<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended June 30, 1996
Commission File Number 1-7107
LOUISIANA-PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 93-0609074
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
111 S. W. Fifth Avenue, Portland, Oregon 97204-3699
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 221-0800
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock: 108,639,650 shares of Common Stock, $1 par
value, outstanding as of June 30, 1996.
<PAGE>
FORWARD LOOKING STATEMENTS
Statements in this report, to the extent they are not based on historical
events, constitute forward looking statements. Forward looking statements
include, without limitation, statements regarding the outlook for future
operations, forecasts of future costs and expenditures, evaluation of market
conditions, the outcome of legal proceedings, the adequacy of reserves, or
plans for product development. Investors are cautioned that forward looking
statements are subject to an inherent risk that actual results may vary
materially from those described herein. Factors that may result in such
variance, in addition to those accompanying the forward looking statements,
include changes in interest rates, commodity prices, and other economic
conditions; actions by competitors; changing weather conditions and other
natural phenomena; actions by government authorities; uncertainties associated
with legal proceedings; technological developments; future decisions by
management in response to changing conditions; and misjudgments in the course
of preparing forward looking statements.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Summary Statements of Income
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions except per share) (Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
----------------- -------------------
1996 1995 1996 1995
------- ------- -------- --------
Net sales $ 658.3 $ 709.3 $1,242.4 $1,396.1
------- ------- -------- --------
Costs and expenses:
Cost of sales 540.9 593.2 1,051.7 1,118.8
Depreciation, amortization
and depletion 51.9 47.9 95.0 92.9
Selling and administrative 30.5 26.6 65.7 56.3
Interest expense 3.4 1.7 4.3 4.0
Interest income (2.9) (2.0) (3.8)
(5.1)
------- ------- -------- --------
Total costs and expenses 623.8 667.4 1,212.9 1,266.9
------- ------- -------- --------
Income before taxes and
minority interest 34.5 41.9 29.5 129.2
Provision for income taxes 13.0 14.9 11.1 47.0
Minority interest in
net income (loss) of
consolidated subsidiaries .5 .7 1.0 1.6
------- ------- -------- --------
Net income $ 21.0 $ 26.3 $ 17.4 $ 80.6
======= ======= ======== ========
Net income per share $ .19 $ .25 $ .16 $ .75
======= ======= ======== ========
Cash dividends per share $ .14 $ .14 $ .28 $ .265
======= ======= ======== ========
<PAGE>
Consolidated Summary Balance Sheets
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
June 30, 1996 Dec. 31,
1995
------------- ------------
- -
Cash and cash equivalents $ 54.2 $
75.4
Accounts receivable, net 190.9
128.7
Inventories 252.5
317.7
Prepaid expenses 8.5
14.3
Deferred income taxes 82.4
82.4
-------- -------
- -
Total current assets 588.5
618.5
-------- -------
- -
Timber and timberlands 665.9
689.6
Property, plant and equipment 2,672.2
2,592.5
Less reserves for depreciation (1,178.6)
(1,140.2)
-------- -------
- -
Net property, plant and equipment 1,493.6
1,452.3
Other assets 73.5
45.0
-------- -------
- -
Total assets $2,821.5
$2,805.4
========
========
Current portion of long-term debt $ 40.6 $
38.6
Short-term notes payable 37.8
98.3
Accounts payable and accrued liabilities 196.6
161.6
Current portion of contingency reserves 100.0
150.0
Income taxes payable 10.2 --
- -
-------- -------
- -
Total current liabilities 385.2
448.5
-------- -------
- -
Long-term debt, excluding current portion 347.5
201.3
Deferred income taxes 205.8
207.5
Contingency reserves, net of current portion 177.1
250.5
Other long-term liabilities and minority interest 47.6
41.6
Stockholders' equity:
Common stock 117.0
117.0
Additional paid-in capital 472.9
472.4
Retained earnings 1,388.2
1,400.8
Treasury stock (186.2)
(192.7)
Loans to Employee Stock Ownership Trusts (73.6)
(85.5)
Other equity adjustments (60.0)
(56.0)
-------- -------
- -
Total stockholders' equity 1,658.3
1,656.0
-------- -------
- -
Total liabilities and equity $2,821.5
$2,805.4
========
========
<PAGE>
Consolidated Summary Statements of Cash Flows
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Six Months Ended June 30, 1996
1995
------- ------
- -
Cash flows from operating activities:
Net income $ 17.4 $
80.6
Depreciation, amortization and depletion 95.0
92.9
Payments of settlement liabilities (123.4) --
- -
Other adjustments, net 1.0
17.2
Decrease (increase) in certain working
capital components 99.4
(9.4)
Increase (decrease) in deferred income taxes (1.7)
(.1)
------- ------
- -
Net cash provided by operating activities 87.7
181.2
------- ------
- -
Cash flows from investing activities:
Capital spending, including acquisitions (174.7)
(197.7)
Other investing activities, net 7.2
3.8
------- ------
- -
Net cash used in investing activities (167.5)
(193.9)
------- ------
- -
Cash flows from financing activities:
New borrowing 120.0 --
- -
Repayment of long-term debt (26.8)
(61.7)
Increase (decrease) in short-term notes payable (10.5)
(.3)
Cash dividends (30.0)
(28.5)
Purchase of treasury stock ---
(120.2)
Other financing activities, net 5.9
(3.3)
------- ------
- -
Net cash provided by (used in) financing activities 58.6
(214.0)
------- ------
- -
Net increase (decrease) in cash and cash equivalents (21.2)
(226.7)
Cash and cash equivalents at beginning of year 75.4
315.9
------- ------
- -
Cash and cash equivalents at end of period $ 54.2 $
89.2
=======
=======
<PAGE>
Consolidated Statements of Stockholders' Equity
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions except per share) (Unaudited)
Six Months Ended
June 30, 1996
--------------------
Shares Amount
----------- -------
Common Stock 116,937,022 $ 117.0
=========== =======
Additional Paid-in-Capital:
Beginning balance $ 472.4
Net transactions .5
-------
Ending balance $ 472.9
=======
Retained Earnings:
Beginning balance $1,400.8
Net income 17.4
Cash dividends, $.28 per share (30.0)
-------
Ending balance $1,388.2
=======
Treasury stock:
Beginning balance 8,588,427 $(192.7)
Shares reissued under employee
stock plans and other purposes (291,055) 6.5
---------- -------
Ending balance 8,297,372 $(186.2)
========== =======
Loans to Employee Stock Ownership Trusts:
Beginning balance $ (85.5)
Less accrued contribution 11.9
-------
Ending balance $ (73.6)
=======
Other Equity Adjustments:
Beginning balance $ (56.0)
Currency translation adjustment and
amortization of deferred compensation (4.0)
-------
Ending balance $ (60.0)
=======
<PAGE>
Notes To Financial Statements
Louisiana-Pacific Corporation and Subsidiaries
1. The interim period information included herein reflects all adjustments
which are, in the opinion of the management of L-P, necessary for a fair
statement of the results of the respective interim periods. Such
adjustments are of a normal recurring nature. Results of operations for
interim periods are not necessarily indicative of results to be expected
for an entire year. It is suggested that these summary financial
statements be read in conjunction with the financial statements and the
notes thereto included in L-P's 1995 Annual Financial Report to
Stockholders. Interim financial statements are by necessity somewhat
tentative; judgments are used to estimate quarterly amounts for items
that are normally determinable only on an annual basis.
