shares and the
Committee establishes an earn-out/forfeiture formula based upon return on equity
and pre-tax earnings per share. Each year during the performance period, in
accordance with the formula, participants earn out or forfeit a portion of the
shares originally granted to them. All shares not earned out by the end of a
performance period are forfeited. Participants receive non-preferential
dividends on outstanding restricted performance shares but may not sell or
otherwise transfer those shares unless and until they have been earned out.
In each of the last four years, since the specified minimum return on
equity objective was not attained, no restricted performance shares were earned
out and each participant forfeited the required portion of the shares originally
granted to him. In addition, all of the shares that remained at the end of the
most recent five-year performance period on December 31, 1993 were forfeited by
the participants. Reference is made to note 4 to the Summary Compensation Table
below for the number and dollar value of the restricted performance shares
forfeited by each of the named executives in 1991, 1992 and 1993.
No restricted performance share grants have been made since 1990, and there
currently are no restricted performance shares outstanding. The Committee has
not determined whether it will make any further grants under this plan.
Stock Options
Stock options are designed to provide long-term (10-year) incentives and
rewards based upon an increase in the price of the Company's Common Stock. Given
the vagaries of the stock market, stock price performance and financial
performance are not always consistent. The Committee believes that stock
options, which provide value to participants only when the Company's
shareholders benefit from stock price appreciation, are an appropriate
complement to the Company's two other incentive compensation plans, the benefits
under which are more directly dependent upon financial performance.
Approximately 400 key employees, including all of the executive officers,
participate in the Company's 1986 Stock Option Plan.
Stock options are granted primarily as an incentive for the future rather
than as a reward for the past. Consequently, the size of the annual option award
is a function of grade level and does not vary with Company performance. The
size of the annual award also is not affected by the number of options and
restricted performance shares previously granted to, or held at the time by, an
individual.
Annual options awards are designed to reflect competitive practice for each
eligible grade level. Annual awards for executive officer grade levels are
targeted at the median of the Forest Products Group and the General Industrial
Group.
Since recent competitive practice has not changed significantly, the number
of shares underlying options awarded in respect of each eligible grade level has
remained constant in recent years, excluding the special 1991 grant discussed in
note 3 to the Summary Compensation Table below. Accordingly, reflecting
competitive practice for his grade level, Mr. Sigler has been awarded options
with tandem stock appreciation rights to purchase 50,000 shares of Common Stock
in each of the last three years, excluding the special 1991 grant.
11
<PAGE> 15
Deduction Limit for Executive Compensation
The Omnibus Budget Reduction Act of 1993 ("OBRA") disallows a deduction for
federal income tax purposes by public corporations for compensation in excess of
$1 million paid in any year to any "covered employee" except under certain
circumstances, including the attainment of objective performance goals. "Covered
employees" are the individuals who, at the end of the taxable year, are the
chief executive officer and the other four most highly compensated officers of a
company. This provision of OBRA was effective on January 1, 1994.
Stock option compensation: Under the transition provisions of the proposed
regulations of the Internal Revenue Service, the deduction limit currently does
not apply to compensation attributable to the exercise of stock options and
stock appreciation rights that have been or may be granted under the Company's
1986 Stock Option Plan. The Committee expects to recommend that the Board of
Directors take the necessary actions before the end of the transition period
provided for in the proposed regulations, including seeking the approval of
shareholders, in order to allow the Company to continue to fully deduct
compensation attributable to the exercise of non-qualified stock options and
stock appreciation rights by "covered employees".
Annual contingent compensation: The deduction limit does apply to annual
contingent compensation paid to each "covered employee", to the extent that such
compensation plus all other compensation (e.g., salary) subject to the deduction
limit exceeds $1 million. In view of the anticipated compensation levels for the
executive officers for services in 1994, the Committee expects that the impact
on the Company of any loss of deductions resulting from the deduction limit in
OBRA will be immaterial.
As discussed above, the maximum amount of annual contingent compensation
that can be paid to all participants in any year is determined in accordance
with a shareholder-approved, objective formula. The annual contingent
compensation paid to each participant from the total pool available for awards
is based on objective Company performance goals as well as the Committee's
evaluation of individual performance. The Committee believes that this
combination of objective standards and Committee judgment provides appropriate
incentives and rewards to plan participants. In the Committee's view, it is
important that certain key intangible factors (e.g., leadership qualities,
managerial and long-term strategic planning capabilities) remain part of the
determination of annual contingent compensation. Basing such compensation
exclusively on one or more rigid, mechanistic standards would eliminate these
intangible factors and, in the Committee's view, diminish rather than enhance
incentives for plan participants.
The Committee intends to review its position from time to time with regard
to annual contingent compensation and the deduction limit in OBRA.
