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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1 )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
Lane Plywood, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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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:
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5) Total fee paid:
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/X/ 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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L A N E P L Y W O O D, I N C.
65 N. BERTELSEN ROAD
EUGENE, OREGON 97402
(541) 342-5561
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SATURDAY, APRIL 13, 1996
To the Shareholders:
The Annual Meeting of Shareholders (the "Meeting") of Lane Plywood, Inc.
(the "Corporation") will be held in the Willamette High School Auditorium,
1801 Echo Hollow Road, Eugene Oregon, on Saturday, April 13, 1996, at 1:30 p.m.,
local time, for the following purposes:
1. To approve the Agreement and Plan of Merger (the "Merger Agreement")
dated October 26, 1995 between the Corporation and Pioneer Merger, Inc. ("PMI")
and a wholly owned subsidiary of PMI, Lane Acquisition, Inc. ("LAI"). The
Merger Agreement provides for the Merger of LAI with and into the Corporation
with each shareholder of the Corporation being entitled to $49 per share in cash
(the "Merger"). Shareholders of the Corporation have the right to dissent from
the Merger and may obtain payment for their shares under the provisions of
Oregon Revised Statutes sections 60.551 through 60.594, a copy of which is set
forth in Appendix B to the Proxy Statement.
2. To elect directors.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Corporation's shareholders ("Lane Shareholders") of record at the close
of business on February 26, 1996 are entitled to notice of and to vote at the
Meeting and at any adjournment thereof.
By Order of the Board of Directors
Janis M. Johnson
Vice-President/Secretary-Treasurer
Eugene, Oregon
March 20, 1996
PLEASE VOTE. APPROVAL OF THE MERGER AGREEMENT REQUIRES THAT THE HOLDERS OF A
MAJORITY OF THE CORPORATION'S SHARES VOTE "YES". PLEASE FILL IN, DATE, AND SIGN
THE ENCLOSED PROXY, AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
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L A N E P L Y W O O D, I N C.
65 N. BERTELSEN ROAD
EUGENE, OREGON 97402
(541) 342-5561
PROXY STATEMENT FOR
APRIL 13, 1996 ANNUAL MEETING OF SHAREHOLDERS
SOLICITATION OF PROXIES
The enclosed form of proxy (the yellow colored page) is solicited on behalf
of the Board of Directors of the Corporation for use at the Annual Meeting of
the Shareholders ("Meeting") on April 13, 1996, and at any adjournment of the
Meeting. Please fill in, date and sign the proxy and return it to Lane
Plywood, Inc. ("Corporation") prior to the meeting.
The proxy may be revoked at any time prior to the actual vote by delivering
to the Secretary of the Corporation at the above address a written notice of
revocation or a duly executed proxy bearing a later date, or by attending the
meeting and voting in person.
The cost of preparing, assembling, and mailing material in connection with
this solicitation will be borne by the Corporation. In addition to the use of
the mails, proxies may be solicited personally or by telephone by individual
officers, directors and regular employees of the Corporation without additional
compensation.
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BE SURE TO VOTE. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE TODAY.
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The 1996 Annual Report to the Stockholders of Lane Plywood for the year
ended November 30, 1995 is included in the mailing with this proxy statement.
Please refer to it for the information it contains.
All information in this Proxy Statement concerning the Corporation or the
Agreement and Plan of Merger (the "Merger Agreement") has been furnished by the
Corporation and all information concerning Pioneer Merger, Inc. ("PMI") or Lane
Acquisition, Inc. ("LAI") has been furnished by PMI.
Approximate date of mailing:
March 20, 1996
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PROXY STATEMENT
TABLE OF CONTENTS
Page
SOLICITATION OF PROXIES . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Matters to be Considered at the Meeting. . . . . . . . . . . . . . 4
Voting at the Meeting. . . . . . . . . . . . . . . . . . . . . . . 4
Proxy Solicitation . . . . . . . . . . . . . . . . . . . . . . . . 4
VOTE ON THE MERGER AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 5
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Factors Leading to the Merger. . . . . . . . . . . . . . . . . . . 6
General Background. . . . . . . . . . . . . . . . . . . . . . 6
Alternatives to, and Reasons for, the Merger. . . . . . . . . 7
History of Negotiations . . . . . . . . . . . . . . . . . . . 8
Provisions Regarding Operations . . . . . . . . . . . . . . . 9
Fairness of the Transaction. . . . . . . . . . . . . . . . . . . . 10
Appraisals Considered. . . . . . . . . . . . . . . . . . . . . . . 11
Timber Appraisal. . . . . . . . . . . . . . . . . . . . . . . 11
The Plywood Mill. . . . . . . . . . . . . . . . . . . . . . . 13
Other Value Components. . . . . . . . . . . . . . . . . . . . 14
Availability of Appraisals. . . . . . . . . . . . . . . . . . 15
Recommendation of the Directors. . . . . . . . . . . . . . . . . . 16
Recommendation of the Majority of Directors . . . . . . . . . 16
Discussion of Francis Bales' Vote Against the Merger
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Interests of Certain Persons in the Merger. . . . . . . . . . 16
Vote Required for Approval . . . . . . . . . . . . . . . . . . . . 17
Other Conditions With Respect to the Merger. . . . . . . . . . . . 17
Shareholder Approval. . . . . . . . . . . . . . . . . . . . . 17
Lack of Excessive Dissents. . . . . . . . . . . . . . . . . . 17
Litigation and Other Matters. . . . . . . . . . . . . . . . . 17
Other Actions by PMI. . . . . . . . . . . . . . . . . . . . . 18
Other Actions by the Corporation. . . . . . . . . . . . . . . 18
Payment for Shares . . . . . . . . . . . . . . . . . . . . . . . . 18
Rights of Dissenting Shareholders. . . . . . . . . . . . . . . . . 19
No Vote in Favor of the Merger. . . . . . . . . . . . . . . . 19
Written Notice of Intention to Demand Payment . . . . . . . . 19
Form for Demanding Payment. . . . . . . . . . . . . . . . . . 20
Remittance to Dissenting Shareholders . . . . . . . . . . . . 20
Demand for Payment of Deficiency. . . . . . . . . . . . . . . 21
Court Appraisal . . . . . . . . . . . . . . . . . . . . . . . 21
Meaning of "Fair Value" . . . . . . . . . . . . . . . . . . . 22
Consequences of Dissent on Approval of the Merger . . . . . . 22
Certain Federal Income Tax Consequences to Lane Shareholders . . . 22
Accounting Treatment of the Merger . . . . . . . . . . . . . . . . 24
Operation of Lane Plywood After the Merger . . . . . . . . . . . . 24
SELECTED FINANCIAL DATA OF LANE PLYWOOD . . . . . . . . . . . . . . . . 26
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INFORMATION ABOUT LANE PLYWOOD. . . . . . . . . . . . . . . . . . . . . 27
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Description of Business Operations . . . . . . . . . . . . . . . . 27
Tree Farms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Sources of Raw Material. . . . . . . . . . . . . . . . . . . . . . 28
Factors Affecting Revenues . . . . . . . . . . . . . . . . . . . . 28
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 30
Market for the Corporation's Stock; Dividend History . . . . . . . 30
INFORMATION ABOUT PMI AND LAI . . . . . . . . . . . . . . . . . . . . . 30
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 31
Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Vote Required to Elect . . . . . . . . . . . . . . . . . . . . . . 31
Directors Whose Terms are Continuing . . . . . . . . . . . . . . . 32
MANAGEMENT AND COMPENSATION
OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . 33
Executive Officers of the Corporation. . . . . . . . . . . . . . . 33
Compensation Committee Interlocks and Insider Participation. . . . 34
Report on Executive Compensation . . . . . . . . . . . . . . . . . 34
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 35
Director Compensation. . . . . . . . . . . . . . . . . . . . . . . 36
Incentive Profit Sharing Plan. . . . . . . . . . . . . . . . . . . 36
Group Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Stock Performance. . . . . . . . . . . . . . . . . . . . . . . . . 37
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . 38
Certain Transactions With Management . . . . . . . . . . . . . . . 39
BENEFICIAL OWNERSHIP OF COMMON STOCK. . . . . . . . . . . . . . . . . . 39
COMPLIANCE WITH SECTION 16 FILING REQUIREMENTS. . . . . . . . . . . . . 41
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ANNUAL REPORT ON FORM 10-K. . . . . . . . . . . . . . . . . . . . . . . 42
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS. . . . . . . . . . . . 42
INCORPORATION BY REFERENCE. . . . . . . . . . . . . . . . . . . . . . . 42
1997 SHAREHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . 42
APPENDIX A: THE MERGER AGREEMENT
APPENDIX B: STATUTES GOVERNING THE RIGHTS OF DISSENTERS
APPENDIX C: PROXY
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GENERAL INFORMATION
MATTERS TO BE CONSIDERED AT THE MEETING.
At the Meeting, the Corporation's shareholders ("Lane Shareholders") are
being asked to consider and vote upon the proposal to approve the Merger
Agreement. The Merger Agreement provides for the merger of LAI with and into
the Corporation, with each Lane Shareholder, other than those who exercise
their dissenters' rights, being entitled to receive $49.00 per share in cash.
Shareholders who exercise their dissenters' rights may obtain payment for
their shares under the provisions of Oregon Revised Statutes (ORS) sections
60.557 through 60.594, a copy of which is set forth in Appendix B to this
Proxy Statement.
In addition, Lane Shareholders will, at the Meeting, be asked to elect
directors for two open positions on the Board of Directors. The Corporation
knows of no other matters which are to come before the Meeting.
VOTING AT THE MEETING.
The Board of Directors set the close of business on February 26, 1996 as
the record date (the "Record Date"). Only shareholders of record on the Record
Date will be entitled to notice of, and to vote at, the Meeting. As of the
Record Date, there were 204,662 shares of the Corporation's Common Stock ("Lane
Common Stock") outstanding, owned by approximately 400 shareholders of record.
Each Lane Shareholder of record on the Record Date will be entitled to one
vote for each share of Lane Common Stock owned of record on the Record Date on
each of the matters submitted to a vote of the shareholders at the Meeting.
Shares may be voted in person or by proxy. A majority of the outstanding
shares, represented in person or by proxy, must be present for a quorum to
exist. Without a quorum no business, other than adjournment of the Meeting to a
later date or time, can take place at the Meeting.
Under the Oregon Business Corporation Act, the affirmative vote of a
majority of the outstanding shares of Lane Common Stock is required for approval
of the Merger Agreement. The votes for each of the two open director positions
will be taken separately. In each case, the candidate receiving the highest
number of votes will be elected to that position. The Board of Directors
recommends that Lane Shareholders vote FOR approval of the Merger Agreement and
vote FOR the two candidates nominated by the Board of Directors.
PROXY SOLICITATION.
The enclosed Proxy is being solicited by and on behalf of the Board of
Directors of the Corporation. Lane Shareholders are requested to complete,
date, sign and promptly return this Proxy in
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the enclosed envelope. All shares represented by properly executed unrevoked
proxies received by the Corporation prior to, or at, the Meeting will be
voted in accordance with the instructions indicated by the shareholder on the
proxies. If no instructions are specified on an executed Proxy, the shares
will be voted for approval of the Merger Agreement and in favor of each of
the two candidates nominated by the Board of Directors.
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted: (i) by filing with the Secretary of
the Corporation written notice of such revocation, or (ii) by duly executing a
subsequent proxy bearing a later date and delivering such subsequent proxy to
the Secretary of the Corporation, or (iii) attending the Meeting and voting in
person (although attendance at the Meeting will not by itself revoke a proxy).