2. Earnings per share is based on the weighted average number of shares of
common stock outstanding during the periods (107,260,000 in 1996 and
107,040,000 in 1995). The effect of common stock equivalents is not
material.
3. The effective income tax rate is based on estimates of annual amounts of
taxable income, foreign sales corporation income and other factors.
These estimates are updated quarterly.
4. Determination of interim LIFO inventories requires estimates of year-end
inventory quantities and costs. These estimates are revised quarterly
and the estimated annual change in the LIFO inventory reserve is expensed
over the remainder of the year.
5. Reference is made to "Legal Proceedings" and to elsewhere in this report
for a description of certain contingencies which may have a materially
adverse effect on L-P and for a description of settlements of certain
class action proceedings.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
General
Continued weakness in pulp markets, due largely to high world-wide pulp
inventory levels, was the single largest cause of lower sales and profits in
the second quarter and first six months of 1996 compared to 1995. An
oversupply of structural panel products, particularly in the first quarter of
1996, also contributed to a decline in the six month sales and profits.
Overall net income for the second quarter declined 20 percent to $21.0 million
($.19 per share) in 1996 from $26.3 million ($.25 per share) in 1995. Six
months net income fell 78 percent to $17.4 million ($.16 per share) in 1996
from $80.6 million ($.75 per share) in 1995. Net sales declined 7 percent in
the second quarter of 1996 to $658.3 million from $709.3 million in 1995. For
the first six months of 1996, sales fell 11 percent to $1,242.4 million from
$1,396.1 million in 1995.
L-P operates in two segments: building products and pulp. Building
products is the most significant segment, accounting for more than 86 percent
of sales and more than 78 percent of operating profit in the first six months
of 1996 and 1995. The results of operations are discussed separately for each
segment below. Key segment information, production volumes and industry
product price trends are presented in the following tables labeled "Sales and
Operating Profit by Major Product Group", "Summary of Production Volumes" and
"Industry Product Price Trends."
Building Products Segment
Quarter Ended Six Months Ended
June 30 June 30
--------------------- ------------------------
- -
1996 1995 % Chg 1996 1995 %
Chg
------ ------ ----- -------- ------- ----
- -
(Dollar amounts in millions)
Sales:
Structural panels $280.2 $264.2 +6% $ 514.2 $ 526.1 -
2%
Lumber 164.2 175.2 -6% 302.6 327.2 -
8%
Industrial panel products 51.3 53.0 -3% 97.9 111.5 -
12%
Other building products 121.7 121.4 0% 236.3 240.1 -
2%
------ ------ -------- --------
Total building products $617.4 $613.8 +1% $1,151.0 $1,204.9 -
5%
====== ====== ======== ========
Operating profit $ 72.3 $ 63.3 +14% $ 102.3 $ 153.7 -
33%
====== ====== ======== ========
Structural panel products (plywood and oriented strand board (OSB))
prices were lower an average of 11% in the second quarter of 1996 compared to
1995 (15% lower for the six month period) due to an oversupply of structural
panel products in North America. L-P and its competitors have opened numerous
new OSB plants in 1995 and 1996 and more are scheduled to open through late
1997, which has significantly increased the structural panel capacity in North
America. L-P structural panel sales volumes increased in the second quarter
and first six months largely due to the start-up of new OSB production
facilities by L-P in the U.S., Canada and Ireland.
Lumber sales have decreased in 1996 from 1995 for both the second quarter
and first six month periods because of significantly lower volumes resulting
from the permanent closure of approximately 15 unprofitable sawmills (not all
of these mills were producing immediately prior to their closure). These
lower volumes of lumber produced have been partially offset by an increase in
the volume of lumber sold through L-P's wholesale operations. Sales prices
averaged a 10% increase in the second quarter of 1996 compared to 1995 (2%
higher for the six month period). Lumber markets have generally been stronger
in 1996 due to a strong economy, lower U.S. production volumes and lower
volumes of lumber imported from Canada.
Industrial panel products (particleboard, medium-density fiberboard (MDF)
and hardboard) sales decreased slightly in the second quarter of 1996 compared
to 1995 due to lower average selling prices of approximately 11%, offset by
higher volume of about 10%. The largest change in selling prices was in MDF
(approximately 18% lower) which is due to new industry capacity without a
significant change in demand. For the six month period, the decrease in sales
was caused primarily by approximately 13% lower average selling prices (for
the same reason discussed above) with no significant change in volume.
Sales in the other building products category have remained virtually
unchanged in the second quarter of 1996 compared to 1995. However, the mix of
products sold within the category changed with significantly lower chip sales
(due to lower sawmill production and lower chip prices) offset by increases in
engineered wood products and other products. For the six month periods, the
decrease in chip sales was not completely offset by increases in sales for
other products.
The increase in building products operating profit in the second quarter
of 1996 over 1995 is primarily due to lumber. Higher sales prices (discussed
above) combined with lower log costs turned lumber profits from a loss in 1995
to a profit in 1996. Lower margins, due to lower per unit sales prices
(discussed above) in structural panel products, industrial panel products and
other building products partially offset the higher margins in lumber.
For the first six months, the decrease in building products operating
profit was caused by the lower sales prices (discussed above) for nearly all
products, particularly in the first three months of the year. Raw material
prices have generally been lower in 1996 than in 1995, helping to offset the
decrease in selling prices. The demand for wood chips has decreased in 1996,
which has reduced by-product income particularly at L-P's sawmills.
L-P's building products are primarily sold as commodities and therefore
sales prices fluctuate based on market factors over which L-P has no control.
L-P cannot predict whether the prices of its building products will remain at
current levels, or will increase or decrease in the future because supply and
demand are influenced by many factors, only one of which is the cost and
availability of raw materials. Therefore, L-P is not able to determine to
what extent, if any, it will be able to pass any future increases in the price
of raw materials on to customers through product price increases.
Subsequent to the end of the second quarter, prices for structural panel
have decreased (see following table labeled "Industry Product Price Trends").
L-P expects that prices will either remain depressed or experience significant
volatility through at least the remainder of 1996 due to the excess production
capacity discussed above.
Pulp Segment
Quarter Ended Six Months Ended
June 30 June 30
--------------------- ----------------------
1996 1995 % Chg 1996 1995 % Chg
------ ------ ----- ------ ------ -----
(Dollar amounts in millions)
Pulp sales $ 40.9 $ 95.5 -57% $ 91.4 $191.2 -52%
====== ====== ====== ======
Operating profit $(30.5) $ 23.2 $(52.4) $ 42.0
====== ====== ====== ======
Pulp segment sales fell dramatically in both the second quarter and first
six months of 1996 compared to 1995. Prices decreased 56 percent in the
second quarter and 38 percent for the first six months from the comparable
periods a year ago. Sales volumes decreased approximately 4 percent during
the second quarter and 23 percent during the first six months of 1996 compared
to 1995. Large world-wide pulp inventories at the end of 1995 have carried
through the first six months of 1996, creating very weak pulp markets.
