<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 Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(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 transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-111
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
1Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[LOGO]
One Champion Plaza
Stamford, Connecticut 06921
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 16, 1996
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of Champion International Corporation
will be held at One Champion Plaza, Stamford, Connecticut, on Thursday, May 16,
1996 at 9:30 a.m., for the following purposes:
1. To elect five directors, one to serve until the 1997 Annual Meeting of
Shareholders, one to serve until the 1998 Annual Meeting of
Shareholders and three to serve until the 1999 Annual Meeting of
Shareholders.
2. To consider and act upon a proposal to approve the appointment of
Arthur Andersen LLP as auditors for 1996.
3. 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 28, 1996 as
the record date for the determination of the holders of Common Stock 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 11, 1996
<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 16, 1996. 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 $15,000.
This Proxy Statement and the accompanying proxy are scheduled to be sent to
shareholders commencing on April 11, 1996.
VOTING RIGHTS
Only holders of record at the close of business on March 28, 1996 of the
Company's Common 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 95,533,075 shares of Common Stock. Each share of Common Stock is
entitled to one vote.
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 Mellon Shareholder Services, L.L.C., 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, if any, will not be
counted and, accordingly, will have no effect on the outcome of the vote.
Approval of the appointment of auditors requires the affirmative vote of a
majority of the votes cast on that proposal. Under New York law, in determining
whether the proposal has received the requisite number of affirmative votes,
abstentions 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
the Company's Common Stock, which is the only outstanding class of voting
securities of the Company. The percent owned by each such person is based upon
the total number of shares outstanding on the record date.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
<S> <C> <C>
- ----------------------------------------------------------------------
Oppenheimer Group, Inc.
Oppenheimer Tower
World Financial Center 7,877,307 shares(1) 8.25%
New York, New York 10281(1)
Wellington Management Company
75 State Street 6,483,900 shares(2) 6.79%
Boston, Massachusetts 02109(2)
Ark Asset Management Co., Inc.
One New York Plaza 5,371,000 shares(3) 5.62%
New York, New York 10004(3)
- ----------------------------------------------------------------------
</TABLE>
(1) This information is as of December 31, 1995 and is based
upon a Schedule 13G filed with the Securities and Exchange
Commission by Oppenheimer Group, Inc. In its report,
Oppenheimer Group, Inc. stated that (i) such shares
collectively are beneficially owned by Oppenheimer Capital,
Oppenheimer Financial Corp., Oppenheimer Equities, Inc.,
Oppenheimer Holdings, Inc. and Oppenheimer & Co., Inc.
(together, the "Oppenheimer Companies"), and (ii) the
Oppenheimer Companies have shared voting and shared
dispositive power with respect to all of such shares.
(2) This information is as of December 31, 1995 and is based
upon a Schedule 13G filed with the Securities and Exchange
Commission by Wellington Management Company. In its report,
Wellington Management Company stated that (i) it has shared
voting power with respect to 510,100 of such shares and
shared dispositive power with respect to all of such
shares, and (ii) such shares are owned by various
investment advisory clients, principally Vanguard/Windsor
Fund, Inc. In a Schedule 13G filed with the Securities and
Exchange Commission, Vanguard/Windsor Fund, Inc., P.O. Box
2600, Valley Forge, Pennsylvania 19482, reported that as of
December 31, 1995 it beneficially owned 5,700,000 shares of
the Company's Common Stock, with sole voting and shared
dispositive power with respect to all of such shares; such
shares represented 5.97% of the outstanding Common Stock of
the Company.
(3) This information is as of December 31, 1995 and is based
upon a Schedule 13G filed with the Securities and Exchange
Commission by Ark Asset Management Co., Inc. In its report,
Ark Asset Management Co., Inc. stated that it has sole
voting power with respect to 3,921,000 of such shares and
sole dispositive power with respect to 5,319,600 of such
shares.
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 12 directors.
Ten regular meetings and two special meetings of the Board were held in
1995. Ten regular meetings are scheduled for 1996, 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 1995.
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.
Robert A. Charpie, Alice F. Emerson, Allan E. Gotlieb and Kenwood C.
