<PAGE> 1
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:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
CHAMPION INTERNATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CHAMPION INTERNATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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 transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[LOGO]
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 1995
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of Champion International Corporation
will be held at One Champion Plaza, Stamford, Connecticut, on Thursday, May 18,
1995 at 9:30 a.m., for the following purposes:
1. To elect four directors to serve until the 1998 Annual Meeting of
Shareholders.
2. To consider and act upon a proposal to approve the appointment of
Arthur Andersen LLP as auditors for 1995.
3. To consider and act upon the shareholder proposals 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 30, 1995 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 13, 1995
<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 18, 1995. 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 13, 1995.
VOTING RIGHTS
Only holders of record at the close of business on March 30, 1995 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 93,617,947 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 5% 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 14,561,253 shares(1) 15.55%
New York, New York 10021(1)
Common Stock FMR Corp.
82 Devonshire Street 7,342,149 shares(2) 7.82%
Boston, Massachusetts 02109(2)
$92.50 Preference Berkshire Hathaway Inc.
Stock 1440 Kiewit Plaza 300,000 shares(3) 100%
Omaha, Nebraska 68131(3)
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) This information is as of April 5, 1995 and is based upon
an Amendment to Schedule 13D 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.
On the record date for the Annual Meeting of Shareholders,
Loews beneficially owned 15,196,253 shares of Common
Stock.
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 of the 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, 1994 and is based
upon a Schedule 13G filed with the Securities and Exchange
Commission by FMR Corp. In its report, FMR Corp. stated
that (i) such shares are beneficially owned by two
subsidiaries and one former subsidiary (collectively, the
"Fidelity Companies") and are held for the accounts of
various clients; (ii) such shares include 212,943 shares of
Common Stock issuable upon conversion of $7,400,000
principal amount of the Company's 6 1/2% Convertible
Subordinated Debentures due April 15, 2011; and (iii) the
Fidelity Companies have sole voting power with respect to
77,305 of such shares and sole dispositive power with
respect to all of such shares.
(3) 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 7.78% 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 1994. Ten regular meetings are
scheduled for 1995, 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 1994.
THE NOMINEES
In accordance with the recommendation of its Committee on Board Affairs,
the Board of Directors has chosen four persons as nominees for election to the
Board.
Sybil C. Mobley, Lawrence G. Rawl, Andrew C. Sigler and John L. Weinberg,
who previously have been elected by the shareholders and whose terms will expire
at the 1995 Annual Meeting of Shareholders, have been nominated for regular
three-year terms expiring at the 1998 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 1995 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 69
Alice F. Emerson 1996 1993 63
Allan E. Gotlieb 1996 1989 67
L. C. Heist 1997 1987 63
Sybil C. Mobley 1998 1981 69
H. Barclay Morley 1997 1979 66
Kenwood C. Nichols 1996 1989 55
Lawrence G. Rawl 1998 1989 66
Walter V. Shipley 1997 1983 59
Andrew C. Sigler 1998 1973 63
James S. Tisch 1997 1993 42
Richard E. Walton 1997 1987 63
John L. Weinberg 1998 1989 70
-----------------------------------------------------------------------------------------------
</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 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 served as Canada's Ambassador to the United States from 1981 to
1989 and as Chairman of Burson-Marsteller Canada, a public relations firm, from
1991 to April 1995. He is a director of Alcan Aluminium Limited, Hollinger Inc.,
Peoples Jewellers Limited and Suncor Inc.
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, and Schering-Plough Corporation.
Mr. Nichols was elected Vice Chairman and a director of the Company in
1989.
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
Warner-Lambert Company.
Mr. Shipley is Chairman of the Board and chief executive officer of
Chemical Banking Corporation and its subsidiary, Chemical Bank. He has served as
Chairman and chief executive officer or as President of each of those companies
since 1982. 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 is President, chief operating officer and a director of Loews
Corporation, a diversified holding company. From 1986 to 1994, he was Executive
Vice President and a director of Loews. 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 E.I. du Pont de Nemours
& Company, The B.F. Goodrich Company, Knight-Ridder, Inc., Providian Corporation
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
Richard E. Walton, Vice Chairman Robert A. Charpie
Alice F. Emerson H. Barclay Morley
Allan E. Gotlieb James S. Tisch
Sybil C. Mobley John L. Weinberg
Committee on Board Affairs Pension Funding and Investment Committee
Robert A. Charpie, Chairman Robert A. Charpie, Chairman
Lawrence G. Rawl Alice F. Emerson
Walter V. Shipley Allan E. Gotlieb
James S. Tisch Sybil C. Mobley
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 1994.