Any notice with respect to the revocation of a proxy should be in writing and
sent to or personally given to Janis M. Johnson, Secretary-Treasurer, Lane
Plywood, Inc., 65 North Bertelsen Road, Eugene, Oregon 97402.
This Proxy Statement is first being mailed to Lane Shareholders on or
about March 20, 1996. All expenses of this solicitation, including the cost
of preparing and mailing these proxy materials will be borne by the
Corporation. In addition to this Proxy Statement, directors, officers and
employees of the Corporation may solicit proxies by telephone or in person.
Such persons will not be additionally compensated for such activities but may
be reimbursed for out-of-pocket expense in connection with any such
solicitations.
VOTE ON THE MERGER AGREEMENT
The Merger Agreement contains the detailed terms of and conditions to the
plan of merger (the "Merger"). A copy of the Merger Agreement is included as
Appendix A to this Proxy Statement. The following description of the material
terms of the Merger Agreement is qualified by, and made subject to, the text of
the Merger Agreement. The terms of the Merger Agreement were negotiated at
arms-length, and have been found to be fair by the directors of the Corporation.
OVERVIEW.
For purposes of the Merger, PMI created LAI as a wholly owned subsidiary.
LAI was organized solely for the purpose of merging with the Corporation. In
return for all the stock in LAI, PMI agreed to contribute to LAI the money
needed to effect the Merger. LAI will have no assets other than cash and cash
equivalents, and no liability other than its organizational expenses and its
obligations under the Merger Agreement. LAI has not, and will not, conduct any
business other than that necessary to effect the Merger.
If the Merger is approved by Lane Shareholders, on the date the Merger
becomes effective (the "Effective Date"), each
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outstanding share of the Corporation's common stock ("Lane Common Stock"),
except for the shares of dissenters, will be cancelled and converted into the
right to receive cash, in the amount of $49 per share (the "Purchase Price").
However, shares of Lane Common Stock owned by Lane Shareholders who exercise
and perfect their right to dissent, as described in the Oregon Business
Corporation Act, will be exchanged for their "fair value", as determined by
the statutory procedure, as of the Effective Date. For a more complete
discussion of dissenters' rights, see "Rights of Dissenting Shareholders"
below.
Upon consummation of the Merger, the Corporation will become a wholly owned
subsidiary of PMI, and LAI will cease to exist as a separate corporation. The
directors of the Corporation will then resign as directors so that PMI, as the
Corporation's sole shareholder, may elect its own directors of the Corporation.
Shortly after the Merger, the Corporation will be liquidated with all its assets
and liabilities being transferred to PMI. PMI will then change its corporate
name to "Lane Plywood, Inc."
The Merger is subject to several conditions. More detail about these
conditions is provided below. The Merger Agreement is binding upon both PMI and
the Corporation. Neither can terminate the agreement except upon a material
breach by the other or upon a failure of a condition to the Merger.
If the Merger Agreement is approved by the Lane Shareholders at the annual
meeting, management anticipates that the Effective Date will be April 17, 1996.
No federal or state regulatory approvals must be obtained to consummate the
Merger.
FACTORS LEADING TO THE MERGER.
The Merger Agreement presented with this Proxy Statement represents the
culmination of several years' work by the Board of Directors to realize the
value of the Corporation for the benefit of Lane Shareholders. Since many Lane
Shareholders are also employees of the Corporation, the Board of Directors also
considered the impact of any transaction on the continued operation of the
plywood mill.
GENERAL BACKGROUND. The forest products industry in the Northwest in
general, and in western Oregon in particular, has been hard hit by timber
shortages caused primarily by reductions in the federal timber harvest.
Increasing competition from other regions has kept prices for timber products
from rising with the shrinking supplies in the Northwest. As a result, timber
prices in the Northwest have risen and revenues for mills have dropped.
This squeeze has resulted in numerous such mills closing down. Since 1989,
when the current timber harvest restrictions first came into place, 261 mills
operating in the Pacific Northwest, including plywood, veneer and sawmills,
employing more than 22,000 workers, have shut down. In western Oregon alone,
100 mills, employing more than 9,500 workers, have closed.
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At the same time, the shortage of harvestable timber has increased the
value of private timber holdings. Because the Corporation invested in
timberland over the years, it has benefited from the increase in value of
timberlands, at the same time as its mill operations have been hurt. Despite
these problems, however, the Corporation has survived, and has been profitable
in three of the last four years.
The value of the Corporation's timberland now exceeds the value of the mill
and mill property. According to the Corporation's most recent appraisals, the
timberlands are worth between $11,000,000 and $13,900,000, and the mill and real
property on which it sits is worth approximately $4,600,000. See the discussion
on "Appraisals Considered," below.
An additional factor considered by the Board of Directors is the aging of
Lane Shareholders. Many Lane Shareholders who were employees of the Corporation
have now retired. In addition, many of the employees who are Lane Shareholders
are nearing retirement age. These shareholders would like to realize the value
of their investment in the Corporation. However, the absence of any active
trading market for Lane Common Stock makes it very difficult for such
shareholders to do so.
ALTERNATIVES TO, AND REASONS FOR, THE MERGER. As the value of the
Corporation's timberlands has increased, so has the interest from other forest
products companies in purchasing those timberlands. The Board of Directors has
fielded many calls from persons interested in purchasing all or part of the
timberlands, or inquiring about buying the entire company, either in an asset
sale or a stock purchase.
The Board of Directors considered the possibility of the sale of some or
all of the timberlands followed by a dividend of the after-tax proceeds to
Lane Shareholders. Such a plan would have the advantage of allowing the
Corporation to continue operating the mill, and would help Lane Shareholders
receive at least some of the value for their shares. However, the Board of
Directors rejected this plan. One problem with such a plan is the high tax
cost, both to the Corporation from the sale of the timberlands, and to the
individual Lane Shareholders from the dividend. The Board of Directors was
concerned that the dividend to Lane Shareholders would be for substantially
less than the value that could be obtained through a sale of the Corporation.
Also, a sale of the timberlands would leave the Corporation with a very
limited ability to borrow funds to pay for modernization, or to weather
unprofitable operating periods.
The Board of Directors believes that a sale of the timberlands to generate
dividends would leave the Corporation in a weak operating position, and would
not be in the best interests of either Lane Shareholders or the Corporation's
employees.
The Board of Directors also considered continuing to operate the
Corporation, but selling the timberlands only as needed. The
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advantage to such a plan would be to provide a strong asset base for the
Corporation, to allow it to borrow, to make improvements, and to operate even
during periods of unprofitability. However, such a plan would leave Lane
Shareholders with no realistic opportunity to realize on the value of their
shares.
Since there is no trading market for shares in the Corporation, and since
transactions involving Lane Common Stock are rare, Lane Shareholders who wish to
sell their shares for a fair price, taking into account the value of the
Corporation's timberlands, have little or no opportunity to do so. For this
reason, the Board of Directors did not consider this alternative to be in the
best interests of Lane Shareholders.
HISTORY OF NEGOTIATIONS. Since June of 1993, the Board of Directors has
received written expressions of interest to purchase the Corporation, or all of
its assets, from at least 11 different parties. The Board of Directors had
discussions with several such parties to explore a potential purchase. On April
28, 1994, the Board of Directors entered into a memorandum of understanding with
an investment group that would have resulted in a purchase price of $24.50 per
share. The investment group eventually broke off negotiations.
On December 12, 1994, the Corporation and Tree Products Enterprises, Inc.
("Tree Products") entered into a memorandum of understanding which would have
resulted in a purchase price of $25.00 per share. In connection with that
proposal, the Corporation commissioned an appraisal of its timber holdings.
On January 16, 1995, the Board of Directors received a preliminary draft of
the timber cruise and appraisal. It estimated the value for the timber at
between $11,000,000 and $11,500,000. This was $3,000,000 more than the Board of
Directors had estimated at the time it entered into negotiations with Tree
Products.
As a result of this appraisal, the Board of Directors rejected the Tree
Products offer as too low.
The rejection of the Tree Products offer caused a group of shareholders to
try to elect two of their own members as directors, with the stated goal of
attempting to persuade the entire Board of Directors to accept the Tree Products
offer. At the annual meeting held April 22, 1995, Lane Shareholders rejected
this slate and elected the directors nominated by the Board of Directors.
However, as a result of the meeting, the Board of Directors determined that a
substantial number of Lane Shareholders wished to have the Board of Directors
negotiate a sale of the Corporation at a fair price.
Following the annual meeting, the Board of Directors solicited offers
from companies known to be interested. As a result of that solicitation the
Board of Directors received expressions of interest from five different
parties. The parties provided a variety of types of offers, each heavily
restricted with conditions. On May 12, the Board of Directors considered the
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merits of these offers and decided to request the parties to submit bids
beginning at $50 per share. By May 18, two of the parties said they were no
longer interested, and one responded that it was prepared to pay no more than
$40 per share. This left two potential bidders. The Board of Directors
requested that each refine its bid. In early July both submitted follow-up
offers.
The offer from one group would have been a stock-for-stock transfer in
which Lane Shareholders would become shareholders of a new company ("NEWCO").
Each such shareholder would be offered the opportunity to redeem shares in NEWCO
for the price of $42.80. The investors making this offer proposed to pay for
the redemption by liquidating assets of NEWCO to pay for the stock redemptions,
rather than using the investors' own funds. The Board of Directors considered
this offer unacceptable.
As a result, the Board of Directors entered into a memorandum of
understanding with the investment group that formed PMI for the cash purchase of
all Lane Common Stock at $49 per share. After a period of negotiation over the
terms and conditions of the purchase, the parties agreed to the Merger
Agreement, which was signed October 26, 1995.
The majority of the Board of Directors believes that this Merger Agreement,
delivering $49 per share, is fair to and in the best interests of Lane
Shareholders, and recommends that all Lane Shareholders vote for approval of the
Merger Agreement.
One member of the Board of Directors, Francis Bales, voted against
recommending approval of the Merger Agreement. A discussion of his reasons for
voting against the Merger is provided in "Recommendation of the Directors -
Discussion of Francis Bales' Vote Against the Merger," below.
PROVISIONS REGARDING OPERATIONS. One of the concerns with respect to the
Merger, because of the large number of employee shareholders, is the effect of
the Merger on operations at the plywood mill and continued employment of the
current employees.
In negotiations with PMI, the Board of Directors requested, and PMI agreed
to, the inclusion of Paragraph 3.6 of the Merger Agreement which addresses
continuity of the business of the Corporation. That paragraph states PMI's
present intention to continue the ongoing business operations of the Corporation
after the Merger. However, the statement of intent by PMI is not a guaranty
that PMI will continue the business operations of the Corporation in the same
manner as those operations would have been conducted without the Merger, nor is
it a promise to maintain operations if economic conditions indicate to PMI's
directors that its financial interest is best served by closing the mill. For a
more detailed discussion of these matters see "Operation of Lane Plywood After
the Merger", below. The entire Merger Agreement is set forth in Appendix A to
this Proxy Statement.
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FAIRNESS OF THE TRANSACTION.
The majority of the Board of Directors believes the Merger offers a fair
price and is in the best interests of Lane Shareholders.
As described above, a majority of the Board of Directors believed, after
the 1995 annual meeting, that a substantial number of Lane Shareholders wanted
the Board of Directors to negotiate and bring to Lane Shareholders a purchase
offer. Following the meeting, the Board of Directors solicited offers from
parties it knew to be interested in acquiring the Corporation. Based on that
solicitation, the Board of Directors entered into preliminary negotiations with
five separate parties.