Nichols, who previously have been elected by the shareholders and whose terms
will expire at the 1996 Annual Meeting of Shareholders, are nominees for
re-election to the Board. Ms. Emerson and Mr. Nichols have been nominated for
regular three-year terms expiring at the 1999 Annual Meeting. In accordance with
the By-Laws, Mr. Charpie has been nominated for a one-year term expiring at the
1997 Annual Meeting, and Mr. Gotlieb has been nominated for a two-year term
expiring at the 1998 Annual Meeting.
Lawrence A. Bossidy 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 1999 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 1996 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>
Lawrence A. Bossidy 1999 1995 61
Robert A. Charpie 1997 1975 70
Alice F. Emerson 1999 1993 64
Allan E. Gotlieb 1998 1989 68
L. C. Heist 1997 1987 64
Sybil C. Mobley 1998 1981 70
Kenwood C. Nichols 1999 1989 56
Lawrence G. Rawl 1998 1989 67
Walter V. Shipley 1997 1983 60
Andrew C. Sigler 1998 1973 64
Richard E. Walton 1997 1987 64
John L. Weinberg 1998 1989 71
-----------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 7
Mr. Bossidy has been Chief Executive Officer of AlliedSignal Inc., a
manufacturer of aerospace and automotive products and engineered materials,
since 1991 and Chairman of the Board of AlliedSignal since 1992. From 1957 to
1991, he served in various executive and financial positions, including Vice
Chairman and Executive Officer, at General Electric Company, a diversified
services and manufacturing company. He also is a director of Merck & Co., Inc.
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. 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 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 and SBC Communications, Inc.
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, a petroleum company, from 1987 until 1993. He is a director of
Warner-Lambert Company.
Mr. Shipley is Chairman and Chief Executive Officer of The Chase Manhattan
Corporation. From 1982 through March 1996, he served as Chairman and Chief
Executive Officer or as President of Chemical Banking Corporation, which merged
with and changed its name to The Chase Manhattan Corporation on March 31, 1996.
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, The Chase Manhattan Corporation and General
Electric Company.
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 Knight-Ridder, Inc. 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 John L. Weinberg
Allan E. Gotlieb
Sybil C. Mobley
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
John L. Weinberg Sybil C. Mobley
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 1995.
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. The Committee on Board
Affairs held four meetings in 1995.
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 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 four times in 1995.
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 1995.
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 1995 was equivalent to 5,352 shares, and the total number of units
accrued for incumbent directors as of March 1, 1996 was equivalent to 51,968
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 and equivalent units of the Company's Common Stock beneficially owned, as
of March 1, 1996, 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.
<TABLE>
<CAPTION>
Name Shares(1),(2) Share Units(3) Total
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Lawrence A. Bossidy 2,000 - 2,000
William H. Burchfield 94,359 2,185 96,544
Robert A. Charpie 7,559 31,026 38,585
Alice F. Emerson 430 - 430
Allan E. Gotlieb 1,000 - 1,000
L. C. Heist 242,508 4,920 247,428
Sybil C. Mobley 111 - 111
Kenwood C. Nichols 178,173 2,889 181,062
Richard E. Olson 51,716 2,400 54,116
Lawrence G. Rawl 1,500 8,682 10,182
Walter V. Shipley 1,000 - 1,000
Andrew C. Sigler 286,052 3,798 289,850
Richard E. Walton 1,900 4,017 5,917
John L. Weinberg 5,000 8,243 13,243
All directors and
executive officers
as a group(4) 1,186,730 115,377 1,302,107
- --------------------------------------------------------------------------
</TABLE>
(1) This column includes shares that executive officers have
the right to acquire pursuant to stock options that are or
will become exercisable within 60 days, as follows: Mr.
Burchfield - 76,800 shares; Mr. Heist - 205,000 shares; Mr.
Nichols - 154,000 shares; Mr. Olson - 36,000 shares; Mr.
Sigler - 238,000 shares; and all executive officers as a
group - 960,200 shares. The table does not include an
additional 118,000 shares underlying stock options held by
all executive officers as a group that are not exercisable
within 60 days.
(2) Certain directors and executive officers share voting or
investment power with other persons with respect to 17,766
of such shares.