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 two meetings in 1994.
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 four meetings and took action by
unanimous written consent once in 1994.
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 1994.
5
<PAGE> 9
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company receives an annual
retainer of $30,000 for services as a director and a fee of $1,500 for each
Board meeting attended. In addition, each committee chairman receives an annual
retainer of $5,000, and committee members, including chairmen, receive a fee of
$1,000 for each committee meeting attended. The Company provides $50,000 of
group term life insurance and $200,000 of travel accident insurance to the
outside 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 1994 was equivalent to 5,862 shares, and the total number of units
accrued for incumbent directors as of March 15, 1995 was equivalent to 46,803
shares.
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 15, 1995
(or, in the case of Mr. Tisch, April 5, 1995), 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> <C>
- -------------------------------------------------------------------------------
William H. Burchfield 20,413 (86,700) *
Robert A. Charpie 7,528 *
Alice F. Emerson 430 *
Allan E. Gotlieb 1,000 *
L. C. Heist 37,245 (318,000) *
Sybil C. Mobley 110 *
H. Barclay Morley 500 *
Kenwood C. Nichols 23,968 (154,000) *
Richard E. Olson 15,603 (59,300) *
Lawrence G. Rawl 1,500 *
Walter V. Shipley 1,000 *
Andrew C. Sigler 58,977 (535,000) *
James S. Tisch 14,517,800(4) (43,453)(4) 15.55%(4)
Richard E. Walton 1,900 *
John L. Weinberg 5,000 *
Directors and executive
officers as a group 14,759,811(4) (1,617,153)(4) 17.20%(4)
- -------------------------------------------------------------------------------
</TABLE>
* Represents less than 1% of the outstanding Common Stock
of the Company.
(1) This table does not include (i) the 46,803 Common Stock
equivalent units accrued for various outside directors as
of March 15, 1995, as discussed above under "Directors'
Compensation", or (ii) the 14,274 Common Stock equivalent
units accrued for the executive officers as a group as of
March 15, 1995 under the Company's Nonqualified
Supplemental Savings Plan.
(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 17,749
of such shares.
(4) These respective numbers include 14,517,800 shares owned by
Loews Corporation and 43,453 shares which a subsidiary of
Loews Corporation has the right to acquire, representing in
the aggregate 15.55% of the outstanding Common Stock of the
Company. Mr. James S. Tisch disclaims beneficial ownership
of all such shares. He is the President and chief operating
officer and a director of Loews Corporation. His father,
Mr. Laurence A. Tisch, and his uncle, Mr. Preston R. Tisch,
are the co-Chairmen of the Board and co-chief executive
officers of Loews Corporation. In the aggregate, Messrs.
Laurence and Preston Tisch own approximately 32% 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 1994
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 1994 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 three principal components of the Company's executive compensation
program, discussed in detail below, are salary, annual contingent compensation
and stock options. The Company had a strong operating performance in 1994,
including annual increases in production of 4.8% and productivity (tons per mill
employee) of 7.2% and an annual decrease in cash cost per ton of 2.8% in its
North American pulp and paper operations. With regard to financial performance,
the Company returned to profitability in 1994, with an earnings improvement of
$219 million ($142 million excluding non-recurring items) from 1993. The
Committee believes that the Company's strong operating performance and
much-improved financial performance were properly reflected in executive
compensation levels for 1994.
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 to an existing 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 1994, 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 (below
minimum, 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 three
individual performance ratings. The lower an individual is in the salary range
and the higher the individual performance rating, the greater is the potential
annual salary increase. The matrix sets forth a percentage salary increase (or
no increase) for each of the 15 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 judgment concerning the Company's financial performance and cash
requirements.
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 determination 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 3.9% in 1994. This reflected his
individual performance rating and his position in the upper third of his salary
range.