The Board of Directors evaluated the responses from these parties, to
determine not only which party offered the highest bid, but also which
appeared best able to pay the price discussed. The Board of Directors also
considered the willingness and ability of each party to continue operating
the mill. Eventually, as discussed in "History of the Negotiations", above,
PMI emerged as the highest bidder. Based on its evaluation of all the
criteria, including the factors discussed in "Alternatives to, and Reasons
for, the Merger", the majority of the Board of Directors decided to enter into
the Merger Agreement.
Independent of its negotiations with PMI, the Board of Directors reviewed
its own estimate of the value of the Corporation. Most directors believed a
purchase offer of between $41 and $58 per share would be reasonable. The Board
of Directors included in its review the appraisal of the timberlands conducted
in connection with the Tree Products offer, as discussed in more detail in
"Appraisals Considered - Timber Appraisals", below, as well as an update of the
appraisal of the mill and the property on which the mill is located. The update
is discussed in "Appraisals Considered - The Plywood Mill", below.
The Board of Directors determined the possible range of share values by
estimating the net value to Lane Shareholders from a liquidation of the
Corporation's assets. The Board of Directors estimated the net amount
available to distribute to Lane Shareholders if the assets sold at the high
and low ranges of the appraised values, net of the estimated costs of sale.
It subtracted from those values the Corporation's liabilities, the estimate
of taxes which would be due on a sale of the assets, the costs of
liquidation, including the costs associated with shutting down the mill
operation, and the costs to the Corporation of the resulting layoffs. Taxes
alone on a sale of the assets at the highest appraised values would be more
than $5,900,000. These factors are discussed in more detail in "Appraisals
Considered-Other Value Components" below.
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The estimated proceeds from a liquidation ranged from a low of
$15,570,696 to a high of $19,300,186. Liabilities, taxes, and costs to shut
down were estimated at $7,174,234 for the low range of values and $7,529,336
for the high range of values. This yielded a net liquidation value to Lane
Shareholders of $8,396,462, or approximately $41 per share at the lowest
appraised values, using the high range of estimated liquidation expenses. If
the assets could be liquidated at the high range of appraised values and with
the lowest estimate of the expenses of liquidation the review yielded a net
liquidation value of $11,770,820, or approximately $58 per share.
The Board of Directors also considered the value of the Corporation as
an operating entity in light of its past profits and losses, its uncertain
future prospects, its limited history of dividend payments, and the lack of
an active trading market for Lane Common Stock.
The Board of Directors gave the greatest consideration to the actual
results of its extensive negotiations. Those negotiations gave the best
indication of what the Corporation is truly worth on the market. The Board of
Directors sought bids from all the different parties who expressed interest
in purchasing the Corporation. Each bidder was given an opportunity to refine
its proposal. Out of this process, PMI emerged with the best offer. The
process used by the Board of Directors is explained in the "History of
Negotiations", above. The process conducted by the Board of Directors
produced a more accurate method of determining value than any appraisal
could. For this reason, the Board of Directors decided that a separate
appraisal of the Corporation, or fairness opinion, was unnecessary.
In determining that the Purchase Price is a fair price and in the best
interests of Lane Shareholders, the Board of Directors relied primarily on
the fact that the Purchase Price presented with this Merger Agreement emerged
from the extensive bidding process as the best offer. The Board of Directors
also noted that the Purchase Price is near the middle of the range of values
determined by its review of the liquidation values discussed above.
APPRAISALS CONSIDERED.
TIMBER APPRAISAL. The Corporation's timber is the largest component of its
value and the component whose value is most reliably obtained. There is a ready
market for comparable types of timber, and the prices paid for timber and
timberland are frequently reported.
In late 1994, when the Board of Directors entered into negotiations with
Tree Products, it decided to have the Corporation's timberlands appraised.
Management hired Gary
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Thompson to conduct the appraisal. Mr. Thompson's crew cruised the timber
during December 1994 and January 1995, and reported on its value by
estimating the volume of timber available and its likely market price as
stumpage. He also compared the Corporation's timberland tracts to other
similarly situated tracts which had sold near the time of his appraisal.
For purposes of the appraisal, Mr. Thompson assumed the Corporation had
good marketable title to the timberlands, there were no impediments to
logging the timber from lack of access or environmental restrictions, other
than the normal laws governing timber removal. Management believes these are
accurate assumptions. He ignored, for purposes of his appraisal, any value
for water rights, gas, oil or minerals which might exist on the property.
Because of the geology of the region, the remote locations of the timberlands
and the restrictions on non-timber uses imposed by Oregon's land use planning
laws, management believes that such rights, if any, are a negligible component
to the value of the timberlands.
Mr. Thompson concluded that the value of the timberlands as of January 11,
1995 was between $11,700,000 and $11,900,000. However, he further concluded
that if all the tracts were sold together, the combined sale would be large
enough to command a premium in the market, making the timber worth $13,600,000
to $13,900,000.
The Board of Directors does not have specific information as to the
changes in values of the appraised timberland after the appraisal. The
timberland value is determined primarily by the value of its timber. Sales of
private timber are not publicly reported, and the Corporation does not
purchase timber directly. However, based on modest declines in the prices of
veneer since the appraisals, management believes that values for the timber
on the Corporation's timberland have declined somewhat from the appraised
values.
Mr. Thompson is an experienced timber appraiser, having worked in the field
for 22 years. He has appraised timber for several Oregon timber companies, as
well as for banks, government agencies, bonding companies and other institutions
with an interest in determining timber values. He has no present or future
interest in the property, or in the outcome of the Merger negotiations. There
has been no material relationship between Mr. Thompson or any of his affiliates
and the Corporation or any affiliate of the Corporation, nor is such a
relationship contemplated in the future.
No limitations were placed on Mr. Thompson in preparing his appraisal. Mr.
Thompson appeared at the Corporation's 1995 annual meeting and explained his
appraisal methods and answered questions regarding the appraisal at that
time. Mr. Thompson was paid approximately $19,000 for his appraisal.
Management selected Mr. Thompson to conduct the appraisal, after seeking bids
from several qualified timber appraisers, based on his bid price and
availability to perform the appraisal.
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Any estimate of the value of the timber has to take into account that any
sale of the timber by the Corporation would result in a capital gain to the
Corporation that would be subject to income tax at both the federal and state
level. For instance, if the timberland of the Corporation were marketed and
sold for the highest value in the appraisal, $13,900,000, the after-tax proceeds
to the Corporation, ignoring any costs of sale, would be approximately
$9,074,000.
THE PLYWOOD MILL. The plywood mill is more difficult to value because
the uncertainties of the plywood market mean the mill might attract few
buyers. In addition, because of the many mill closures in the Northwest
since 1989, used mill equipment is readily available and generally difficult
to sell. However, if restrictions on the harvest of federal timber in the
Northwest are lifted, such equipment could have substantially greater value.
The plant was last appraised in September 1993. That appraisal, by Byron
Slack of the National Appraisal Company, Inc. ("National") concluded the plywood
mill had a fair market value as an operating plant of $6,783,000. If the
machinery were sold and the land and buildings liquidated, National concluded
that it would have a value of $3,147,000. National conducted a physical
inspection of the plant at the time of the appraisal. National compared the
value of the mill as an operating entity with prices paid for operating mills of
comparable size and market. National compared the value of the equipment and
land and buildings with sales of similar equipment and land and buildings sold
near the time of the appraisal.
In connection with its decision to seek purchase offers following the 1995
annual meeting, the Board of Directors asked National to update its appraisal.
That update, which was completed April 17, 1995, concluded that the liquidation
value for the mill's equipment and land and buildings was $4,639,000. National
did not update the appraisal as an operating mill.
As with any sale of the timberlands, a liquidation of the plywood mill
would entail a significant tax cost. The net after tax proceeds from a
liquidation of the mill, ignoring any costs of sale and any costs associated
with a liquidation and shut down, would be $3,636,000.
National's update of its appraisal indicated that the value of the mill
equipment, machinery and rolling stock had dropped by approximately 10%, to
$2,500,000, from the value in September 1993, despite a net investment by the
Corporation in such equipment, machinery and rolling stock of approximately
$200,000 during the same period. However, National found an increase in the
value of the land and buildings at the mill site, to $2,139,000, resulting in
the higher overall estimated value of the mill in the update.
The value reported in National's appraisal includes the value of the land
and buildings. However, the appraisal did not include a parcel owned by the
Corporation with possible environmental
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contamination. For purposes of the appraisal, National assumed that the
Corporation provided accurate descriptions of its property, had good
marketable title to the land, buildings and equipment, and that there is no
significant environmental contamination on the portion of the mill site
included in the appraisal. Management believes these are accurate
assumptions.
Mr. Slack has been president and owner of National since it was established
in 1980. National has performed appraisals for more than 60 Northwest
industrial timber products firms, including Bohemia, Inc., Champion
International, Inc., Louisiana Pacific Corp., and Weyerhauser Company. In
addition, National had conducted previous appraisals for the Corporation in
connection with property tax issues. Neither National nor Mr. Slack had an
interest in the property or in the outcome of the Merger. There has been no
material relationship between National or any of its affiliates and the
Corporation, nor is such a relationship contemplated in the future.
No limitations were placed on National in preparing the appraisal,
except the instruction not to include in the appraisal the portion of the
property with possible environmental contamination. National was paid
approximately $15,000 for the 1993 appraisal and $5,000 for the update to
that appraisal. Mr. Slack appeared at the 1995 annual meeting of
stockholders and explained the 1993 appraisal and answered questions with
respect to that appraisal. Management selected National for the update
because of National's familiarity with the mill from the prior appraisals.
OTHER VALUE COMPONENTS. The Corporation's value is not just the sum of
the value of its two major components. Taxes and other costs of sales,
including the cost of a shut down if assets are to be liquidated, would be
substantial. The liabilities of the Corporation as disclosed in the
financial statements, and other factors such as the unfunded health care
commitments and potential environmental liability also reduce the
Corporation's total net value. Value is also affected by the risks to a
buyer who intends to continue operations of operating a forest products
company under current conditions.
The tax cost of selling the Corporation's major assets would be
substantial. If the Corporation sold the timberlands and mill at the highest
appraised values, the tax costs for the gain on the sale would be more than
$5,900,000. In addition, there would be significant broker, legal,
accounting, and closing fees associated with any sale of the assets. These
costs are not reflected in the appraisal figures.
Any liquidation of the Corporation would also create substantial costs
in connection with shutting down the mill and laying off the employees. These
costs include the costs of payroll during the WARN act notification period,
and the costs for maintenance, security and mothballing the equipment,
machinery, rolling stock and building during a period of orderly liquidation
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that could last for two or three years. Management estimates these costs at
between $500,000 and $2,400,000.
Any analysis of the potential value to be obtained from liquidating the
Corporation's assets should also take into account the time value of money
for the period of liquidation and for a period of five years after a
dissolution of the Corporation until creditor claims are barred by the
provision of the Oregon Business Corporation Act governing corporate
dissolutions.
The accrued unfunded health care commitment liability, using generally
accepted accounting principles, is approximately $500,000. In accruing this
amount, management assumed a health care trend cost rate of 9% until 2001, and
5% thereafter. The actual amount of benefits paid under the plan in fiscal 1995
was $14,336.
The potential environmental liability, in particular, is difficult to
measure. Based on its analysis of the issue, management believes that a
reasonable estimate of likely liability is approximately $85,000, depending
in part upon factors beyond the Corporation's control. Management is aware
of other areas of potential environmental liability, but believes other
parties should be responsible for substantially all of the costs associated
with any clean up of those areas. However, there is no assurance that such
other parties will be willing, or able, to pay such costs, if a cleanup
should be necessary.
Any purchaser of the Corporation who intends to continue operations must
also take into account such risk factors as the uncertain supply of quality
veneer, the effect on veneer prices from the reductions in the federal timber
harvest, and the competition from engineered panels and southern plywood
mills.
