<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
</TABLE>
Champion International Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
LOGO
One Champion Plaza
Stamford, Connecticut 06921
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1998
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of Champion International Corporation
will be held at One Champion Plaza, Stamford, Connecticut, on Thursday, May 21,
1998 at 9:30 a.m., for the following purposes:
1. To elect five directors, two to serve until the 1999 Annual Meeting of
Shareholders and three to serve until the 2001 Annual Meeting of
Shareholders.
2. To consider and act upon a proposal to approve the appointment of
Arthur Andersen LLP as auditors for 1998.
3. To consider and act upon the shareholder proposals set forth in the
following Proxy Statement.
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on April 2, 1998 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 16, 1998
<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 21, 1998. 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 16, 1998.
VOTING RIGHTS
Only holders of record of the Company's Common Stock at the close of
business on April 2, 1998 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 96,203,689 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,
ChaseMellon 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.
The election of directors requires a plurality of the votes cast. Approval
of each of the other matters being submitted to shareholders requires the
affirmative vote of a majority of the votes cast. Under the law of New York, the
Company's state of incorporation, votes withheld in the election of directors as
well as abstentions and any broker non-votes in connection with the other
matters being submitted to shareholders will not be treated 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 as of December 31, 1997
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.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
- ----------------------------------------------------------------------
<S> <C> <C>
Oppenheimer Capital
Oppenheimer Tower 12,228,415 shares(1) 12.72%
World Financial Center
New York, New York 10281(1)
Wellington Management Company, LLP
75 State Street 6,494,200 shares(2) 6.76%
Boston, Massachusetts 02109(2)
Sanford C. Bernstein & Co., Inc.
767 Fifth Avenue 6,393,931 shares(3) 6.65%
New York, New York 10153(3)
FMR Corp.
82 Devonshire Street 5,608,139 shares(4) 5.83%
Boston, Massachusetts 02109(4)
- ----------------------------------------------------------------------
</TABLE>
The information that is footnoted in the table above and set forth in the notes
below is based upon a Schedule 13G filed with the Securities and Exchange
Commission by each respective shareholder.
(1) In its Schedule 13G, Oppenheimer Capital stated that it has shared voting
and shared dispositive power with respect to all of such shares.
(2) In its Schedule 13G, Wellington Management Company, LLP stated that (i) it
has shared voting power with respect to 200 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, 1997 it
beneficially owned 6,494,000 shares of the Company's Common Stock, with
sole voting and shared dispositive power with respect to all of such
shares; such shares represented 6.76% of the outstanding Common Stock of
the Company.
(3) In its Schedule 13G, Sanford C. Bernstein & Co., Inc. stated that (i) such
shares are held for the accounts of various clients, and (ii) it has sole
voting power with respect to 4,215,525 of such shares, shared voting power
with respect to 356,680 of such shares and sole dispositive power with
respect to all of such shares.
(4) In its Schedule 13G, FMR Corp. stated that (i) such shares collectively are
beneficially owned by two subsidiaries and one former subsidiary
(collectively, the "Fidelity Companies") and are held for the accounts of
various clients, and (ii) the Fidelity Companies collectively have sole
voting power with respect to 294,639 of such shares and sole dispositive
power with respect to all 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 11 directors.
Ten regular meetings and two special meetings of the Board were held in
1997. Eight regular meetings are scheduled for 1998. All directors attended at
least 75% of the Board meetings and meetings of committees on which they served
during 1997. The average attendance by directors at Board meetings and meetings
of committees on which they served was more than 96%.
THE NOMINEES
In accordance with the recommendation of its Committee on Board Affairs,
the Board of Directors has chosen the following individuals, who previously were
elected by the shareholders, as nominees for re-election to the Board: Robert A.
Charpie, H. Corbin Day, Alice F. Emerson, Allan E. Gotlieb and Kenwood C.
Nichols.
Messrs. Charpie and Gotlieb, whose terms expire at the 1998 Annual Meeting
of Shareholders, have been nominated for one-year terms expiring at the 1999
Annual Meeting in accordance with the Company's By-Laws.
The present terms of Ms. Emerson and Mr. Nichols are due to expire at the
1999 Annual Meeting, and the present term of Mr. Day is due to expire at the
2000 Annual Meeting. They have been nominated for three-year terms expiring at
the 2001 Annual Meeting in order to apportion the directors among the three
classes so as to make all classes as nearly equal in number as possible, as
required by the New York Business Corporation Law.
Sybil C. Mobley and John L. Weinberg, whose terms expire at the 1998 Annual
Meeting, will retire from the Board, and the number of directors will be reduced
to nine.
The Company's By-Laws require that directors retire from the Board at the
Annual Meeting of Shareholders following their 70th birthday unless the Board
provides otherwise. In certain cases during the last few years, the Board has
made exceptions to the age-70 retirement provision in accordance with the
By-Laws. These exceptions were made principally so that the Board would have the
benefit of experienced directors during the extensive deliberations that led to
the Company's major management transition in 1996 and major restructuring and
divestiture plan in late 1997. Those key decisions having been made, it is the
intention of the Board going forward that directors not serve beyond the normal
retirement age except in special circumstances. In this regard, as noted above,
Mrs. Mobley and Mr. Weinberg will retire from the Board at the Annual Meeting
this year. Messrs. Charpie and Gotlieb, whose election for one-year terms will
ensure that the Board continues to satisfy the minimum-size requirements of law
and the Company's By-Laws, are expected to retire at next year's 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. The Committee on Board Affairs does not anticipate
that any of the nominees will be unavailable.
3
<PAGE> 7
INFORMATION ON THE NOMINEES AND DIRECTORS
The following table sets forth the names of the nominees and the directors
continuing in office after the 1998 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 63
Robert A. Charpie 1999 1975 72
H. Corbin Day 2001 1997 60
Alice F. Emerson 2001 1993 66
Allan E. Gotlieb 1999 1989 70
Kenwood C. Nichols 2001 1989 58
Richard E. Olson 2000 1996 60
Walter V. Shipley 2000 1983 62
Richard E. Walton 2000 1987 66
- --------------------------------------------------------------------------------------
</TABLE>
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 J.P. Morgan & Co.