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 1994, 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. In the case of the lowest executive officer grade level, potential award
amounts ranged from no award, to 48% of the salary range midpoint upon the
attainment of targeted performance, 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 award amounts ranged from no award, to 66% of the
salary range midpoint upon the attainment of targeted performance, to a maximum
of 165% of the salary range midpoint. 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.
The Company's performance rating - performance in relation to plan: At the
beginning of 1994, 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
9
<PAGE> 13
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: product quality, organizational development
and safety -- 25%; cost containment -- 20%; profit from operations -- 20%;
working capital management -- 20%; and productivity -- 15%. Reflecting the
Company's strong operating performance, the Company's performance rating for
purposes of the executive officer annual contingent compensation matrices for
1994 was target. Actual performance exceeded the established objectives for
working capital management and productivity 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 determination 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. In early 1994, the Committee approved a
range of adjustment percentages, corresponding to a range of earnings per share
levels, from 50% to 150%. Reflecting earnings for the year, the actual
adjustment percentage for 1994 was 80%.
The purpose of the earnings per share adjustment is to make annual
contingent compensation sensitive to corporate financial performance as well as
operating performance. The Committee approves adjustment percentages and
corresponding earnings per share levels early in the year taking into
consideration a number of factors, including the Company's earnings in prior
years, anticipated market conditions for forest products in the current year and
the cyclicality of the industry. The adjustment percentages and corresponding
earnings per share levels reflect the Committee's determination of appropriate
incentives to plan participants with regard to corporate financial performance.
The Committee approved individual performance ratings for the chief
executive officer and each of the other four most highly compensated executive
officers which, together with the Company's target performance rating and the
80% 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 1994 was $600,000, which represented 80% of the salary range midpoint for
his grade level. Annual contingent compensation awards for all of the executive
officers for 1994 increased from the sharply reduced levels of the immediately
preceding years. The Committee notes that this is the first significant increase
in overall annual contingent compensation for the executive officer group since
the Company's record-earnings year of 1988. Between 1988 and 1993, overall
awards for the executive officer group declined substantially; in the case of
Mr. Sigler, his 1993 award declined 67.5% from 1988. The increase in annual
contingent compensation for 1994 reflected the strong operating performance and
improved financial performance of the Company.
10
<PAGE> 14
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 annual contingent compensation, which is 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
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. 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.
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.
Compensation that is deferred until retirement does not count toward the $1
million limit. "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.
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. Reflecting the level of compensation (some of which
has been deferred until retirement) for the Company's executive officers, the
impact on the Company of the loss of deductions resulting from the deduction
limit in OBRA was immaterial in 1994 and is expected to be immaterial in 1995.
11
<PAGE> 15
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 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:
Robert A. Charpie
H. Barclay Morley
Lawrence G. Rawl
James S. Tisch
John L. Weinberg
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
1992, 1993 and 1994 of the Company's chief executive officer and each of the
other four most highly compensated executive officers of the Company in 1994
(collectively, the "named executives").
Summary Compensation Table
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------
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 SARs(1) Payouts sation(3)
($) ($) ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------
Andrew C. Sigler, 1994 $925,000 $600,000 $12,463 50,000 $ 29,516
Chairman and Chief 1993 890,000 220,000 5,595 50,000 175,276
Executive Officer 1992 850,000 294,000 6,366 50,000 See 175,067
note 2
- --------------------------------------------------------------------------------------- -------------
L. C. Heist, 1994 575,000 375,000 6,725 35,000 regarding 118,239
President and Chief 1993 550,000 172,000 4,650 35,000 the forfei- 85,451
Operating Officer 1992 520,000 230,000 5,138 35,000 ture of 83,817
restricted
- --------------------------------------------------------------------------------------- -------------
Kenwood C. Nichols, 1994 465,000 285,000 1,464 28,000 perfor- 107,944
Vice Chairman 1993 450,000 125,000 3,230 28,000 mance 68,603
1992 420,000 130,000 3,642 28,000 shares 68,471
by the
- --------------------------------------------------------------------------------------- -------------
William H. Burchfield, 1994 372,000 185,000 3,504 12,000 named 81,008
Executive Vice 1993 360,000 105,000 2,238 12,000 execu- 25,949
President 1992 340,000 130,000 2,546 12,000 32,665
tives in
1992 and
- --------------------------------------------------------------------------------------- -------------
Richard E. Olson, 1994 356,000 185,000 983 12,000 1993. 74,541
Executive Vice 1993 345,000 105,000 2,480 12,000 52,896
President 1992 325,000 130,000 2,740 12,000 70,734
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The numbers in this column represent shares underlying options to purchase
Common Stock. Each such option has a tandem stock appreciation right
("SAR"). To the extent that a stock option or an SAR is exercised, the
tandem grant is canceled.
