<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
POPE & TALBOT, INC.
- --------------------------------------------------------------------------------
(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)(1)
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>
POPE & TALBOT, INC.
1500 S.W. FIRST AVENUE
PORTLAND, OREGON 97201
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 29, 1999
------------------------
The Annual Meeting of Shareholders of Pope & Talbot, Inc. (the "Company"), a
Delaware corporation, will be held at the Riverplace Hotel, 1510 Southwest
Harbor Way, Portland, Oregon on Thursday, April 29, 1999, at 2:00 p.m., for the
following purposes:
1. To elect three persons to the Board of Directors of the Company to serve
for a term of three years;
2. To approve and ratify the implementation of the Special Non-employee
Director Stock Retainer Fee Plan pursuant to which 300,000 shares of the
Company's common stock will be reserved for issuance to non-employee
Board members who elect to forego all or a portion of their annual
retainer fees and Chairman of the Board fees in exchange for stock option
grants under the Plan;
3. To ratify the selection of independent public accountants for 1999; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on March 12, 1999 are
entitled to receive notice of and to vote at the Annual Meeting.
It is important that your shares be represented and voted at the Annual
Meeting. Whether or not you currently intend to be present personally at the
Annual Meeting, you are urged to complete, date, sign and return the
accompanying proxy in the enclosed, self-addressed envelope requiring no postage
if mailed in the United States. You may still vote in person if you do attend
the Annual Meeting.
By order of the Board of Directors
Maria M. Pope
TREASURER AND SECRETARY
Portland, Oregon
March 26, 1999
<PAGE>
PROXY STATEMENT
GENERAL
The accompanying proxy is solicited by the Board of Directors of the Company
for use at the Annual Meeting to be held April 29, 1999 and at any adjournment
thereof. You may revoke it at any time before its use by a written communication
to Maria M. Pope, Treasurer and Secretary of the Company, or by a duly executed
proxy bearing a later date. Shareholders attending the Annual Meeting may vote
their shares in person even though they have already submitted a proxy. Properly
executed proxies not revoked will be voted in accordance with the specifications
thereon at the Annual Meeting and at any adjournment thereof.
Only shareholders of record at the close of business on March 12, 1999 are
entitled to vote at the Annual Meeting. On that date, the Company had
outstanding 13,481,441 shares of common stock entitled to vote. Each share is
entitled to one vote except that the election of directors will be conducted
pursuant to cumulative voting. Under cumulative voting, each share of common
stock is entitled to one vote multiplied by the number of directors to be
elected, and that number of votes may be cast for one director or may be
distributed among any number of directors as designated by the shareholder or
his or her proxy. The Company intends to mail this proxy statement and proxy
card, together with the 1998 Annual Report, to its shareholders on March 26,
1999.
Shares of common stock represented by proxies in the accompanying form that
are properly executed and returned to the Company will be voted at the Annual
Meeting in accordance with the shareholders' instructions contained in such
proxies. Where no such instructions are given, the shares will be voted for the
election of directors, as described herein, for approval and ratification of the
Special Non-employee Director Stock Retainer Fee Plan and the options granted
thereunder, for ratification of Arthur Andersen LLP as the Company's independent
public accountants for 1999 and at the discretion of the proxy holders on such
other matters as may come before the Annual Meeting.
A majority of the shares of the Company's common stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the Annual
Meeting. In all matters other than the election of directors, the affirmative
vote of a majority of the shares present in person or represented by proxy at
the Annual Meeting and entitled to vote on the subject matter shall be required.
Directors shall be elected by a plurality of the votes present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election
of directors. Abstentions and broker nonvotes are each included in the number of
shares present for quorum purposes. Abstentions, which may be specified on all
proposals other than the election of directors, are counted in tabulations of
the votes cast on proposals presented to shareholders and will have the same
effect as negative votes, whereas broker nonvotes are not counted for purposes
of determining whether a proposal has been approved.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors presently consists of nine directors divided into
three classes serving staggered three-year terms. Three directors are to be
elected at the Annual Meeting, each to hold office until the 2002 Annual Meeting
of Shareholders and until a successor has been elected and qualified. All
nominees are presently directors. Six directors will continue to serve in
accordance with their prior elections. Unless otherwise instructed, the proxy
holders named on the enclosed proxy card intend to use the cumulative
1
<PAGE>
voting right described above to distribute the votes represented by proxies in
such proportion as they shall determine between the three nominees or their
substitutes so as to elect the maximum number of such persons. The Board of
Directors expects that all of these nominees will be available for election, but
if any of these nominees is not so available at the time of the Annual Meeting,
proxies received will be voted for a substitute nominee to be designated by the
Board of Directors. The Board of Directors unanimously recommends a vote for
election of all of the nominees as directors.
CERTAIN INFORMATION REGARDING DIRECTORS AND OFFICERS
The names of the nominees and the directors continuing in office, their
ages, the year each first became a director, their principal occupations during
at least the last five years and other directorships held by each are set forth
below:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE-YEAR TERM EXPIRING IN 2002
KENNETH G. HANNA, age 62, was elected as a director of the Company in 1998.
Mr. Hanna is also a member of the Board's Human Resources and Nominating
Committee. Mr. Hanna was appointed Public Governor of the Vancouver Stock
Exchange in January 1999. Since September 1996, Mr. Hanna has been President and
Chief Executive Officer of Aber Resources Ltd., a diamond mining company in
Canada. He was previously a partner with Hanna Heppel Bell & Visosky, corporate
finance lawyers, from April 1, 1992 to January 31, 1997.
ROBERT STEVENS MILLER, JR., age 57, has been a director of the Company since
1993. Mr. Miller is also a member of the Board's Audit and Human Resources and
Nominating Committees. Since October 1997, Mr. Miller has been the Chairman of
the Board of Waste Management, Inc., an international provider of waste
management services. Since September 1996, Mr. Miller has been the Vice Chairman
of the Board of Morrison Knudsen Corporation, an engineering and construction
company, and from April 1995 to September 1996 he was the Chairman of the Board
of Morrison Knudsen Corporation. From 1992 to February 1993, he was a senior
partner with the investment banking firm of James D. Wolfensohn, Inc. Before
that time, he was with Chrysler Corporation, an automobile manufacturer, as the
Vice Chairman of the Board from 1990 to 1992 and as the Chief Financial Officer
from 1981 to 1990. Mr. Miller is also a director of Federal-Mogul Corporation,
Fluke Corporation, Morrison Knudsen Corporation, Symantec, Inc. and Waste
Management, Inc.
HUGO G. L. POWELL, age 54, has been a director of the Company since 1985.
Mr. Powell is also a member of the Board's Audit Committee. Since September
1997, Mr. Powell has been Chief Executive Officer-- Americas of Labatt Brewing
Company, Ltd., beverage manufacturers and distributors. Before that time, he was
Chief Operating Officer--Americas of Labatt Brewing Company, Ltd. from 1994 to
September 1997 and was President of Labatt Breweries of Canada from 1992 to
1994.
2
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 2000
GORDON P. ANDREWS, age 42, has been a director of the Company since 1994.
Mr. Andrews is also a member of the Board's Audit Committee. Since 1982, Mr.
Andrews has been associated with Andrews Associates, Inc., a management
consulting firm, as a director and in various management positions. He has been
the President of Andrews Associates, Inc. since 1993. Mr. Andrews was Vice
President of Institutional Sales for Shearson Lehman Brothers from 1990 to 1992.
PETER T. POPE, age 64, has been a director of the Company since 1962. Since
1971, Mr. Pope has been Chairman of the Board and Chief Executive Officer of the
Company. From 1990 to September 1995, he was also President of the Company. Mr.
Pope is also a director of the Newhall Land and Farming Company and Pope MGP,
Inc. and Pope EGP, Inc., General Partners of Pope Resources.
BROOKS WALKER, JR., age 70, has been a director of the Company since 1981.
Mr. Walker is also a member of the Board's Audit and Human Resources and
Nominating Committees. Since 1988, Mr. Walker has been General Partner of Walker
Investors, a venture capital investment partnership. Mr. Walker is also a
director of AT&T Capital Corporation, The Gap, Inc. and Greylock Management
Corporation.
TERM EXPIRING IN 2001
HAMILTON W. BUDGE, age 70, has been a director of the Company since 1967.
Mr. Budge is also a member of the Board's Human Resources and Nominating
Committee. Before his retirement in 1990, Mr. Budge was a partner in the law
firm of Brobeck, Phleger and Harrison LLP and has been of counsel to that firm
since his retirement.
CHARLES CROCKER, age 60, has been a director of the Company since 1986. Mr.
Crocker is also a member of the Board's Audit Committee. Since September 1997,
Mr. Crocker has served as Chairman of the Board, President and Chief Executive
Officer of BEI Technologies, Inc., a diversified electronics company
specializing in electronic sensors and motion control products, and as Chairman
of the Board of BEI Medical Systems Company, a medical device company
specializing in diagnostic and therapeutic products for the women's health care
market. From 1974 until September 1997, Mr. Crocker served as Chairman of the
Board of BEI Electronics, Inc., a diversified technology firm. He has been
President of Crocker Capital, a private venture capital firm, since 1985. Mr.