As a result of these other considerations, the Board of Directors
concluded, as described in "Fairness of the Transaction" that the net
realizable value of the Corporation through a liquidation would be between
$8,396,462, or approximately $41 per share, and $11,770,820, or approximately
$58 per share.
AVAILABILITY OF APPRAISALS. Copies of the appraisals by Mr. Thompson and
National, as well as the update of the National appraisal, are available for
inspection and copying at the Corporation's principal executive offices during
the Corporation's regular business hours by any interested Lane Shareholder or
any representative of any Lane Shareholder, who has been so designated in
writing. Any copies will be made at the expense of the requesting shareholder.
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RECOMMENDATION OF THE DIRECTORS.
RECOMMENDATION OF THE MAJORITY OF DIRECTORS. After considering all of
the factors described above, a majority of the Corporation's directors have
determined that the Merger is in the best interest of Lane Shareholders and
recommend that Lane Shareholders vote for approval. The majority of the Board
of Directors believes the Purchase Price to be paid for Lane Common Stock is
a fair price.
DISCUSSION OF FRANCIS BALES' VOTE AGAINST THE MERGER AGREEMENT. Francis
Bales was the sole director to vote against the proposed Merger Agreement. Mr.
Bales said he voted against the proposed Merger Agreement because he believes
the value of the Corporation and its assets would sustain a program of paying
dividends to Lane Shareholders. He said he believes Lane Shareholders will be
better off with such a program than with the cash they will receive upon the
Merger.
Mr. Bales also said he believes the employees and the community will be
better off if ownership of the Corporation continues with the existing Lane
Shareholders, rather than PMI. Mr. Bales said he wants it made clear he has
nothing against PMI, but simply believes that existing Lane Shareholders,
employees and the community will be better off if the Merger does not occur.
Mr. Bales is an employee of the Corporation, working as a sander operator.
He has received a copy of this statement, which was written by the Corporation's
legal counsel. He agrees this adequately states his position. Mr. Bales does
not intend to submit for inclusion in this Proxy Statement a written statement
regarding his reasons for objecting to the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Several of the directors own
shares in the Corporation. They will benefit to the same extent, with respect
to their shares, as other Lane Shareholders. Several of the directors are also
employees of the Corporation and, as such, have an interest in assuring the
continued operation of the Corporation's business.
The Board of Directors, acting in executive session with Gary Jensen
excused, recommended to PMI that it pay bonuses to Gary Jensen, Carl Wiley and
Janis Johnson in the amounts of $30,000, $30,000, and $25,000, respectively,
following the close of the Merger, if they are still employed by the
Corporation. Any payment of this bonus would be by PMI. PMI is under no
obligation to pay such a bonus. At the date of this Proxy Statement, PMI has
indicated it will not make such a payment.
The Corporation's executive officers, Gary Jensen, Carl Wiley and Janis
Johnson have all had discussions with PMI concerning their continued employment
after the Merger. Management believes PMI will continue employing each through
calendar 1996 at their present salaries.
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No director, nominee for director, executive officer of the Corporation, or
associate of any of them, will receive any other benefit, direct or indirect, by
security holdings or otherwise, from the Merger.
VOTE REQUIRED FOR APPROVAL.
The affirmative vote of the holders of a majority of the outstanding shares
of Lane Common Stock is required to approve the Merger Agreement.
Abstentions and broker nonvotes will be treated as no votes in determining
whether the Merger Agreement is approved. As of the record date, there were
204,662 shares of Lane Common Stock outstanding. Therefore, at least 102,332
shares must be voted in favor of the Merger. In addition, PMI need not proceed
with the Merger if the number of dissenting shares exceeds 30% of the total
outstanding shares.
On the record date, the Corporation's directors, executive officers and
their affiliates owned 6.7% of the outstanding Lane Common Stock. See
"Beneficial Ownership of Common Stock", below. All of the Corporation's
directors except Francis Bales have stated their intent to vote their shares to
approve the Merger Agreement. Mr. Bales is the beneficial owner of 1,201
shares, or .6% of the outstanding shares of Lane Common Stock.
The majority of the Board of Directors recommend that Lane Shareholders
vote FOR approval of the Merger Agreement.
If the Merger Agreement is not approved, the Board of Directors has no
specific plan for future operation of the Corporation. The Board of Directors
anticipates that if the Merger Agreement is not approved, it would continue
to operate the business in much the same manner as it has in the past, while
it considered possible options. Any decisions would depend, in part, on the
understanding of the Board of Directors as to the reasons for votes against
approval of the Merger Agreement.
OTHER CONDITIONS WITH RESPECT TO THE MERGER.
Before the Merger Agreement can be completed, certain conditions spelled
out in the Merger Agreement must be satisfied. These conditions include the
following:
SHAREHOLDER APPROVAL. The Merger must be approved by an affirmative vote
of a majority of the outstanding shares of Lane Common Stock.
LACK OF EXCESSIVE DISSENTS. PMI is not required to consummate the Merger
if holders of more than 30% of the Lane Common Stock exercise dissenters'
rights.
LITIGATION AND OTHER MATTERS. The completion of the Merger is also
conditioned on the absence of any action, suit or proceeding,
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either pending or threatened, before any court or administrative agency, if
such action, suit or proceeding could result in a ruling that would prevent
consummation of, or require rescission of, the Merger. In addition, the
completion of the Merger is conditioned on the absence of any action, suit or
proceeding, either threatened or pending, before any court or administrative
agency, which could impose any liability on any of the officers or directors
of the Corporation on account of the Merger.
OTHER ACTIONS BY PMI. The obligation of Lane to complete the Merger is
conditioned on PMI and LAI performing all the covenants of the Merger Agreement;
confirming that all the representations and warranties of PMI and LAI have been
fulfilled and are true; and providing the Corporation with an opinion of counsel
to PMI and LAI as to certain matters.
OTHER ACTIONS BY THE CORPORATION. The obligation of PMI and LAI to proceed
with the Merger is conditioned on the Corporation performing its covenants and
confirming that its representations are true; making no material adverse changes
in its assets, earnings, business operations, prospects or financial condition;
and having no changes in the required accounting principles which would effect
the transaction. The Corporation must also furnish PMI and LAI with an opinion
of the Corporation's counsel as to certain matters.
PAYMENT FOR SHARES.
The Purchase Price for each share of Lane Common Stock will be $49. The
Purchase Price does not depend on the Corporation's operating results during the
period between the execution of the Merger Agreement, which occurred on October
26, 1995, and the actual date of closing of the Merger. There are no
differences in the rights of Lane Shareholders with respect to their shares
under the Merger Agreement.
Payments to Lane Shareholders for their respective shares will be made
through Oregon Title Company ("Oregon Title"), acting as exchange agent. On
the Effective Date, PMI will deposit the Purchase Price for all the
outstanding shares of Lane Common Stock with Oregon Title. Oregon Title will
send a notice to each Lane Shareholder of record as soon as practical
thereafter. The notice from Oregon Title will contain specific instructions as
to how to turn in share certificates and receive cash. Lane Shareholders who
exercise and perfect their dissenters' rights will be paid only in accordance
with the statutory procedure governing dissenters' rights. A discussion of that
statutory procedure is contained in "Rights of Dissenting Shareholders", below.
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PLEASE RETAIN YOUR SHARE CERTIFICATES UNTIL SUCH TIME AS YOU RECEIVE THE
EXCHANGE INSTRUCTIONS FROM OREGON TITLE. DO NOT BRING SHARE CERTIFICATES TO THE
MEETING.
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Receipt of the Purchase Price by Lane Shareholders in return for their Lane
Common Stock will be a taxable transaction. A general discussion of the tax
impact of the transaction is provided in "Certain Federal Income Tax
Consequences to Lane Shareholders," below.
RIGHTS OF DISSENTING SHAREHOLDERS.
Certain provisions of the Oregon Business Corporation Act entitle Lane
Shareholders to dissent from the Merger and receive the "fair value", as that
term is defined therein, of the shares in lieu of the Purchase Price payable
under the Merger Agreement. The "fair value" may be more or less than the
Purchase Price. The statutory provisions describing dissenters' rights are
included as Appendix B to this Proxy Statement.
MERELY VOTING AGAINST APPROVAL OF THE MERGER AGREEMENT IS NOT SUFFICIENT TO
ESTABLISH DISSENTERS' RIGHTS. FAILURE TO STRICTLY FOLLOW ANY OF THE PROCEDURES
SET FORTH IN THE STATUTES REPRODUCED IN APPENDIX B MAY RESULT IN LOSS OF
STATUTORY DISSENTERS' RIGHTS.
A shareholder may not dissent as to less than all of the shares registered
in his or her name, except that a recordholder of shares for the benefit of more
than one person may treat each such person as a separate shareholder for the
purpose of the election to dissent if the recordholder discloses to the
Corporation the name and address of each person on whose behalf the recordholder
dissents.
The following is a summary of steps that must be taken for the effective
exercise of dissenters' rights. However, the summary is not intended to be
complete and is qualified in its entirety by reference to the statutes set forth
in Appendix B. Lane Shareholders should look to the provisions of the Oregon
Business Corporation Act reproduced in Appendix B for a complete recitation of
the steps necessary to protect their rights.
NO VOTE IN FAVOR OF THE MERGER. A Lane Shareholder wishing to assert
dissenters' rights must not vote in favor of approving the Merger Agreement.
Delivery of a proxy that does not specify a choice will be voted in favor of
approving the Merger Agreement and will disqualify that Lane Shareholder from
exercising dissenters' rights. However, abstention is not a vote in favor of
approving the Merger Agreement.
WRITTEN NOTICE OF INTENTION TO DEMAND PAYMENT. A Lane Shareholder wishing
to assert dissenters' rights must also deliver
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to the Corporation, BEFORE the vote on the Merger Agreement, written notice
of his or her intention to demand payment. A written notice delivered after
that time will be ineffective to preserve dissenters' rights. A vote against
approval of the Merger Agreement does not constitute written notice. The
written notice may be in the form of a letter and must be delivered to the
Secretary of the Corporation at the address indicated on the cover of this
Proxy Statement, BEFORE the vote on the Merger Agreement is taken.
FORM FOR DEMANDING PAYMENT. If the Merger Agreement is approved, either
the Corporation or PMI as its successor, will mail notice of the approval of the
Merger to any Lane Shareholder who gave the written notice of intention to
demand payment and who did not vote in favor of the Merger Agreement. This
notice will be sent to those dissenting Lane Shareholders no later than 10 days
after the Merger Agreement is approved.
The notice will state where payment demand must be sent and where and when
the share certificates must be deposited. The notice will contain the form
required for demanding payment. The notice will also contain a time, not less
than 30 and not more than 60 days from the mailing of such notice, within which
the dissenting Lane Shareholder must return his or her payment demand form and
deposit the stock certificates.
A dissenting Lane Shareholder sent such notice must demand payment, certify
the date of acquisition of beneficial ownership of the shares, and deposit the
stock certificates in accordance with the notice. A dissenting shareholder who
does not demand payment or deposit the shareholder's certificates where
required, each by the date set forth in the notice, is not entitled to payment
for the shares as a dissenting shareholder. Neither a vote against approval of
the Merger Agreement nor a notice of intent to demand payment constitutes this
required payment demand form or deposit of stock certificate.