Incorporated and 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 Arch Coal, Inc.
Mr. Day has been Chairman of the Board of Jemison Investment Co., Inc., a
diversified holding company and venture capital firm, since 1988. He is a
limited partner and former general partner of Goldman, Sachs & Co., which
provides investment banking and financial advisory services to the Company. He
also is a director of American Heritage Life Investment Corporation, Blount
International, Inc., European Investors Holding Company, Inc. and Hughes Supply,
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, BankBoston Corp. 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 and Hollinger Inc.
Mr. Nichols was elected Vice Chairman and Executive Officer of the Company
in 1996. He has been Vice Chairman and a director of the Company since 1989.
Mr. Olson was elected Chairman and Chief Executive Officer of the Company
in 1996. He had been an Executive Vice President of the Company since 1987.
4
<PAGE> 8
Mr. Shipley is Chairman and Chief Executive Officer of The Chase Manhattan
Corporation. From 1982 to 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 in 1996. He also is a
director of Bell Atlantic Corporation.
Mr. Walton was a professor at the Harvard University Graduate School of
Business Administration, specializing in organizational development and work
innovation in industry, from 1968 to 1997.
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
Richard E. Walton, Chair Lawrence A. Bossidy, Chair
H. Corbin Day Robert A. Charpie
Alice F. Emerson H. Corbin Day
Allan E. Gotlieb John L. Weinberg
Sybil C. Mobley
Committee on Board Affairs Pension Funding and Investment Committee
Robert A. Charpie, Chair Alice F. Emerson, Chair
Lawrence A. Bossidy Allan E. Gotlieb
Walter V. Shipley 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 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 1997.
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 three meetings in 1997.
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 five meetings in 1997.
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 policies with respect to and monitors
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 one meeting in 1997.
5
<PAGE> 9
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company receives an annual
retainer of $22,500 for services as a director and a fee of $1,500 for each
Board meeting attended. Each committee chair receives an annual retainer of
$5,000, and committee members, including chairs, receive a fee of $1,000 for
each committee meeting attended. At each director's election, these fees are
paid quarterly in cash or are deferred quarterly in the form of units equivalent
to shares of the Company's Common Stock; such units accrue dividend equivalents
and are paid in cash following retirement from the Board in the same manner as
the stock units described in the next paragraph.
The Board believes that, in order to further align the interests of outside
directors with the interests of shareholders, directors' compensation should
include a significant component of Company equity. Accordingly, each director
who is not an employee of the Company receives quarterly grants of Common Stock
equivalent units with an annual value of $22,500. These units accrue amounts
equal to dividends paid on the Company's Common Stock, which are credited in the
form of additional units. The value of all of a director's Common Stock
equivalent units (whether received pursuant to the grants described in this
paragraph or pursuant to any elective deferral of fees as described in the
previous paragraph) is paid in cash following his or her retirement from the
Board, in accordance with a schedule selected by the director, based upon the
then-current price of the Company's Common Stock.
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.
Effective January 1, 1997, pensions were eliminated for incumbent and
future directors.
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 31, 1998, 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>
L. Scott Barnard 44,443 1,453 45,896
Lawrence A. Bossidy 2,000 1,909 3,909
Robert A. Charpie 7,621 40,305 47,926
H. Corbin Day 3,000 769 3,769
Joe K. Donald 18,410 37,585 55,995
Alice F. Emerson 430 546 976
Allan E. Gotlieb 1,000 546 1,546
Burton G. MacArthur, Jr. 13,729 1,491 15,220
Sybil C. Mobley 112 1,107 1,219
Kenwood C. Nichols 229,051 4,014 233,065
Richard E. Olson 67,927 3,742 71,669
Richard L. Porterfield 43,367 1,507 44,874
Walter V. Shipley 1,000 6,868 7,868
Richard E. Walton 1,900 5,510 7,410
John L. Weinberg 5,000 14,845 19,845
All directors and
executive officers
as a group(4) 507,934 125,525 633,459
- --------------------------------------------------------------------
</TABLE>
(1) This column includes shares that executive officers have the right to
acquire pursuant to exercisable stock options, as follows: Mr.
Barnard - 38,000 shares; Mr. Donald - 8,000 shares; Mr. MacArthur - 6,800
shares; Mr. Nichols - 197,500 shares; Mr. Olson - 47,000 shares; Mr.
Porterfield - 41,800 shares; and all executive officers as a group - 390,600
shares. The table does not include shares underlying performance share units
and restricted stock units held by executive officers.
(2) Certain directors and executive officers share voting or investment power
with other persons with respect to 23,985 of such shares.
(3) For the outside directors, this column includes the share units discussed
above under "Directors' Compensation" and, in the case of certain directors,
share units representing the settlement of their accrued pension benefit as
of January 1, 1997 under the Company's former retirement plan for outside
directors. For the executive officers, share units represent (i) matching
contributions by the Company and purchases by executive officers 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 incentive 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 less than
1% of the outstanding Common Stock of the Company.
7
<PAGE> 11
EXECUTIVE COMPENSATION
REPORT ON 1997 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") administers the Company's executive compensation program and
determines the compensation of senior management. The Committee is composed
entirely of outside 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 shareholder value. Accordingly, a substantial portion of each
executive's compensation is dependent upon Company financial performance and
appreciation in the price of the Company's Common Stock.
The decisions of the Committee with regard to executive compensation are
made in the context of competitive conditions. The Committee reviews summaries
of surveys prepared by outside compensation consultants with respect to the
compensation levels of approximately 15 other large companies in the forest
products industry (the "Forest Products Group") and approximately 300 large
industrial companies (the "General Industrial Group"). Since the Company
competes for executive talent with companies other than its principal business
competitors, the comparative groups for executive compensation purposes are
broader than the principal business competitor group represented in the
Comparison of Five-Year Cumulative Total Return Graph below.