(3) For the outside directors, share units represent retainers
and meeting fees that have been deferred in the form of
Common Stock equivalent units, as discussed above under
"Directors' Compensation". For the executive officers,
share units represent (i) matching contributions by the
Company under the Nonqualified Supplemental Savings Plan in
the form of Common Stock equivalent units that are settled
in cash following or, under certain circumstances, prior to
retirement, and (ii) annual contingent compensation that
has been deferred in the form of Common Stock issuable
following retirement. The value of all such share units
fluctuates with the price of the Company's Common Stock.
(4) All directors and executive officers as a group
beneficially own approximately 1.23% of the outstanding
Common Stock of the Company. No individual director or
executive officer owns more than 1%.
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 1995
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 1995 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. 1995 was, by far, a record year for the Company in terms of
earnings and free cash flow. The Company's operating performance also was
outstanding in 1995, including annual increases in production of 2.8% and
productivity (tons per mill employee) of 6.1% in its North American pulp and
paper operations. The Committee believes that the Company's record financial
performance and outstanding operating performance were properly reflected in
executive compensation levels for 1995.
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 that 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 1995, 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's 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 approximately 8% in 1995, which reflected his individual performance rating
and position in 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.
Seventy-seven key employees, including all of the executive officers,
participated in the annual contingent compensation plan in 1995.
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 1995, 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. Upon the attainment of targeted performance, the matrices provided for an
award equal to 48% of the salary range midpoint in the case of the lowest
executive officer grade level and 66% of salary in the case of the Chief
Executive Officer; in each case, lower percentages were provided for performance
below the targeted level and higher percentages were provided for performance
above the targeted level. Annual contingent compensation for executive officer
grade levels is designed so that, upon the attainment of targeted performance,
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
after 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 1995, 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: productivity
- -- 30%; product quality,
9
<PAGE> 13
organizational development and safety -- 30%; cost containment -- 25%; working
capital management -- 10%; and profit from operations -- 5%. Reflecting the
Company's outstanding operating performance, the Company's performance rating
for purposes of the executive officer annual contingent compensation matrices
for 1995 was above target. Actual performance met the established objectives for
working capital management and exceeded the established objectives for all of
the other performance measures.
The individual's performance rating: After 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.
After 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 1995, the Committee approved a
range of adjustment percentages corresponding to a range of earnings per share
levels. Reflecting the Company's record earnings, the actual adjustment
percentage for 1995 was 230%.
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 above-target performance rating and
the 230% 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 1995 was $2,530,000, which represented approximately 250% of salary.
Annual contingent compensation awards for all of the executive officers for 1995
increased substantially from the reduced levels of the immediately preceding
years, reflecting the record financial performance and outstanding operating
performance of the Company. The Committee notes that 1995 is the first year that
the Company's performance rating has been above target since the Company's
previous record-earnings year of 1988, and the only year that the earnings per
share adjustment percentage has exceeded 80% since the earnings per share
component was incorporated in the annual contingent compensation matrices
beginning in 1992.
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 option 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 four years.
Deduction Limit for Executive Compensation
The Omnibus Budget Reconciliation 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
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 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. The impact of the loss of deductions resulting from
the deduction limit in OBRA was not material to the Company in 1995 and is not
expected to be material to the Company in 1996.
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
Lawrence G. Rawl
John L. Weinberg
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
1993, 1994 and 1995 of the Company's Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company in 1995
(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 SARs(1) Payouts sation(3)
($) ($) ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Andrew C. Sigler, 1995 $1,000,000 $2,530,000 $ 3,555 50,000 See note 2 $138,000
Chairman and Chief 1994 925,000 600,000 12,463 50,000 regarding 29,516
Executive Officer 1993 890,000 220,000 5,595 50,000 the 175,276
- --------------------------------------------------------------------------------------- forfeiture -------------
L. C. Heist, 1995 625,000 1,438,000 3,716 35,000 of 81,508
President and Chief 1994 575,000 375,000 6,725 35,000 restricted 118,239
Operating Officer 1993 550,000 172,000 4,650 35,000 performance 85,451
- --------------------------------------------------------------------------------------- shares by -------------
Kenwood C. Nichols, 1995 500,000 1,049,000 4,674 28,000 the named 106,400
Vice Chairman 1994 465,000 285,000 1,464 28,000 executives 107,944
1993 450,000 125,000 3,230 28,000 in 1993. 68,603
- --------------------------------------------------------------------------------------- -------------
William H. Burchfield, 1995 390,000 726,000 1,582 12,000 43,550
Executive Vice 1994 372,000 185,000 3,504 12,000 81,008
President 1993 360,000 105,000 2,238 12,000 25,949
- --------------------------------------------------------------------------------------- -------------
Richard E. Olson, 1995 380,000 726,000 2,677 12,000 52,180
Executive Vice 1994 356,000 185,000 983 12,000 74,541
President 1993 345,000 105,000 2,480 12,000 52,896
- -----------------------------------------------------------------------------------------------------------------
</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 number of restricted performance shares forfeited by the named
executives in 1993 and the value of such shares on the December 31, 1993
forfeiture date were as follows: Mr. Sigler - 20,578 shares with a value
of $686,791; Mr. Heist - 17,250 shares with a value of $575,719; Mr.