Decreased volumes were the result of lower production due to the weak markets
and unscheduled maintenance shut-downs.
Pulp segment operating profits were severely impacted by the decreased
sales prices, resulting in operating losses in 1996 compared to operating
profit in 1995. Inventory market write-downs have also contributed to the
operating losses in 1996. Raw material costs in 1996 (purchased chips and/or
raw logs for chipping) for the Samoa, California and Chetwynd, British
Columbia mills have been comparable to or lower than 1995. However, the mill
operated by L-P's Ketchikan Pulp Company subsidiary has experienced very high
raw material costs in 1996. The US Forest Service has not released adequate
volume from the long-term timber supply contract which has forced KPC to
obtain logs from higher-priced outside sources. More than half of the pulp
operating loss in the second quarter of 1996 was attributable to KPC. See
"Ketchikan Pulp Company Update" below.
L-P's pulp products are primarily sold as commodities and therefore sales
prices fluctuate based on market factors over which L-P has no control. L-P
cannot predict whether the prices of its pulp products will remain at current
levels, or will increase or decrease in the future because supply and demand
are influenced by many factors, only one of which is the cost and availability
of raw materials. Therefore, L-P is not able to determine to what extent, if
any, it will be able to pass any future increases in the price of raw
materials on to customers through product price increases.
The excess inventory situation in the world-wide pulp markets appeared to
be much less severe by the end of the second quarter, and L-P expects that
prices for certain of its pulp products will increase slightly to moderately
over the remainder of the year.
Unallocated Expense
Unallocated expense decreased in the second quarter of 1996 to $6.8
million from $44.9 million in 1995. The largest factor in the decrease was
that second quarter 1995 unallocated expenses included a $25 million charge
for an increase in litigation-related reserves. In the second quarter of 1996,
non-recurring credits of $10.0 million were taken against the unallocated
expense, primarily a gain on the sale of a sawmill and related timberland in
Pilot Rock, Oregon. Lower advertising expenditures and lower unreserved
litigation-related expenses also contributed to the decrease. For the six
month period, unallocated expenses decreased to $19.9 million from $67.6
million. This decrease was primarily related to the second quarter decrease,
as well as lower stock compensation expenses. Also netted against first
quarter 1996 unallocated expenses was a recovery by KPC of $5 million, plus
interest, from the US Forest Service for damages sustained as a result of
changes in the long-term timber supply contract.
Net Interest Income (Expense)
L-P's interest expense (net of capitalized interest and interest income)
has increased in 1996 primarily resulting from increased borrowings and lower
levels of cash and cash equivalents on which L-P earns interest income.
Legal and Environmental Matters
Refer to the "Legal Proceedings" section of this Form 10-Q for a
discussion of certain environmental litigation and other litigation and its
potential impact on L-P.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations decreased to $87.7 million in the first six
months of 1996 from $181.2 million in the first six months of 1995. The
decrease was primarily caused by lower net income ($17.4 million in 1996 and
$80.6 million in 1995) and by $123.4 million cash paid against accrued
settlement liabilities. These cash uses were partially offset by a reduction
in inventories and an increase in accounts payable and accrued liabilities.
Cash used in investing activities decreased to $167.5 million from
$193.9 million in 1995, primarily due to decreased capital expenditures. The
largest portion of these capital expenditures were for new production
facilities and the acquisition of Associated Chemists, Inc. Significant
amounts have also been spent on environmental projects (such as pollution
control equipment) and upgrades of existing production facilities. L-P is
budgeting capital expenditures, including timber and logging road additions,
for all of 1996 of approximately $300 million.
Cash provided by financing activities for the first six months of 1996
was $58.6 million compared to cash used by financing activities in the same
period in 1995 of $214.0 million. In 1996, L-P had net new borrowings of
$82.7 million compared with net repayments in 1995 of $62.0 million. In 1996,
L-P has not purchased any treasury shares compared to $120.2 million of
purchases in 1995.
Contingency reserves, which represent an estimate of future cash needs
for various contingencies (principally payments for siding litigations costs),
total $277.1 million at June 30, 1996, of which $100 million is estimated to
be payable within one year. As with all accounting estimates, there is
inherent uncertainty concerning the reliability and precision of such
estimates. L-P has been named as a defendant in other litigation for which
reserves have not been established. See "Legal Proceedings" for a description
of certain pending legal proceedings.
L-P continues to be in a strong financial condition with $54.2 million of
cash and cash equivalents and a low ratio of long-term debt as a percent of
total capitalization. Although cash and cash equivalents decreased, existing
amounts, combined with borrowings available under L-P's $300 million revolving
credit facility and cash to be generated from operations are expected to be
sufficient to meet projected cash needs including the payments related to the
siding litigation costs referred to above. The company also believes that
because of its conservative financial structure and policies, it has
substantial financial flexibility to generate additional funds should the need
arise.
Ketchikan Pulp Company Update
Ketchikan Pulp Company (KPC) is a wholly-owned subsidiary of the
registrant. KPC operates a dissolving pulp mill and two sawmills in Southeast
Alaska and has a long-term timber cutting contract with the U.S. Forest
Service (USFS) on the Tongass National Forest which is intended to supply
approximately 75 percent of the wood fiber requirements of the manufacturing
facilities. The contract is a 50-year contract expiring in 2004.
In November, 1990, Congress passed the Tongass Timber Reform Act (TTRA)
which made a number of unilateral modifications to the long-term contract and
which required the USFS to incorporate those modifications in a revised
contract document (the Unilateral Terms). TTRA and the Unilateral Terms have
caused KPC to incur substantial additional costs and have disrupted the
continuity of operations by, among other things, leading to a failure on the
part of the USFS to provide the timber volumes specified in the contract.
These issues are currently the subject of three claims filed against the USFS
in the United States Court of Federal Claims which seek in excess of $200
million. In addition, KPC has been prosecuting two additional claims against
the USFS in the same court which deal with contract issues predating TTRA and
the Unilateral Terms. One of these two claims was recently concluded with KPC
receiving a total payment of $6.1 million. The other claim seeks in excess of
$30 million. None of the claims currently in litigation have been recorded
for financial reporting purposes.
Following a concerted effort by KPC, citizens of Southeast Alaska, the
Governor, and legislators of Alaska, legislation has been introduced in
Congress which would extend the contract term 15 years beyond the current
expiration date and revise the contract language to provide relief from a
number of the problems and hardships caused by TTRA and the Unilateral Terms.
KPC's pulp mill has been the subject of certain water and air compliance
issues during the late 1980's and early 1990's. In 1995, KPC entered into a
civil consent decree, which is further described under the Legal Proceedings
section of this report, requiring KPC to complete certain capital projects at
the pulp mill. In addition, management plans numerous other capital projects
in the next several years to modernize and improve the efficiency of the mill.