Recent Changes to the Executive Compensation Program
Following a comprehensive review of the Company's incentive compensation
philosophy, the Committee last year approved significant changes to the
executive compensation program in order to more closely align executive pay with
the interests of the Company's shareholders. These changes are designed to
increase management's focus on the Company's return on capital employed and on
total shareholder return. In addition, executive officers and other key managers
are required to attain specified levels of Common Stock ownership within a
certain period.
* * *
The principal components of the Company's executive compensation program in
1997 were salary; annual incentive compensation; and longer-term, equity-based,
incentive compensation. As discussed below, each of these components serves a
somewhat different purpose in motivating executives to maximize shareholder
value.
Salary
Salary is intended to provide a competitive base level of compensation.
Salary ranges for executive officers are targeted to approximate the 75th
percentile of the Forest Products Group and the median of the General Industrial
Group for substantially similar positions. The salary increase for each
executive officer in 1997 was based upon his individual performance and position
in his salary range. The Committee's evaluation of individual performance
included an assessment of, among other factors, the executive's managerial
skills, leadership qualities and strategic planning capabilities. On this basis,
Mr. Olson received a salary rate increase of 6.7% in January 1997.
Beginning in 1998, executive officers are not eligible for salary increases
on an annual basis unless their salary levels are below the targeted position in
their respective salary range. Under this new system, no salary increases were
granted to certain executive officers, including Messrs. Nichols and Olson, in
January 1998.
8
<PAGE> 12
Annual Incentive Compensation
The primary purpose of annual incentive compensation is to motivate senior
managers, through short-term (one-year) incentives and rewards, to maximize
shareholder value by maximizing the Company's financial performance.
Annual incentive compensation for executive officers is designed so that,
upon the attainment of targeted performance levels, total annual cash
compensation for substantially similar positions approximates the 75th
percentile of the Forest Products Group and the median of the General Industrial
Group. Actual incentive award amounts each year are at, above or below the
designed level depending upon whether performance in that year is at, above or
below targeted levels. In 1997, the incentive award for each executive officer
was based upon two performance measures: (i) the Company's return on capital
employed ("ROCE") in relation to objectives established at the beginning of the
year; and (ii) the executive's individual performance. The ROCE performance
measure had substantially greater weight than the individual performance measure
in determining annual incentive awards.
The performance criteria described above resulted in the incentive awards
for 1997 set forth in the bonus column of the Summary Compensation Table below
for Mr. Olson and each of the other five most highly compensated executive
officers. The awards for all of the executive officers declined substantially
from 1996 and were well below the targeted performance levels for 1997. This
reflects the fact that, notwithstanding the Company's excellent operating
performance last year, its financial performance - as measured by ROCE - was
considerably below the targeted level, primarily due to low pulp and paper
prices.
Longer-Term, Equity-Based, Incentive Compensation
The primary purpose of longer-term, equity-based, incentive compensation is
to motivate senior managers to maximize shareholder value by linking a portion
of their compensation directly to shareholder return. In 1997, the Company's
equity-based compensation for executive officers consisted of grants of stock
options and performance share units. These grants provide value to executives
only when the Company's shareholders benefit from appreciation in the price of
the Company's Common Stock.
Equity-based, incentive compensation for executive officers is targeted at
the median of the Forest Products Group and the General Industrial Group for
substantially similar positions. In order to maintain the value of such
compensation at approximately the same level in 1997 as in 1996, fewer options
were granted to executive officers in 1997 because of the grant of performance
share units in 1997. The exception was Mr. Olson, who received more options last
year than in 1996 because of his promotion to the office of Chairman and Chief
Executive Officer.
Equity-based compensation is granted as an incentive for the future rather
than as a reward for the past. Consequently, the size of the award generally is
a function of the executive's grade level and does not vary with Company
performance. The size of the award is not affected by the amount of equity-based
compensation previously granted to, or held at the time by, an executive.
Performance share units were granted in lieu of a portion of the normal
stock option award in order to tie a significant part of equity-based
compensation to a very aggressive total shareholder return ("TSR") goal. As
described under "Long-Term Incentive Plan Awards Table" below, performance share
units will be earned out only if this aggressive TSR goal is achieved within
three years from the date of grant. If the TSR goal is not achieved, there will
be no earn-out, and the performance share units will be forfeited.
9
<PAGE> 13
Deduction Limit for Executive Compensation
For federal income tax purposes, a public company may not deduct
compensation in excess of $1 million paid in any year to its Chief Executive
Officer or any of its other four most highly compensated executive officers.
However, compensation that is deferred until retirement or is paid solely on
account of the attainment of objective performance goals is not subject to the
$1 million deduction limit.
Compensation attributable to the exercise of stock options is fully
deductible by the Company. In addition, as the result of the deferral provisions
of the Company's performance share unit awards in 1997 and restricted stock unit
awards in 1996, no loss of deductions is anticipated upon the vesting of those
units.
Since annual incentive compensation awards are not paid solely upon the
attainment of objective performance goals, the deduction limit does apply to
such awards. However, the impact of the loss of deductions resulting from the
deduction limit was not material to the Company in 1997. In view of the
anticipated compensation levels for the executive officers in 1998, no loss of
deductions is expected this year. The Committee believes that the purposes of
the Company's executive compensation program are better served by basing annual
incentive compensation on the combination of an objective Company performance
goal (ROCE) and individual performance evaluations rather than exclusively on
mechanistic criteria that allow no opportunity for Committee judgment regarding
important intangible factors.
* * *
Compensation and Stock Option Committee
Lawrence A. Bossidy, Chair
Robert A. Charpie
H. Corbin Day
John L. Weinberg
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Day is one of the four outside directors who comprise the Compensation
and Stock Option Committee of the Board of Directors. He is a limited partner
and former general partner of Goldman, Sachs & Co., which provides investment
banking and financial advisory services to the Company.
Mr. Day retired as a general partner of Goldman Sachs in 1986. Since then,
he has had no role in the management of and has not shared in the profits of
Goldman Sachs. As a limited partner, his financial interest in Goldman Sachs
consists solely of the receipt of a fixed rate of return on the capital
contribution that he made to the firm prior to his retirement as a general
partner. This return is not dependent upon or affected in any way by the
services that Goldman Sachs performs for the Company.