Nichols - 11,911 shares with a value of $397,530; Mr. Burchfield - 8,231
shares with a value of $274,710; and Mr. Olson - 9,200 shares with a value
of $307,050.
(3) The amounts in this column for 1995 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 - $138,000;
Mr. Heist - $48,924; Mr. Nichols - $74,446; Mr. Burchfield - $21,172; and
Mr. Olson - $31,950. Company contributions are invested in shares of the
Company's Common Stock under the Savings Plan for Salaried Employees, which
is funded, and are made in units equivalent to shares of the Company's
Common Stock under the Nonqualified Supplemental Savings Plan, which is
unfunded.
The balance of the amounts in this column for 1995 for Messrs. Heist,
Nichols, Burchfield and Olson represents premiums paid by the Company under
the Company's Executive Life Insurance Plan. All employees who are above a
certain compensation grade level, including all of the executive officers,
participate in this plan.
14
<PAGE> 18
OPTION/SAR GRANT TABLE
The following table sets forth information concerning the grant of stock
options and tandem SARs to each of the named executives in 1995.
Option/SAR Grants in 1995
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
--------------------------------------------------------- Value
Number of at Assumed Annual Rates
Securities % of Total of
Underlying Options/ Stock Price Appreciation
Options/ SARs Exercise for Option Term(4)
SARs Granted to or Base -------------------------
Granted(1) Employees Price(3) Expiration 5% 10%
Name (#) in 1995(2) ($/Sh) Date ($) ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Andrew C. Sigler 50,000 8.3%/19.9% $39.125 March 15, 2005 $1,230,275 $3,117,759
L. C. Heist 35,000 5.8%/14.0% 39.125 March 15, 2005 861,193 2,182,431
Kenwood C. Nichols 28,000 4.6%/11.2% 39.125 March 15, 2005 688,954 1,745,945
William H. Burchfield 12,000 2.0%/ 4.8% 39.125 March 15, 2005 295,266 748,262
Richard E. Olson 12,000 2.0%/ 4.8% 39.125 March 15, 2005 295,266 748,262
- --------------------------------------------------------------------------------------------------------------
</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 15, 1995 and became exercisable on March
15, 1996, 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 15, 1996 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 1995
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 1995 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 1995.
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 1995, the price of a share
of the Company's Common Stock would be $63.73 at an assumed annual
appreciation rate of 5% and $101.48 at an assumed annual appreciation rate
of 10%. Gains to all Common shareholders at those assumed annual
appreciation rates would be approximately $2.35 billion and $5.96 billion,
respectively, over the term of the 1995 options.
- --------------------------------------------------------------------------------
OPTION/SAR EXERCISE AND YEAR-END VALUES TABLE
The following table sets forth information with respect to each of the
named executives concerning the exercise of stock options and tandem SARs in
1995 and concerning unexercised stock options and tandem SARs held at December
31, 1995.
Aggregated Option/SAR Exercises in 1995
and Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Number of Securities Value of Unexercised
Underlying Underlying Unexercised In-the-Money Options/SARs at
Options/SARs Value Options/SARs at Year-End Year-End(2)
Exercised Realized(1) (#) ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Andrew C. Sigler 367,000 $9,385,125 188,000 50,000 $1,799,250 $143,750
L. C. Heist 155,500 4,417,125 170,000 35,000 2,313,125 100,625
Kenwood C. Nichols 34,000 813,875 126,000 28,000 1,704,500 80,500
William H. Burchfield 21,900 535,519 64,800 12,000 819,600 34,500
Richard E. Olson 35,300 891,450 24,000 12,000 316,500 34,500
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts reported in this column as values realized in 1995 derived from
the exercise of grants that were made between 1985 and 1993.