SUBMITTED BY THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF
DIRECTORS:
<TABLE>
<S> <C>
Robert A. Charpie
H. Barclay Morley
Lawrence G. Rawl
James S. Tisch
John L. Weinberg
</TABLE>
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
1991, 1992 and 1993 of the Company's chief executive officer and each of the
other four most highly compensated executive officers of the Company in 1993
(collectively, the "named executives").
Summary Compensation Table
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------------
Other Securities All
Name and Annual Underlying Other
Principal Compen- Options/ LTIP Compen-
Position Year Salary Bonus sation(1) SARs(2) Payouts sation(5)
($) ($) ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Andrew C. Sigler, 1993 $890,000 $220,000 $ 5,595 50,000 $175,276
Chairman and Chief 1992 850,000 294,000 6,366 50,000 See 175,067
Executive Officer 1991 850,000 294,000 20,800 250,000(3) note 4 174,868
regarding
- --------------------------------------------------------------------------------------- -------------
L. C. Heist, 1993 550,000 172,000 4,650 35,000 the forfei- 85,451
President and Chief 1992 520,000 230,000 5,138 35,000 ture of 83,817
Operating Officer 1991 520,000 230,000 16,786 135,000(3) 61,174
restricted
perfor-
- --------------------------------------------------------------------------------------- -------------
Kenwood C. Nichols, 1993 450,000 125,000 3,230 28,000 mance 68,603
Vice Chairman 1992 420,000 130,000 3,642 28,000 shares 68,471
1991 420,000 130,000 11,832 28,000 50,304
by the
- --------------------------------------------------------------------------------------- -------------
William H. Burchfield, 1993 360,000 105,000 2,238 12,000 named 25,949
Executive Vice 1992 340,000 130,000 2,546 12,000 execu- 32,665
President 1991 340,000 130,000 8,320 12,000 tives in 24,941
1991,
- --------------------------------------------------------------------------------------- -------------
Richard E. Olson, 1993 345,000 105,000 2,480 12,000 1992 and 52,896
Executive Vice 1992 325,000 130,000 2,740 12,000 1993. 70,734
President 1991 325,000 125,000 9,009 12,000 51,907
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts in this column represent non-preferential dividends paid on
restricted performance shares previously granted under the Company's
Restricted Share Performance Plan. See note 4 below for a description of
that plan.
(2) The numbers in this column represent shares underlying options to purchase
Common Stock. Each such option has a tandem stock appreciation right
("SAR") except as indicated in note 3 below. To the extent that a stock
option or an SAR is exercised, the tandem grant is canceled.
(3) The 1991 awards to Messrs. Sigler and Heist included a special grant, which
is not intended to be repeated, of options to purchase 200,000 and 100,000
shares of Common Stock, respectively, without tandem SARs. The purpose of
the special grant was to further tie the compensation of the Company's
chief executive and chief operating officers to an increase in shareholder
value, in particular the price of the Company's Common Stock.
13
<PAGE> 17
(4) Under the Company's Restricted Share Performance Plan, participants are
granted restricted performance shares which are earned out or forfeited in
accordance with a formula based upon return on equity and pre-tax earnings
per share. No grants have been made under this plan since 1990.
In each of the last four years, since the specified minimum return on
equity objective was not attained, no shares were earned out and each
participant forfeited the required portion of the restricted performance
shares previously granted to him. In addition, all of the shares that
remained at the end of the most recent five-year performance period on
December 31, 1993 were forfeited by the participants. There currently are
no restricted performance shares outstanding.
The table below sets forth the number of restricted performance shares
forfeited, and the dollar value of such shares at the time of forfeiture
(December 31 of each respective year), for the named executives in each of
the last three years.
<TABLE>
<CAPTION>
Number of Value of
Name Year Shares Forfeited Shares Forfeited
<S> <C> <C> <C>
------------------------------------------------------------------------
Andrew C. Sigler 1993 20,578 $686,791
1992 9,000 258,750
1991 9,000 216,000
L. C. Heist 1993 17,250 575,719
1992 6,750 194,063
1991 6,750 162,000
Kenwood C. Nichols 1993 11,911 397,530
1992 5,040 144,900
1991 5,040 120,960
William H. Burchfield 1993 8,231 274,710
1992 3,600 103,500
1991 3,600 86,400
Richard E. Olson 1993 9,200 307,050
1992 3,600 103,500
1991 3,600 86,400
------------------------------------------------------------------------
</TABLE>
(5) The amounts in this column include matching contributions by the Company to
accounts under the Savings Plan for Salaried Employees for each of the
named executives of $6,667 in 1991, $6,866 in 1992 and $7,075 in 1993.
Company contributions are invested in the Company's Common Stock.
The balance of the amounts in this column represents premiums paid by the
Company for the named executives under the Company's Executive Life
Insurance Plan. All employees who are above a certain compensation grade
level, including all of the executive officers, participate in this plan.
In the case of Mr. Sigler, the Company also elected to satisfy a
contractual obligation made in 1978 relating to life insurance by
providing additional coverage under this plan.