10
<PAGE> 14
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
1995, 1996 and 1997 of the Company's Chief Executive Officer and each of the
other five most highly compensated executive officers of the Company in 1997
(collectively, the "named executives").
Summary Compensation Table
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation Awards
-------------------------------------------------------------------------------
Other Securities
Annual Restricted Underlying
Name and Compen- Stock Options/
Principal Salary(3) Bonus sation(4) Units(5) SARs(6)
Position Year ($) ($) ($) ($) (#)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Olson, 1997 $800,000 $ 300,000 $ 1,071 0 23,000
Chairman and 1996 587,500 700,000 10,338 $2,212,500 12,000
Chief Executive Officer(1) 1995 380,000 726,000 2,677 0 12,000
- -------------------------------------------------------------------------------------------------------------------------
Kenwood C. Nichols, 1997 665,000 250,000 843 0 15,500
Vice Chairman and 1996 600,000 550,000 1,198 1,991,250 28,000
Executive Officer(2) 1995 500,000 1,049,000 4,674 0 28,000
- -------------------------------------------------------------------------------------------------------------------------
Joe K. Donald, 1997 460,000 170,000 449 0 8,000
Executive Vice 1996 413,333 261,400 15,414 1,770,000 12,000
President 1995 350,000 726,000 2,035 0 12,000
- -------------------------------------------------------------------------------------------------------------------------
L. Scott Barnard, 1997 424,000 140,000 420 0 8,000
Executive Vice 1996 366,667 261,400 14,736 1,770,000 10,000
President 1995 275,000 637,000 1,772 0 8,000
- -------------------------------------------------------------------------------------------------------------------------
Burton G. MacArthur, Jr., 1997 397,000 115,000 494 0 6,800
Executive Vice 1996 361,667 200,700 9,457 1,548,750 10,000
President 1995 300,000 637,000 1,126 0 10,000
- -------------------------------------------------------------------------------------------------------------------------
Richard L. Porterfield, 1997 371,000 135,000 352 0 6,800
Executive Vice 1996 350,000 229,400 669 1,416,000 10,000
President 1995 300,000 637,000 1,287 0 10,000
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
----------------
All
Other
Name and Compen-
Principal sation(7)
Position ($)
- ------------------------------- ----------------
<S> <C>
Richard E. Olson, $167,777
Chairman and 167,502
Chief Executive Officer(1) 52,180
- -------------------------------------------------
Kenwood C. Nichols, 152,186
Vice Chairman and 163,542
Executive Officer(2) 106,400
- -------------------------------------------------
Joe K. Donald, 81,870
Executive Vice 138,173
President 49,825
- -------------------------------------------------
L. Scott Barnard, 100,167
Executive Vice 99,102
President 38,342
- -------------------------------------------------
Burton G. MacArthur, Jr., 87,717
Executive Vice 93,484
President 37,902
- -------------------------------------------------
Richard L. Porterfield, 69,575
Executive Vice 87,921
President 43,733
- -------------------------------------------------
</TABLE>
(1) Mr. Olson was elected Chairman and Chief Executive Officer in 1996. He had
been an Executive Vice President since 1987.
(2) Mr. Nichols was elected Vice Chairman and Executive Officer in 1996. He has
been Vice Chairman since 1989.
(3) Messrs. Olson, Nichols, Donald, Barnard and MacArthur received special
salary increases in mid-1996 to reflect their respective promotions and
assumption of additional responsibilities in connection with the Company's
major management transition in 1996. The increase in the salary paid to each
of those named executives in 1997 compared with 1996, as set forth in this
column, (i) primarily reflects the fact that the 1996 salary gives only
partial-year effect, while the 1997 salary gives full-year effect, to the
special increase, and (ii) to a lesser extent, reflects the annual salary
increase granted in 1997.
11
<PAGE> 15
(4) The amounts in this column represent certain tax payments made by the
Company on behalf of the named executives.
(5) The amounts in this column represent the market value of the restricted
stock units as of the date of grant in 1996. The number of restricted stock
units granted to each of the named executives was as follows: Mr.
Olson - 50,000 units; Mr. Nichols - 45,000 units; Mr. Donald - 40,000 units;
Mr. Barnard - 40,000 units; Mr. MacArthur - 35,000 units; and Mr.
Porterfield - 32,000 units. The restricted stock units will vest in
accordance with the following schedule if the named executive is employed by
the Company on the applicable vesting date: 30% on August 15, 1998; 30% on
August 15, 2000; and 40% on August 15, 2002.
For a description of the performance share units granted to each of the
named executives in 1997, see "Long-Term Incentive Plan Awards Table" below.
As of year-end 1997, the number and market value of the restricted stock
units and performance share units in the aggregate held by each of the named
executives were as follows: Mr. Olson - 95,600 units ($4,331,875); Mr.
Nichols - 80,000 units ($3,625,000); Mr. Donald - 60,000 units ($2,718,750);
Mr. Barnard - 60,000 units ($2,718,750); Mr. MacArthur - 49,600 units
($2,247,500); and Mr. Porterfield - 46,600 units ($2,111,563). The
information in the preceding sentence reflects an assumed target performance
level for the performance share units, although in fact they are subject to
forfeiture in their entirety if the total shareholder return goal is not
achieved before March 19, 2000. Dividend equivalents are not paid or
credited with respect to the restricted stock units or performance share
units.
(6) The numbers in this column represent shares underlying options to purchase
Common Stock. Options granted in 1995 and 1996 have tandem stock
appreciation rights ("SARs"). To the extent that a stock option or an SAR is
exercised, the tandem grant is canceled. Options granted in 1997 do not have
tandem SARs.
(7) The amounts in this column for 1997 include matching contributions by the
Company to accounts under the Savings Plan for Salaried Employees and the
Nonqualified Supplemental Savings Plan, as follows: Mr. Olson - $45,000; Mr.
Nichols - $36,450; Mr. Donald - $21,642; Mr. Barnard - $20,562; Mr.