REMITTANCE TO DISSENTING SHAREHOLDERS. After receipt of the stock
certificate(s) and the payment demand form, and after consummation of the
Merger, the Corporation or PMI as its successor will remit to each dissenter who
has taken the steps described above, the amount the Corporation or PMI as its
successor estimates to be the fair value of the shares, with any accrued
interest. The dissenting shareholder shall also be sent: (1) the Corporation's
unaudited balance sheet and income statement at and for the period ended
February 29, 1996, (2) the latest available interim financial statements for the
Corporation, (3) an explanation of how the fair value of Lane Common Stock was
estimated, (4) an explanation of how any accrued interest was calculated, (5) a
statement of the dissenter's right to demand payment under ORS 60.587, and (6) a
copy of ORS 60.551 to 60.594. Interest will accrue from the Effective Date of
the Merger until the date of payment.
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If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing stock certificates, the deposited certificates
will be returned.
DEMAND FOR PAYMENT OF DEFICIENCY. If any dissenting Lane Shareholder,
who has otherwise properly exercised his or her dissenter's rights: (1) is
not paid within 60 days after the date set for demanding payment, or (2)
believes that the amount remitted is less than the fair value of his or her
shares of Lane Common Stock, or (3) believes that the interest is not
correctly determined, then the dissenter may, within 30 days after the
remittance was mailed, send the Corporation or PMI as its successor his or
her own written estimate of the value of the shares or interest and demand
for the deficiency. If no such demand for payment of a deficiency is made
within 30 days after the remittance was mailed, the dissenter is entitled to
no more than the amount originally remitted.
COURT APPRAISAL. If any dissenting Lane Shareholder who has made a proper
demand for payment of a deficiency has not reached an agreement with the
Corporation or PMI as its successor as to the fair value of his or her shares
within 60 days after demand, the Corporation or PMI as its successor must either
petition a court of competent jurisdiction in Lane County, Oregon, to determine
the fair value of the shares and any accrued interest thereon, or pay the amount
demanded by the dissenting shareholder. The court may appoint one or more
persons as appraisers to receive evidence and recommend a decision on the fair
value. Dissenters who have not previously come to an agreement will be entitled
to judgment for any amount by which the court finds the fair value of their
shares of Lane Common Stock exceeds the amount paid, with interest.
The costs of the court appraisal proceeding, including reasonable
compensation and expenses of appraisers appointed by the court, will be assessed
against the Corporation or PMI as its successor unless the court finds that the
refusal of any dissenting shareholder to accept an offer for his or her shares
was arbitrary, vexatious or not in good faith, in which event such costs may be
apportioned as the court deems equitable. Fees and expenses of counsel and
experts may be assessed, in the court's discretion, against the Corporation or
PMI as its successor if the court finds it failed to comply substantially with
the provisions of the statutes with respect to dissenters' rights.
Additionally, the court may assess such fees and expenses against any party
acting arbitrarily, vexatiously or not in good faith with respect to such
rights.
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MEANING OF "FAIR VALUE". ORS 60.551(4) defines "fair value" to which
any dissenting Lane Shareholder is entitled as the value of the shares
immediately before consummation of the Merger, excluding any element of
appreciation or depreciation in anticipation of the Merger unless such
exclusion would be inequitable. The amount determined to be the fair value
may be more than or less than the Purchase Price under the Merger Agreement.
In determining the fair value of any dissenter's shares, the court will
consider any relevant evidence of value presented to it. Such evidence may
include appraisals of the Corporation by any appraisers appointed by the
court, the appraisals of the timberland and of the plywood mill discussed in
"Appraisals Considered", above, the tax and other costs associated with any
sale of the Corporation's assets, the liabilities of the Corporation, the
history of negotiations for the purchase of the Corporation, the lack of any
active trading market for the Corporation's stock, and the earnings and
future prospects of the Corporation, among other information.
CONSEQUENCES OF DISSENT ON APPROVAL OF THE MERGER. Under the Merger
Agreement, PMI need not proceed with the Merger if owners of 30% of the
outstanding shares of Lane Common Stock exercise their dissenters' rights. In
addition, an affirmative vote of a majority of the outstanding shares is
required to approve the Merger. As a result, a small number of dissenting
shareholders, coupled with nonvotes of other Lane Shareholders and votes against
the Merger by Lane Shareholders who do not exercise their right to dissent,
could cause the Merger to fail, even if the dissenting shares do not meet the
30% threshold, and even if a majority of the votes actually cast are voted in
favor of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO LANE SHAREHOLDERS.
The following is a brief description of the anticipated federal income
tax consequences of the merger to Lane Shareholders. It is not intended as
tax advice, and is not intended to be a complete description of the federal
income tax consequences of the Merger. This discussion is based on the
Internal Revenue Code of 1986 ("Code"), as amended and as interpreted by
regulation, administrative determinations, and court decisions. This
discussion does not reflect any changes in the Code or its interpretation
which occurred after January 15, 1996.
Because of the complexity of federal, state and local income tax laws, each
Lane Shareholder should consult his or her own tax advisor concerning the
federal, state and local and other tax consequences from the Merger.
For purposes of this discussion, it is assumed that Lane Shareholders hold
their common stock as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Code. The tax consequences to any
particular Lane Shareholder may be affected by matters not discussed below. For
example, certain taxpayers, such as insurance companies, trusts
22
<PAGE>
and estates, non U.S. Citizens, tax exempt organizations, and shareholders of
PMI, may be subject to special rules not addressed in this discussion. Such
shareholders are particularly cautioned to consult their tax advisors for a
clear understanding of the tax consequences of the merger.
Lane Shareholders will recognize gain or loss for federal income tax
purposes measured by the difference between the cash received for their shares
and the shareholders' tax basis in the shares exchanged. Such gain or loss will
be long-term capital gain or loss if the shareholder held or is considered to
have held the shares for more than one year. In general, capital gain is taxed
in the same manner as other income. However, as of the date of this writing,
the maximum tax rate for individuals on net capital gain (the excess of net
long-term capital gain over net short-term capital loss) is 28%.
A taxpayer's long-term capital gain is added to the taxpayer's other income
to determine whether the taxpayer's income level results in the phase-out of
certain tax benefits, such as personal exemptions, itemized deductions,
deduction of IRA contributions, exemption of social security benefits, the
earned income credit, the alternative minimum tax exemption, and the rental real
estate exemption from the limitation on use of passive losses and credits.
Therefore, the total additional federal income tax resulting from each dollar of
capital gain may be more than $.28.
For corporate taxpayers, net capital gains are taxed at regular tax rates.
Capital losses may be used to offset capital gains. For individuals, the
excess of capital losses over capital gains can be set off against $3,000 of
ordinary income in any one year, and unused capital losses may generally be
carried forward to subsequent years. Corporate taxpayers may not offset capital
losses against ordinary income. However, capital loss carry backs and
carryovers may be available.
Cash received by any shareholder who exercises his or her dissenter's
rights will be treated as a distribution in redemption
of shares, and the shareholder will be taxed on the cash received in accordance
with Section 302 of the Code. In general, such payments will be treated as a
payment in exchange for stock, with the same tax results as described above for
nondissenting shareholders.
The cash payments due to Lane Shareholders, whether as the Purchase
Price paid in accordance with the Merger Agreement or as the "fair value"
paid to Lane Shareholders who comply with the requirements of dissenters'
rights, will be subject to "backup withholding" for federal income tax
purposes unless certain requirements are met. Under the Code, 31% of the
cash payments due to any Lane Shareholder must be withheld if the shareholder
is subject to backup withholding and the federal income tax liability of such
shareholder would be reduced by the amount so
23
<PAGE>
withheld. To avoid backup withholding, a Lane Shareholder must supply Oregon
Title with his or her taxpayer identification number and complete a form in
which he or she certifies that he or she has not been notified by the
Internal Revenue Service that he or she is subject to backup withholding as a
result of a failure to report interest or dividends. The taxpayer
identification number of an individual is his or her Social Security number.
The required Internal Revenue Service form will be provided with the exchange
instructions to be provided by Oregon Title to each Lane Shareholder
following consummation of the Merger.
No ruling has been or will be requested from the Internal Revenue Service
as to any of the tax consequences of the Merger and no opinion of counsel has
been or will be rendered to the Corporation or the Lane Shareholders with
respect to any of the tax consequences of the Merger.
ACCOUNTING TREATMENT OF THE MERGER.
For accounting purposes, the Merger will be treated as a purchase of the
Corporation by PMI. The parties anticipate that, at the corporate level, the
Merger and subsequent liquidation of the Corporation into PMI will be treated as
a tax-free reorganization, thus generating no income tax liability to the
Corporation, PMI or LAI.
OPERATION OF LANE PLYWOOD AFTER THE MERGER.
Following the Merger and the liquidation of the Corporation into PMI, PMI
has indicated that its present intention is to continue the ongoing business
operations of the Corporation, to continue employing a sufficient number of
employees of the Corporation that no notice under the WARN Act is required and
to honor all of the outstanding contractual and statutory obligations of the
Corporation. However, consistent with good business practices, PMI also intends
to continue to review and analyze the Corporation's operations and assets in
light of the plywood market and other relevant factors.
PMI has indicated that it may consider a variety of alternatives including,
but not necessarily limited to, continuing the Corporation's business operations
as they have been conducted, expanding the capacity or otherwise making
improvements at the Corporation's plywood plant, leasing the Corporation's
plywood plant to some third party (which may be an entity including some or all
of PMI's shareholders) for operation by that third party, disposing of certain
of the Corporation's assets, or some combination of the foregoing. The
Corporation has been advised that no decisions have been made by PMI as to any
of these possible actions.
If PMI makes any decision regarding the ongoing operation of the plywood
plant prior to the Meeting, the Merger Agreement requires PMI to communicate
that decision to the Corporation so
24
<PAGE>
that it can be communicated to the Corporation's shareholders. In
particular, if PMI were to decide prior to the completion of the Merger to
lease the Corporation's plywood plant to a third party, the Merger Agreement
requires PMI to give notice to the Corporation's Board of Directors and to
give good faith consideration to any input which the Corporation's Board of
Directors may have as to the intended operator of the plant if PMI determined
it to be reasonably practicable under the circumstances to do so. After the
completion of the Merger, these decisions can be made by PMI in its sole
discretion without the need to notify any party.
PMI has indicated that it intends after the completion of the Merger to
conduct a complete review and analysis of the Corporation's wages, employment
policies and practices. Any new wage scale or employment policies and practices
adopted by PMI will be communicated to employees as soon as they are adopted.
However, the Merger Agreement requires PMI to exercise reasonable efforts to
preserve the portability feature of the Corporation's current medical insurance
(especially with respect to coverage for preexisting medical conditions) and to
maintain the Corporation's 401(k) plan, at least as to voluntary contributions
by employees. PMI has asked Carl R. Wiley, Gary R. Jensen and Janis M. Johnson
to stay on with the Corporation after the closing of the Merger (if the Merger
is approved by the Lane Shareholders) through the end of 1996. PMI has
acknowledged that the Corporation presently has an effective management team and
the Corporation has encouraged PMI to retain this management team to the extent
and on such terms and conditions as are consistent with PMI's goals and good
business practices.