14
<PAGE> 18
OPTION/SAR GRANT TABLE
The following table sets forth information concerning the grant of stock
options and tandem SARs to each of the named executives in 1993.
Option/SAR Grants in 1993
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value
------------------------------------------------------------ at Assumed Annual
Number of Rates of
Securities % of Total Stock Price
Underlying Options/ Appreciation
Options/ SARs Exercise for Option Term(4)
SARs Granted to or Base ----------------------
Granted(1) Employees Price(3) Expiration 5% 10%
Name (#) in 1993(2) ($/Sh) Date ($) ($)
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
Andrew C. Sigler 50,000 8.4%/20.0% $ 31.00 March 17, 2003 $ 974,787 $ 2,470,301
L. C. Heist 35,000 5.9%/14.0% 31.00 March 17, 2003 682,351 1,729,211
Kenwood C. Nichols 28,000 4.7%/11.2% 31.00 March 17, 2003 545,881 1,383,368
William H. Burchfield 12,000 2.0%/ 4.8% 31.00 March 17, 2003 233,949 592,872
Richard E. Olson 12,000 2.0%/ 4.8% 31.00 March 17, 2003 233,949 592,872
---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The numbers in this column represent shares underlying options to purchase
Common Stock. Each such option has a tandem SAR. To the extent that a stock
option or an SAR is exercised, the tandem grant is canceled.
All of the stock options and tandem SARs awarded to the named executives
last year were granted on March 17, 1993. The grants to Messrs. Sigler and
Heist, respectively, included 24,000 and 18,000 stock options and tandem
SARs that were subject to approval by shareholders, which was obtained at
the 1993 Annual Meeting of Shareholders.
All of the stock options and tandem SARs granted on March 17, 1993 became
exercisable on April 1, 1994, provided the optionee remained in the
Company's employ until that date. Although the Compensation and Stock
Option Committee of the Board of Directors had the authority to permit the
exercise of those stock options and tandem SARs at any time prior to April
1, 1994 upon its determination of the existence of a special or
extraordinary situation, it did not exercise this authority.
Reference is made to the section below captioned "Employment and Severance
Agreements" for a description of the cash settlement of stock options and
tandem SARs held by the named executives upon any termination of employment
without cause within three years after a change in control of the Company.
(2) In this column, for each of the named executives: (i) the number on the
left is the percent of the total stock option grants to employees in 1993
represented by the stock option grant to such named executive; and (ii) the
number on the right is the percent of the total tandem SAR grants to
employees in 1993 represented by the tandem SAR grant to such named
executive. Tandem SARs were granted only to certain optionees, including
all of the executive officers, in 1993.
15
<PAGE> 19
(3) The exercise price is 100% of the fair market value of a share of the
Company's Common Stock on the date of grant. The exercise price may be paid
in cash or in shares of the Company's Common Stock valued at their fair
market value on the date of exercise.
(4) At the end of the term of the options granted in 1993, the price of a share
of the Company's Common Stock would be $50.50 at an assumed annual
appreciation rate of 5% and $80.41 at an assumed annual appreciation rate
of 10%. Gains to all Common shareholders at those assumed annual
appreciation rates would be approximately $1.8 billion and $4.6 billion,
respectively, over the term of the 1993 options.
- --------------------------------------------------------------------------------
OPTION/SAR EXERCISE AND YEAR-END VALUES TABLE
The following table sets forth information with respect to each of the
named executives concerning the exercise of stock options and tandem SARs in
1993 and concerning unexercised stock options and tandem SARs held at December
31, 1993.
Aggregated Option/SAR Exercises in 1993
and Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Number of Securities Value of Unexercised
Underlying Underlying Unexercised In-the-Money Options/SARs at
Options/SARs Value Options/SARs at Year-End Year-End(3)
Exercised Realized(1) (#) ($)
Name (#) ($) Exercisable Unexercisable(2) Exercisable Unexercisable(4)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Andrew C. Sigler 16,450 $ 100,756 275,000 250,000 $1,407,375 $1,418,750
L. C. Heist 13,500 68,063 163,000 135,000 943,563 733,125
Kenwood C. Nichols 0 0 110,000 28,000 617,000 66,500
William H. Burchfield 6,000 36,750 66,700 12,000 350,325 28,500
Richard E. Olson 0 0 47,300 12,000 233,700 28,500
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts reported in this column as values realized in 1993 derived from
the exercise of grants that were made in 1983 and 1984.
(2) Of the numbers in this column, 200,000 and 100,000 of the shares underlie
stock options held by Messrs. Sigler and Heist, respectively, that do not
have tandem SARs.
(3) The amounts in these columns are based upon the $33.375 closing price of a
share of the Company's Common Stock on December 31, 1993 on the New York
Stock Exchange Composite Transactions.