These projects could total up to $200 million.
Management cannot assess the probability of enactment of the legislation,
but without such resolution, the future operations of KPC are in doubt. If
KPC is forced to close its facilities permanently, it would be required to
record a charge currently estimated at $125 to $150 million for the write-down
of the net book value of its facilities and other shutdown costs. Management
also cannot assess the probability of success in resolving current and any
future claims for damages against the USFS.
<PAGE>
Sales and Operating Profit by Major Product Group
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
------- ------- -------- -------
Sales:
Structural panel products $ 280.2 $ 264.2 $ 514.2 $ 526.1
Lumber 164.2 175.2 302.6 327.2
Industrial panel products 51.3 53.0 97.9 111.5
Other building products 121.7 121.4 236.3 240.1
------- ------- -------- --------
Total building products 617.4 613.8 1,151.0 1,204.9
Pulp 40.9 95.5 91.4 191.2
------- ------- -------- --------
Total sales $ 658.3 $ 709.3 $1,242.4 $1,396.1
======= ======= ======== ========
Export sales $ 58.3 $ 129.1 $ 137.8 $ 256.4
======= ======= ======== ========
Operating profit:
Building products $ 72.3 $ 63.3 $ 102.3 $ 153.7
Pulp (30.5) 23.2 (52.4) 42.0
------- ------- -------- --------
Total operating profit 41.8 86.5 49.9 195.7
Unallocated expense, net (6.8) (44.9) (19.9)
(67.6)
Interest income (expense), net (.5) .3 (.5) 1.1
------- ------- -------- --------
Income before taxes and
minority interest $ 34.5 $ 41.9 $ 29.5 $ 129.2
======= ======= ======== ========
<PAGE>
Summary of Production Volumes
Louisiana-Pacific Corporation and Subsidiaries
(Volume amounts stated in millions unless otherwise
noted and as a percent of normal capacity)
Quarter Ended Six Months Ended
June 30 June 30
----------------------- -----------------------
1996 1995 1996 1995
---------- --------- ---------- ----------
Oriented strand board,
sq ft 3/8" basis 1,034 85% 875 96% 1,862 84% 1,690 92%
Softwood plywood,
sq ft 3/8" basis 423 110 334 82 832 108 658 81
Lumber, board feet 326 79 352 58 608 74 693 57
Medium density
fiberboard,
sq ft 3/4" basis 55 98 55 97 102 91 108 96
Particleboard,
sq ft 3/4" basis 89 99 84 93 170 94 174 97
Hardboard,
sq ft 1/8" basis 57 104 56 101 111 101 105 96
Hardwood veneer,
sq ft surface
measure 56 90 61 98 106 85 134 107
Pulp, thousand
short tons 121 84 132 88 208 72 267 89
Chips, thousand BDU's 402 458 824 930
<PAGE>
Industry Product Price Trends
Louisiana-Pacific Corporation and Subsidiaries
OSB Plywood Lumber Particleboard
----------- -------- --------- -------------
N. Central Southern
7/16" basis Pine 1/2 Framing
24/16 basis lumber Inland
span CDX composite Industrial
rating 3 ply prices 3/4" basis
----------- -------- --------- -------------
Annual Average
1991 148 191 236 198
1992 217 248 287 200
1993 236 282 394 258
1994 265 302 405 295
1995 245 303 337 290
1995 Second Quarter Average
210 303 317 295
1996 First Quarter Average
191 254 341 277
1996 Second Quarter Average
203 246 393 277
Weekly Average
July 3 175 230 390 277
July 12 185 238 396 277
July 19 185 240 401 277
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The following sets forth the current status of certain legal proceedings:
Environmental Proceedings
In March 1995, L-P's subsidiary Ketchikan Pulp Company (KPC) entered into
agreements with the federal government to resolve the issues related to water
and air compliance problems experienced at KPC's pulp mill during the late
1980s and early 1990s. Under the agreements, KPC entered into a civil consent
decree and pled guilty to one felony and thirteen misdemeanor violations of
the Clean Water Act. The settlement required KPC to pay civil and criminal
penalties of $6.0 million, of which $1.75 million was suspended in
consideration of KPC's expenditures and ongoing efforts to improve its
operations. The penalties were substantially reserved for at December 31,
1994. KPC also agreed to undertake further expenditures, which are primarily
capital in nature, including certain remedial and pollution control related
measures, with an estimated cost of up to approximately $20 million. KPC has
also agreed to undertake a study of whether a clean-up of Ward Cove, the body
of water adjacent to the pulp mill, is needed. If the study determines that
such clean-up is needed, KPC may be required to spend up to $6 million on the
clean-up, including the cost of the study, as part of the overall $20 million
of expenditures. At this time, the company cannot estimate what portion, if
any, of the clean-up expenditures will be required.
KPC has entered into an agreement with the United States Department of
Justice settling alleged violations of the Clean Air Act involving a waste
wood incinerator at KPC's Annette Island, Alaska, cant mill. Pursuant to the
agreement, KPC paid a civil penalty of $359,000.
In March 1996, an information was filed in the United States District
Court for the Eastern District of Washington charging L-P with two misdemeanor
counts related to alleged record-keeping violations in connection with the
disposal by an independent contractor of transformers from a mill owned by L-P
in 1991.
The USFS has named KPC as a potentially responsible party for clean-up
costs related to a landfill near Thorne Bay, Alaska. The USFS has indicated
clean-up costs may range up to $5 million.
Although L-P's policy is to comply with all applicable environmental laws
and regulations, the company has in the past been required to pay fines for
non-compliance and sometimes litigation has resulted from contested
environmental actions. Also, L-P is involved in other environmental actions
and proceedings which could result in fines or penalties. Management believes
that any fines, penalties or other losses resulting from the matters discussed
above in excess of the reserve for environmental loss contingencies will not
have a material adverse effect on the business, financial position or results
of operations of L-P. See "Colorado Criminal Proceedings" for further
discussion of an environmental action against the company.
Colorado Criminal Proceedings
L-P began an internal investigation at L-P's Montrose (Olathe), Colorado,
oriented strand board (OSB) plant of various matters, including certain
environmental matters, in the summer of 1992 and reported its initial finding
of irregularities to governmental authorities in September 1992. Shortly
thereafter, a federal grand jury commenced an investigation of L-P concerning
alleged environmental violations at that plant. In 1995, additional subpoenas
were issued requiring the production of evidence and testimony relating to
alleged fraud in connection with the submission of unrepresentative OSB
product samples to the APA-The Engineered Wood Association (APA), an industry
product certification agency, by L-P's Montrose plant and certain of its other
OSB plants. L-P then commenced an independent investigation, which was
concluded in 1995, under the direction of former federal judge Charles B.
Renfrew concerning irregularities in sampling and quality assurance in its OSB
operations. In June 1995, the grand jury returned an indictment in the U.S.