25
<PAGE>
SELECTED FINANCIAL DATA OF LANE PLYWOOD
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
For the Years Ended November 30
---------------------------------------------------------------------
1995(a) 1994(b)(d) 1993(c)(d) 1992(c)(d) 1991
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $39,621,899 $37,772,648 $36,776,328 $33,882,168 $27,202,211
Operating income (loss) 545,940 804,405 756,398 240,913 (411,269)
Income (loss) before
cumulative effect (335,382) 438,562 449,654 104,571 (389,207)
Cumulative effect on prior
years of change in
accounting principle
for income taxes 185,600
Net income (loss) (335,382) 624,162 449,654 104,571 (389,207)
- ------------------------------------------------------------------------------------------------------
PER SHARE DATA
Income (loss) before
cumulative effect $(1.64) $2.14 $2.20 $ .51 $(1.90)
Cumulative effect on prior
years of change in
accounting principle
for income taxes .91
Net income (loss) (1.64) 3.05 2.20 .51 (1.90)
Cash dividends declared
per share .25
- ------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Current assets $ 3,268,653 $ 4,305,444 $ 4,027,152 $ 3,911,464 $ 3,434,973
Current liabilities 1,664,412 2,562,649 2,613,508 2,748,302 1,910,675
Working capital 1,604,241 1,742,795 1,413,644 1,163,162 1,524,298
Total assets 6,258,732 7,530,039 7,449,220 7,217,906 6,169,672
Long-term debt, excludes
current portion 95,021 124,428 418,273 503,401 518,484
- ------------------------------------------------------------------------------------------------------
EQUITY
Shareholders' equity $ 4,286,971 $ 4,336,356 $ 3,314,590 $ 3,406,801 $ 3,495,130
Book value per share $20.95 $21.19 $16.20 $16.65 $17.08
Weighted average shares
outstanding 204,662 204,662 204,662 204,662 204,662
</TABLE>
(a) Includes loss on settlement of pension plan of $1,357,676 and gain on
sale of land of $319,557.
(b) Includes additional expense of $61,680 from application of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions";
and the cumulative effect (income increase) of $185,600 from SFAS No.
109, "Accounting for Income Taxes". The cumulative amount of the effect
has been restated from the amount that was previously reported. See
footnote 4 to the financial statements.
(c) Operating income includes gain on sale of timber contracts of $200,515
in 1993 and $631,200 in 1992.
(d) Reflects the adoption of SFAS No. 87, "Employers Accounting for
Pensions". The impact was to reduce shareholders' equity by $192,900,
$734,767 and $285,997 in 1992, 1993 and 1994, respectively.
26
<PAGE>
INFORMATION ABOUT LANE PLYWOOD.
GENERAL.
The Corporation has its principal offices at 65 North Bertelsen Road,
Eugene, Oregon 97402, area code (541) 342-5561. The Corporation was founded in
1952, when a group of investors and workers formed the Corporation to purchase a
bankrupt plywood mill. Operations began in December 1952. Operations consisted
of a leased peeling plant and the plywood mill. In 1971, the Corporation
purchased the peeling plant and added a chipping operation. In 1975, the
Corporation acquired a sawmill, and another peeling plant and chipping
operation.
The sawmill operated for five years at limited levels and was dismantled in
1981. The small peeling plant and barker were sold in 1991. In 1992, the
Corporation shut down the large peeling plant. In 1994, Lane discontinued its
chipping operations. Shutting down these green end operations resulted in lay
offs of more than 200 employees. At November 30, 1995, the Corporation employed
208 workers.
DESCRIPTION OF BUSINESS OPERATIONS.
The Corporation produces softwood plywood at its 92 acre plant site in
Eugene, Oregon. Its business includes purchasing veneer to satisfy veneer
needs, manufacturing and selling plywood from the purchased veneer, selling
green or dry veneer, custom drying and composing veneer, selling plywood
manufacturing byproducts, and operating a plywood reload operation.
The principal product manufactured and sold by the Corporation is softwood
plywood. Other products include the byproducts and veneers described above.
Sales of dry veneer used in the laminated veneer lumber market accounted for 16%
of 1994 sales and 13% of 1995 sales. No other product contributed as much as
15% to revenue in any of the last three fiscal years. The Corporation's market
for plywood is scattered throughout the 48 contiguous states and Hawaii. Sales
are handled by a one-person sales staff from the Eugene mill. Customers include
brokers and large distribution warehouses. Except for minor local sales, sales
are made in rail carload or truckload lots, both of which are made from the
mill's shipping facility. The major manufacturing byproduct, ply trim, is sold
to a mill in Oregon.
Nearly all of the Corporation's plywood products are classified as
commodities and are manufactured to voluntary product standards administered by
the National Bureau of Standards. The Corporation has no material new products
in the development stage. However, the Corporation has been working to find
niche noncommodity markets. In 1995, it started to sell plywood blanks to
snowboard manufacturers to serve as the core for the snowboards. Sales in
fiscal 1995 of this product amounted to approximately $80,000.
27
<PAGE>
TREE FARMS.
The Corporation purchased its first tree farm in 1974, and has since added
additional timberland so that it now owns 2,105 acres of timberland. The
Corporation does not anticipate that it can satisfy its raw material needs from
these tree farms.
The tree farms consist of seven separate parcels, all located in Klamath,
Lane and Douglas counties in Oregon. They consist primarily of cut over areas
that have been or are being reforested. None of the timberland is presently
being used for production, although thinning operations have produced some
revenue. In fiscal 1995, the revenue from thinning was $47,800, in 1994, it was
$59,500, and in 1993 it was $662,794.
SOURCES OF RAW MATERIAL.
Like many other forest products companies in Oregon, the Corporation has
been highly dependent on the federal government for its raw material supply. As
environmental and wildlife concerns have caused reductions in federal timber
harvests, local supplies of veneer have been reduced and prices have risen. As
a consequence, the Corporation has expanded its number of suppliers and has
begun purchasing veneer from Canada, the South and South America. Other sources
of veneer are being investigated continuously.
FACTORS AFFECTING REVENUES.
The plywood industry is somewhat seasonal because of construction slowdowns
in some consuming areas caused by unfavorable weather. However, seasonal demand
is nearly offset by production curtailments resulting from unfavorable weather
in some of the producing areas. Housing starts impact the demand for plywood.
However, the Corporation has been moving its production to heavy sanded plywood,
used primarily for commercial building, to reduce the effect of changes in
housing starts on its production.
The Corporation does not carry inventories in order to meet delivery
requirements of customers. The Corporation does not maintain a material backlog
of orders. Its backlog seldom exceeds ten days' production. Manufacturing is
tied directly to orders, and panels are generally not constructed without
orders. Veneers are normally purchased based on projected weekly needs.
Manufacturing operations are curtailed if orders don't merit operations.
The Corporation does not give customers the right to return merchandise
nor does it provide extended payment terms. Customers are invoiced
immediately after the plywood has been shipped and all shipments require
payment within ten days. Although one customer of the Corporation purchases
in excess of 10% of the total production, the Corporation does not regard its
sales as dependent on that customer, because of the commodity nature of the
sales.
28
<PAGE>
In the past 15 years, softwood plywood mills in the South have become major
competitors to the plywood mills in the Northwest. Those mills enjoy
substantially lower raw material and labor costs than the northwestern mills.
They are also closer to large midwestern and eastern markets that once were
dominated by northwestern mills. Although plywood produced from the Northwest's
Douglas Fir is still regarded as generally superior to the plywood produced from
southern tree species, price is the primary consideration in making a sale. In
addition, new engineered products such as wafer board and oriented strand board
were developed during the 1980s to be inexpensive substitutes for plywood. They
now are competing effectively with plywood in some applications.
In the late 1980s and 1990s, timber harvest restrictions on federal lands
raised raw material prices to northwestern mills. The combination of newer
mills in the South with access to lower cost raw materials, cheaper labor and
less expensive transportation and the introduction of engineered panels caused a
consolidation in the Northwest plywood industry. The Corporation has survived
these changes, and remains a competitive producer of plywood products.
Patents, trademarks, licenses, franchises and concessions are not important
in manufacturing or selling any of the Corporation's products. The Corporation
does not spend a material amount on research and development activities.
PROPERTIES.
In addition to the timberlands described above, the Corporation owns the 92
acre industrial site on which its plywood manufacturing and related plant
facilities are located.
In fiscal 1995, the Corporation sold more than seven acres of the site in
two sales. One sale was to the State of Oregon Department of Transportation, of
7.2 acres. The other was of a small strip of .4 acres to a neighboring owner
for an easement. The net gain to the Corporation from the two transactions was
$319,557.
The plant facilities include a plywood layup plant with production capacity
of approximately 630,000 3/8 feet of plywood per day. This facility includes
one 30 opening press, one 20 opening press, four veneer dryers, edge gluing
equipment, veneer patching equipment, a polyurethane panel patching line, a high
speed sander and sort system, and rail and truck shipping facilities.
Two boilers provide heat for the plywood presses, veneer dryers and
building heat. Bark, other wood waste and natural gas supply the fuel for the
boilers. In addition, the industrial facility includes various plant buildings,
storage warehouses, shops, office buildings, railroad sidings and paved areas
for veneer storage.
29
<PAGE>
As of November 30, 1995, all the machinery and equipment was encumbered to
secure a line of credit payable to a bank. One of the tree farms is secured by
the same bank for a second loan. The Corporation has not drawn on that loan.
LEGAL PROCEEDINGS.
Management knows of no legal proceedings, other than ordinary routine
claims incidental to its business, pending against the Corporation. There
are no proceedings in which an executive officer, director, nominee for
director or associate of any such person is an adverse party to the
Corporation.
MARKET FOR THE CORPORATION'S STOCK; DIVIDEND HISTORY.
There is no active trading market for Lane Common Stock. The Corporation
has approximately 400 shareholders and Lane Common Stock trades infrequently.
Management of the Corporation does not request or track information about the
price at which stock changes hands through private transactions. Therefore, the
Corporation is unable to report on historic prices of Lane Common Stock.
The Board of Directors paid a dividend of $.25 per share on January 15,
1995 to holders of Lane Common Stock of record as of November 30, 1994. No
other dividends have been declared or paid during the previous three fiscal
years. The Corporation's line of credit loan contains a covenant limiting
dividends in any fiscal year to no more than 25% of the Corporation's annual net
profits after taxes.
INFORMATION ABOUT PMI AND LAI
Pioneer Merger, Inc. ("PMI") is a corporation which was incorporated under
the laws of the State of Oregon on July 25, 1995 for the purpose of acquiring
the Corporation. Lane Acquisition, Inc. ("LAI") is a corporation which was
incorporated under the laws of the State of Oregon on October 25, 1995 solely
for the purpose of engaging in the Merger. LAI is a wholly-owned subsidiary of
PMI. The principal executive offices of PMI and LAI are located at P. O. Box
1042, Veneta, Oregon 97487. Their telephone numbers are (541) 935-5414.
All of the outstanding capital stock of PMI is currently owned by Melvin L.
McDougal, Norman N. McDougal, Greg Demers, Ed King and Rick Re. The Merger
Agreement provides that PMI shall not accept any other shareholder or investor
in PMI prior to the completion of the Merger without the Corporation's prior
written consent, which will not be unreasonably withheld. After completion of
the Merger, PMI may add other shareholders or investors but has indicated that
it has no agreements or understandings to do so.
Neither PMI nor LAI have any existing business activities. However, each
of the shareholders of PMI either own, operate or have interests in other forest
products companies.
30
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors consists of seven members, divided into three
classes. Either two or three directors are elected annually to serve
three-year terms. At the 1996 Annual Meeting, two directors in Class 3 will
be elected for three-year terms. The term of office of directors Francis D.
Bales and Carl M. Jensen will end upon the election of successor directors at
the Annual Meeting. Carl Jensen is retired and is not a candidate for another
term as a director.
NOMINEES.
The Corporation's nominees for the Board of Directors are Francis D. Bales
and Steven D. Barr. The proxy holders intend to vote all proxies received by
them for the Corporation's nominees, except to the extent a contrary intent is
indicated. As of the date of this proxy statement, the Board of Directors
believes both Francis D. Bales and Steven D. Barr are willing and able to serve
as directors. If either declines or is unable to serve as a director by the
time of the annual meeting, the proxies will be voted for a substitute nominee
designated by the present Board of Directors. The information concerning
nominees for director is based on information furnished by the respective
nominees.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOMINEES FOR ELECTION AT 1996 ANNUAL MEETING
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME AND ADDRESS PRINCIPAL OCCUPATION AND DIRECTOR SINCE
EMPLOYER
- --------------------------------------------------------------------------------
Francis D. Bales, Sander Operator 1987
age 58 Lane Plywood, Inc.