Crocker is also a director of BEI Technologies, Inc., BEI Medical Systems
Company, Fiduciary Trust Company International and Keravision, Inc.
MICHAEL FLANNERY, age 55, has been a director of the Company since September
1995, when he was also elected President of the Company. From August 1987 to
September 1995, he was Group Vice President, Wood Products Division for the
Company.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of January 31, 1999,
regarding the number of shares of the common stock of the Company beneficially
owned by each director, by each of the executive officers named in the Summary
Compensation Table below, and by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------
OPTIONS EXERCISABLE PERCENT OF
CURRENTLY WITHIN 60 DAYS OF OUTSTANDING
NAME OF INDIVIDUAL OR IDENTITY OF GROUP OWNED(1) JANUARY 31, 1999 TOTAL COMMON STOCK
- ---------------------------------------------------- ------------ ------------------- ---------- ---------------
<S> <C> <C> <C> <C>
Gordon P. Andrews................................... 217,384(3) 4,000 221,384 1.6%
Hamilton W. Budge................................... 20,000(4) 4,000 24,000 (2)
Charles Crocker..................................... 1,000 4,000 5,000 (2)
Robert J. Day....................................... -- 6,000 6,000 (2)
Michael Flannery.................................... 16,235(4) 74,560 90,795 (2)
Abram Friesen....................................... 1,700 18,696 20,396 (2)
William G. Frohnmayer(6)............................ 323 55,930 56,253 (2)
Kenneth G. Hanna.................................... 1,000(7) 2,000 3,000 (2)
Ralph Leverton...................................... -- -- -- --
Robert Stevens Miller, Jr........................... 1,000(4) 4,000 5,000 (2)
Peter T. Pope....................................... 419,664(5) 239,650 659,314 4.9%
Hugo G. L. Powell................................... -- 4,000 4,000 (2)
Brooks Walker, Jr................................... 1,600 4,000 5,600 (2)
All directors and executive officers as a group (13
persons).......................................... 679,906 420,836 1,100,742 8.2%
</TABLE>
- ------------------------
(1) Except as otherwise noted, the directors and named executive officers and
all directors and officers as a group have sole voting and investment power
with respect to the shares listed.
(2) Less than 1% of the outstanding common stock.
(3) Includes 37,908 shares for which he is cotrustee for his children and 10,600
shares for which his wife is trustee for his children. Mr. Andrews is Emily
T. Andrews' son. See Beneficial Ownership of Over 5% of Pope & Talbot common
stock below.
(4) Investment and voting power shared with his wife.
(5) Includes 80,000 shares for which he shares investment and voting power with
Emily T. Andrews and for which he disclaims beneficial ownership. Refer to
Emily T. Andrews in table disclosing Beneficial Ownership of Over 5% of Pope
& Talbot Common Stock. Also includes 26,945 shares owned by his wife as to
which he disclaims beneficial ownership.
(6) Mr. Frohnmayer retired from the Company on June 30, 1998.
(7) Shares are held by an entity of which he is the sole shareholder.
4
<PAGE>
INFORMATION ON THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has as its two standing committees the Audit
Committee and the Human Resources and Nominating Committee. These committees are
composed entirely of non-employee directors.
The Audit Committee is currently composed of Brooks Walker, Jr., Chairman,
Gordon P. Andrews, Charles Crocker, Robert Stevens Miller, Jr. and Hugo G. L.
Powell. The Audit Committee monitors, on a periodic basis, the performance of
the independent public accountants and recommends their engagement or dismissal
to the Board of Directors. It also reviews with the independent public
accountants the scope and results of their audits and their independence with
respect thereto and the adequacy of the Company's accounting and financial
controls.
The Human Resources and Nominating Committee is currently composed of
Hamilton W. Budge, Chairman, Kenneth G. Hanna, Robert Stevens Miller, Jr. and
Brooks Walker, Jr. The Human Resources and Nominating Committee generally
performs the functions of a compensation committee and recommends salary,
incentive compensation and bonus arrangements for the Company's senior
management to be implemented by the Board of Directors. The Human Resources and
Nominating Committee has sole authority to administer the Company's stock option
and stock bonus plans and make grants or awards thereunder. It also has the
responsibility to make recommendations to the Board of Directors on the Board's
compensation and on nomination of Board members. The Human Resources and
Nominating Committee will also consider director nominees suggested by
shareholders in writing to the Corporate Secretary.
The Board of Directors held eight meetings during 1998. The Audit Committee
held three meetings, and the Human Resources and Nominating Committee held three
meetings. Each director attended at least 75 percent of the aggregate of (i) the
total number of meetings of the Board, and (ii) the total number of meetings
held by all committees of the Board on which he served.
DIRECTOR REMUNERATION
Each director of the Company, except Messrs. Flannery and Pope, is paid an
annual retainer fee of $18,000 per year. In addition, each director, except
Messrs. Flannery and Pope, is paid $1,000 for every Board meeting attended plus
$1,000 for each meeting of a standing committee of the Board attended. Directors
who are also chairmen of each standing committee are paid an additional $500 for
each committee meeting.
Under the automatic option grant program in effect under the Company's 1996
Non-employee Director Stock Option Plan (the "Director Plan"), an individual who
first becomes a Non-employee member of the Board will receive an automatic
option grant for 2,000 shares of the Company's common stock upon commencement of
Board service, and each individual with six or more months of Board service will
receive an automatic option grant for an additional 1,000 shares at each Annual
Meeting of Shareholders at which he continues to serve as a Non-employee Board
member, whether or not he is standing for reelection at that particular meeting.
Each option has a term of 10 years and is exercisable immediately upon grant. On
April 30, 1998, the date of the 1998 Annual Meeting of Shareholders, each
Non-employee Board member received an automatic option grant under the Director
Plan for 1,000 shares of common stock with an exercise price of $15.6875 per
share, the fair market value per share of common stock on the grant date. On
July 29, 1998, Mr. Hanna received an automatic option grant under the
5
<PAGE>
Director Plan for 2,000 shares of common stock with an exercise price of $10.875
per share, the fair market value per share of common stock on the date of the
grant.
No other compensation is paid to the non-employee members of the Board with
respect to their service on the Board.
BENEFICIAL OWNERSHIP OF OVER 5% OF POPE & TALBOT COMMON STOCK
The following table lists beneficial owners of more than 5% of Pope &
Talbot, Inc. common stock as of December 31, 1998.
<TABLE>
<CAPTION>
VOTING POWER INVESTMENT POWER
------------------ ------------------ PERCENT
SOLE SHARED SOLE SHARED TOTAL OF CLASS
------- --------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Emily T. Andrews(1) ........................................ 874,615 80,000(2) 874,615 80,000(2) 954,615 7.1%
600 Montgomery Street
San Francisco, CA 94111
National Rural Electric .................................... 856,000 -- 856,000 -- 856,000 6.4%
Cooperative Association
4301 Wilson Boulevard
Arlington, VA 22203
Dimensional Fund Advisors Inc.(3) .......................... 926,721 -- 926,721 -- 926,721 6.9%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
</TABLE>
- ------------------------
(1) Emily T. Andrews is the mother of Gordon P. Andrews. See table disclosing
Security Ownership of Management.
(2) Represents shares for which she shares voting and investing power with Peter
T. Pope and for which she disclaims beneficial ownership. Refer to Peter T.
Pope in table disclosing Security Ownership of Management.
(3) Information provided in shareholder's Schedule 13G indicates that shares
reported are owned by advisory clients of the company, no one of which owns
more than 5% of such shares, and that the company disclaims beneficial
ownership of all such shares.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer, and each of the Company's other executive officers
whose compensation for the 1998 fiscal year was in excess of $100,000, for
services rendered in all capacities to the Company and its subsidiaries for the
fiscal years ended December 31, 1998, 1997 and 1996, respectively. The
individuals named in such table will be subsequently referred to as the "Named
Executive Officers." Mr. William Frohnmayer is also included in such table on
the basis of the salary and bonus he earned for the 1998 fiscal year although he
retired from the Company before the end of such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- -----------------------
OTHER
ANNUAL OPTIONS/ ALL OTHER
SALARY BONUS COMPENSATION SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($) (#) ($)(2)
- -------------------------------------------------- ---- ---------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Peter T. Pope .................................... 1998 471,268 -- -- -- 5,000
Chairman of the Board 1997 449,666 162,359 -- -- 4,750
and Chief Executive Officer 1996 428,820 -- -- 40,000 4,750
Michael Flannery ................................. 1998 340,768 -- -- -- 5,000
President and 1997 292,700 90,586 -- 30,000 4,750
Chief Operating Officer 1996 277,049 -- -- 35,000 4,750
Robert J. Day(3) ................................. 1998 210,838 -- -- -- 4,617
Senior Vice President and 1997 85,420 30,751 17,483(4) 30,000 2,050
Chief Financial Officer 1996 -- -- -- -- --
Ralph Leverton(5) ................................ 1998 167,042(6) -- 106,887(7) 10,000 374,273(8)
Vice President-Division Mgr. 1997 -- -- -- -- --
Pulp Division 1996 -- -- -- -- --
Abram Friesen(9) ................................. 1998 187,605(10) -- 60,180(4) -- 2,400
Vice President-Division Mgr. 1997 177,711(11) 82,480 -- 15,000 --
Wood Products Division 1996 170,370(11) -- -- 14,000 --
William G. Frohnmayer(12) ........................ 1998 101,318 -- 31,481(13) -- 463,776(14)
Vice President-Division Mgr. 1997 197,386 33,226 -- -- 4,750
Fiber Products Division 1996 187,698 -- -- 14,000 4,750
</TABLE>
- ------------------------
(1) Includes salary and bonus deferred under the Company's Tax Deferred Savings
Plan.