(4) Of the amounts in this column, $1,300,000 and $650,000 relate to stock
options held by Messrs. Sigler and Heist, respectively, that do not have
tandem SARs.
16
<PAGE> 20
PENSION PLAN TABLE
The Company's retirement program consists of (i) a tax-qualified, funded
pension plan for all non-represented salaried employees, including executive
officers, and (ii) for executive officers and other key employees, a non-
qualified, unfunded supplemental retirement income plan that provides benefits
which, but for certain limits imposed by the Internal Revenue Code on
tax-qualified plans, would be provided under the Company's qualified pension
plan. The retirement program provides non-contributory benefits based upon years
of service and average annual earnings for the highest five consecutive years in
the 10 years preceding retirement. Earnings covered by the program consist of
salary and bonus, as set forth in the Summary Compensation Table above.
The following table sets forth, for various income and service levels, the
annual benefits payable under the Company's retirement program for life,
commencing at normal retirement at 65 or upon early retirement after 62. These
benefits are presented on a straight-life annuity basis and before deducting the
portion of Social Security payments attributable to Company contributions as
provided by the retirement program.
Pension Plan Table
<TABLE>
<CAPTION>
Approximate Annual Retirement Benefits
-------------------------------------------------------------------------------------
15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
Remuneration of Service of Service of Service of Service of Service of Service
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 250,000 $ 62,500 $ 83,333 $104,167 $125,000 $131,250 $137,500
500,000 125,000 166,667 208,333 250,000 262,500 275,000
750,000 187,500 250,000 312,500 375,000 393,750 412,500
1,000,000 250,000 333,333 416,667 500,000 525,000 550,000
1,250,000 312,500 416,667 520,833 625,000 656,250 687,500
1,500,000 375,000 500,000 625,000 750,000 787,500 825,000
1,750,000 437,500 583,333 729,167 875,000 918,750 962,500
- ------------------------------------------------------------------------------------------------------
</TABLE>
Average annual earnings for the highest five consecutive years in the last
10 years and presently credited years of service for the named executives are as
follows: Mr. Burchfield - $510,940 / 30 years; Mr. Heist - $812,600 / 36 years;
Mr. Nichols - $572,200 / 21 years; Mr. Olson - $471,000 / 27 years; and Mr.
Sigler - $1,274,940 / 37 years.
Messrs. Heist, Nichols and Sigler have agreements with the Company which
provide for annual retirement benefits of 60%, in the case of Messrs. Heist and
Nichols, and 65%, in the case of Mr. Sigler, of average annual earnings (salary
and bonus) for the highest three consecutive years in the 10 years preceding
retirement, provided in the case of Mr. Nichols that he remains employed by the
Company until July 19, 1999. These contractual retirement benefits are payable
only to the extent that they exceed the retirement benefits paid under the
Company's retirement program, described above, and the portion of Social
Security payments attributable to Company contributions. The agreements also
provide a survivor retirement benefit for the wives of Messrs. Heist, Nichols
and Sigler equal to 60% of the retirement benefit payable thereunder to the
respective executives during their lifetime. Average annual earnings for the
highest three consecutive years in the last 10 years for Messrs. Heist, Nichols
and Sigler are $844,333, $583,333 and $1,330,667, respectively.
Under an agreement made in 1964, Mr. Sigler is entitled to compensation
based on years of service, payable over 15 years following retirement, funded by
an insurance policy payable to the Company. Upon retirement at 65, this annual
payment would amount to $8,251 after 40 years of service, with actuarially
consistent death benefits in the event of death before retirement.
17
<PAGE> 21
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has agreements with Messrs. Heist, Nichols and Sigler which
provide for continued service in their present positions to December 1, 1994,
July 19, 1999 and October 1, 1995, respectively, with annual extensions
thereafter at the election of both the Company and the respective named
executive. Under these agreements, Messrs. Heist, Nichols and Sigler are
entitled to a minimum monthly base salary of $30,000, $31,250 and $50,000,
respectively. If employment is terminated by the Company without cause, Messrs.
Heist, Nichols and Sigler are entitled to severance pay for two years at monthly
rates of $69,417, $49,167 and $114,750, respectively, as well as the
continuation for two years of certain employee benefits, including medical,
dental and disability coverages. These agreements also provide certain
retirement benefits, as discussed above under "Pension Plan Table."
The Company has agreements with Messrs. Burchfield and Olson which provide
that, if employment is terminated by the Company without cause, they are
entitled to severance pay for two years at monthly rates of $42,667 and $38,750,
respectively, as well as the continuation for two years of certain employee
benefits, including medical, dental and disability coverages.