(2) The amounts in these columns are based upon the $42.00 closing price of a
share of the Company's Common Stock on December 29, 1995 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
Average -------------------------------------------------------------------------------------
Annual 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
Earnings of Service of Service of Service of Service of Service of Service
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 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
2,250,000 562,500 750,000 937,500 1,125,000 1,312,500 1,500,000
2,500,000 625,000 833,333 1,041,667 1,250,000 1,458,333 1,666,667
- ----------------------------------------------------------------------------------------------------
</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 - $718,911 / 32 years; Mr. Heist - $1,251,878 / 38
years; Mr. Nichols - $968,930 / 23 years; Mr. Olson - $706,061 / 29 years; and
Mr. Sigler - $2,065,183 / 39 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 the agreements, upon
retirement Messrs. Heist, Nichols and Sigler may elect to receive the
17
<PAGE> 21
present value of all of their retirement benefits, other than the portion
attributable to the qualified pension plan, in a lump sum, subject to the
approval of the Company's Board of Directors.
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.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has employment agreements with Messrs. Heist, Nichols and
Sigler which provide for a minimum monthly 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 $171,917, $129,083 and $294,167,
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".
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 $93,000 and $92,167, 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 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 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, an index of peer companies (the
"Commodity Paper Group") selected by the Board of Directors and the Standard &
Poor's 500 Stock Index (the "S&P 500 Index"). 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, 1990 in the Common Stock of the Company,
the Commodity Paper Group and the S&P 500 Index. Total return assumes the
quarterly reinvestment of dividends.
Comparison of Five-Year Cumulative Total Return
among Champion,
Commodity Paper Group and S&P 500 Index
<TABLE>
<CAPTION>
Measurement Period Commodity
(Fiscal Year Covered) Champion Paper Group S&P 500
<S> <C> <C> <C>
1990 $100.00 $100.00 $100.00
1991 94.56 139.43 130.34
1992 114.11 151.13 140.25
1993 133.29 166.82 154.32
1994 146.64 173.16 156.42
1995 169.45 184.10 214.99
</TABLE>
TRANSACTIONS
Certain affiliates of Chemical Banking Corporation ("Chemical"), of which
Mr. Shipley was Chairman and Chief Executive Officer and Mr. Sigler was a
director, provided credit to the Company and its subsidiaries in 1995. The
largest amount of borrowings by the Company and its subsidiaries from affiliates
of Chemical outstanding at any time during 1995 was $394,549,788. Interest rates
on virtually all of such borrowings ranged from 6.625% to 6.6875%, commitment
fees on a substantial portion of the credit facilities were 15/100 of 1% and
origination fees with respect to certain of such borrowings totaled $400,000. In
addition, a Chemical affiliate performed underwriting services for the Company
for which it was paid fees totaling $196,000, and the Company's Brazilian
subsidiary invested an average of $3,600,000 in export notes purchased through a
Chemical affiliate and an average of $13,000,000 in certificates of deposit
issued by a Chemical affiliate.
All transactions between the Company and its subsidiaries and affiliates of
Chemical 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. The Company anticipates that affiliates of The Chase Manhattan
Corporation, with which
19
<PAGE> 23
Chemical merged on March 31, 1996 and of which Mr. Shipley is Chairman and Chief
Executive Officer and Mr. Sigler is a director, will provide similar services in
the ordinary course of business in the future.
Effective December 31, 1995, the Company renewed its director and officer
liability insurance policies with Federal Insurance Company, National Union Fire
Insurance Company of Pittsburgh, Pa. and Great American Insurance Company for
one year at a premium 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 1996, 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 1996.
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" and for the approval of the appointment of Arthur Andersen
LLP as auditors for 1996.
It is not anticipated that any other matters will be presented to the
meeting. If any other matters should be properly presented, the holders of the
proxy will vote the shares represented thereby in accordance with their best
judgment.