MacArthur - $23,345; and Mr. Porterfield - $18,012. Company contributions
are invested in shares of the Company's Common Stock under the Savings Plan
for Salaried Employees, which is funded, and are made in units equivalent to
shares of the Company's Common Stock under the Nonqualified Supplemental
Savings Plan, which is unfunded.
The balance of the amounts in this column for 1997 represents premiums paid
by the Company under the Company's Executive Life Insurance Plan. All
employees who are above a certain compensation grade level, including all of
the executive officers, participate in this plan.
12
<PAGE> 16
OPTION/SAR GRANT TABLE
The following table sets forth information concerning the grant of stock
options to each of the named executives in 1997.
Option/SAR Grants in 1997
<TABLE>
<CAPTION>
Potential Realizable
Value
at Assumed Annual
Rates of
Stock Price Appreciation
Individual Grants(1) for Option Term(3)
------------------------------------------------------- -------------------------
Number of
Securities % of Total
Underlying Options/
Options/ SARs Exercise
SARs Granted to or Base
Granted Employees Price(2) Expiration 5% 10%
Name (#) in 1997 ($/Sh) Date ($) ($)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Richard E. Olson 23,000 3.4% $44.625 March 19, 2007 $645,482 $1,635,777
Kenwood C. Nichols 15,500 2.3% 44.625 March 19, 2007 434,999 1,102,372
Joe K. Donald 8,000 1.2% 44.625 March 19, 2007 224,515 568,966
L. Scott Barnard 8,000 1.2% 44.625 March 19, 2007 224,515 568,966
Burton G. MacArthur, Jr. 6,800 1.0% 44.625 March 19, 2007 190,838 483,621
Richard L. Porterfield 6,800 1.0% 44.625 March 19, 2007 190,838 483,621
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No SARs were granted to the named executives or any other employees in 1997.
All of the stock options awarded last year were granted on March 19, 1997
and became exercisable on March 19, 1998, 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 at any time prior to March 19, 1998 upon its
determination of the existence of a special or extraordinary situation, it
did not exercise this authority.
Reference is made to "Employment and Severance Agreements" below for a
description of the cash settlement of stock options held by the named
executives upon any termination of employment without cause within three
years after a change in control of the Company.
(2) 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.
(3) At the end of the term of the options granted in 1997, the price of a share
of the Company's Common Stock would be $72.69 at an assumed annual
appreciation rate of 5% and $115.75 at an assumed annual appreciation rate
of 10%. Gains to all shareholders at those assumed annual appreciation rates
would be approximately $2.7 billion and $6.8 billion, respectively, over the
term of the 1997 options.
13
<PAGE> 17
OPTION/SAR EXERCISE AND YEAR-END VALUES TABLE
The following table sets forth information with respect to each of the
named executives concerning the exercise of stock options and tandem SARs in
1997 and concerning unexercised stock options and tandem SARs held at December
31, 1997.
Aggregated Option/SAR Exercises in 1997
and Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Number of Securities In-the-Money
Underlying Underlying Unexercised Options/SARs
Options/SARs Value Options/SARs at Year-End at Year-End(2)
Exercised Realized(1) (#) ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Richard E. Olson 0 0 24,000 23,000 $ 74,250 $15,813
Kenwood C. Nichols 0 0 182,000 15,500 2,295,125 10,656
Joe K. Donald 24,000 $ 515,250 0 8,000 0 5,500
L. Scott Barnard 13,900 478,044 30,000 8,000 228,250 5,500
Burton G. MacArthur, Jr. 40,000 1,158,750 0 6,800 0 4,675
Richard L. Porterfield 0 0 35,000 6,800 272,188 4,675
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts reported in this column as values realized in 1997 derived from
the exercise of grants that were made between 1988 and 1996.
(2) The amounts in these columns are based upon the $45.3125 closing price of a
share of the Company's Common Stock on December 31, 1997 on the New York
Stock Exchange Composite Transactions.
14
<PAGE> 18
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table sets forth information with respect to each of the
named executives concerning the grant of performance share units in 1997 and the
potential earn-out of shares of the Company's Common Stock pursuant to such
grant.
Long-Term Incentive Plan Awards in 1997
<TABLE>
<CAPTION>
Estimated Future Payouts
Number of (Number of Shares)
Performance Performance ----------------------------
Name Share Units Period Threshold Target Maximum
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
Richard E. Olson 45,600 3/19/97-3/18/00 36,480 45,600 77,520
Kenwood C. Nichols 35,000 3/19/97-3/18/00 28,000 35,000 59,500
Joe K. Donald 20,000 3/19/97-3/18/00 16,000 20,000 34,000
L. Scott Barnard 20,000 3/19/97-3/18/00 16,000 20,000 34,000
Burton G. MacArthur, Jr. 14,600 3/19/97-3/18/00 11,680 14,600 24,820
Richard L. Porterfield 14,600 3/19/97-3/18/00 11,680 14,600 24,820
- --------------------------------------------------------------------------------------
</TABLE>
Performance share units were granted in lieu of a portion of normal stock
option awards in 1997 in order to tie a significant part of equity-based
compensation to a very aggressive goal relating to total shareholder return
(stock price appreciation plus dividend yield) ("TSR"). These units entitle the
executives, upon earn-out, to receive shares of the Company's Common Stock. The
earn-out of shares is dependent upon TSR increasing, at any time within three
years from the date of grant (i.e., at any time before March 19, 2000), to a
value equivalent to approximately 15% per annum compounded for three years. If
the TSR goal is achieved, then, depending upon the Company's TSR during the
performance period relative to an industry peer group, the number of shares
earned out will range from 80% to 170% of the number of performance share units
granted. In the table above, the threshold, target and maximum potential payouts
correspond to earn-out levels equal to 80%, 100% and 170%, respectively, of the
number of performance share units granted. If the TSR goal is not achieved, no
shares will be earned out, and the performance share units will be forfeited.
15
<PAGE> 19
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.
Average annual earnings covered by the program consist of (1) the average of the
salaries reported in the Summary Compensation Table for the applicable years,
plus (2) the higher of (a) the average of the bonuses reported in the Summary
Compensation Table for such years or (b) the average of the bonuses paid in such
years but earned in, and reported in the Summary Compensation Table for, the
immediately preceding years.