District Court in Denver, Colorado, against L-P, a former manager of the
Montrose mill, and a former superintendent at the mill. L-P is now facing 23
felony counts related to environmental matters at the Montrose mill, including
alleged conspiracy, tampering with opacity monitoring equipment, and making
false statements under the Clean Air Act. The indictment also charges L-P
with 25 felony counts of fraud relating to alleged use of the APA trademark on
OSB structural panel products produced by the Montrose mill as a result of
L-P's allegedly improper sampling practices in connection with the APA quality
assurance program. No trial date has been set.
In December 1995, L-P received a notice of suspension from the United
States Environmental Protection Agency ("EPA") stating that, because of
criminal proceedings pending against L-P in Colorado, agencies of the federal
government would be prohibited from purchasing from L-P's Northern Division.
L-P is negotiating to have the EPA suspension lifted or modified based on
positive environmental programs actively underway. While negotiations are
continuing, the EPA has approved a preliminary agreement limiting the
prohibition to L-P's Montrose, Colorado, facility for a period of six months
in recognition of L-P's environmental compliance efforts. Under recently
revised regulations of the United States Department of Agriculture, the EPA
suspension will also have the effect of prohibiting L-P's Montrose facility
from purchasing timber directly, but not indirectly, from the United States
Forest Service.
At the present time, L-P cannot predict whether or to what extent these
circumstances will result in further civil litigation or investigation by
government authorities, or the potential financial impact of any such current
or future proceedings. However, the resolution of the above matters could
have a materially adverse impact on L-P.
OSB Siding Matters
L-P has been named as a defendant in at least 12 purported class actions
filed in various jurisdictions, as well as numerous non-class action
proceedings, brought on behalf of various persons or purported classes of
persons (including nationwide classes in the United States and Canada) who own
or have purchased or used OSB siding manufactured by L-P, because of alleged
unfair business practices, breach of warranty, misrepresentation, conspiracy
to defraud, and other theories related to alleged defects, deterioration, or
failure of OSB siding products.
A settlement of one of the OSB siding class actions has been approved by
the Circuit Court for Lake County, Florida. Under the settlement, L-P has
established a claims procedure pursuant to which members of the settlement
class may report problems with L-P's OSB siding and have their properties
inspected by an independent adjuster, who will measure the amount of damage
and also determine the extent to which improper design, construction,
installation, finishing, painting, and maintenance may have contributed to any
damage. The maximum payment for damaged siding will be $3.40 per square foot
for lap siding and $2.82 per square foot for panel siding, subject to
reduction of up to 75 percent for damage resulting from improper design,
construction, installation, finishing, painting, or maintenance, and also
subject to reduction for age of siding more than three years old. L-P has
agreed with attorneys representing the class that if the national class
settlement in the federal court in Oregon described below becomes final, then
the deduction from the payment to a member of the Florida class will be not
greater than the deduction computed for a similar claimant under the national
settlement agreement. Class members will be entitled to make claims for up to
five years after October 4, 1995. As of July 15, 1996, approximately
16,000 claims forms had been requested and mailed; approximately
7,800 completed claims forms had been returned, and approximately 6,700
inspections had been completed; this resulted in approximately 5,000 allowed
claims, approximately 4,500 of which had been paid at an aggregate cost of
approximately $15 million (including adjustments to deductions to conform to
the national settlement).
In April 1996, the United States District Court for the District of
Oregon approved an amended settlement agreement between L-P and attorneys
representing a nationwide class composed of all persons who own, who have
owned, or who subsequently acquire property on which L-P's OSB siding was
installed prior to January 1, 1996, excluding persons who timely opt out of
the settlement and persons who are members of the settlement class in the
Florida litigation. Under the settlement agreement, an eligible claimant
whose claim is filed prior to January 1, 2003 (or earlier in certain cases),
and is approved by an independent claims administrator will be entitled to
receive from the settlement fund established under the agreement a payment
equal to the replacement cost (to be determined by a third-party construction
cost estimator and currently estimated to be in the range $2.20 to $6.40 per
square foot depending on the type of product and geographic location) of
damaged siding, reduced by a specific adjustment (of up to 65 percent) based
on the age of the siding. Class members who have previously submitted or
resolved claims under any other warranty or claims program of L-P may be
entitled to receive the difference between the amount which would be payable
under the settlement agreement and the amount previously paid. Independent
adjusters will determine the extent of damage to OSB siding at each claimant's
property in accordance with a specified protocol. There will be no adjustment
to settlement payments for improper maintenance or installation.
A claimant who is dissatisfied with the amount to be paid under the
settlement may elect to pursue claims against L-P in a binding arbitration
seeking compensatory damages without regard to the amount of payment
calculated under the settlement protocol. A claimant who elects to pursue an
arbitration claim must prove his entitlement to damages under any available
legal theory, and L-P may assert any available defense, including defenses
that otherwise had been waived under the settlement agreement. If the
arbitrator reduces the damage award otherwise payable to the claimant because
of a finding of improper installation, the claimant will be entitled to pursue
a claim against the contractor/builder to the extent the award was reduced.
L-P will be required to pay $275 million into the settlement fund in
seven annual installments beginning in mid-1996: $100 million, $55 million,
$40 million, $30 million, $20 million, $15 million, and $15 million. If at
any time after the fourth year of the settlement period the amount of approved
claims (paid and pending) equals or exceeds $275 million, then the settlement
agreement will terminate as to all claims in excess of $275 million unless L-P
timely elects to provide additional funding within 12 months equal to the
lesser of (i) the excess of unfunded claims over $275 million or (ii)
$50 million and, if necessary to satisfy unfunded claims, a second payment
within 24 months equal to the lesser of (i) the remaining unfunded amount or
(ii) $50 million. If the total payments to the settlement fund are
insufficient to satisfy in full all approved claims filed prior to January 1,
2003, then L-P may elect to satisfy the unfunded claims by making additional
payments into the settlement fund at the end of each of the next two 12-month
periods or until all claims are paid in full, with each additional payment
being in an amount equal to the greater of (i) 50 percent of the aggregate sum
of all remaining unfunded approved claims or (ii) 100 percent of the aggregate
amount of unfunded approved claims, up to a maximum of $50 million. If L-P
fails to make any such additional payment, all class members whose claims
remain unsatisfied from the settlement fund may pursue any available legal
remedies against L-P without regard to the release of claims provided in the
settlement agreement.
If L-P makes all payments required under the settlement agreement,
including all additional payments as specified above, class members will be
deemed to have released L-P from all claims for damaged OSB siding, except for
claims arising under their existing 25-year limited warranty after termination
of the settlement agreement. The settlement agreement does not cover
consequential damages resulting from damage to OSB siding or damage to utility
grade OSB siding (sold without any express warranty), both of which are the
subject of additional claims. In the event all claims filed prior to January
1, 2003, that are approved have been paid without exhausting the settlement
fund, any amounts remaining in the settlement fund revert to L-P. In addition
to payments to the settlement fund, L-P will be required to pay fees of class
counsel in the amount of $26.25 million, as well as expenses of administering
the settlement fund and inspecting properties for damage, any amounts of
arbitration awards in excess of the amounts calculated under the settlement
protocol, and certain other costs. As of July 15, 1996, approximately
$23 million of the first year's $100 million installment had been spent to
cover class notification costs and prior claims costs, including interim
payments advanced to homeowners in urgent circumstances. By that date,
approximately 53,000 claims forms had been requested and mailed; inspections
and claims payments were at a very early stage.