(2) Consists of contributions made by the Company to the Tax Deferred Savings
Plan on behalf of each Named Executive Officer.
(3) Mr. Day was hired as Senior Vice President and Chief Financial Officer in
August 1997.
(4) Includes payment by the Company of certain moving expenses incurred by
Messrs. Day and Friesen in relocating to Portland, Oregon.
7
<PAGE>
(5) Mr. Leverton is President and Chief Operating Officer of Harmac Pacific
Inc. ("Harmac"), majority ownership of which was acquired by the Company on
February 2, 1998. Mr. Leverton was named Vice President-Division Manager,
Pulp Division in September 1998.
(6) Includes salary paid by Harmac from February 2 through August 31, 1998. Mr.
Leverton's compensation was paid in Canadian dollars and is reflected above
in U.S. dollars using an exchange rate of .6517.
(7) Includes payment by the Company of certain moving expenses. Also includes
payment of banked vacation benefits payable upon his transfer from Harmac
of $52,333 which is reflected above in U.S. dollars using an exchange rate
of .6517.
(8) Upon acquisition of a majority interest in Harmac by the Company, Mr.
Leverton was entitled to elect to terminate his employment and to receive a
severance allowance equal to three times the sum of his 1998 salary and the
average of the bonuses paid to him in the three preceding fiscal years. In
order to induce Mr. Leverton to provide continuity of management by
remaining with Harmac after the acquisition of control by the Company,
Harmac entered into an agreement with Mr. Leverton under which his
employment contract was amended to provide for the immediate payment to him
of two-thirds of the stipulated severance allowance, and for the further
payment to him if his employment should be terminated, voluntarily or
involuntarily, before July 31, 1999, of the remaining one-third. The amount
stated under the heading also includes financial advisory expenses totaling
$5,906 paid by Harmac on his behalf, as well as the contribution to a share
purchase plan. The above compensation is reflected in U.S. dollars using an
exchange rate of .6517. This amount also includes contributions of $3,680
by the Company to the Tax Deferred Savings Plan.
(9) Mr. Friesen was named Vice President-Division Manager, Wood Products
Division in February 1996. Before February 1996, Mr. Friesen did not hold
the office of an executive officer of the Company; however, Mr. Friesen did
serve as President of Pope & Talbot Ltd., a wholly-owned Canadian
subsidiary of the Company.
(10) Mr. Friesen was relocated to Portland, Oregon on August 1, 1998. Mr.
Friesen was compensated in Canadian dollars through July 31, 1998. From
August 1, 1998 to December 31, 1998 Mr. Friesen was compensated in U.S.
dollars. The 1998 compensation in Canadian dollars is reflected above in
U.S. dollars using an exchange rate of .6517.
(11) Mr. Friesen was compensated in Canadian dollars. The compensation above
reflects the conversion to U.S. dollars using year-end 1997 and 1996
Canadian to U.S. exchange rates of .6992 and .7297, respectively.
(12) Mr. Frohnmayer retired from the Company on June 30, 1998.
(13) Consists of payment by the Company to Mr. Frohnmayer of earned vacation
benefits upon his retirement.
(14) In addition to contributions of $5,000 made by the Company to the Tax
Deferred Savings Plan, this amount consists of (i) the actuarial present
value of the additional pension benefits to which Mr. Frohnmayer became
entitled in connection with his retirement totaling $143,676, (ii) a
consulting agreement for one year of $140,000, (iii) a retirement cash
bonus of $150,000, (iv) a vehicle valued at $21,000 and (v) a retirement
gift valued at $4,100.
8
<PAGE>
STOCK OPTION AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the grants of stock
options and stock appreciation rights ("SARs") made under the Company's Stock
Option and Appreciation Plan ("Stock Option Plan") for the 1998 fiscal year to
the Named Executive Officers:
OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL
% OF TOTAL RATES OF STOCK
NUMBER OF OPTIONS/SARS PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(2)
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION ----------------
GRANTED(1)(2) YEAR ($/SHARE) DATE 5%($) 10%($)
------------- ------------ ------------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Peter T. Pope..................................... -- -- -- -- -- --
Michael Flannery.................................. -- -- -- -- -- --
Robert J. Day..................................... -- -- -- -- -- --
Abram Friesen..................................... -- -- -- -- -- --
William G. Frohnmayer............................. -- -- -- -- -- --
Ralph Leverton.................................... 10,000 13.1 11.0625 7/27/08 69,571 176,308
</TABLE>
- ------------------------
(1) Options become exercisable for the option shares in a series of 5 equal and
successive annual installments, beginning April 29, 1999 for Ralph Leverton.
Each option becomes immediately exercisable for all of the option shares in
the event the Company is acquired by merger or sale of substantially all of
the Company's assets or outstanding common stock, unless the option is
assumed or otherwise replaced by the acquiring entity. Upon the termination
of the optionee's employment within 18 months after (i) an acquisition of
the Company which does not otherwise result in the immediate acceleration of
the option or (ii) any hostile change in control of the Company effected by
tender offer for 25% or more of the outstanding common stock or proxy
contest for Board membership, the option will become immediately exercisable
for all of the option shares. Option acceleration will, however, in all
instances be limited so as to avoid excess parachute payments under the
federal tax laws. For further information concerning these option
acceleration provisions, please see the section below entitled Employment
Contracts and Change in Control Arrangements. Each option has a maximum term
of 10 years, subject to earlier termination in the event of the optionee's
cessation of service with the Company.
(2) The potential realizable value illustrates the value that might be realized
upon exercise of the options immediately prior to the expiration of their
maximum 10-year term, assuming the specified compounded rates of
appreciation on the Company's common stock over the option term. However,
there is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over
the 10-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the common stock does in
fact appreciate over the option term, no value will be realized from the
option grants made to the executive officers. In addition, these assumed
values do not take into account option provisions which trigger the
termination of the option following cessation of employment, the
nontransferability of the options and the vesting schedule in effect for
each option which is contingent upon continuous service with the Company for
periods of up to 5 years.
9
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning exercised options during 1998 and unexercised
options held as of the end of that fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE REALIZED NUMBER OF SECURITIES
(MARKET PRICE UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES AT OPTIONS IN-THE-MONEY
ACQUIRED ON EXERCISE LESS AT FY-END(#) OPTIONS AT FY-END($)(1)
EXERCISE EXERCISE -------------------------- --------------------------
NAME (#) PRICE)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter T. Pope........................ -- -- 254,560 46,280 -- --
Michael Flannery..................... -- -- 57,370 55,940 -- --
Robert J. Day........................ -- -- 6,000 24,000 -- --
Abram Friesen........................ -- -- 14,816 22,280 -- --
William G. Frohnmayer................ -- -- 55,930 14,420 -- --
Ralph Leverton....................... -- -- -- 10,000 -- --
</TABLE>
- ------------------------
(1) Based upon the market price of $8.375 per share, which was the closing
selling price of the Company's common stock on the last day of the 1998
fiscal year, less the exercise price payable per share.
PENSION PLANS
The following table shows the estimated annual pension benefits payable in
the aggregate to a covered participant as a single life annuity beginning at
normal retirement age (age 65) under the Company's qualified defined benefit
pension plan and the nonqualified supplemental pension plans which provide
benefits that would otherwise be denied participants by reason of certain
Internal Revenue Code and other applicable limitations on qualified plan
benefits. The estimated benefits are based upon the remuneration that is covered
under the plans and years of service with the Company and its subsidiaries and
are not subject to offsets for Social Security retirement benefits:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FINAL YEARS OF SERVICE
AVERAGE ----------------------------------------------------------
SALARY 15 20 25 30 35
- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 25,871 $ 34,494 $ 43,118 $ 45,618 $ 48,118
125,000 33,371 44,494 55,618 58,743 61,868
150,000 40,871 54,494 68,118 71,868 75,618
175,000 48,371 64,494 80,618 84,993 89,368
200,000 55,871 74,494 93,118 98,118 103,118
225,000 63,371 84,494 105,618 111,243 116,868
250,000 70,871 94,494 118,118 124,368 130,618
300,000 85,871 114,494 143,118 150,618 158,118
350,000 100,871 134,494 168,118 176,868 185,618
400,000 115,871 154,494 193,118 203,118 213,118
450,000 130,871 174,494 218,118 229,368 240,618
500,000 145,871 194,494 243,118 255,618 268,118
</TABLE>
10
<PAGE>
A participant's compensation covered by the Company's pension plan is his or
her average salary for the five consecutive calendar plan years within the last
10 years of the participant's career for which such average is the highest or,
in the case of a participant who has been employed for fewer than five full
calendar years, the period of his or her employment with the Company. Covered
compensation estimated for Named Executive Officers as of the end of the last
calendar year is as follows: Mr. Pope, $475,008; Mr. Flannery, $350,004; Mr.