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 age 65 or upon early
retirement after age 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
Earnings of Service of Service of Service of Service of Service
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 500,000 $125,000 $166,667 $208,333 $ 250,000 $ 291,667
750,000 187,500 250,000 312,500 375,000 437,500
1,000,000 250,000 333,333 416,667 500,000 583,333
1,250,000 312,500 416,667 520,833 625,000 729,167
1,500,000 375,000 500,000 625,000 750,000 875,000
1,750,000 437,500 583,333 729,167 875,000 1,020,833
2,000,000 500,000 666,667 833,333 1,000,000 1,166,667
</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. Olson - $1,199,934 / 31 years; Mr. Nichols - $1,218,987 / 25 years;
Mr. Donald - $804,677 / 31 years; Mr. Barnard - $715,503 / 29 years; Mr.
MacArthur - $687,122 / 23 years; and Mr. Porterfield - $684,133 / 19 years.
Messrs. Nichols and Olson have agreements with the Company which provide
for annual retirement benefits of 60% 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. The retirement benefit for Mr. Olson will increase
to 65% of average annual earnings if he remains employed by the Company until
August 10, 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. Nichols and Olson equal to
60% of the retirement benefit payable thereunder to the respective executives
during their lifetime. Under the agreements, upon retirement Messrs. Nichols and
Olson may elect to receive the 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.
16
<PAGE> 20
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has employment agreements with Messrs. Nichols and Olson which
provide for minimum annual salaries of $375,000 and $800,000, respectively. If
employment is terminated by the Company without cause, Messrs. Nichols and Olson
are entitled to severance pay for two years (but not beyond age 65) at annual
rates of $1,549,000 and $1,287,500, 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. Barnard, Donald, MacArthur and
Porterfield which provide generally 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 annual rates of $912,000, $1,076,000, $937,000 and $937,000,
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 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.
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
"Peer Group") and the Standard & Poor's 500 Stock Index (the "S&P 500 Index").
The Peer Group consists of the following major forest products companies: Boise
Cascade Corporation, Georgia-Pacific Corporation (including both the
Georgia-Pacific Group Common Stock and the Georgia-Pacific Timber Group Common
Stock), International Paper Company, Stone Container Corporation, Union Camp
Corporation and Weyerhaeuser Company. The graph assumes that $100 was invested
on December 31, 1992
17
<PAGE> 21
in Champion Common Stock, Peer Group Common Stock and the S&P 500 Index. Total
return assumes the quarterly reinvestment of dividends.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Champion Peer Group S&P 500
<S> <C> <C> <C>
1992 $100.00 $100.00 $100.00
1993 116.80 110.40 110.10
1994 128.50 114.60 111.50
1995 148.50 121.80 153.40
1996 153.60 132.60 188.60
1997 161.60 144.30 251.50
</TABLE>
TRANSACTIONS
Certain affiliates of The Chase Manhattan Corporation ("Chase"), of which
Mr. Shipley is Chairman and Chief Executive Officer, provided credit to and
performed various other financial services for the Company and its subsidiaries
in 1997. The largest amount of borrowings by the Company and its subsidiaries
from affiliates of Chase outstanding at any time during 1997 was $40,000,000.
Affiliates of FMR Corp. purchased $862,723 of merchandise from the Company
in 1997. As noted above, FMR Corp. beneficially owned 5.83% of the Common Stock
of the Company as of December 31, 1997.
All transactions between the Company and its subsidiaries, on the one hand,
and affiliates of Chase and FMR Corp., respectively, on the other hand, were
made in the ordinary course of business and on substantially the same terms as
those prevailing at the time for comparable transactions with other persons.
Effective December 31, 1997, the Company renewed its director and officer
liability insurance policies with Federal Insurance Company, Great American
Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pa.
for one year at a premium of $529,000. 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 1998, 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 1998.
18
<PAGE> 22
SHAREHOLDER PROPOSALS
Certain shareholders have notified the Company that the following proposals
will be presented at the Annual Meeting. The proposals have been provided by the
respective proponents, and the Company is not responsible for the statements
contained therein. The proposals include certain assertions about the Company
which the Board of Directors believes are inaccurate. Rather than addressing
each of those assertions, however, the Board has recommended a vote against the
proposals for the broader policy reasons set forth following each proposal.
- -- SHAREHOLDER PROPOSAL - USE OF CHLORINE
The General Board of Pension and Health Benefits of the United Methodist
Church, 1201 Davis Street, Evanston, Illinois 60201, the owner of 94,700 shares
of Common Stock, and three other organizations (whose names, addresses and
shareholdings will be furnished promptly upon oral or written request to the
Secretary of the Company) have notified the Company that the following proposal
will be presented at the Annual Meeting.
The preamble and resolution are as follows:
"WHEREAS: our company claims to be environmentally responsible, yet uses
chlorine-based bleach chemicals that produce dioxin and many other persistent
pollutants known to harm human and environmental health in even minute
quantities;
Dioxins, furans, and other organochlorines are created whenever
chlorine-based chemicals are used. These chemicals pass up the food chain,
accumulating in living organisms. In humans, it is apparent that miniscule
amounts contribute to reproductive failure, birth defects, immune suppression,
and cancer. In children, they are linked to developmental impairment, hormonal
disruption, and behavioral disorders;
Distinguished world bodies, including the:
- World Bank
- American Public Health Association
- International Joint Commission on the Great Lakes
- Intergovernmental Forum on Chemical Safety
publicly recognize the significant risks posed by chlorine-based pulp and paper
bleaching. These significant scientific and economic viewpoints demonstrate
worldwide support for phasing-out the industrial use of chlorine-containing
compounds;
New regulations set minimum bleach standards as 100% chlorine dioxide. But
chlorine dioxide perpetuates organochlorine contamination, and represents a
costly and imprudent investment when commercially available technologies that
eliminate chlorinated compounds are in successful use by our global competitors;
US EPA recognizes 'technology options more advanced [emphasis added] than
the technology option ultimately selected as BAT [chlorine
dioxide] . . . . qualifying technologies might include processes employing
extended delignification, ozone based bleaching sequences, totally chlorine-free
(TCF) bleaching [emphasis added], process wastewater flow reduction (i.e.,
technologies which move mills toward closed loop operation), or other
combinations of technologies.'