(2) Under the Company's Restricted Share Performance Plan, participants were
granted restricted performance shares which were 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 1990, 1991, 1992 and 1993, 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.
13
<PAGE> 17
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
1992 and 1993.
<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
L. C. Heist 1993 17,250 575,719
1992 6,750 194,063
Kenwood C. Nichols 1993 11,911 397,530
1992 5,040 144,900
William H. Burchfield 1993 8,231 274,710
1992 3,600 103,500
Richard E. Olson 1993 9,200 307,050
1992 3,600 103,500
------------------------------------------------------------------------
</TABLE>
(3) The amounts in this column for 1994 include matching contributions by the
Company to accounts under the Savings Plan for Salaried Employees and the
Nonqualified Supplemental Savings Plan as follows: Mr. Sigler - $16,063;
Mr. Heist - $94,580; Mr. Nichols - $21,563; Mr. Burchfield - $54,617; and
Mr. Olson - $8,060. Company contributions are invested in shares of the
Company's Common Stock under the Savings Plan for Salaried Employees, which
is funded, and are made in units equivalent to shares of the Company's
Common Stock under the Nonqualified Supplemental Savings Plan, which is
unfunded.
The balance of the amounts in this column for 1994 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, in 1992 and 1993, the Company elected to
satisfy a contractual obligation made in 1978 relating to life insurance
by providing additional coverage under this plan; $18,312 of the $168,201
Executive Life Insurance Plan premium that is included in the $175,067
amount in this column for Mr. Sigler for 1992, and $20,145 of the $168,201
Executive Life Insurance Plan premium that is included in the $175,276
amount in this column for Mr. Sigler for 1993, relate to life insurance
coverage provided in satisfaction of the Company's 1978 contractual
obligation.
14
<PAGE> 18
OPTION/SAR GRANT TABLE
The following table sets forth information concerning the grant of stock
options and tandem SARs to each of the named executives in 1994.
Option/SAR Grants in 1994
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value
------------------------------------------------------------ at Assumed Annual
Number of Rates of
Securities % of Total Stock Price
Underlying Options/ Appreciation
Options/ SARs Exercise for Option Term(4)
SARs Granted to or Base ----------------------
Granted(1) Employees Price(3) Expiration 5% 10%
Name (#) in 1994(2) ($/Sh) Date ($) ($)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Andrew C. Sigler 50,000 8.6%/20.0% $30.125 March 16, 2004 $947,273 $2,400,575
L. C. Heist 35,000 6.0%/14.0% 30.125 March 16, 2004 663,091 1,680,402
Kenwood C. Nichols 28,000 4.8%/11.2% 30.125 March 16, 2004 530,473 1,344,322
William H. Burchfield 12,000 2.1%/ 4.8% 30.125 March 16, 2004 227,345 576,138
Richard E. Olson 12,000 2.1%/ 4.8% 30.125 March 16, 2004 227,345 576,138
---------------------------------------------------------------------------------------------------------------
</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 16, 1994 and became exercisable on March
16, 1995, 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 March 16, 1995 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 1994
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 1994 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 1994.
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 1994, the price of a
share of the Company's Common Stock would be $49.07 at an assumed annual
appreciation rate of 5% and $78.14 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 $4.5 billion,
respectively, over the term of the 1994 options.
- --------------------------------------------------------------------------------
OPTION/SAR EXERCISE AND YEAR-END VALUES TABLE
The following table sets forth information with respect to each of the
named executives concerning the exercise of stock options and tandem SARs in
1994 and concerning unexercised stock options and tandem SARs held at December
31, 1994.