Day, $212,004; Mr. Leverton, $210,300; Mr. Friesen, $210,300; and Mr.
Frohnmayer, $204,624. The estimated years of service for each Named Executive
Officer is as follows: Mr. Pope, 33 years; Mr. Flannery, 12 years; Mr. Day, 2
years; Mr. Leverton, 24 years; Mr. Friesen, 11 years; and Mr. Frohnmayer, 21
years. For Mr. Leverton, years of service included years of service with Harmac.
His benefit is calculated under the Company's formula and then offset with the
Harmac benefit. Refer to Employment Contracts, Change in Control Arrangements
and Retirement Arrangements for discussion of Mr. Frohnmayer's retirement
benefits and Mr. Leverton's employment arrangement.
EMPLOYMENT CONTRACTS, CHANGE IN CONTROL ARRANGEMENTS AND RETIREMENT ARRANGEMENTS
The Company does not have any employment agreements with any of the
executive officers named in the Summary Compensation Table. However, on February
5, 1998, the Company entered into new severance agreements with each of the
Named Executive Officers that replaced their existing severance agreements.
Under the new agreements, the executive officers will be entitled to certain
benefits if their employment is involuntarily terminated (other than for cause)
within 18 months following a change in control of the Company. Involuntary
termination is defined in each severance agreement as the officer's involuntary
dismissal (other than for cause) by the Company or his resignation in connection
with a material reduction in his duties, a reduction in his level of
compensation by more than 20% or a relocation of his principal place of
employment by more than 50 miles.
Upon such an involuntary termination, the officer will be entitled to the
following severance benefits: (i) a cash severance payment equal to two times
his annual rate of base salary plus one times his target bonus for the year in
which such termination occurs, (ii) accelerated vesting of all of his
outstanding stock options and (iii) continued health care coverage for himself
and his eligible dependents for up to 18 months at the Company's expense.
However, the total benefit package (as valued under the federal parachute tax
laws and regulations) will be limited to 2.99 times the officer's average W-2
wages from the Company for the five calendar years immediately preceding the
calendar year in which the change in control occurs. This limitation is designed
to prevent the benefit package from becoming an excess parachute payment under
the federal tax laws.
Each severance agreement contains a detailed procedure for valuing the
officer's total benefit package and determining whether or not the total value
of the package exceeds the parachute payment limitation. In no event, however,
will benefits be reduced if they are found to represent reasonable compensation
for the officer's services with the Company before involuntary termination.
For purposes of each severance agreement, a change in control will be deemed
to occur upon (i) the successful acquisition of securities possessing more than
25% of the total combined voting power of the Company's outstanding securities
pursuant to a transaction or series of related transactions that the Board does
not at any time recommend the Company's shareholders to approve, (ii) a change
in the composition of the Board over a period of 36 consecutive months or less
such that a majority of the Board ceases, by reason of one or more contested
elections for Board membership, to be composed of individuals who either (A)
have been members of the Board continuously since the beginning of such period
or (B) have been elected or nominated for election as Board members during such
period by at least a majority of the
11
<PAGE>
Board members described in clause (A) who were still in office at the time such
election or nomination was approved by the Board, (iii) the sale, transfer or
other disposition of all or substantially all of the assets of the Company in
complete liquidation or dissolution of the Company or (iv) any merger or
consolidation in which securities possessing more than 50% of the total combined
voting power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately
before such transaction.
In the event benefits were to become due in the year ending December 31,
1999 under the severance agreements currently in effect for the executive
officers listed in the Summary Compensation Table, the maximum amounts payable
would be as follows: Mr. Pope, $1,669,249; Mr. Flannery, $1,072,828; Mr. Day,
$677,854; Mr. Leverton, $638,797; and Mr. Friesen, $630,070. Mr. Friesen was
compensated in Canadian dollars from January 1, 1998 to July 31, 1998 and this
maximum amount payable has been converted to U.S. dollars using the year-end
1998 exchange rate of .6517. Upon acquisition of control of Harmac by the
Company, Mr. Leverton was entitled to elect to terminate his employment and to
receive a severance allowance equal to three times the sum of his 1998 salary
and the average of the bonuses paid to him in the three preceding fiscal years.
In order to induce Mr. Leverton to provide continuity of management by remaining
with Harmac after the acquisition of control by the Company, Harmac entered into
an agreement with Mr. Leverton under which his employment contract was amended
to provide for the immediate payment to him of two-thirds of the stipulated
severance allowance, and for the further payment to him if his employment should
be terminated, voluntarily or involuntarily, before July 31, 1999, of the
remaining one-third. Mr. Leverton may benefit from either, at his election, but
not both of (i) the change in control severance agreement from the Company or
(ii) the agreement with Harmac before July 31, 1999. After that date Mr.
Leverton is eligible only for the Change in Control Agreement with the Company.
The Human Resources and Nominating Committee of the Company's Board of
Directors approved a special early retirement arrangement for Mr. Frohnmayer
pursuant to which he retired from the Company on June 30, 1998. Under the
arrangement, Mr. Frohnmayer was provided the following benefits upon his
retirement: (i) pension benefits calculated under the Company's pension plans as
if he had continued in employment for an additional two years through age
sixty-two and his salary had increased at the rate of 3% per year over that
two-year period, present value of $143,676, (ii) continued health care coverage
through age 65, (iii) a cash bonus equal to $150,000, (iv) a three-year period
following his retirement date in which to exercise his outstanding options for
any shares for which those options were exercisable on his retirement date, (v)
a consulting agreement for one year of $140,000 and (vi) a vehicle, valued at
$21,000. Refer to Summary Compensation Table, Aggregated Option Exercises and
Holdings, and Pension Plans for related information.
12
<PAGE>
HUMAN RESOURCES AND NOMINATING COMMITTEE OF THE
BOARD OF DIRECTORS
EXECUTIVE COMPENSATION REPORT
The Human Resources and Nominating Committee of the Board of Directors has
furnished the following report on executive compensation.
It is the duty of the Human Resources and Nominating Committee to set the
base salary of the Company's executive officers and to administer the Company's
Stock Option and Appreciation Plan under which grants may be made to such
officers and other key employees. In addition, the Human Resources and
Nominating Committee administers the Company's Executive Incentive Plan under
which the Company's executive officers and other key employees may earn
additional bonus amounts each year based upon individual performance and the
Company's attainment of specified performance goals.
GENERAL COMPENSATION POLICY
The fundamental policy of the Human Resources and Nominating Committee in
compensation matters is to offer the Company's executive officers competitive
compensation opportunities based upon their personal performance and their
contribution to the financial success of the Company. It is an objective of this
policy to have a substantial portion of each officer's total annual compensation
contingent upon the achievement of financial objectives and performance goals.
Accordingly, each executive officer's compensation package is composed of three
elements: (i) base salary that is designed primarily to be competitive with base
salary levels in effect both at companies within the forest products industry
that are of comparable size to the Company and at companies outside of such
industry with which the Company competes for executive talent, (ii) annual
variable performance awards payable in cash and tied to the achievement of
performance goals, financial or otherwise, established by the Human Resources
and Nominating Committee and (iii) long-term stock-based incentive awards that
strengthen the mutuality of interests between the executive officers and the
Company's shareholders. As an employee's level of responsibility and
accountability within the Company increases over time, a greater portion of his
or her total compensation is intended to be dependent upon Company and personal
performance and stock price appreciation rather than upon base salary.
To facilitate the implementation of these policies, the Human Resources and
Nominating Committee has in the past employed, and expects to continue to
employ, the services of a nationally recognized, independent compensation
consulting firm.
FACTORS. The principal factors that were considered by the Human Resources
and Nominating Committee in establishing the components of each officer's
compensation package for 1998 are summarized below:
- BASE SALARY. The base salary for each executive officer is determined on
the basis of internal comparability considerations and the base salary
levels in effect for comparable positions at comparable companies, both
inside and outside the industry. Within the forest products industry the
peer group consists of 34 companies of which 21 are included in the Value
Line Paper and Forest Products Index, which is included in the stock price
performance graph on page 16. The base salary level for executive officers
is generally at the median level determined for such individuals on the
basis of the external salary data provided to the Human Resources and
Nominating Committee by the independent compensation consulting firm.
Salaries are reviewed on an annual basis and,
13
<PAGE>
subject to individual performance, with adjustments to each executive
officer's base salary based upon salary increases paid by the Company's
competitors.
- ANNUAL INCENTIVE COMPENSATION. An annual bonus may be earned by each
executive officer under the terms of the Executive Incentive Plan,
provided the Company's earnings for the fiscal year exceed 4% of
shareholder equity, as measured at the start of that year. Bonuses under
this program are based on the following factors: (i) the extent to which
the company-wide performance objective was obtained, (ii) earnings
achieved at the division level, for those executives who are division
leaders rather than corporate officers and (iii) personal performance. The
target bonus for each executive officer was established by the Human
Resources and Nominating Committee at the start of the year, with the
target bonus per executive officer set at 25% to 35% of base salary (in
accordance with his position at the Company) and the maximum bonus limited
to a range between 50% and 70% of base salary for the year. The Company
did not meet the minimum corporate performance thresholds established for
1998 and, therefore, no cash bonus payments were made to any of the
executive officers named in the Summary Compensation Table.