According to EPA: 'total chlorine free bleaching, while still evolving,
provides significant benefits such as elimination of chlorinated pollutants
[emphasis added] to the environment and allows bleach plant effluents to be
recycled . . . [this] moves the mill further toward the closed mill concept';
Closed-loop mills are possible because totally chlorine-free (TCF)
technologies eliminate highly corrosive chlorine dioxide. Chlorine dioxide's
corrosiveness wears out mill equipment more rapidly, resulting in accelerated
capital replacement and higher costs. Closed-loop mills would allow tremendous
savings through the reduction and reuse of chemicals, energy and water;
19
<PAGE> 23
Dangerously unstable, chlorine dioxide also threatens worker health and
safety, we feel, driving up costs and reducing productivity. The paper
industry's record of adopting innovative technology is one of the country's
lowest when compared to other US industrial sectors;
Using TCF technology would enable Champion to compete for global TCF
markets. The world's largest paper market (Europe) has moved from less than 5%
to over 25% TCF just since 1991. Champion cannot sell to world TCF markets if it
only produces with chlorinated chemicals;
Chlorine-based bleaching inevitably releases persistent organochlorine
toxins, and results in higher health and safety costs. Our company should
phase-out chlorine-based compounds in its production;
RESOLVED: it is requested that our company report by the 1999 annual
meeting on a schedule to phase-out the use of chlorine-based compounds from its
pulp and paper production."
The supporting statement is as follows:
"Champion should not be committed to chlorine-based chemicals, but rather
to comprehensive solutions. Chlorine dioxide has significant problems that have
yet to be overcome: high corrosiveness, explosiveness, and toxicity. The use of
chlorine dioxide reduces global opportunities and results in higher long-term
operating costs.
It seems clear from scientific research that NO safe or 'acceptable' level
of exposure to many organochlorine chemicals exists. Reliance on chlorine
dioxide bleaching postpones the adoption of proven TCF technologies. To be an
environmental and technological innovator, Champion must use technology that
eliminates organochlorines from pulp and paper production."
STATEMENT BY THE BOARD OF DIRECTORS IN OPPOSITION TO THE PROPOSAL
After several years of study and deliberation, the United States
Environmental Protection Agency (EPA) issued new regulations under the federal
Clean Water Act late last year. The regulations applicable to the production of
bleached kraft pulp are based upon the elemental-chlorine-free (ECF)
pulp-bleaching process rather than the totally-chlorine-free (TCF) process
advocated by the proponents. The ECF technology substitutes chlorine dioxide for
elemental chlorine in the manufacture of pulp, which virtually eliminates the
inadvertent creation of the substances that are the cause of concern in
bleaching with elemental chlorine, including dioxin. In the preamble to its new
regulations, the EPA states that ECF bleaching "achieves greater environmental
benefits than any other economically achievable technology considered by the EPA
and, for that reason, also represents the best technology among those
considered" (emphasis added).
The Company already has installed the ECF technology at most of its fully
bleached kraft mills in the United States, years ahead of the EPA's compliance
deadline and well in advance of much of the industry. This technology will be in
place at all such Company mills by the end of 2000. In addition, the Company has
exceeded the requirements of the new regulations by investing in another major
environmental technology that is recognized as even "more advanced" by the EPA;
the Company has installed oxygen delignification, which enhances the
environmental benefits of the ECF process by significantly reducing the amount
of bleaching chemicals used in the manufacture of pulp, at all of its fully
bleached kraft mills.
Recent scientific studies by the Finnish Environment Agency, the Swedish
Environmental Protection Agency and the International Institute for Environment
and Development concluded that there is no appreciable environmental difference
between the ECF bleaching process being installed by the Company and the TCF
process advocated by the proponents. Similarly, a scientific panel report
released in December 1997 determined that ECF bleaching presents a negligible
risk to aquatic ecosystems and has been highly effective in eliminating risks
previously associated with bleaching processes that utilize elemental chlorine.
The market for ECF pulp is much larger than for TCF pulp and continues to
grow. According to the Alliance for Environmental Technology, ECF pulp
production worldwide increased by 12% in 1997 and accounted for 50% of the
20
<PAGE> 24
world market. On the other hand, TCF pulp production did not increase in 1997
and accounted for only 6% of the world market and less than 1% of the United
States market.
The Company is proud of its environmental performance in general and of its
record in dealing with chlorine-based compounds in particular. The installation
of the ECF and oxygen delignification technologies is being accomplished in a
planned capital program, at substantial cost to the Company. Converting to TCF
production, we believe, would render much of this equipment obsolete and require
significant capital expenditures during the phase-out period for different
process equipment. Such significant expenditures, in our view, would result in
no environmental, safety or marketing benefit.
At last year's Annual Meeting, the Company's shareholders rejected this
same proposal by more than 96% of the votes cast. For the reasons discussed
above, the Board of Directors believes that the proposal should again be
rejected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
- -- SHAREHOLDER PROPOSAL - CUMULATIVE VOTING
Ms. Park Overall, 4843 Arcola Avenue, North Hollywood, California 91601,
the owner of 100 shares of Common Stock, has notified the Company that the
following proposal will be presented at the Annual Meeting.
The resolution is as follows:
"RESOLVED: That the stockholders of Champion International Corporation,
assembled in an annual meeting in person and by proxy, request the Board of
Directors to take the steps necessary to provide for cumulative voting in the
election of directors, which means each stockholder shall be entitled to as many
votes as shall equal the number of shares he or she owns multiplied by the
number of directors to be elected, and he or she may cast all of such votes for
a single candidate, or any two or more of them as he or she wishes."
The supporting statement is as follows:
"I believe the board of directors of Champion International Corporation
should adopt cumulative voting in the election of directors as part of its
program of corporate governance.