Potential members of the settlement class were entitled to opt out of the
settlement class until May 27, 1996. Approximately 1,400 opt out notices were
timely submitted; this has resulted in numerous additional claims being filed
by those who opted out, predominantly by owners/developers of commercial
properties. An appeal from the court's order approving the settlement has
been filed.
L-P maintains reserves for the estimated costs of these siding
settlements, although, as with any estimate, there is uncertainty concerning
the actual costs to be incurred. The discussion above notes some of the
factors, in addition to the inherent uncertainty of predicting the outcome of
claims and litigation, that could cause actual costs to vary materially from
current estimates.
Other OSB Matters
Three separate purported class actions on behalf of owners and purchasers
of properties in which L-P's OSB panels are used for flooring, sheathing, or
underlayment have been consolidated in the United States District Court for
the Northern District of California under the caption Agius v. Louisiana-
Pacific Corporation. The actions seek damages and equitable relief for
alleged fraud, misrepresentation, breach of warranty, negligence, and improper
trade practices related to alleged improprieties in testing, APA
certification, and marketing of OSB structural panels, and alleged premature
deterioration of such panels. A separate state court action entitled Carney
v. Louisiana-Pacific Corporation is pending in the Superior Court of the State
of California for the City and County of San Francisco, seeking relief under
California consumer protection statutes based on similar allegations.
At the present time, L-P cannot predict the potential financial impact of
the above actions. However, the resolution of the above matters could have a
materially adverse impact on L-P.
Stockholder Actions
L-P and certain of its present and former executive officers were named
as defendants in numerous actions brought on behalf of various purported
classes of purchasers of L-P's common stock. The actions subsequently were
consolidated in the United States District Court for the District of Oregon
under the caption In Re Louisiana Pacific Corp. Securities Litigation, Civil
Action No. 95-707-JO. Plaintiffs seek to recover damages under the securities
laws for alleged failures to disclose or improper disclosures generally
relating to the various legal proceedings described above and the matters that
are the subject of such proceedings. Motions to Dismiss have been denied and
the Court has conditionally certified the class as requested by the attorneys
appointed to act as lead counsel for the plaintiff class. L-P is defending
the consolidated action vigorously, but is unable to make any prediction as to
the likely outcome or the financial impact of an adverse decision. However,
the resolution of the above matters could have a materially adverse impact on
L-P.
Five individual directors (Messrs. du Pont, Kayser, and Yeager, Ms. Hill
and Mrs. Neff) and three former directors of the registrant have been named as
defendants in ten stockholder derivative actions, which also name the
registrant as a nominal defendant. Eight of these actions were brought in the
Court of Chancery of the State of Delaware in and for New Castle County and
have been consolidated under the caption In re Louisiana-Pacific Corporation
Derivative Litigation, Civil Action No. 14322 (the "Delaware action"). One
action, captioned Silverman, et al. v. Merlo, et al., No. 9505-03630, was
brought in the Circuit Court of the State of Oregon for the County of
Multnomah (the "Oregon action"). The remaining action, captioned Rand v.
Merlo, et al., No. 95-Z-1511, was brought in the United States District Court
for the District of Colorado (the "Colorado action"). The actions seek to
recover damages from the directors on behalf of the corporation because of
alleged mismanagement and breaches of fiduciary duty generally related to the
various legal proceedings described above and the matters that are the subject
of such legal proceedings. The individual directors, former directors, the
registrant, and attorneys representing plaintiffs have entered into a
memorandum of understanding concerning a proposed settlement of the derivative
actions without payment by the directors or former directors or any admission
of liability. The settlement recognizes the recent management changes
effected by the registrant and certain other actions taken and to be taken by
the registrant with respect to quality control. The proposed settlement is
subject to confirmatory discovery by attorneys for plaintiffs and approval by
the courts.
Executive Employment Matter
In January 1996, an action entitled International Paper Company v. Mark
A. Suwyn and Louisiana-Pacific Corporation was instituted in the United States
District Court for the Southern District of New York claiming that Mr. Suwyn's
employment as chief executive officer of L-P violated the terms of a previous
employment agreement with the plaintiff. The complaint seeks an injunction
prohibiting Mr. Suwyn from continuing his employment with L-P for 18 months
and other relief. L-P believes there are meritorious defenses related to this
case and does not believe that there is any material liability related to this
case.
Other
L-P and its subsidiaries are parties to other legal proceedings.
Management believes that the outcome of such proceedings will not have a
material adverse effect on the business, financial position or results of
operations of L-P.
<PAGE>
Item 4. Submission of Matters to a Vote of Security-Holders
The Registrant held its annual meeting of stockholders on May 6, 1996.
The following summarizes the matters voted upon at the meeting and the results
of the voting:
Directors elected for a term of office expiring 1999:
Name of Director
Withheld Shares Voted For Shares Individually
- ---------------- ---------------- -------------------
Pierre S. du Pont 86,198,168 1,238,186
William E. Flaherty 87,352,132 84,222
Donald R. Kayser 86,451,892 984,462
<TABLE>
Shares Shares Broker
Description of Proposal Shares For Against Abstained Non-Votes
- ----------------------- ---------- ------- --------- ---------
<S> <C> <C> <C> <C>
Approval of performance
goals under a performance-
based incentive bonus plan
83,317,938 5,843,480 724,575 0
Approval of 1996 Employee
Stock Purchase Plan
82,575,452 6,819,786 490,755 0
Approval of Arthur
Andersen LLP as auditors
for 1996
89,241,266 329,763 490,755 0
Stockholder proposal
relating to classification
of the board of directors
31,976,109 41,980,052 1,276,161 14,653,671
Stockholder proposal
related to personal
liability of directors
7,472,026 66,354,455 1,405,841 14,653,671
Stockholder proposal
relating to compensation
and workplace policies 5,476,713 66,883,181 2,872,428 14,653,671
</TABLE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits filed as part of this report or incorporated by
reference herein are listed in the accompanying exhibit index.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended June 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOUISIANA-PACIFIC CORPORATION
By /s/ WILLIAM L. HEBERT
William L. Hebert
Vice President - Treasurer
and Controller
(Principal Financial Officer)
DATED: August 14, 1996
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
3.B Bylaws of the Registrant as amended to date
10.A Performance-Based Incentive Bonus Plan
10.B Performance-Based Incentive Bonus Award
11 Calculation of Net Income Per Share for the
Three Months Ended June 30, 1996
27 Financial Data Schedule
<PAGE>
<PAGE>
EXHIBIT 3.B
BYLAWS OF
LOUISIANA-PACIFIC CORPORATION
ARTICLE I. STOCKHOLDERS' MEETINGS
Section 1. Annual Meeting. The annual meeting of the stockholders
shall be held on the first Friday in the month of May in each year at
10:30 a.m. or at such other time or date in April or May of each year as shall
be fixed by the Board of Directors, for the election of directors and the
transaction of such other business as may properly come before the meeting.