Under the Company's By-Laws, a shareholder who intends to make a nomination
for the election of directors or to submit any other proposal for adoption at
any meeting of shareholders must provide written notice of such intention to the
Secretary of the Company in accordance with the prescribed procedure. In
general, the By-Law procedure (the full provisions of which govern) requires
that such notice be received at the Company's principal executive office not
less than 60 nor, in the case of director nominations, more than 90 days before
the meeting and that it set forth the shareholder's name and address and the
number of shares of the capital stock of the Company beneficially owned by the
shareholder, together with such information about the candidate or the proposal
as would be required in a proxy statement.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1997 Annual Meeting
of Shareholders must be received by the Company at its principal executive
office not later than December 12, 1996. Proposals should be directed to the
attention of the Secretary of the Company.
By order of the Board of Directors,
Lawrence A. Fox
Vice President and Secretary
Stamford, Connecticut
April 11, 1996
20
<PAGE> 24
[LOGO]
One Champion Plaza
Stamford, Connecticut 06921
This document is printed on Champion(R) Register Bond/18 lb.
<PAGE> 25
This letter will accompany the 1996 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 AND SAVINGS PLAN FOR HOURLY EMPLOYEES #158
- --------------------------------------------------------------------------------
The Annual Meeting of Champion Shareholders will be held on May 16, 1996.
At this meeting, shareholders will vote on two items which are described in the
Proxy Statement.
As a participant in one or both 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 9,
1996. 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 11, 1996
<PAGE> 26
PROXY
CHAMPION INTERNATIONAL CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL
MEETING OF SHAREHOLDERS -- MAY 16, 1996
The undersigned constitutes and appoints ROBERT A. CHARPIE, LAWRENCE G. RAWL,
WALTER V. SHIPLEY 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 16, 1996 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> 27
<TABLE>
<S> <C>
Please mark -----
your votes X
like this -----
in black
or blue ink.
FOR ALL
WITHHOLD EXCEPT
THE BOARD OF DIRECTORS RECOMMENDS FOR ALL FROM ALL AS NOTED*
A VOTE FOR ITEMS 1 AND 2. ------- ------- -------
Item 1--ELECTION OF DIRECTORS
NOMINEES: Lawrence A. Bossidy,
Robert A. Charpie, ------- ------- -------
Alice F. Emerson, Allan
E. Gotlieb and
Kenwood C. Nichols.
*Withhold from following individual
nominees (if any):
-----------------------------------
Item 2--Appointment of Arthur Andersen LLP as FOR AGAINST ABSTAIN
auditors for 1996. ------- ------- -------
------- ------- -------
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
DESIGNATED DIRECTOR NOMINEES AND FOR ITEM 2.
Dated: ___________________________________________________, 1996
________________________________________________________________
________________________________________________________________
Note: Please sign as name appears hereon. Joint owners should all
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
</TABLE>
<PAGE> 28
CHAMPION INTERNATIONAL CORPORATION
VOTING INSTRUCTIONS TO TRUSTEE
Savings Plan #077 Trustee: The Northern Trust Company
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 and the Champion
International Corporation Savings Plan for Hourly Employees #158, to vote at
the Annual Meeting of Shareholders of Champion International Corporation,
called to be held on May 16, 1996, 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> 29
<TABLE>
<S> <C>
Please mark -----
your votes X
like this -----
in black
or blue ink.
FOR ALL
WITHHOLD EXCEPT
THE BOARD OF DIRECTORS RECOMMENDS FOR ALL FROM ALL AS NOTED*
A VOTE FOR ITEMS 1 AND 2. ------- ------- -------
Item 1--ELECTION OF DIRECTORS
NOMINEES: Lawrence A. Bossidy,
Robert A. Charpie, ------- ------- -------
Alice F. Emerson,
Allan E. Gotlieb and
Kenwood C. Nichols.
*Withhold from following individual
nominees (if any):
-----------------------------------
Item 2--Appointment of Arthur Andersen LLP as FOR AGAINST ABSTAIN
auditors for 1996. ------- ------- -------
------- ------- -------
I understand that this card must be returned no later than May 9, 1996
in the enclosed envelope, if my voting instructions are to be honored. If
it is not received by May 9, 1996 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: ___________________________________________________, 1996
________________________________________________________________
Signature of Participant
</TABLE>