65 N. Bertelsen Road
Eugene, OR 97402
- --------------------------------------------------------------------------------
Steven D. Barr, Spreader leadperson N/A
age 40 Lane Plywood, Inc.
65 N. Bertelsen Road
Eugene, OR 97402
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Francis Bales has been employed by the Corporation since April 1959. He
has worked as a glue mixer, and is now a sander operator.
Steve Barr has been employed by the Corporation since September 1974. He
is currently a spreader leadperson and before that worked for the Corporation as
a core layer and sheet turner.
VOTE REQUIRED TO ELECT.
The two director positions open for election are in Class 3, as defined in
Article 2, Section 2 of the bylaws. Under that provision, neither candidate for
Class 3 needs to be a non-employee of the Corporation. The votes for each open
position will be taken
31
<PAGE>
separately. The candidate for each position receiving the highest number of
votes will be elected. Abstentions and other nonvotes will not be counted for
purposes of determining the outcome of the election. Abstentions will be
counted for purposes of determining if a quorum is present.
DIRECTORS WHOSE TERMS ARE CONTINUING.
Information regarding the members of the Board of Directors whose terms
continue beyond this year's Annual Meeting, is set forth in the box below. The
information about each director has ben furnished by the respective directors.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS WHOSE TERMS EXTEND BEYOND THE 1996 ANNUAL MEETING
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current
Name, Age and Principal Occupation Director term
Address and Employer since expires
- --------------------------------------------------------------------------------
Paul F. Ehinger, Forest Industry 1986 1998
age 72 Consultant
Paul F. Ehinger & Associates
1200 High St., Suite 22
Eugene, OR 97401
- --------------------------------------------------------------------------------
James E. Gent, Veneer grader 1979 1997
age 66 Lane Plywood, Inc.
65 N. Bertelsen Road
Eugene, OR 97402
- --------------------------------------------------------------------------------
Gary R. Jensen, Resource Manager 1988 1998
age 49 Lane Plywood, Inc.
65 N. Bertelsen Road
Eugene, OR 97402
- --------------------------------------------------------------------------------
Paul W. Jensen, Retired 1991 1997
age 65 c/o Lane Plywood, Inc.
65 N. Bertelsen Road
Eugene, OR 97402
- --------------------------------------------------------------------------------
John W. Revell, Bank Administrator 1987 1997
age 42 Liberty Federal Bank, S.B.
899 Pearl Street
Eugene, OR 97401
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Paul Ehinger has been self-employed as an independent forest products
consultant for 11 years and has more than 40 years' experience in the forest
products industry. Mr. Ehinger is elected to a position which requires that he
meet the qualification of having extensive business and executive experience,
but not be an employee of the Corporation. Mr. Ehinger meets that standard.
32
<PAGE>
James Gent is a veneer grader. He has worked for the Corporation since
April 1959 and worked as a sheet turner on a spreader crew laying up plywood for
19 years, prior to becoming a veneer grader.
Gary Jensen has been a human resource and timber manager of the Corporation
since 1977, and has been chairman of the Board of Directors since 1991.
Paul Jensen was employed as a quality controller and shift production
supervisor for the Corporation for more than five years prior to retiring in
1993.
John Revell is currently a construction and environmental risk
administrator for Liberty Federal Bank, S.B., and was formerly employed by
Pacific First Federal Savings and Loan for more than five years. Mr. Revell is
elected to a position which requires that he meet the qualification of having
extensive business and executive experience, but not be an employee of the
Corporation. Mr. Revell meets that standard.
None of the directors of the Corporation, or nominee, serves as a director
of any other company which is publicly traded. No director, nominee for
director or executive officer of the Corporation has any family relationship,
whether by blood, marriage or adoption, with any other director, nominee or
executive officer of the Corporation.
During the last fiscal year, the Board of Directors held 41 meetings. Each
director attended at least 75% of the meetings held during his term as director.
The Board of Directors does not have a nominating committee, audit committee, or
compensation committee.
If the Merger is approved by the Lane Shareholders, all of the directors,
including those elected at the Meeting, will be asked to step down as directors
so that PMI, which will then be the Corporation's sole shareholder, may elect
its own directors for the Corporation.
MANAGEMENT AND COMPENSATION
OF DIRECTORS AND OFFICERS
EXECUTIVE OFFICERS OF THE CORPORATION.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME POSITION OFFICER SINCE
- --------------------------------------------------------------------------------
Carl R. Wiley, age 65 President 1993
- --------------------------------------------------------------------------------
Janis M. Johnson, age 53 Vice President 1988
Secretary
Treasurer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
33
<PAGE>
Carl Wiley was employed as Chief Executive Officer of Puget Sound Plywood
for more than five years prior to his employment with the Corporation. Puget
Sound Plywood is not an affiliate of the Corporation. Mr. Wiley joined Lane
Plywood, Inc. as President in January 1993. He is not a beneficial owner of any
of the Corporation's stock.
Janis Johnson is employed as an accounting manager for the Corporation.
She is not a beneficial owner of any of the Corporation's stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The Corporation does not have a compensation committee. Compensation of
Carl Wiley, President of the Corporation, is determined in negotiations between
Mr. Wiley and the entire Board of Directors. Three of the seven board members,
James Gent, Francis Bales and Gary Jensen, are currently employed by the
Corporation. A fourth director, Carl Jensen, retired as a production employee
February 28, 1995. The Board of Directors does not directly determine the
compensation of any employee of the Corporation other than Carl Wiley.
REPORT ON EXECUTIVE COMPENSATION.
The Board of Directors does not use any specific performance based criteria
in determining Mr. Wiley's compensation. He receives no specific performance
related bonus, except to the extent that every employee of the Corporation
receives such a bonus under the Incentive Profit Sharing Plan. The Board of
Directors reviews Mr. Wiley's compensation annually.
In deciding on Mr. Wiley's compensation, individual directors rely on such
factors as their own subjective views of the President's performance, the wage
increases granted to production workers, the Corporation's operating earnings
and profitability, its potential growth, as well as any other factors they think
significant.
Lane Common Stock does not trade on any active or organized market. The
Corporation does not track the prices at which stock changes hands through
private transactions. Therefore, the Board of Directors does not relate Mr.
Wiley's compensation package to the performance of the stock.
As a company whose stock is largely owned by present and former employees,
the Corporation gives the same health and other benefit packages to its
president as is offered to other employees. Mr. Wiley and other officers
participate equally in these plans along with all other employees (salaried and
hourly).
34
<PAGE>
Your Board of Directors:
Gary R. Jensen, Chairman Carl M. Jensen
Francis D. Bales Paul W. Jensen
Paul F. Ehinger John W. Revell
James E. Gent
EXECUTIVE COMPENSATION.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL COMPENSATION
- --------------------------------------------------------------------------------
Other Long All
Annual Term Other
Name and Compen- Compen- Compen-
Principal Salary Bonus sation sation sation
Position Year ($) ($) ($) ($) ($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Carl R. Wiley 1994-95 110,000 $0 $0 $0 $4,950
President and 1993-94 $109,999 $1,008 $0 $0 $4,950
CEO 1992-93 $100,833 $0 $0 $0 $0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Mr. Wiley is the only officer who receives compensation, including salary
and bonuses, in excess of $100,000.
Mr. Wiley joined Lane Plywood, Inc. in January 1993. Therefore, the salary
figure shown for 1992-93 represents 11 months' salary. Mr. Wiley is not
eligible for any retirement benefit from the defined benefit plan.
The figures shown under "All Other Compensation" for Mr. Wiley for
1994-95 and 1993-94 are contributions to the combined profit sharing and
401(k) retirement plan, based on 5% of 90% of straight-time earnings.
Mr. Wiley was not eligible to participate in the plan in the 1992-93 fiscal
year.
The Board of Directors has recommended to PMI that it pay to Carl Wiley a
bonus of $30,000 following the close of the Merger, if he is still employed by
the Corporation. PMI is under no obligation to do so. At the date of this
Proxy Statement, PMI has indicated it will not make such a payment.
There are no other compensatory plans or arrangements which would result
from a change in control of the Corporation or from the resignation, retirement
or change in duties of Carl Wiley.
The Corporation does not have any benefit plans involving stock options or
long term incentives.
35
<PAGE>
DIRECTOR COMPENSATION.
During fiscal 1995, directors were paid on a per meeting basis until the
middle of June of 1995. During that period, payments per
meeting were $300 to outside directors and $200 to employee directors, except
that meetings on Saturdays were paid at $150 per meeting to outside directors
and $50 per meeting to employee directors. Beginning in the middle of June 1995
and through the end of fiscal 1995, outside directors received $300 per month
plus $125 for extra meetings during the month and employee directors received
$200 per month plus $50 for extra meetings during the month.
As chairman of the Board of Directors, Gary Jensen received the same
payments as other employee directors, plus an additional $500 per month for
serving as chairman.
Total compensation paid to directors for their service as directors during
fiscal 1995 was $44,250. Total compensation paid to directors, including
director compensation and wages for employee directors, was $153,879.
INCENTIVE PROFIT SHARING PLAN.
The Corporation has an incentive profit sharing plan which provides for
bonus payments to eligible employees. The total bonus distribution to eligible
employees is based on 30% of income before income taxes, adjusted for the effect
of major gains and losses on dispositions of assets, if any, in excess of a base
provision equal to the sum of 5% of shareholders' equity and 10% of long-term
debt at the beginning of the fiscal year. See the distribution of the bonus in
paragraphs 1. and 2. below:
1. During the period from March 1, 1981 to July 31, 1983, wage and salary
rates were either reduced or restored, dependent upon the Corporation's
financial position. An accumulation of the net earnings reduction due to the
reduced wage and salary rates during this period was maintained for this group
of employees and, as provided in the incentive profit sharing plan, were to be
paid out of 20% of the future profits when realized and as defined in the
incentive profit sharing plan. There were no payments due under the plan for
1995. The amount of payments due for 1994 and 1995 under the terms of the plan
for this class of employees was $77,491, and $44,638, respectively. At November
30, 1995, the accumulated amount of earnings eligible for future payments,
contingent upon future profits as defined by the plan, totaled $868,262.
2. The remaining 10% of profits earned in accordance with the incentive
profit sharing plan is distributed to all eligible employees, independent of the
portion described in paragraph 1., above. Bonuses were paid in the amount of
- -0-, $38,745, and $22,319, for 1995, 1994, and 1993, respectively. Officers
participate in this bonus to the same extent as other eligible employees.
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If the Corporation were, for any reason, to discontinue all business
operations, payments under the incentive profit sharing
plan would cease as a result of how bonus payments are computed under the plan.
GROUP PLANS.
The Corporation pays the premiums on various group health and welfare
plans. Officers of the Corporation participate equally in these plans along with
all other employees (salaried and hourly).
STOCK PERFORMANCE.
There is no public market for the Corporation's stock. Shares trade
infrequently, and the Corporation does not keep track of the price at which
trades occur. Consequently, the Corporation cannot chart the actual performance
of the Corporation's stock over a period of time.
Rules promulgated by the Securities and Exchange Commission require that
the Corporation provide a chart which compares the performance of its stock, as
measured by the percentage in total stockholder return, with the performance of
the stock market in general. Because the Corporation does not track the prices
at which its shares are traded, the following chart uses a substitute measure of
performance. The line for Lane Plywood in the chart shows the change in book
value of the Corporation over the past five years, adjusted to remove the
effects of a change in accounting principles.