Aggregated Option/SAR Exercises in 1994
and Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Number of Securities Value of Unexercised
Underlying Underlying Unexercised In-the-Money Options/SARs at
Options/SARs Value Options/SARs at Year-End Year-End(2)
Exercised Realized(1) (#) ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Andrew C. Sigler 20,000 $295,000 505,000 50,000 $4,063,125 $318,750
L. C. Heist 7,500 116,250 290,500 35,000 2,441,813 223,125
Kenwood C. Nichols 6,000 33,750 132,000 28,000 1,041,375 178,500
William H. Burchfield 4,000 45,500 74,700 12,000 540,413 76,500
Richard E. Olson 12,000 132,000 47,300 12,000 312,950 76,500
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts reported in this column as values realized in 1994 derived from
the exercise of grants that were made between 1984 and 1991.
(2) The amounts in these columns are based upon the $36.50 closing price of a
share of the Company's Common Stock on December 31, 1994 on the New York
Stock Exchange Composite Transactions.
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, in the case of executive officers,
the highest three consecutive years in the 10 years preceding retirement. Annual
earnings covered by the program consist of the salary reported in the Summary
Compensation Table for that year plus the bonus paid in that year but earned in,
and reported in the Summary Compensation Table for, the immediately preceding
year.
The following table sets forth, for various income and service levels, the
annual benefits payable to executive officers 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 $ 145,833 $ 166,667
500,000 125,000 166,667 208,333 250,000 291,667 333,333
750,000 187,500 250,000 312,500 375,000 437,500 500,000
1,000,000 250,000 333,333 416,667 500,000 583,333 666,667
1,250,000 312,500 416,667 520,833 625,000 729,167 833,333
1,500,000 375,000 500,000 625,000 750,000 875,000 1,000,000
1,750,000 437,500 583,333 729,167 875,000 1,020,833 1,166,667
2,000,000 500,000 666,667 833,333 1,000,000 1,166,667 1,333,333
- ------------------------------------------------------------------------------------------------------
</TABLE>
Average annual earnings for the highest three consecutive years in the last
10 years and presently credited years of service for the named executives are as
follows: Mr. Burchfield - $527,333 / 31 years; Mr. Heist - $844,333 / 37 years;
Mr. Nichols - $632,146 / 22 years; Mr. Olson - $486,955 / 28 years; and Mr.
Sigler - $1,330,667 / 38 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 70%, 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, plus 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.
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 after attaining age
65, Mr. Sigler would receive an annual payment of $8,251, 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, 1995,
July 19, 1999 and October 1, 1996, 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 (but not
beyond age 65) at monthly rates of $79,167, $62,500 and $127,083, respectively,
as well as the continuation for two years (but not beyond age 65) of certain
employee benefits, including medical, dental and disability coverages. These
agreements also provide certain retirement benefits, as discussed above under
"Pension Plan Table". Mr. Sigler's agreement includes a commitment, originally
made in 1978, to provide certain life insurance coverage - see note 3 to the
Summary Compensation Table above; since January 1, 1994, this commitment has
been satisfied by providing Mr. Sigler with the coverage under the Company's
group life insurance plan that is available generally to all salaried employees.
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 (but not beyond age 65) at monthly rates
of $46,417 and $45,083, respectively, as well as the continuation for two years
(but not beyond age 65) 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 these
agreements 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.
The Company has an agreement with Mr. Sigler which provides for the
performance of consulting services for five years following termination of his
employment. In consideration for such services, Mr. Sigler will receive $200,000
per year for five years and administrative support for 10 years following
termination of his employment.
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, 1989 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>
1989 $100.00 $100.00 $100.00
1990 83.37 96.89 85.12
1991 78.83 126.28 118.69
1992 95.12 135.88 128.64
1993 111.12 149.52 141.99
1994 122.24 151.55 147.39
</TABLE>
TRANSACTIONS
Two of the banks which provide credit to the Company and its subsidiaries
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 Bank National Association. The largest amount of borrowings by the
Company and its subsidiaries from Chemical Bank and Texas Commerce Bank National
Association outstanding at any time during 1994 was $19,000,000. Interest rates
on borrowings from these banks ranged from 4.375% to 6.1875% during the year,
and commitment fees during the year on a substantial portion of the credit
facilities were 1/4 of 1% until November 15 and 15/100 of 1% thereafter. In
addition, commercial paper issued by a subsidiary of the Company, the largest
amount of which outstanding at any time during 1994 was $19,000,000, is secured
by a letter of credit issued by Texas Commerce Bank National Association. In
1994, the Company also paid $262,330 to a Chemical affiliate for pension fund
investment management services, and the Company's Brazilian subsidiary invested
an average of $1,800,000 in export notes purchased through a Chemical affiliate
during the year and an average of $9,900,000 in certificates of deposit issued
by a Chemical affiliate in November and December.