- LONG-TERM INCENTIVE COMPENSATION. In 1998, the Human Resources and
Nominating Committee approved the grant of a nonstatutory stock option to
one newly hired executive officer under the Company's Stock Option and
Appreciation Plan. This grant is designed to align the interests of this
executive officer with those of the Company's shareholders and provide
this individual with a significant incentive to manage the Company from
the perspective of an owner with an equity stake in the business. Although
option grants continue to be an integral part of the Company's
compensation program for executives, no options were granted in 1998 to
executive officers other than to new hires because the Human Resources and
Nominating Committee believed that existing options provided adequate
incentives for the next year.
Each option grant allows the officer to acquire shares of the Company's
common stock at a fixed price per share (the market price on the date
preceding the grant date) over a specified period of time (up to 10
years). The exercisability of these stock options generally vests in equal
installments over a five-year period, contingent upon the executive
officer's continued employment with the Company. Accordingly, the option
will provide a return to the executive officer only if the executive
officer remains employed by the Company for one or more years during which
the option vests, and then only if the market price of the underlying
shares appreciates over the option term.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits to $1 million per person
the amount that the Company may deduct for compensation paid to any of its most
highly compensated officers in any year. The levels of salary and bonus
generally paid by the Company do not exceed this limit. Upon the exercise of
nonstatutory stock options the excess of the current market price over the
option price (option spread) is treated as compensation and, therefore, it may
be possible for option exercises by an officer in any year to cause the
officer's total compensation to exceed $1 million. Under IRS regulations, option
spread compensation from options that meet certain requirements will not be
subject to the $1 million cap on deductibility, and it is the Company's current
policy generally to grant options that meet those requirements.
14
<PAGE>
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In setting the compensation payable to the Company's Chief Executive
Officer, Mr. Pope, the Human Resources and Nominating Committee has sought to
establish a competitive rate of base salary, while at the same time tying a
significant percentage of his overall compensation package to individual and
Company performance and stock price appreciation.
Mr. Pope's base salary is established through an evaluation of salaries paid
to similarly situated chief executive officers both at companies in the forest
products industry that are of comparable size to the Company and at companies in
other industries with which the Company competes for executive personnel. These
same companies form the peer group for comparative compensation purposes for all
other executive officers of the Company. In setting Mr. Pope's base salary, it
is the intent of the Human Resources and Nominating Committee to provide him
with a level of stability and certainty each year and not have this particular
component of compensation affected to any significant degree by Company
performance factors. For the 1998 fiscal year, Mr. Pope's base salary was set
approximately at the median level in effect for chief executive officers at the
surveyed companies. In February 1999, the Human Resources and Nominating
Committee conducted its annual review of Mr. Pope's base salary level and
increased his base salary by 3.5% effective March 1, 1999. The increase was
designed to maintain Mr. Pope's base salary at approximately the median level
for chief executive officers at the surveyed companies.
The Company did not meet the minimum corporate performance thresholds
established under the Executive Incentive Plan; therefore, no cash incentive
payments were made to Mr. Pope for 1998.
The Human Resources and Nominating Committee did not grant stock options to
Mr. Pope for 1998.
HUMAN RESOURCES AND NOMINATING COMMITTEE
<TABLE>
<S> <C>
Hamilton W. Budge Robert Stevens Miller,
Jr.
Kenneth G. Hanna Brooks Walker, Jr.
</TABLE>
15
<PAGE>
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
total shareholder return on the Company's common stock during the five
fiscal-year period ended December 31, 1998 with the cumulative total return on
the S&P 500 Index, the Russell 2000 Index, and the Value Line Paper and Forest
Products Index for that same period. The Company has selected the Russell 2000
Index as a comparable broad market index for 1998. The change from the S&P 500
Index was made to provide companies of comparable market capitalization. Both
indices are presented below. The comparison assumes $100 was invested on
December 31, 1993 in the Company's common stock and in each of the foregoing
indices and assumes reinvestment of dividends.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
POPE & TALBOT, INC. STANDARD & POORS 500 RUSSELL 2000 PAPER & FOREST PRODUCTS
<S> <C> <C> <C> <C>
1993 100.00 100.00 100.00 100.00
1994 57.23 101.60 98.02 102.65
1995 50.21 139.71 125.89 121.69
1996 63.21 172.18 146.59 142.24
1997 62.78 229.65 179.13 165.41
1998 37.17 294.87 174.23 154.40
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the preceding Executive Compensation Report and the
preceding Stock Performance Chart shall not be incorporated by reference into
any such filings; nor shall such Report or Chart be incorporated by reference
into any future filings.
16
<PAGE>
SECTION 16(a)--BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") initial reports of ownership and reports of
changes in ownership of the Company's common stock and other equity securities.
Officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports
filed.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that there was compliance for the fiscal year ended December
31, 1998 with all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than 10% beneficial owners except that Mr.
Walker did not report on a timely filed Form 4 an acquisition of 10,000 shares
held by the M.K. Walker Trust, of which Mr. Walker is Trustee.
PROPOSAL NO. 2
SPECIAL NON-EMPLOYEE DIRECTOR
STOCK RETAINER FEE PLAN
The Company's shareholders are being asked to approve and ratify the Special
Non-employee Director Stock Retainer Fee Plan (the "Special Plan") pursuant to
which the non-employee Board members will be allowed to apply all or a portion
of their annual retainer fees and any Chairman of the Board fees for the year to
the acquisition of options to purchase shares of the Company's common stock in
lieu of the receipt of those fees in cash.
The purpose of the Special Plan is to promote the interests of the Company
and its shareholders by offering non-employee Board members the opportunity to
enhance their equity interest in the Company through the receipt of stock option
grants in lieu of cash fees and thereby align their compensation more closely
with the economic return realized by the shareholders.
The principal features of the Special Plan are summarized below. The summary
is not, however, intended to be a complete description of all the provisions of
the Special Plan. A copy of the Special Plan is attached to the Proxy statement
as Exhibit I.
The Special Plan was approved by the Board on December 10, 1998 and became
effective on January 4, 1999, subject to shareholder approval of this Proposal.
STOCK RETAINER FEE PLAN
Under the Special Plan, each non-employee Board member will have the
opportunity to apply all or a portion of his annual retainer fee and Chairman of
the Board fees for the year to the acquisition of options to purchase shares of
common stock of the Company. All grants under the Special Plan will be made in
strict compliance with the provisions of the plan document, and no
administrative discretion with respect to such grants will be exercised by the
Board or any committee of the Board. Shareholder approval of this Proposal will
constitute approval of each option grant made pursuant to the provisions of the
Special Plan summarized below and the subsequent exercise of that option in
accordance with those provisions.
17
<PAGE>
Non-employee Board members also participate in the Company's 1996 Director
Plan. Under that plan, each individual who first becomes a non-employee Board
member will receive an automatic option grant for 2,000 shares of common stock
upon commencement of Board service, and each individual with six or more months
of Board service will receive an automatic option grant for an additional 1,000
shares at each Annual Meeting of Shareholders at which he continues to serve as
a non-employee Board member. Each such option will have an exercise price per
share equal to the fair market value per share of the Company's common stock on
the grant date and will have a maximum term of 10 years, subject to earlier
termination following the optionee's cessation of Board service. Each option
will be immediately exercisable for all the option shares as fully vested shares
of common stock.
The maximum number of shares of common stock issuable under the Special Plan
is limited to 300,000 shares. The common stock will be made available from
authorized but unissued shares of common stock or from shares of common stock
reacquired by the Company, including shares repurchased on the open market.
Should an option expire or terminate for any reason prior to exercise in
full, the shares subject to the portion of the option not so exercised will be
available for subsequent option grant under the Special Plan.
CHANGES IN CAPITALIZATION
In the event any change is made to the Company's outstanding common stock by
reason of any stock split, stock dividend, combination of shares, exchange of
shares or other change affecting the outstanding common stock as a class without
the Company's receipt of consideration, appropriate adjustments will be made to
(i) the maximum number and/or class of securities issuable under the Special
Plan and (ii) the number and/or class of securities available for purchase under
each outstanding option and the exercise price payable per share in order to
prevent the dilution or enlargement of benefits thereunder.
ELIGIBILITY
Only non-employee Board members are eligible to participate in the Special
Plan. As of January 31, 1999, seven non-employee Board members were eligible to
participate in the Special Plan.
OPTION GRANTS
Each non-employee Board member may elect to apply all or a portion, in 25%
increments, of his annual retainer fee and Chairman of the Board fees for the
year to the acquisition of options to purchase shares of common stock in lieu of
receipt of those fees in cash. The election must be filed with the Company's
Chief Financial Officer before the start of the calendar year for which the fees
would otherwise be payable in cash. Each non-employee Board member who files
such a timely election will automatically be granted four separate stock options
during the calendar year for which the election is in effect. The option grants
will be made on the first business day of January, April, July and October.
However, no option grants will be made to any non-employee Board member
following his cessation of Board service.
The number of shares of common stock subject to each option granted will be
determined by dividing (i) one-fourth of the fees for the year applied to the
program by (ii) the Black-Scholes formula value of the option, as determined by
the Company's independent financial advisors.