If the date fixed for the annual meeting shall be a legal holiday in the place
of the meeting, the meeting shall be held on the next succeeding business day.
Section 2. Special Meetings. Special meetings of the stockholders for
any proper purposes, unless otherwise provided by the law of Delaware, may be
called by the Chairman or pursuant to resolution of the Board of Directors and
shall be called by the Chairman at the request in writing of a majority of the
directors. Business transacted at a special meeting of stockholders shall be
confined to the purpose or purposes of the meeting as stated in the notice of
the meeting.
Section 3. Place of Meetings. Meetings of the stockholders may be held
at such places, within or without the State of Delaware, as the Board of
Directors or the officer calling the same shall specify in the notice of such
meeting.
Section 4. Notice of Meeting. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall, unless otherwise prescribed
by statute, be given not less than ten nor more than sixty days before the
date of the meeting, either personally or by mail, by or at the direction of
the Chairman, the President, the Secretary, or other persons calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation. When a meeting is adjourned to
another time or place, notice of the adjourned meeting need not be given
provided that the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, the adjournment is
for no more than thirty days, and after the adjournment no new record date is
fixed for the adjourned meeting. Notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting if all the
conditions of the proviso in the preceding sentence are not met. At an
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting.
Section 5. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders except as otherwise provided
by statute or in the Certificate of Incorporation. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 6. Organization. At each meeting of the stockholders the
Chairman, or in his absence or inability to act, the President, or in the
absence or inability to act of the Chairman and the President, a Vice
President, or in the absence of all the foregoing, any person chosen by a
majority of those stockholders present shall act as chairman of the meeting.
The Secretary, or, in his absence or inability to act, the Assistant Secretary
or any person appointed by the chairman of the meeting, shall act as secretary
of the meeting and keep the minutes thereof.
Section 7. Conduct of Business. The Board of Directors shall have
authority to determine from time to time the procedures governing, and the
rules of conduct applicable to, annual and special meetings of the
stockholders. Except as otherwise determined by the Board of Directors prior
to the meeting, the chairman of any stockholders meeting shall determine the
order of business and shall have authority in his discretion to adjourn such
meeting and to determine the procedures governing such meeting and to regulate
the conduct thereat, including, without limitation, imposing restrictions on
the persons (other than stockholders of the corporation or their duly
appointed proxies) who may attend any such stockholders meeting, determining
whether any stockholder or any proxy may be excluded from any stockholders
meeting based upon any determination by the chairman in his sole discretion
that any such person has unduly disrupted or is likely to disrupt the
proceedings thereat and specifying the circumstances in which any person may
make a statement or ask questions at any stockholders meetings.
Section 8. Voting. Except as otherwise provided by statute, the
Certificate of Incorporation, or any certificate duly filed pursuant to
Section 151 of the Delaware General Corporation Law, each stockholder shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders for each share of capital stock held of record by him on the date
fixed by the Board of Directors as the record date for the determination of
the stockholders who shall be entitled to notice of and to vote at such
meeting; or if such record date shall not have been so fixed, then at the
close of business on the day next preceding the day on which notice thereof
shall be given. Except as otherwise provided by statute, these Bylaws, or the
Certificate of Incorporation, any corporate action to be taken by vote of the
stockholders shall be authorized by a majority of the total votes, or when
stockholders are required to vote by class by a majority of the votes of the
appropriate class, cast at a meeting of stockholders by the holders of shares
present in person or represented by proxy and entitled to vote on such action.
Unless required by statute, or determined by the chairman of the meeting to be
advisable, the vote on any question need not be by written ballot and may be
by such other means as the chairman deems advisable under the circumstances.
On a vote by written ballot, each ballot shall be signed by the stockholder
voting, or by his proxy, if there be such proxy, and shall state the number of
shares voted.
Section 9. Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by a proxy
signed by such stockholder or his attorney-in-fact. No proxy shall be valid
after the expiration of three years from the date thereof, unless otherwise
provided in the proxy.
Section 10. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 11. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may
appoint inspectors. The inspectors shall determine the number of shares
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies,
and shall receive votes or ballots, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes or ballots, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them.
No director or candidate for the office of director shall act as inspector of
an election of directors. Inspectors need not be stockholders.
Section 12. Denial of Action by Consent of Stockholders. No action
required to be taken or which may be taken at any annual or special meeting of
the stockholders of the Corporation may be taken without a meeting, and the
power of stockholders to consent in writing, without a meeting, to the taking
of any action is specifically denied.
Section 13. Nominations for Director. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any stockholder
of record entitled to vote for the election of directors. Any stockholder
entitled to vote for the election of directors may nominate at a meeting
persons for election as directors only if written notice of such stockholder's
intent to make such nomination is given, either by personal delivery or by
certified mail, postage prepaid, addressed to the Chairman at the
Corporation's executive offices not later than (i) with respect to an election
to be held at an annual meeting of stockholders, 60 days prior to the date of
such meeting (provided that if such annual meeting of stockholders is held on
a date other than the first Friday in May, such written notice must be given
within 10 days after the first public disclosure of the date of the annual
meeting, including, without limitation, disclosure of the meeting date set
forth in any document or exhibit thereto filed by the Corporation with the
Securities and Exchange Commission), and (ii) with respect to an election to
be held at a special meeting of stockholders for the election of directors,
the close of business on the seventh day following the date on which notice of
such meeting is first given to stockholders. Each such notice shall set
forth: (a) the name and address, as they appear on the Corporation's stock
ledger, of the stockholder who intends to make the nomination and the name and
address of each person to be nominated; (b) a representation that such
stockholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear at the meeting in person or by proxy to
nominate the person or persons specified in the notice as directors; (c) a
description of all arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by
such stockholder; (d) such other information regarding each nominee proposed
by such stockholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission
were such nominee to be nominated by the Board of Directors; and (e) the
consent of each proposed nominee to serve as a director of the Corporation if
so elected. The chairman of any meeting of stockholders to elect directors
may refuse to permit the nomination of any person to be made without
compliance with the foregoing procedure.
Section 14. Notice of Stockholder Business. At any annual meeting of
the stockholders held after May 6, 1988, only such business shall be conducted
as shall have been brought before the meeting (a) by or at the direction of
the Board of Directors or (b) by any stockholder of record of the Corporation
who complies with the notice procedures set forth in this Section 14. For
business to be properly brought before an annual meeting by any such
stockholder, the stockholder must give written notice thereof to the Chairman,
either by personal delivery or by certified mail, postage prepaid, addressed
to the Chairman at the Corporation's executive offices not less than 60 nor
more than 90 days in advance of such meeting (provided that if such annual
meeting of stockholders is held on a date other than the first Friday in May,
such written notice must be given within 10 days after the first public
disclosure of the date of the annual meeting, including, without limitation,
disclosure of the meeting date set forth in any document or exhibit thereto
filed by the Corporation with the Securities and Exchange Commission). Each
such notice shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (a) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (b) the name and address, as they appear
on the Corporation's stock ledger, of the stockholder proposing such business,
(c) a representation that such stockholder is a holder of record of stock of
the Corporation entitled to vote at such meeting and intends to appear at the
meeting in person or by proxy to propose such business, and (d) any material
interest of such stockholder in the proposed business. The chairman of an
annual meeting shall, if the facts warrant, determine and declare to the
meeting that any such business was not properly brought before the meeting and
in accordance with the provisions of this Section 14, and if he should so
determine, he shall so declare to the meeting and such business not properly
brought before the meeting shall not be transacted.