All these agreements also provide that, if employment is terminated without
cause within three years after a change in control of the Company: (i) severance
amounts, medical, dental and disability coverages for two years and the present
value of any contractual retirement benefits will become payable in a lump sum;
and (ii) absent notice to the contrary from the named executive, the Company
will settle his stock options and tandem SARs for cash equal to the difference
between the fair market value of the option shares at the time of termination
(or, if applicable and if higher, the change in control tender offer price) and
the exercise price. In addition, provision is made for the payment of legal
expenses up to one year's base salary if the Company refuses to make required
payments under the agreements and for the funding of certain of such payments by
a trust when a potential change in control occurs.
The Company's obligation to make the payments provided for in its
agreements with the named executives is subject to certain conditions. Such
conditions require, among other things, that following termination of employment
the named executive provide such assistance in litigation as may reasonably be
requested by the Company and refrain from actions, such as competition against
the Company and disclosure of confidential information relating to the Company,
that would be materially detrimental to the Company.
For the purpose of these agreements, "termination" means actual discharge
as well as specified types of constructive discharge, including diminution of
title, responsibility or base salary below the specified minimum. "Cause" means
(i) a breach by the named executive of his agreement which results in material
injury to the Company, or (ii) an act of dishonesty constituting a felony and
resulting or intended to result in personal gain at the expense of the Company.
"Change in control" means (a) the acquisition by any person of securities
representing 30% or more of the combined voting power of the Company's
securities, (b) a change in the composition of a majority of the Board of
Directors under certain circumstances within any two-year period or (c) approval
by shareholders of the liquidation of the Company or the disposition of all or
substantially all of its assets.
18
<PAGE> 22
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN GRAPH
The following graph presents a five-year comparison of cumulative total
returns for the Common Stock of the Company, the Standard & Poor's 500 Stock
Index (the "S&P 500 Index") and an index of peer companies (the "Commodity Paper
Group") selected by the Board of Directors. The Commodity Paper Group consists
of six other large manufacturers of commodity paper: Boise Cascade Corporation,
Georgia-Pacific Corporation, International Paper Company, Stone Container
Corporation, Union Camp Corporation and Weyerhaeuser Company. The graph assumes
that $100 was invested on December 31, 1988 in the Common Stock of the Company,
the S&P 500 Index and the Commodity Paper Group. Total return assumes the
quarterly reinvestment of dividends.
Comparison of Five-Year Cumulative Total Return
among Champion, S&P 500 Index and Commodity Paper
Group
<TABLE>
<CAPTION>
Measurement Period Commodity
(Fiscal Year Covered) Champion S&P 500 Paper Group
<S> <C> <C> <C>
1988 100.0 100.0 100.0
1989 103.0 131.6 116.7
1990 85.9 127.5 99.4
1991 81.2 166.2 138.5
1992 98.0 178.8 150.2
1993 114.5 196.7 165.7
</TABLE>
TRANSACTIONS
Two of the banks which provide credit to the Company are Chemical Bank, of
which Mr. Shipley is Chairman of the Board and chief executive officer and Mr.
Sigler is a director, and Chemical's affiliate Texas Commerce Bancshares, Inc.,
of which Mr. Rawl is a director. The largest amount of borrowings by the Company
and its subsidiaries from Chemical Bank and Texas Commerce Bancshares, Inc.
outstanding at any time during 1993 was $22,000,000. Interest rates on
borrowings from these banks ranged from 3.24% to 4.56% during the year, and
commitment fees on a substantial portion of the credit facilities were 1/4 of
1%. In addition, commercial paper issued by a subsidiary of the Company, the
largest amount of which outstanding at any time during 1993 was $20,400,000, is
secured by a letter of credit issued by Texas Commerce Bancshares, Inc. In 1993,
the Company also paid $182,259 to a Chemical affiliate for pension fund
investment management services, and the Company's Brazilian subsidiary invested
an average of $7,000,000 in export notes purchased through a Chemical affiliate.
J. P. Morgan & Co. Incorporated ("J. P. Morgan") beneficially owned
approximately 5.29% of the outstanding Common Stock of the Company as of
December 31, 1993. Two of the banks which provide credit to the Company are
Morgan Guaranty Trust Company of New York and JPM (Delaware), which are
affiliates of J. P. Morgan. Commitment fees on the credit facilities from these
banks were 1/4 of 1% in 1993; no borrowings were outstanding during the year.
J.P. Morgan Securities Inc., which also is an affiliate of J. P. Morgan,
performed underwriting
19
<PAGE> 23
services for the Company in 1993, for which it was paid fees totaling $972,000.
The Company paid $1,183,000 to an affiliate of J. P. Morgan for pension fund
investment management services in 1993. The Company's Brazilian subsidiary
invested an average of $1,100,000 in export notes purchased through an affiliate
of J. P. Morgan and borrowed amounts from an affiliate of J. P. Morgan not
exceeding $1,000,000 at any time outstanding during 1993.
All transactions between the Company and Chemical Bank, affiliates of
Chemical Bank and affiliates of J. P. Morgan, respectively, were made in the
ordinary course of business and on substantially the same terms as those
prevailing at the time for comparable transactions with other persons.