All transactions between the Company and its subsidiaries and Chemical Bank
and affiliates of Chemical Bank, 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.
19
<PAGE> 23
Effective December 31, 1994, the Company purchased director and officer
liability insurance from Federal Insurance Company, National Union Fire
Insurance Company of Pittsburgh, Pa. and Great American Insurance Company for
one year at a cost of $608,550. 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 LLP, certified public accountants, as
independent auditors for the Company for 1995, subject to approval by the
shareholders at the Annual Meeting.
Representatives of Arthur Andersen LLP 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 LLP AS INDEPENDENT AUDITORS FOR 1995.
SHAREHOLDER PROPOSAL - CLASSIFIED BOARD OF DIRECTORS
Kenneth Steiner, 14 Stoner Avenue, Great Neck, New York 11024, has notified
the Company that he will present the following proposal for action at the
meeting. In his notification, Mr. Steiner represented that he held 150 shares of
the Company's Common Stock.
The resolution submitted by Mr. Steiner is:
"RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to declassify
the Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected."
SHAREHOLDER'S STATEMENT IN SUPPORT OF THE PROPOSAL
"The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable for
it's implementation of those policies. I believe that the classification of the
Board of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and it's stockholders.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. I believe that the Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of current
management, which in turn limits management's accountability to stockholders.
The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity to
register their views on the performance of the Board collectively and each
director individually. I believe this is one of the best methods available to
stockholders to insure that the Company will be managed in a manner that is in
the best interests of the stockholders.
As a founding member of the Investors Rights Association of America I
believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION."
20
<PAGE> 24
STATEMENT BY THE DIRECTORS IN OPPOSITION TO THE PROPOSAL
The purpose of a classified Board is to help assure that at least
two-thirds of the directors at all times will have prior experience as directors
of the Company and, accordingly, will be familiar with the business of the
Company and the major issues which it faces. The commitment by directors to
serve staggered three-year terms helps limit the number of Board vacancies that
might have to be filled in a single year. Experience on the Board is especially
important in a cyclical, capital-intensive industry like ours, which involves
long-term projects and requires long-range economic perspective, strategic
planning and oversight.
A majority of large corporations have chosen to adopt the classified Board
structure, recognizing its benefit to companies and their shareholders. The
Investor Responsibility Research Center reported in late 1994 that 59% of the
1,537 companies which it monitors have classified Boards, an increase from 1993.
Directors are fully accountable to shareholders regardless of the length of
their terms. The annual election of one-third of the Company's directors affords
shareholders the opportunity to express their views each year regarding the
performance of the Board. And, of course, the accountability of directors to
shareholders under law, as well as the natural desire of directors to see their
directorship companies prosper, is the same whether they are elected every year
or once every three years.
The Board of Directors is proud of the Company's record on corporate
governance. For many years, beginning long before such principles became
generally accepted, Champion's Board has had a substantial majority of outside
directors and all standing committees of the Board have been composed solely of
outside directors. In recent years, in response to the wishes of many of the
Company's shareholders, the Board of Directors rescinded the Company's
shareholder rights plan and instituted confidential shareholder voting. Each
year, the Company's Chief Executive Officer meets with most of the Company's
major shareholders and, on occasion, outside directors have met with
shareholders. The Board believes that the staggered election of directors is
fully in accord with the Company's long-held principles of good corporate
governance. The Board notes that, as a matter of policy, a number of major
institutional investors support the right of a Board to organize itself in the
manner it deems most efficient and oppose shareholder proposals that seek the
election of all directors on an annual basis.