18
<PAGE>
EXERCISE AND TERM OF OPTIONS
Each option will be immediately exercisable for any or all of the option
shares as fully vested shares. However, all options granted before the Annual
Meeting (the grants made on January 4, 1999 and those to be made on April 1,
1999) will not become exercisable unless the Special Plan is approved by the
shareholders at the Annual Meeting.
Each option will have an exercise price per share equal to the fair market
value per share of common stock on the grant date and will have a maximum term
of 10 years measured from such grant date.
For all valuation purposes under the Special Plan, the fair market value per
share of common stock on any relevant date will be the closing selling price per
share on that date, as officially quoted on the composite tape of transactions
on the New York Stock Exchange. On January 31, 1999, the closing selling price
per share was $8.375.
The exercise price may be paid in cash or in shares of common stock. Options
may also be exercised through a same-day sale program, pursuant to which a
designated brokerage firm will effect the immediate sale of those shares and pay
over to the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the exercise price for the purchased shares.
CESSATION OF BOARD SERVICE
Each option grant will remain exercisable for a three year period following
the optionee's cessation of Board service. In no event, however, may the option
be exercised after the expiration date of the ten year option term.
LIMITATIONS
No optionee under the Special Plan is to have any shareholder rights with
respect to the option shares until the optionee has exercised the option, paid
the exercise price for the purchased shares and become the record holder of
those shares. Generally, an option will not be assignable or transferable other
than by will or the laws of inheritance, and during the optionee's lifetime the
option may be exercised only by the optionee. However, the optionee may, in
connection with his estate plan, transfer the option during his lifetime to
members of his immediate family or to a trust established for such family
members. The transferred portion may only be exercised by the persons who
acquire a proprietary interest in the option pursuant to the assignment.
CORPORATE TRANSACTION
Each outstanding option will terminate upon acquisition of the Company by
merger or sale of all or substantially all of the Company's assets, unless
assumed by the successor entity or its parent company. Each outstanding option
that is assumed in connection with such an acquisition of the Company will be
appropriately adjusted to apply and pertain to the number and class of
securities that would have been issued to the option holder in the consummation
of such transaction had that option been exercised immediately before such
transaction. Appropriate adjustments will also be made to the option exercise
price payable per share, provided that the aggregate option exercise price shall
remain the same.
19
<PAGE>
NEW PLAN BENEFITS
The table below shows, as to the Company's non-employee Board members, both
individually and as a group, the number of shares of common stock subject to
options granted to them on January 4, 1999 pursuant to their election to apply
all or part of their calendar year 1999 fees to the acquisition of stock options
under the Special Plan together with the exercise price payable per share.
SPECIAL NON-EMPLOYEE DIRECTOR STOCK RETAINER FEE PLAN
<TABLE>
<CAPTION>
NAME NUMBER OF OPTION SHARES EXERCISE PRICE PER SHARE
- -------------------------------------------- ----------------------- -------------------------
<S> <C> <C>
Charles Crocker............................. 1,097 $ 8.75
Gordon P. Andrews........................... 2,195 8.75
Hamilton W. Budge........................... 2,195 8.75
Kenneth G. Hanna............................ 2,195 8.75
Hugo G. L. Powell........................... 2,195 8.75
Brooks Walker, Jr........................... 2,195 8.75
Robert Stevens Miller, Jr................... 2,195 8.75
All current non-employee Board members as a
group (7 persons)......................... 14,267 8.75
</TABLE>
In addition, each of the foregoing non-employee Board members will also
receive an additional option grant under the Special Plan on April 1, 1999
pursuant to his election under the Special Plan.
All options under the Special Plan, whether granted on January 4, 1999 or to
be granted on April 1, 1999, are subject to the shareholder approval of this
Proposal and will not become exercisable in whole or in part unless such
shareholder approval is obtained. Shareholder approval of this Proposal will
constitute ratification of the option grants made under the Special Plan on
January 4, 1999 and April 1, 1999.
PLAN AMENDMENT AND TERMINATION
The Board may amend the provisions of the Special Plan at any time, subject
to any required shareholder approval under applicable law or regulation.
Unless sooner terminated by the Board, the Special Plan will terminate on
the earlier of (i) December 31, 2008 or (ii) the date on which all shares
available for issuance under the Special Plan have been issued pursuant to the
exercise of outstanding options. If the Special Plan is terminated on December
31, 2008, any options outstanding will remain in force in accordance with the
provisions of the instruments evidencing such grants.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the Special Plan will be nonstatutory options that are
not intended to satisfy the requirements of Section 422 of the Internal Revenue
Code.
No taxable income is recognized by an optionee upon the grant of a
nonstatutory option. The optionee will recognize ordinary income, in the year in
which the option is exercised, equal to the excess of the fair market value of
the purchased shares on the exercise date over the exercise price paid for the
shares.
20
<PAGE>
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
nonstatutory option. The deduction will be allowed for the taxable year of the
Company in which such ordinary income is recognized by the optionee.
ACCOUNTING TREATMENT
Under the accounting rules currently in effect for equity incentive programs
for non-employee Board members, the option grants under the Special Plan
generally will not result in any compensation expense included in the Company's
reported earnings because those grants will have an exercise price equal to the
fair market value of the shares on the grant date. However, the fair value of
those options will have to be disclosed in the notes to the Company's financial
statements, and the Company must also disclose, in proforma notes to the
Company's financial statements, the impact those options would have upon the
Company's reported earnings were the fair value of those options at the time of
grant treated as compensation expense. In addition, the number of outstanding
options may be a factor in determining the Company's earnings per share on a
diluted basis.
Because the option grants made under the Special Plan on January 4, 1999 and
the option grants to be made on April 1, 1999 will be subject to shareholder
approval, the Company may have to recognize compensation expense in the fiscal
quarter in which the Special Plan is approved. The amount of that expense will
be equal to the number of shares subject to the options outstanding at the time
of such shareholder approval multiplied by the excess (if any) of the fair
market value per share of the common stock at that time over the option exercise
price payable per share.
Under a recently proposed amendment to current accounting principles, option
grants made to non-employee Board members will result in a direct charge to the
Company's reported earnings based upon the fair value of the option measured on
the vesting date of that option. However, in the event the proposal is adopted,
the impact of the charge should be mitigated by the fact that the non-employee
Board member will only receive stock options under the Special Plan to the
extent he elects to forego the fees otherwise payable to him in cash for the
same period.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the voting shares of the Company
present or represented and entitled to vote at the Annual Meeting is required to
approve the Special Plan. Abstentions have the same effect as "no" votes in
determining whether the Special Plan is approved. Broker nonvotes are counted
for purposes of determining whether a quorum exists at the Annual Meeting but
are not counted and have no effect on the results of the vote on the Proposal.
Should such shareholder approval not be obtained, then the Special Plan will not
be implemented and any outstanding options granted under such Plan will
immediately terminate and cease to be outstanding.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the shareholders vote FOR approval of
the Special Plan.
21
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee of
the Board, appointed Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1999, subject to
ratification by the shareholders at the Annual Meeting. A representative of
Arthur Andersen LLP is expected to be present at the Annual Meeting with the
opportunity to make a statement if he or she so desires and to respond to
appropriate questions. The Board of Directors recommends that the shareholders
approve this appointment. Although this appointment is not required to be
submitted to a vote by the shareholders, the Company continues to believe it
appropriate, as a matter of policy, to request the shareholders' ratification.
If the shareholders do not ratify this appointment, the Board of Directors will
reconsider such selection.
SHAREHOLDER PROPOSALS
The Company's bylaws require shareholders to give the Company advance notice
of any proposal or director nomination to be submitted at any meeting of
shareholders. The bylaws prescribe the information to be contained in any such
notice. For any shareholder proposal or nomination to be considered at the 2000
Annual Meeting of Shareholders, the shareholder's notice must be received at the
Company's principal executive office no later than January 30, 2000. In
addition, any shareholder proposal to be considered for inclusion in the
Company's proxy statement for the 2000 Annual Meeting of Shareholders must be
received at the Company's principal executive office no later than November 23,
1999.
SOLICITATION OF PROXIES
The cost of soliciting proxies in the enclosed form will be borne by the
Company. In addition to solicitation by mail, officers and other employees of
the Company may solicit proxies personally or by telephone. The Company may
request banks and brokers or other similar agents or fiduciaries to transmit the
proxy materials to the beneficial owners for their voting instructions and will
reimburse them for their expenses in so doing.
OTHER MATTERS
The Board of Directors does not know of any other matters that will be
presented for action at the Annual Meeting. However, if other matters come
before the meeting, the persons named in each proxy intend to vote it in
accordance with their best judgment.
ANNUAL REPORT--FINANCIAL MATTERS
The annual report to shareholders covering the operations of the Company for
the year 1998, including financial statements, is enclosed herewith. Copies of
the 1998 annual report and annual 10-K, including financial statements and
schedules filed with the SEC, may be obtained from Ms. Maria M. Pope, Treasurer
and Secretary, Pope & Talbot, Inc., P.O. Box 8171, Portland, Oregon 97207.
By order of the Board of Directors
Maria M. Pope
TREASURER AND SECRETARY
March 26, 1999
22
<PAGE>
EXHIBIT I
POPE & TALBOT, INC.