Effective December 31, 1993, the Company purchased director and officer
liability insurance from Federal Insurance Company and National Union Fire
Insurance Company of Pittsburgh, Pa., for one year at a cost of $580,150. This
information is provided in accordance with New York law and does not reflect a
transaction between the Company and its directors, executive officers or
shareholders.
THE AUDITORS
The Board of Directors, pursuant to the recommendation of its Audit
Committee, has appointed Arthur Andersen & Co., certified public accountants, as
independent auditors for the Company for 1994, subject to approval by the
shareholders at the Annual Meeting.
Representatives of Arthur Andersen & Co. are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement, if they
desire, and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE
APPOINTMENT OF ARTHUR ANDERSEN & CO. AS INDEPENDENT AUDITORS FOR 1994.
SHAREHOLDER PROPOSAL
The New York City Employees' Retirement System ("NYCERS"), c/o Comptroller
of the City of New York, 1 Centre Street, New York, New York 10007-2341, has
notified the Company that it will present the following proposal for action at
the meeting. In its notification, NYCERS represented that it held 253,088 shares
of the Company's Common Stock.
The preamble and resolution submitted by NYCERS are:
"WHEREAS, the board of directors is meant to be an independent body elected
by shareholders and charged by law and shareholders with the duty, authority and
responsibility to formulate and direct corporate policies, and
WHEREAS, the chairperson of the board is responsible for, among other
things, the smooth functioning of the board by setting the agenda, presiding at
board meetings and ensuring that directors are given adequate information, and
the chair should have a central role in the board's evaluation of management's
performance, and
WHEREAS, the position of chairperson should be a nonexecutive role, whose
basic responsibilities should include working with the directors to direct
management operations and overseeing corporate strategy, compliance with laws,
accounting principles and ethical standards applicable to our company,
NOW THEREFORE, BE IT RESOLVED, that the shareholders request that the
company's board of directors adopt and implement a policy that the positions of
chairperson of the board and chief executive officer not be held by the same
individual and that the chairperson not be a former CEO of this company, but be
elected from among the outside, independent directors."
20
<PAGE> 24
SHAREHOLDER'S STATEMENT IN SUPPORT OF THE PROPOSAL
"We believe that shareholders will best be served when the board includes a
chairperson who is chosen from among the independent, outside directors. Such a
person will bring objectivity and unique perspectives to issues facing our
company.
As matters stand, the chief executive officer is an employee of the company
who reports to our board of directors. However, he or she also acts as the
chairperson of the very same board he or she is accountable to. There is an
appearance of a conflict of interests each time matters concerning executive
compensation policies, possible takeover offers and corporate performance issues
arise. How can one person who serves as both chairperson and CEO evaluate his or
her own performance?
Clearly, shareholders have no role to play in the day-to-day operations of
our company. We rely on management to run, direct, and operate the company and
we expect the directors to oversee management. We believe this on-going dynamic,
and the resolution of our company's disappointing performance, can best be
served by having different individuals serve as chairperson and chief executive
officer.
We urge you to vote FOR this proposal."
STATEMENT BY THE DIRECTORS IN OPPOSITION TO THE PROPOSAL
The Board of Directors unanimously opposes this proposal for the following
reasons.
A substantial majority of Champion's Board of Directors, including all
members of all of the committees of the Board, are outside directors. Each of
the outside directors is a full participant in the Company's major strategic and
policy decisions. As a result, the independence necessary for effective Board
oversight of management, which is the purpose of the proposal, already exists at
Champion.
As described earlier in this Proxy Statement and in the Company's Annual
Report, the responsibilities of two committees of the Board, in particular, make
a non-executive chairperson unnecessary at Champion. The Compensation and Stock
Option Committee determines executive compensation policies. The Committee on
Board Affairs provides direct shareholder access to the Company's outside
directors and also recommends director candidates to the full Board. The Board
believes that no meaningful additional measure of independence and shareholder
access would be provided by a non-executive chairperson.
In the Board's view, the election of a non-executive chairperson at
Champion would undermine the effectiveness of its Chief Executive Officer and
create confusion, both within and outside the Company, regarding the direction
of the Company. The Board believes that the interests of Champion and its
shareholders are best served by the experience, consistent direction and ability
for decisive action afforded by a full-time Chairman and Chief Executive Officer
who is subject to oversight by the Company's outside directors.
At last year's Annual Meeting, this same proposal was rejected by more than
85% of the votes cast. For the reasons discussed above, the Board of Directors
believes that the Company's shareholders should continue to oppose it.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
21
<PAGE> 25
1995 SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1995 Annual Meeting
of Shareholders must be received by the Company at its principal executive
office not later than December 15, 1994.
OTHER MATTERS
If the accompanying proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the specifications, if any,
made in the proxy. If not otherwise specified in the proxy, the shares will be
voted in the election of directors for the nominees referred to above under "The
Board of Directors," for the approval of the appointment of Arthur Andersen &
Co. as auditors for 1994 and against the shareholder proposal set forth above.