Provision for cumulative voting brings to the corporate system a means by
which a significant group of stockholders, though in the minority, can elect
candidates of its choice, making a more diverse board of directors.
If you agree, please mark your proxy for the resolution. All marked proxies
will be voted in favor, against or as an abstention to the proposal, as
designated by the shareholder on the proxy card. The Company will vote unmarked
proxies against the proposal, using its discretionary voting authority."
STATEMENT BY THE BOARD OF DIRECTORS IN OPPOSITION TO THE PROPOSAL
Cumulative voting would permit the election of one or more directors by a
relatively small group of shareholders. Directors so elected by a particular
group might represent the narrow, special interests of that group rather than
the interests of all shareholders. In addition, cumulative voting would
introduce the possibility of factionalism within the Board, impairing the
ability of Board members to work together effectively and discouraging qualified
individuals from serving as directors.
The Board believes that each director should represent the interests of all
of the Company's shareholders. This principle is best served under the present
system, which provides for the election of each director by a plurality of the
votes cast by the shareholders as a whole rather than by the vote of a minority
constituency.
The use of cumulative voting has declined significantly over the years.
Many companies have eliminated cumulative voting, and most states that once
mandated cumulative voting in corporate elections have repealed that
requirement. Today, fewer than 15% of large companies use cumulative voting.
21
<PAGE> 25
The statement in support of the proposal suggests that cumulative voting
would make for a more diverse Board of Directors. In fact, the present system
has resulted in the election of a very diverse and independent Board. For many
years the Board has reflected diversity in terms of experience, background and
gender. In addition, for decades a substantial majority of the Board, including
all members of all standing committees of the Board, have been outside
directors.
The Board of Directors supports the present system of electing directors
because it provides the best assurance that each director will act for the
benefit of all shareholders rather than for the benefit of special interest
groups.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
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 1998 and against the shareholder proposals set forth above.
The Board of Directors is not aware of any other matters to be presented
for action at the meeting, except for the possible presentation of a shareholder
proposal that has been omitted from the Proxy Statement in accordance with the
federal securities laws. If any other matters, including the omitted shareholder
proposal, shall properly come before the meeting, the persons named in the
accompanying 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 1999 ANNUAL MEETING
In order to be considered for inclusion in the Proxy Statement for the 1999
Annual Meeting of Shareholders, shareholder proposals must be received by the
Company not later than December 17, 1998. Proposals should be directed to the
attention of the Secretary, Champion International Corporation, One Champion
Plaza, Stamford, Connecticut 06921.
By order of the Board of Directors,
Lawrence A. Fox
Vice President and Secretary
Stamford, Connecticut
April 16, 1998
22
<PAGE> 26
Logo
One Champion Plaza
Stamford, Connecticut 06921
This document is printed on Champion(R) Register Bond/18 lb.
<PAGE> 27
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 21, 1998.
At this meeting, shareholders will vote on four 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 14,
1998. 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 (Chamcon
8-868-5441 or 513-868-5441) if you have any questions.
Kenwood C. Nichols
Chairman, Pension and Employee Benefits Committee
Vice Chairman and Executive Officer, Champion International Corporation
April 16, 1998
<PAGE> 28
CHAMPION INTERNATIONAL CORPORATION
VOTING INSTRUCTIONS TO TRUSTEE OF
Savings Plan #077
and
Savings Plan for Hourly Employees #158
The undersigned hereby directs State Street Bank and 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 21, 1998, 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
Please mark
your votes ---
like this X
in black ---
or blue ink
- ------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
- ------------------------------------------------------------------------------
WITHHOLD FOR ALL EXCEPT
FOR ALL FROM ALL AS NOTED*
--- --- ---
Item 1 - ELECTION OF DIRECTORS
--- --- ---
Nominees: Robert A. Charpie, H. Corbin Day,
Alice F. Emerson, Allan E. Gotlieb
and Kenwood C. Nichols.
*Withhold from following individual
nominees (if any):
-----------------------------------
FOR AGAINST ABSTAIN
Item 2 - Appointment of Arthur Andersen --- --- ---
LLP as auditors for 1998.
--- --- ---
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 3 AND 4.
- ------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
Item 3 - Proposal by shareholder regarding --- --- ---
use of chlorine.
--- --- ---
FOR AGAINST ABSTAIN
Item 4 - Proposal by shareholder regarding --- --- ---
cumulative voting.
--- --- ---
- -------------------------------------------------------------------------------
I understand that this card must be returned no later than May 14, 1998 in
the enclosed envelope, if my voting instructions are to be honored. If it is
not received by May 14, 1998 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.
Signature of Participant: Dated: , 1998
------------------------------- ---------
<PAGE> 30
PROXY
CHAMPION INTERNATIONAL CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL
MEETING OF SHAREHOLDERS - MAY 21, 1998
The undersigned constitutes and appoints LAWRENCE A. BOSSIDY, ROBERT A. CHARPIE
and WALTER V. SHIPLEY, 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 21, 1998 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
Please mark ---
your votes X
like this ---
in black
or blue ink.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
- --------------------------------------------------------------------------------
WITHHOLD FOR ALL EXCEPT
FOR ALL FROM ALL AS NOTED*
Item 1 - ELECTION OF DIRECTORS --- --- ---
Nominees: Robert A. Charpie, H. Corbin Day, --- --- ---
Alice F. Emerson, Allan E. Gotlieb
and Kenwood C. Nichols.
*Withhold from following individual
nominees (if any):
---------------------------------- FOR AGAINST ABSTAIN
Item 2 - Appointment of Arthur Andersen LLP --- --- ---
as auditors for 1998.
--- --- ---
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 3 AND 4.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
Item 3 - Proposal by shareholder regarding --- --- ---
use of chlorine.
--- --- ---
FOR AGAINST ABSTAIN
Item 4 - Proposal by shareholder regarding --- --- ---
cumulative voting.
--- --- ---
- --------------------------------------------------------------------------------
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, FOR ITEM 2 AND AGAINST ITEMS 3 AND 4.
Signature(s): Dated: , 1998
------------------------------------ -----------------
Note: Please sign as name appears hereon. Joint owners all should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