For the reasons discussed above, the Board of Directors believes that a
classified Board is in the best interests of the Company and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
SHAREHOLDER PROPOSAL - DIRECTORS' RETIREMENT BENEFITS
William Steiner, 4 Radcliff Drive, Great Neck, New York 11024, has notified
the Company that he will present the following proposal for action at the
meeting. In his notification, Mr. Steiner represented that he held 150 shares of
the Company's Common Stock.
The resolution submitted by Mr. Steiner is:
"RESOLVED, that the shareholders assembled in person and by proxy,
recommend (i) that all future non-employee directors not be granted pension
benefits and (ii) current non-employee directors voluntarily relinquish their
pension benefits."
SHAREHOLDER'S STATEMENT IN SUPPORT OF THE PROPOSAL
"Aside from the usual reasons, presented in the past, regarding 'double
dipping', that is outside (non-employee) directors who are in almost all cases
amply rewarded with their pension at their primary place of employment, and in
many instances serving as outside pensioned directors with other companies,
there are other more cogent reasons that render this policy as unacceptable.
21
<PAGE> 25
Traditionally, pensions have been granted in both the private and public
sectors for long term service. The service component usually represents a
significant number of hours per week. The practice of offering pensions for
consultants is a rarity. Outside directors' service could logically fit the
definition of consultants and pensions for this type of service is an abuse of
the term.
But more importantly, outside directors, although retained by corporate
management, namely the C.E.O., are in reality representatives of shareholders.
Their purpose is to serve as an impartial group to which management is
accountable. Although outside directors are certainly entitled to compensation
for their time and expertise, pensions have the pernicious effect of
compromising their impartiality. In essence, pensions are management's grants to
outside directors to insure their unquestioning loyalty and acquiescence to
whatever policy management initiates, and at times, serving their own self
interests. Thus, pensions become another device to enhance and entrench
management's controls over corporate policies while being accountable only to
themselves. As a founding member of the Investors Rights Association of America
I feel this practice perpetuates a culture of corporate management 'cronyism'
that can easily be at odds with shareholder and company interest.
A final note in rebuttal to management's contention that many companies
offer their outside directors pensions, so they can attract and retain persons
of the highest quality. Since there are also companies that do not offer their
outside directors pensions, can management demonstrate that those companies that
offer pensions have a better performance record than their non-pensioned peers?
In addition, do we have any evidence of a significant improvement in corporate
profitability with the advent of pensions for outside directors?
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION."
STATEMENT BY THE DIRECTORS IN OPPOSITION TO THE PROPOSAL
The most important component of effective corporate governance is a strong,
independent and diverse Board of Directors. In order to continue to attract and
retain such directors, the Company must offer a fair and competitive
compensation package.
The directors' fees and retirement benefits provided by the Company are
consistent with those of other large corporations. A recent study conducted by
an independent benefits consulting firm found that 75% of the 100 major
industrial corporations surveyed provide their outside directors with retirement
benefits, often more substantial than the Company's (which are described on page
6). Further, the Company does not provide various other benefits to outside
directors that are provided by many other corporations.
A fair compensation package, including a limited retirement benefit,
recognizes the increasing time commitment and risks associated with Board
service. Such a compensation package is necessary for the Company to compete
with other large corporations in the increasingly challenging, but increasingly
important, job of recruiting quality directors. This, in turn, will help assure
that the Company continues to have a strong, independent and diverse Board of
Directors that can well represent the interests of shareholders.
It should be noted that outside directors at Champion are not, as the
proponent asserts, "retained by corporate management, namely the C.E.O." Rather,
directors are nominated by the Board, a substantial majority of which consists
of outside directors, based upon the recommendation of its Committee on Board
Affairs, all of whose members are outside directors. Likewise, directors'
retirement benefits are not "management's grants to outside directors" but,
rather, are reviewed and approved by the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
22
<PAGE> 26
1996 SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1996 Annual Meeting
of Shareholders must be received by the Company at its principal executive
office not later than December 15, 1995.
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 LLP
as auditors for 1995 and against the shareholder proposals 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 13, 1995
23
<PAGE> 27
[LOGO]
This document is printed on Champion(R) Register Bond/18 lb.
<PAGE> 28
This letter will accompany the 1995 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 18, 1995.
At this meeting, shareholders will vote on four 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
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 11,
1995. 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.