It is not anticipated that any other matters will be presented to the
meeting. If any other matters should be presented, the holders of the proxy will
vote the shares represented thereby in accordance with their best judgment.
By order of the Board of Directors,
Lawrence A. Fox
Vice President and Secretary
Stamford, Connecticut
April 14, 1994
22
<PAGE> 26
[LOGO]
This document is printed on Champion(R) Sunlite Opake(TM)/45 lb.
<PAGE> 27
THIS LETTER WILL ACCOMPANY THE 1994 NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT SENT TO PARTICIPANTS WHO HAVE PASS-THROUGH VOTING RIGHTS WITH RESPECT
TO SHARES OF THE COMPANY'S COMMON STOCK OWNED BY CERTAIN EMPLOYEE BENEFIT PLANS
OF THE COMPANY.
TO ALL PARTICIPANTS IN
SAVINGS PLAN #077
STOCK OWNERSHIP PLAN #078
EMPLOYEE INVESTMENT AND STOCK OWNERSHIP PLAN #082
SAVINGS PLAN FOR HOURLY EMPLOYEES #158
- --------------------------------------------------------------------------------
The Annual Meeting of Champion Shareholders will be held on May 19, 1994.
At this meeting, shareholders will vote on three items which are described in
the Proxy Statement.
As a participant in one or more of these plans, you have the right to
instruct the Trustee how to vote your equivalent shares at the Annual Meeting.
We urge you to exercise this right. In order to instruct the Trustee how to
vote, you must complete and return the accompanying voting instruction card.
The number of equivalent shares you can vote is shown on the reverse side
of the voting instruction card.
Please review the Proxy Statement before completing the voting instruction
card. The card must be returned as soon as possible but not later than May 12,
1994. A postage-paid return envelope is enclosed for your convenience. It is
important to remember that if you do not return the voting instruction card in
timely fashion or if you return the card unsigned, your equivalent shares will
not be voted by the Trustee.
Plan participants should let their voices be heard by exercising their
right to vote on matters submitted to the shareholders. We strongly urge you to
participate this year by instructing the Trustee how to vote your equivalent
shares.
Contact the Savings Department in Hamilton, Ohio (513-868-4615 or Chamcon
868-4615) if you have any questions.
Gerald J. Beiser
Chairman, Pension and Employee Benefits Committee
Senior Vice President-Finance
April 14, 1994
<PAGE> 28
-------------------- ---------------------------
Account No. of Shares
PROXY - $92.50 PREFERENCE STOCK
CHAMPION INTERNATIONAL CORPORATION
Proxy Solicited by Board of Directors for Annual
Meeting of Shareholders - May 19, 1994
The undersigned constitutes and appoints ROBERT A. CHARPIE, LAWRENCE
G. RAWL, WALTER V. SHIPLEY, JAMES S. TISCH AND JOHN L. WEINBERG, and each of
them, attorneys and proxies, each with full power of substitution and
revocation, to vote all shares of Preference Stock, $92.50 Cumulative
Convertible Series, which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of Champion
International Corporation, called to be held on May 19, 1994, at 9:30 a.m., at
One Champion Plaza, Stamford, Connecticut, and at any adjournment or
adjournments thereof, as set forth below:
Directors recommend a vote FOR Items 1 and 2.
1. ELECTION OF DIRECTORS
Nominees: L. C. Heist, H. Barclay Morley, Walter V. Shipley,
James S. Tisch and Richard E. Walton.
<TABLE>
<S> <C>
FOR all director nominees WITHHOLD VOTE from all
listed above (except as director nominees listed above
noted*)
------- -------
</TABLE>
* Vote withheld from following individual nominees (if any):
----------------------------------------------------
2. Approval of the appointment of Arthur Andersen & Co. as
auditors for 1994.
<TABLE>
<S> <C> <C>
For Against Abstain
------ ------- --------
</TABLE>
Directors recommend a vote AGAINST Item 3.
3. Proposal by shareholder regarding a non-executive chairperson.
<TABLE>
<S> <C> <C>
For Against Abstain
------ ------- --------
</TABLE>
In their discretion, to vote upon such other business as may come before the
meeting. THIS PROXY WILL BE VOTED AS SPECIFIED AND, IN THE ABSENCE OF ANY
SPECIFICATION, WILL BE VOTED FOR THE ELECTION OF THE ABOVE DIRECTOR NOMINEES,
FOR PROPOSAL 2 AND AGAINST PROPOSAL 3.
DATED: , 1994
-----------------------------------------
-----------------------------------------------------
(Please sign above exactly as name appears on proxy.)
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------- ---------- ----------- ---------- Please mark
#077 - SAVINGS PLAN #078 - SOP #082 - ESOP #158 - HSP X your votes like
this in black
or blue ink.