The Board of Directors declared a dividend November 17, 1994, of 25
CENTS a share. That dividend was paid January 15, 1995, to Lane Shareholders
as of the November 30, 1994, record date. The book value adjustment includes
adding the accrued dividend back into shareholder equity.
The comparison lines are for the performance of the S&P 500 and the S&P
Paper and Forest Products Index, assuming reinvestment of dividends. The S&P
500 is a weighted index of 500 large capitalization companies from four primary
groups: Industrial, Transportation, Utility, and Financial. The S&P Paper and
Forest Products Index is a weighted index of 14 large capitalization companies
which operate primarily in the paper and forest products industries. These 14
companies represent about 1.7% of the weighted capitalization of the S&P 500.
To make the comparison, all values were normalized at $100 as of the close
of the 1990 fiscal year.
Although the Corporation has a very low capitalization (less than $10
million), it is not easily compared with indexes of other low capitalization
companies, since many of those that are publicly traded are companies promoting
newly emerging technology, and/or have expectations of rapid expansion. Neither
description would apply to the Corporation.
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Performance Graph
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S&P PAPER
AND PRODUCTS
LANE S&P 500 INDEX
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November 30, 1990 100 100 100
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November 30, 1991 90 123 122
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November 30, 1992 88 144 148
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November 30, 1993 85 160 152
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November 30, 1994 113 160 156
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November 30, 1995 112 216 183
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Because the performance of the Corporation's stock is not known, the Board
of Directors does not tie the compensation of the executive officers to the
performance of such stock. The directors do consider the operating earnings of
the Corporation as one of the factors used to determine the compensation to be
paid to Mr. Wiley.
RETIREMENT PLANS.
At January 1, 1996, the Corporation maintained a Combined 401(k) and
Retirement Plan (401(k) Plan), a defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code ("Code"). The amount of profit
sharing contributions to be made to the 401(k) Plan for any calendar plan year
is determined each year by the Board of Directors. The Corporation is not
required to make a profit sharing contribution to the 401(k) Plan for any plan
year. Any profit sharing contribution so made under the 401(k) Plan for a plan
year is based on a percentage of compensation paid to the eligible participants
for the plan year. Each eligible participant is allocated the same percentage
of compensation. Subject to certain restrictions and limitations imposed under
the Code, participants may also elect to make contributions to the 401(k) Plan
on a tax-deferred, salary reduction basis. No matching contributions are made
under the 401(k) Plan.
The Corporation previously maintained a defined benefit pension plan
("Plan") qualified under Section 401 of the Code. The Plan, which was suspended
effective December 31, 1987, and all benefits frozen, provides for fixed
benefits in the event of retirement and the attainment of a specified age and
after the completion of a specified number of years of service. Only employees
who were covered under the Plan as of December 31, 1987 are eligible for a
benefit.
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On January 5, 1995, the Board of Directors adopted a resolution to
terminate the Plan effective March 15, 1995. On March 9, 1995, the Board of
Directors adopted an amendment to the Plan to effectuate its termination. In
April 1995, the Corporation entered into an agreement with Transamerica Life
Insurance and Annuities Company for that insurance company to provide for the
future payment and administration of benefits under the Plan. The agreement
constitutes an irrevocable commitment by Transamerica to pay all the benefits
under the Plan. The Corporation has paid to Transamerica the full amount of
Transamerica's estimated cost for its assumption of this pension obligation.
The Corporation has secured the approval of the termination of the Plan
from the Pension Benefit Guaranty Corporation. In addition, an approval request
has been filed with the Internal Revenue Service. The termination of the Plan
does not affect any employee's rights or benefits under the 401(k) Plan.
The Corporation does not have any other special benefit plans such as stock
purchase, options, stock bonus, warrants, thrift, supplemental insurance or
income plans.
CERTAIN TRANSACTIONS WITH MANAGEMENT.
There were no material transactions between the officers, directors, or
nominee for director and the Corporation during the fiscal year ending November
30, 1995. No officer, director of the Corporation, nominee for director, or any
associate of any officer, director or nominee has any understanding with respect
to any future employment with the Corporation, except the expectation of
retaining any present employment.
PMI has discussed continued employment after the Merger with Carl Wiley,
Gary Jensen and Janis Johnson. They believe that PMI will continue employing
each through the end of calendar 1996 at their present salaries.
BENEFICIAL OWNERSHIP OF COMMON STOCK
There are 204,662 shares of Lane Common Stock outstanding as of the record
date. These shares are held of record by approximately 400 shareholders. The
following table sets forth the number of shares of Lane Common Stock
beneficially owned by each director, nominee for director, and by the officers,
nominees, and directors of the Corporation as a group, as of January 31, 1996.
39
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SECURITY OWNERSHIP OF MANAGEMENT
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Number of
Shares Percentage of
Beneficially Outstanding
Name Owned Shares
- --------------------------------------------------------------------------------
Francis D. Bales 1,201(1) .6
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Steven D. Barr 412(1) .2
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Paul F. Ehinger 402(1) .2
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James E. Gent 1,139(1) .6
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Carl M. Jensen 3,750 1.8
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Gary R. Jensen 806(1) .4
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Paul W. Jensen 5,961(2) 2.9
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John W. Revell 0 0.0
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Carl R. Wiley, President 0 0.0
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Janis M. Johnson, Vice 0 0.0
President
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All officers and directors 13,671 6.7
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The information as to beneficial ownership of stock is based on data
furnished by the named persons. Except as otherwise indicated, the persons
named in the table possess sole voting and investment power with respect to the
stock shown opposite their names. None of the directors or officers own any
stock of record that is not beneficially owned by them.
As of January 31, 1996, no officer or director beneficially owned more than
2.9% of the outstanding stock of the Corporation. Together, the officers and
directors of the Corporation beneficially owned 13,671 shares as of January 31,
1996 representing approximately 6.7% of the Corporation's outstanding stock.
No person is known to the Corporation to be the beneficial owner of more
than 5% of the stock of the Corporation.
- -------------------
(1) All of the stock reported as beneficially owned by this shareholder is
registered jointly in the names of the shareholder and the shareholder's spouse.
Therefore, the shareholder and the stockholder's spouse may be deemed to share
voting and investment power with respect to this stock.
(2) Includes 2,980 shares owned outright by Mr. Jensen's spouse.
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COMPLIANCE WITH SECTION 16 FILING REQUIREMENTS.
Management believes officers and directors of the Corporation were unaware
of the requirement that they file reports on stock transactions with the
Securities and Exchange Commission (the "SEC") pursuant to SEC Rule 16a-3(e).
After the directors and officers were informed of the reporting requirements,
each of the directors and officers filed reports with the SEC, and, as required
by SEC rules, provided a copy of each filed report to the Corporation. The
Corporation received copies of the following reports, required by SEC Rule 16a-
3(e), which were filed in the fiscal year ended November 30, 1995, by the named
directors and officers.
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COMPLIANCE WITH SECTION 16(A)
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NUMBER OF
NUMBER TRANSACTIONS
DIRECTOR OR OF LATE NOT TIMELY
OFFICER REPORTS LATE REPORTS REPORTED
- --------------------------------------------------------------------------------
Francis D. Bales 1 Form 3 0
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Paul F. Ehinger 2 Form 3, Form 4 1
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James E. Gent 1 Form 3 0
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Carl M. Jensen 1 Form 3 0
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Gary R. Jensen 3 Form 3, Form 4, 1
Form 5
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Paul W. Jensen 2 Form 3, Form 5 0
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Janis M. Johnson 1 Form 3 0
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John W. Revell 1 Form 3 0
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Carl J. Wiley 1 Form 3 0
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The Corporation is not aware of any other failure by any officer or
director to file forms required by SEC Rule 16a-3(e) on a timely basis.
OTHER MATTERS
The Corporation knows of no matters to be brought before the meeting
other than the vote on the Merger Agreement and the election of directors.
However, should any other matter properly come before the meeting, the
persons named in the accompanying form of proxy will vote, or refrain from
voting, thereon in accordance with their judgment.
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<PAGE>
ANNUAL REPORT ON FORM 10-K
Upon written request to Janis M. Johnson, treasurer of the Corporation, at
65 N. Bertelsen Road, Eugene, Oregon 97402 by any person whose proxy is
solicited by the proxy statement, the Corporation will provide without charge a
copy of its annual report on Form 10-K, including the financial statements and
schedules thereto.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand L.L.P., independent
public accountants, to examine the financial statements of the Corporation for
the year 1996. Auditing services provided by Coopers & Lybrand L.L.P. include
the examination of annual financial statements, assistance in connection with
registration statements filed with the Securities and Exchange Commission and
consultation concerning various accounting matters. The full Board of Directors
appoints the independent certified public accountants. Representatives of
Coopers & Lybrand L.L.P., the independent public accountant for the Corporation
in fiscal 1995, are expected to be present at the Annual Stockholders Meeting,
and will have the opportunity to make a statement if they desire to do so. They
will also be available to answer questions.
INCORPORATION BY REFERENCE
The Annual Report to the Stockholders of Lane Plywood, Inc. For the Year
Ended November 30, 1995 (Annual Report) is mailed with this Proxy Statement.
The sections of the Annual Report entitled "Management's Discussion and
Analysis", and "Report of Independent Accountants", including the financial
statements and accompanying notes, are hereby incorporated by reference in this
Proxy Statement.
1997 SHAREHOLDER PROPOSALS
Proposals intended to be presented by Lane Shareholders at the 1997 Annual
Meeting of Shareholders must be received by the Corporation by October 8, 1996
in order to be included in the proxy materials relating to that meeting.
By Order of the Board of Directors
Janis M. Johnson
Vice-President/Secretary-Treasurer
65 North Bertelsen Road
Eugene, Oregon 97402
February 29, 1996
42
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PROXY - SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF LANE PLYWOOD, INC.
The undersigned hereby revokes all prior proxies and appoints Gary R.
Jensen and Janis M. Johnson or any one of them, with the power of substitution
in each, proxies to vote all shares of Common Stock of the undersigned in Lane
Plywood, Inc. at the Annual Meeting of Stockholders to be held April 13, 1996,
and all adjournments thereof.
1. Election of Directors
FOR ALL NOMINEES LISTED BELOW ______ WITHHOLD AUTHORITY _____
(except as marked to the (to vote for all
contrary below) nominees below)
FRANCIS D. BALES STEVEN D. BARR
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list above.)
If either named nominee declines or is unable to serve by the time of the annual
meeting, the proxies will be voted for a substitute nominee designated by the
Board of Directors.
2. Approval of the Agreement and Plan of Merger (Merger Agreement) dated
October 26, 1995 as more fully described in the accompanying Proxy Statement.
FOR AGAINST ABSTAIN
---- ---- ----
3. On any other business that may properly come before the meeting.
Shares will be voted as specified. IF NO SPECIFICATION IS MADE, THE PROXY WILL
BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES AND FOR APPROVAL OF THE MERGER
AGREEMENT. If other matters come before the meeting, the proxies or substitutes
may vote upon such matters according to their best judgment.
Please mark your vote, insert the date and sign, have any co-owner date and
sign, and return promptly.
DATED: _______________, 1996 ______________________________
SIGNATURE
DATED: _______________, 1996 ______________________________
SIGNATURE OF CO-OWNER
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- --------------------------------------------------------------------------------
BE SURE YOUR VOTE IS COUNTED.
PLEASE MARK YOUR VOTE, DATE, SIGN AND RETURN THIS PROXY TODAY.
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