SPECIAL NON-EMPLOYEE DIRECTOR STOCK RETAINER FEE PLAN
I. PURPOSE OF THE PLAN
This Special Non-Employee Director Stock Retainer Fee Plan (the "Plan") is
intended to promote the interests of Pope & Talbot, Inc., a Delaware corporation
(the "Corporation"), by providing the non-employee members of the Corporation's
Board of Directors with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
II. ADMINISTRATION OF THE PLAN
The terms and conditions of each option grant (including the timing and
pricing of the option grant) shall be determined solely pursuant to the express
terms and conditions of the Plan, and neither the Board nor any committee of the
Board shall exercise any discretionary functions with respect to option grants
made pursuant to the Plan.
III. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock shall be available for issuance
under the Plan and shall be drawn from either the Corporation's authorized but
unissued shares of Common Stock or from reacquired shares of Common Stock,
including shares repurchased by the Corporation on the open market. The maximum
number of shares of Common Stock issuable under this Plan shall not exceed
300,000 shares, subject to adjustment from time to time in accordance with the
provisions of this Article III.
B. Should one or more outstanding options under the Plan expire or
terminate for any reason prior to exercise in full, then the shares subject to
the portion of each option not so exercised shall be available for subsequent
option grant under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock, then the
number of shares of Common Stock available for issuance under this Plan shall be
reduced only by the net number of shares of Common Stock actually issued to the
holder of such option, and not by the gross number of shares for which such
option is exercised.
C. Should any change be made to the Common Stock issuable under the Plan by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then the
Board shall make appropriate adjustments to (i) the maximum number and/or class
of securities issuable under the Plan and (ii) the number and/or class of
securities and price per share in effect for each option outstanding under the
Plan. Such adjustments to the outstanding options are to be effected in a manner
which shall preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Board shall be final, binding
and conclusive.
IV. OPTION GRANTS
Each non-employee Board member may elect to apply all or a portion, in
twenty-five percent (25%) increments, of the annual retainer fee and any
Chairman of the Board fees for the year to the acquisition of stock options
under the Plan in lieu of payment of those fees in cash. Such election must be
filed with
<PAGE>
the Corporation's Chief Financial Officer prior to the start of the calendar
year for which the fees which are the subject of that election would otherwise
be payable in cash. Each non-employee Board member who files such a timely
election shall automatically be granted four (4) separate stock options under
this Plan during the calendar year for which such election is in effect. The
grants shall be made on the first business day in January, April, July and
October of that year. However, no option grants shall be made to any
non-employee Board member following his or her cessation of Board service.
V. OPTION GRANTS
Each quarterly stock option grant shall be a Non-Statutory Option governed
by the terms and conditions specified below.
A. EXERCISE PRICE. The exercise price per share shall be equal to the Fair
Market Value per share of Common Stock on the grant date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject
to the option shall be determined by dividing (i) one-fourth of the fees for the
year applied to the program by (ii) the Black-Scholes formula value of the
option, as determined by the Corporation's independent financial advisors.
C. OPTION TERM. Each option shall have a maximum term of ten (10) years
measured from the grant date.
D. EXERCISABILITY. Each option grant shall be immediately exercisable for
any or all of the option shares as fully vested shares. However, any options
granted prior to the 1999 Annual Stockholders Meeting shall be subject to
stockholder approval of this Plan at such Annual Meeting and shall not become
exercisable unless and until such stockholder approval is obtained.
E. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee
the option may, in connection with the Optionee's estate plan, be assigned in
whole or in part to one or more members of the Optionee's immediate family or to
a trust established exclusively for one or more such family members. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Corporation may deem appropriate. Should
the Optionee die while holding the option, then that option shall be transferred
in accordance with the Optionee's will or the laws of descent and distribution.
F. EFFECT OF TERMINATION OF BOARD SERVICE.
1. Should the Optionee cease for any reason to serve as a Board member
while holding one or more option grants under the Plan, then such individual
shall have a three (3)-year period following the date of such cessation of Board
service in which to exercise each such option for any or all of the option
shares at the time subject to that option. In no event shall any option grant
remain exercisable after the expiration date of the ten (10)-year option term.
2. Should the Optionee die while holding one or more option grants under
the Plan, then each such grant may subsequently be exercised, for any or all of
the option shares at the time subject to that option, by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. The right to exercise each such option shall
lapse upon the EARLIER of (i) the expiration of the three (3)-year
2
<PAGE>
period measured from the date of the Optionee's cessation of Board service or
(ii) the expiration of the ten (10) year option term.
G. CORPORATE TRANSACTION. Each outstanding option shall terminate at the
time of a Corporate Transaction, except to the extent that option is assumed by
the successor entity or its parent company. Each option which is so assumed
shall, immediately after the Corporate Transaction, be appropriately adjusted to
apply and pertain to the number and class of securities which would have been
issued to the option holder in the consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the option exercise price payable
per share, PROVIDED the aggregate option exercise price shall remain the same.
H. STOCKHOLDER RIGHTS. The holder of an option grant shall have no
stockholder rights with respect to any shares subject to such option until such
individual shall have exercised the option, paid the exercise price for the
purchased shares and become a holder of record of the shares.
I. REMAINING TERMS. The remaining terms and conditions of each option
grant shall be as set forth in the form of Stock Option Agreement attached as
EXHIBIT A.
VI. AMENDMENT OF THE PLAN AND AWARDS
The Board shall have complete and exclusive power and authority to amend or
modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options at the time outstanding under the Plan unless the affected
Optionees consent to such amendment or modification. In addition, certain
amendments may require stockholder approval pursuant to applicable laws or
regulations.
EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall be implemented effective January 4, 1999, subject to
stockholder approval of the Plan at the 1999 Annual Stockholders Meeting. If
such stockholder approval is not obtained, then the Plan shall terminate, all
options previously granted hereunder shall terminate and cease to be
outstanding, and no further option grants shall be made under the Plan.
B. If the Plan is approved by the stockholders at the 1999 Annual Meeting,
then the Plan shall remain in effect until the EARLIER of (i) December 31, 2008
or (ii) the date on which all shares available for issuance under this Plan
shall have been issued pursuant to the exercise of outstanding options. If the
date of plan termination is determined under clause (i) above, then all option
grants outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing those
grants.
VII. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes
3
<PAGE>
VIII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under the Plan
and the issuance of Common Stock upon the exercise of the option grants made
hereunder shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it, and the Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under this Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the Common Stock is then listed for trading.
IX. NO IMPAIRMENT OF RIGHTS
Neither the action of the Corporation in establishing the Plan nor any
provision of the Plan shall be construed or interpreted so as to affect
adversely or otherwise impair the right of the Corporation or the stockholders
to remove any individual from the Board at any time in accordance with the
provisions of applicable law.
X. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the Plan may not
be assigned, encumbered or otherwise transferred by any Optionee.
B. The provisions of the Plan relating to the exercise of the outstanding
options shall be governed by the laws of the State of Oregon, as such laws are
applied to contracts entered into and performed in such State.
C. The provisions of the Plan shall inure to the benefit of, and be binding
upon, the Corporation and its successors or assigns, and the Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
4
<PAGE>
APPENDIX
For purposes of the Plan, the following definitions shall be in effect:
A. BOARD: the Corporation's Board of Directors.
B. CODE: the Internal Revenue Code of 1986, as amended.
C. COMMON STOCK: shares of the Corporation's common stock.
D. CORPORATE TRANSACTION: any of the following stockholder-approved
transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Corporation is incorporated,
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation, or
(iii) any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such merger.
E. EFFECTIVE DATE: the January 4, 1999 date on which the first stock
option grants shall be made under the Plan, subject to stockholder approval at
the 1999 Annual Meeting.
F. FAIR MARKET VALUE: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
(i) If the Common Stock is at the time listed or admitted to trading
on the New York Stock Exchange or on any other national securities
exchange, then the Fair Market Value shall be the closing selling price
per share on the date in question, as officially quoted on the composite
tape of transactions on the exchange serving as the primary market for
the Common Stock. If there is no reported sale of Common Stock on such
exchange on the date in question, then the Fair Market Value shall be the
closing selling price on the exchange on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is not at the time listed or admitted to
trading on any national securities exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price
per share on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market.
If there is no reported closing selling price for the Common Stock on the
grant date, then the closing selling price on the last preceding date for
which such quotation exists shall be determinative of Fair Market Value.
G. 1934 ACT: the Securities Exchange Act of 1934, as amended.
H. OPTIONEE: any person to whom an option is granted under the Plan.
A-1
<PAGE>
EXHIBIT A
POPE & TALBOT, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented the Special Non-Employee Director Stock
Retainer Fee Plan (the "Plan") pursuant to which eligible non-employee members
of the Corporation's Board of Directors (the "Board") may elect to apply all or
a portion of the annual retainer fee and any Chairman of the Board fees for the
year to the acquisition of stock options in lieu of payment of those fees in
cash.
B. Optionee is an eligible non-employee Board member, and this Agreement is
executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the grant of a stock option to purchase shares of the
Corporation's common stock ("Common Stock") under the Plan.
C. The granted option is intended to be a non-statutory option which does
NOT meet the requirements of Section 422 of the Internal Revenue Code.