Please contact the Benefits Department in Hamilton, Ohio (513-868-4615 or
Chamcon 868-4615) if you have any questions.
Kenwood C. Nichols
Chairman, Pension and Employee Benefits Committee
Vice Chairman, Champion International Corporation
April 13, 1995
<PAGE> 29
Please mark your votes like this in black or blue ink. /X/
- -------------------- ----------- ------------ -----------
#077 -- SAVINGS PLAN #078 -- SOP #082 -- ESOP #158 -- HSP
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ITEMS 1 AND 2.
Item 1 -- ELECTION OF DIRECTORS
Nominees: Sybil C. Mobley, Lawrence G. Rawl, Andrew C. Sigler and John L.
Weinberg.
FOR ALL
FOR WITHHOLD EXCEPT
ALL FROM ALL AS NOTED*
/ / / / / /
*Withhold from following individual nominees (if any):
----------------------------------------------
Item 2 -- Appointment of Arthur Andersen LLP as auditors for 1995.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST ITEMS 3 AND 4.
Item 3 -- Proposal by shareholder regarding a classified board of directors.
FOR AGAINST ABSTAIN
/ / / / / /
Item 4 -- Proposal by shareholder regarding directors' retirement benefits.
FOR AGAINST ABSTAIN
/ / / / / /
I understand that this card must be returned no later than May 11, 1995 in the
enclosed envelope, if my voting instructions are to be honored. If it is not
received by May 11, 1995 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: ------------------------------------ , 1995
------------------------------------
Signature of Participant
CHAMPION INTERNATIONAL CORPORATION
VOTING INSTRUCTIONS TO TRUSTEE
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
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 18, 1995, 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)
<PAGE> 30
Please mark your votes like this in black or blue ink. /X/
----------- ------------------------
COMMON DIVIDEND INVESTMENT
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ITEMS 1 AND 2.
Item 1 -- ELECTION OF DIRECTORS
Nominees: Sybil C. Mobley, Lawrence G. Rawl, Andrew C. Sigler and John L.
Weinberg.
FOR ALL
FOR WITHHOLD EXCEPT
ALL FROM ALL AS NOTED*
/ / / / / /
*Withhold from following individual nominees (if any):
----------------------------------------------
Item 2 -- Appointment of Arthur Andersen LLP as auditors for 1995.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST ITEMS 3 AND 4.
Item 3 -- Proposal by shareholder regarding a classified board of directors.
FOR AGAINST ABSTAIN
/ / / / / /
Item 4 -- Proposal by shareholder regarding directors' retirement benefits.
FOR AGAINST ABSTAIN
/ / / / / /
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 ITEMS 3 AND 4.
Dated: ------------------------------------ , 1995
------------------------------------
------------------------------------
(Please sign above exactly as name appears on proxy. If joint account, all
should sign.)
CHAMPION INTERNATIONAL CORPORATION PROXY
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL
MEETING OF SHAREHOLDERS -- MAY 18, 1995
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 18, 1995 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)
<PAGE> 31
- ----------------------------- ------------------------
Account Number of Shares
PROXY - $92.50 PREFERENCE STOCK
CHAMPION INTERNATIONAL CORPORATION
Proxy Solicited by Board of Directors for Annual
Meeting of Shareholders - May 18, 1995
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 18, 1995, 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: Sybil C. Mobley, Lawrence G. Rawl, Andrew C. Sigler
and John L. Weinberg
FOR all director nominees WITHHOLD VOTE from all
listed above (except as director nominees listed above
noted*)
-------- --------
* Vote withheld from following individual nominees (if any):
------------------------------------------------
2. Approval of the appointment of Arthur Andersen LLP as auditors for 1995.
For Against Abstain
-------- -------- --------
- -------------------------------------------------
Directors recommend a vote AGAINST Items 3 and 4.
3. Proposal by shareholder regarding a classified board of directors.
For Against Abstain
-------- -------- --------
4. Proposal by shareholder regarding directors' retirement benefits.
For Against Abstain
-------- -------- --------
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 ITEMS 3 AND 4.
DATED: , 1995
----------------------------------------
-----------------------------------------------------
(Please sign above exactly as name appears on proxy.)