</TABLE>
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE THE BOARD OF DIRECTORS RECOMMENDS
FOR ITEMS 1 AND 2. A VOTE AGAINST ITEM 3.
Item 3 - Proposal by shareholder
regarding a non-executive
chairperson.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Item 1 - ELECTION OF DIRECTORS
Nominees: L. C. Heist, H. Barclay Morley, FOR ALL
Walter V. Shipley, James S. Tisch FOR WITHHOLD EXCEPT
and Richard E. Walton. ALL FROM ALL AS NOTED* FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
*Withhold from following individual
nominees (if any):
----------------------------------
Item 2 - Appointment of Arthur Andersen & Co.
as auditors for 1994. FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
<TABLE>
<S> <C>
I understand that this card must
be returned no later than
May 12, 1994 in the enclosed envelope,
if my voting instructions
are to be honored. If it is not
received by May 12, 1994 or if
it is received but the voting
instructions are invalid, my equivalent
shares will not be voted.
Please complete, date and sign
below exactly as your name
appears on the card.
DATED , 1994
-----------------------
------------------------------------
Signature of Participant
</TABLE>
FOLD AND DETACH HERE
IMPORTANT: THIS IS YOUR VOTING INSTRUCTION
CARD. PLEASE MARK, SIGN AND RETURN THIS CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 30
CHAMPION INTERNATIONAL CORPORATION
VOTING INSTRUCTIONS TO TRUSTEE
<TABLE>
<S> <C>
Savings Plan #077 Trustee: The Northern Trust Company
Stock Ownership Plan #078 Trustee: The Northern Trust Company
Employee Investment and Stock Trustee: Bankers Trust Company
Ownership Plan # 082
Savings Plan for Hourly Employees #158 Trustee: The Northern Trust Company
</TABLE>
The undersigned hereby directs The Northern Trust Company, as Trustee of the
Champion International Corporation Savings Plan #077, the Champion
International Corporation Stock Ownership Plan #078 and the Champion
International Corporation Savings Plan for Hourly Employees #158, and Bankers
Trust Company, as Trustee of the Champion International Corporation Employee
Investment and Stock Ownership Plan #082, to vote at the Annual Meeting of
Shareholders of Champion International Corporation, called to be held on May
19, 1994, and at any adjournment or adjournments thereof, as set forth on the
reverse side of this card:
(Continued and to be SIGNED on the reverse side)
FOLD AND DETACH HERE
<PAGE> 31
<TABLE>
<S> <C> <C> <C> <C>
----------- ------------------- Please mark
COMMON DIVIDEND INVESTMENT X your votes like
this in black
or blue ink.
</TABLE>
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE THE BOARD OF DIRECTORS RECOMMENDS A
FOR ITEMS 1 AND 2. VOTE AGAINST ITEM 3.
Item 3 - Proposal by shareholder
regarding a non-executive
chairperson.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Item 1 - ELECTION OF DIRECTORS
Nominees: L. C. Heist, H. Barclay Morley, FOR ALL
Walter V. Shipley, James S. Tisch FOR WITHHOLD EXCEPT
and Richard E. Walton. ALL FROM ALL AS NOTED* FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
*Withhold from following individual
nominees (if any):
----------------------------------
Item 2 - Appointment of Arthur Andersen & Co.
as auditors for 1994. FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
<TABLE>
<S> <C>
In their discretion, to vote upon such
other business as may come before the
meeting. THIS PROXY WILL BE VOTED AS
SPECIFIED AND, IN THE ABSENCE OF ANY
SPECIFICATION, WILL BE VOTED FOR THE
ELECTION OF THE ABOVE DIRECTOR NOMINEES,
FOR ITEM 2 AND AGAINST ITEM 3.
Dated: , 1994
-------------------------
-------------------------------------
-------------------------------------
(Please sign above exactly as name
appears on proxy. If joint
account, all should sign.)
</TABLE>
FOLD AND DETACH HERE
IMPORTANT: THIS IS YOUR PROXY CARD.
PLEASE MARK, SIGN AND RETURN THIS CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 32
PROXY
CHAMPION INTERNATIONAL CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS - MAY 19, 1994
The undersigned constitutes and appoints ROBERT A. CHARPIE, LAWRENCE G. RAWL,
WALTER V. SHIPLEY, JAMES S. TISCH AND JOHN L. WEINBERG, and each of them,
attorneys and proxies, each with full power of substitution and revocation, to
vote all shares of Common Stock which the undersigned would be entitled to vote
if personally present at the Annual Meeting of Shareholders of Champion
International Corporation, called to be held on May 19, 1994 at 9:30 a.m. at
One Champion Plaza, Stamford, Connecticut, and at any adjournment or
adjournments thereof, as set forth on the reverse side of this card:
(Continued and to be SIGNED on the reverse side)
FOLD AND DETACH HERE