D. All capitalized terms in this Agreement, to the extent not otherwise
defined in the Agreement, shall have the meaning assigned to them in the
attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of the
Grant Date, a Non-Statutory Option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a maximum term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or Paragraph 6.
3. LIMITED TRANSFERABILITY. During the lifetime of the Optionee the option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part to one or more members of the Optionee's immediate family or to a trust
established exclusively for one or more such family members. The assigned
portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate. Should Optionee die
while holding this option, then the option shall be transferred in accordance
with Optionee's will or the laws of descent and distribution.
4. EXERCISABILITY/VESTING. This option shall be immediately exercisable
for any or all of the Option Shares as fully-vested shares and shall remain so
exercisable until the Expiration Date or the sooner termination of the option
term under Paragraph 5 or Paragraph 6. In no event, however, shall this option
become exercisable for any of the Option Shares prior to stockholder approval of
the Plan at the 1999 Annual Stockholders Meeting. Should such stockholder
approval not be obtained, then this option shall immediately terminate.
<PAGE>
5. CESSATION OF BOARD SERVICE. Should Optionee cease service as a Board
member while this option remains outstanding, then the option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date in accordance with the following provisions:
-- Should Optionee cease for any reason to serve as a Board member
while this option is outstanding, then the period during which this option
may be exercised, for any or all of the Option Shares at the time subject to
this option, shall be limited to the three (3)-year period measured from the
date of such cessation of Board service. In no event, however, shall this
option be exercisable at any time after the Expiration Date.
-- Should Optionee die while holding this option, then the personal
representative of Optionee's estate or the person or persons to whom the
option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution shall have the right to exercise this
option for any or all of the Option Shares at the time subject to this
option. Such right shall terminate, and this option shall accordingly cease
to be exercisable for such Option Shares, upon the earlier of (A) the
expiration of the three (3)-year period measured from the date of Optionee's
cessation of Board service or (B) the specified Expiration Date of the
option term.
6. CORPORATE TRANSACTION. This option shall terminate at the time of a
Corporate Transaction, except to the extent assumed by the successor entity or
its parent company. To the extent this option is so assumed, the option shall be
appropriately adjusted, immediately after the Corporate Transaction, to apply
and pertain to the number and class of securities which would have been issued
to the holder of this option in the consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Exercise Price payable per
share, PROVIDED the aggregate Exercise Price shall remain the same.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option for all or any part of the Option Shares
for which the option is at the time exercisable, Optionee (or in the case of
exercise after Optionee's death, Optionee's executor, administrator, heir or
legatee, as the case may be) must take the following actions:
(i) The Secretary of the Corporation shall be provided with written
notice of the option exercise (the "Exercise Notice"), in substantially the
form of Exhibit A1 attached hereto, in which there is specified the number
of Option Shares to be purchased under the exercised option.
(ii) The aggregate Exercise Price for the purchased shares shall be paid
in one or more of the following alternative forms:
-- payment in cash or check made payable to the Corporation; or
2
<PAGE>
-- payment in shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
-- payment effected through a broker-dealer sale and remittance
procedure pursuant to which Optionee shall provide irrevocable
instructions (A) to a Corporation-designated brokerage firm to effect
the immediate sale of the shares purchased under the option and remit
to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Exercise
Price payable for those shares plus the applicable Federal, State and
local income taxes required to be withheld by the Corporation by
reason of such exercise and (B) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
(iii) Appropriate documentation evidencing the right to exercise this
option shall be furnished the Corporation if the person or persons
exercising the option is other than the Optionee.
(iv) Appropriate arrangement must be made with the Corporation for the
satisfaction of all Federal, State and local income tax withholding
requirements applicable to the option exercise.
B. Except to the extent the sale and remittance procedure specified above
is utilized in connection with the exercise of the option, payment of the
Exercise Price for the purchased shares must accompany the Exercise Notice
delivered to the Corporation in connection with the option exercise.
C. As soon as practical after the Exercise Date, the Corporation shall
issue to or on behalf of Optionee (or any other person or persons exercising
this option) a certificate or certificates representing the purchased Option
Shares.
D. In no event may this option be exercised for any fractional shares.
10. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise make
changes in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets. In
addition, this Agreement shall not in any way be construed or interpreted so as
to affect adversely or otherwise impair the right of the Corporation or the
stockholders to remove Optionee from the Board at any time in accordance with
the provisions of applicable law.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of the Option Shares upon
such exercise shall be subject to compliance by the Corporation and Optionee
with all applicable requirements of law relating thereto and with all applicable
regulations of the New York Stock Exchange.
B. The inability of the Corporation to obtain approval from any regulatory
body having authority deemed by the Corporation to be necessary to the lawful
issuance and sale of any Common Stock pursuant to this option shall relieve the
Corporation of any liability with respect to the non-issuance or sale of the
Common Stock as to which such approval shall not have been obtained. However,
the Corporation shall use its best efforts to obtain all such applicable
approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3 or Paragraph 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its
3
<PAGE>
successors and assigns and Optionee, Optionee's assigns and the legal
representatives, heirs and legatees of Optionee's estate.
13. CONSTRUCTION/GOVERNING LAW. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the express terms and provisions of the Plan. The
interpretation, performance, and enforcement of this Agreement shall be governed
by the laws of the State of Oregon without resort to that State's
conflict-of-laws rules.
14. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
4
<PAGE>
EXHIBIT A1
NOTICE OF EXERCISE
I hereby notify Pope & Talbot, Inc. (the "Corporation") that I elect to
purchase shares of the Corporation's Common Stock (the "Purchased Shares")
at the option exercise price of $ per share (the "Exercise Price") pursuant
to that certain option (the "Option") granted to me under the Corporation's
Special Non-Employee Director Stock Retainer Fee Plan on , 1999.
Concurrently with the delivery of this Exercise Notice to the Secretary of
the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with the
Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker/dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price for
any Purchased Shares.
<TABLE>
<S> <C>
- ------------------------------------------- -------------------------------------------
Date Optionee
Address: ---------------------------------
---------------------------------
Print name in exact manner
it is to appear on the
stock certificate:
-------------------------------------------
Address to which certificate
is to be sent, if different
from address above: -------------------------------------------
-------------------------------------------
Social Security Number:
-------------------------------------------
</TABLE>
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean any of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Corporation is incorporated,
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation, or
(iii) any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such merger.
F. CORPORATION shall mean Pope & Talbot, Inc., a Delaware corporation.
H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price payable per share as
specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option term expires
as specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined as follows:
(i) If the Common Stock is at the time listed or admitted to trading
on the New York Stock Exchange or on any other national securities
exchange, then the Fair Market Value shall be the closing selling price
per share on the date in question, as officially quoted on the composite
tape of transactions on the exchange serving as the primary market for
the Common Stock. If there is no reported sale of Common Stock on such
exchange on the date in question, then the Fair Market Value shall be the
closing selling price on the exchange on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is not at the time listed or admitted to
trading on any national securities exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price
per share on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market.
If there is no reported closing selling price for the Common Stock on the
grant date, then the closing selling
A-1
<PAGE>
price on the last preceding date for which such quotation exists shall be
determinative of Fair Market Value.
L. GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of
the basic terms of the option evidenced hereby.
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
P. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.
Q. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
S. PLAN shall mean the Corporation's Special Non-Employee Director
Stock Retainer Fee Plan.
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<PAGE>
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<PAGE>
POPE & TALBOT, INC.
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, APRIL 29, 1999
The undersigned hereby appoints Hamilton W. Budge, Charles Crocker and Michael
Flannery, jointly and severally, with full power of substitution, proxies of
the undersigned, to vote the shares of Common Stock which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of Pope & Talbot,
Inc., to be held on April 29, 1999, and at any adjournments thereof:
FOLD AND DETACH HERE
<PAGE>
Please mark
your votes as
indicated in
this example X
/ / WITH / / WITHOUT 1. Authority to vote for the following nominees
to the Board of Directors to serve three-year
terms, as described in the accompanying Proxy
Statement (THE BOARD OF DIRECTORS FAVORS A VOTE
WITH AUTHORITY):
KENNETH G. HANNA, ROBERT STEVENS MILLER, JR., HUGO G.L. POWELL
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- ------------------------------------------------
2. The proposal to approve and ratify the / / FOR / / AGAINST / / ABSTAIN
implementation of the Special Non-Employee
Director Retainer Fee Plan pursuant to
which 300,000 shares of the Company's
Common Stock will be reserved for
issuance to non-employee Board members
who elect to forego all or a portion
of their annual cash retainer fees and
Chairman of the Board fees in exchange for
stock option grants under the Plan (THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR):
3. The proposal to ratify the selection / / FOR / / AGAINST / / ABSTAIN
of Arthur Andersen LLP to continue as
independent certified public
accountants for the year 1999 (THE
BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR): and
4. In their discretion, upon any such
other matters as may properly come
before the meeting.
Unless otherwise specified, the proxies are granted the authority to vote for
the election of all or any of the nominees for Director and for Proposals 2
and 3.
Please date, sign and return this proxy in the enclosed envelope.
Dated , 1999
- ------------------------------------- ---------------------------
Please sign here exactly as name(s) appear(s) hereon. (When signing as
attorney, administrator, trustee, guardian or corporate officer, please so
indicate.)
FOLD AND DETACH HERE