ARTICLE II. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors.
Section 2. Number, Classification, Election and Qualification. The
number of directors of the Corporation shall be nine, but, by vote of a
majority of the entire Board of Directors or amendment of these Bylaws, the
number thereof may be increased or decreased to such greater or lesser number
(not less than three) as may be so provided. At the first election of
directors by the stockholders, the directors shall be divided into three
classes; the term of office of those of the first class to expire at the first
annual meeting thereafter; of the second class at the second annual meeting
thereafter; and of the third class at the third annual meeting thereafter. At
each annual election held after such classification and election, directors
shall be elected to succeed those whose terms expire, each such newly elected
director to hold office for a term of three years and until his successor is
elected or until his death, resignation, retirement or removal. Except as
otherwise provided by statute or these Bylaws, directors shall be elected at
the annual meeting of the stockholders, and the persons receiving a plurality
of the votes cast at such election shall be elected, provided that a quorum is
present at the meeting. Directors need not be stockholders.
Section 3. Place of Meetings. Meetings of the Board of Directors may
be held at such place, within or without the State of Delaware, as the Board
of Directors may from time to time determine or as shall be specified in the
notice or waiver of notice of such meeting.
Section 4. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, the annual meeting of stockholders for the
purpose of electing officers and the transaction of other business. The Board
of Directors may provide by resolution the time and place, either within or
without the State of Delaware, for holding of additional regular meetings
without other notice than such resolution.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman, President or any
two directors. The person or persons authorized to call special meetings of
the Board of Directors may fix any place, either within or without the State
of Delaware, as the place for holding any special meeting of the Board of
Directors called by them.
Section 6. Notice. Notice of any special meeting shall be given
personally or by telephone to each director at least twenty-four hours before
the time at which the meeting is to be held or shall be mailed to each
director, postage prepaid, at his residence or business address at least three
days before the day on which the meeting is to be held; provided that, in the
case of any special meeting to be held by conference telephone or similar
communications equipment, notice of such meeting may be given personally or by
telephone to each director not less than six hours before the time at which
the meeting is to be held. Except as otherwise specifically provided in these
Bylaws, neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Board of Directors need be specified in the
notice of the meeting.
Section 7. Quorum and Manner of Acting. A majority of the entire Board
of Directors shall be present in person at any meeting of the Board of
Directors in order to constitute a quorum for the transaction of business at
such meeting, except that one-third of the entire Board of Directors present
in person at a meeting shall constitute a quorum if the Chairman is present at
the meeting. Except as otherwise specifically required by statute or the
Certificate of Incorporation, the vote of a majority of the directors present
at any meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum at any meeting of the Board of
Directors, a majority of the directors present or, if no director be present,
the Secretary, may adjourn such meeting to another time and place. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called. Except
as provided in Article III of these Bylaws, the directors shall act only as a
board of directors and the individual directors shall have no power as such.
Section 8. Organization. At each meeting of the Board of Directors,
the Chairman (or, in his absence or inability to act, the President, or in his
absence or inability to act, another director chosen by a majority of the
directors present) shall act as chairman of the meeting. The Secretary (or,
in his absence or inability to act, any person appointed by the chairman)
shall act as secretary of the meeting and keep the minutes thereof.
Section 9. Resignations. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors
or Chairman or the President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 10. Vacancies and Newly Created Directorships. Vacancies and
newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in
office, though less than a quorum, or by a sole remaining director, and any
director so chosen shall hold office until the next election of the class for
which such director has been chosen and until his successor is elected and
qualified, or until his earlier resignation or removal. When one or more
directors shall resign from the Board of Directors, effective at a future
date, a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective,
and each director so chosen shall hold office as provided in this section in
the filling of other vacancies.
Section 11. Removal of Directors. All or any number of the directors
may be removed at any time, but only for cause and only by the affirmative
vote of the holders of at least 75 percent of the outstanding Common Stock of
the Corporation at a meeting of the stockholders expressly called for that
purpose. A vacancy in the Board of Directors caused by any such removal may
be filled by such stockholders at such meeting, or if the stockholders shall
fail to fill such vacancy, as in these Bylaws provided.
Section 12. Compensation. The Board of Directors shall have authority
to fix the compensation, including fees and reimbursement of expenses, of
directors for services to the Corporation in any capacity, provided, no such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 13. Board and Committee Action Without Meeting. Any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if all members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 14. Board and Committee Telephonic Meetings. A director or a
member of a committee designated by the Board of Directors may participate in
a meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at the meeting.
ARTICLE III. EXECUTIVE AND OTHER COMMITTEES
Section 1. Executive and Other Committees. The Board of Directors may,
by resolution passed by a majority of the whole Board of Directors, designate
one or more committees, each committee to consist of two or more of the
directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In addition,
in the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any
such absent or disqualified member. Any such committee, to the extent
provided in the resolution, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall
have the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending,
these Bylaws; and, unless the resolution expressly so provides, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Each committee shall keep written minutes of
its proceedings and shall report such minutes to the Board of Directors when
required. All such proceedings shall be subject to revision or alteration by
the Board of Directors, provided, however, that third parties shall not be
prejudiced by such revision or alteration.
Section 2. General. A majority of any committee may determine its
action and establish the time, place and procedure for its meetings, unless
the Board of Directors shall otherwise provide. Notice of such meetings shall
be given to each member of the committee in the manner provided for in Article
II, Section 6 or as the Board of Directors may otherwise provide. The Board
of Directors shall have power at any time to fill vacancies in, to change the
membership of, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board of Directors from appointing one or more
committees consisting in whole or in part of persons who are not directors of
the Corporation; provided, however, that no such committee shall have or may
exercise any authority of the Board of Directors.
ARTICLE IV. EXCEPTIONS TO NOTICE REQUIREMENTS
Section 1. Waiver of Notice. Whenever notice is required to be given
under these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 2. Unlawful Notice. Whenever notice is required to be given
under these Bylaws to any person with whom communication is unlawful, the
giving of such notice to such person shall not be required and there shall be
no duty to apply to any governmental authority or agency for a license or
permit to give such notice to such person. Any action or meeting which shall
be taken or held without notice to any such person with whom communication is
unlawful shall have the same force and effect as if such notice has been duly
given.
ARTICLE V. OFFICERS
Section 1. Number, Election and Qualification. The elected officers of
the Corporation shall be a Chairman, a President, one or more Vice Presidents
(one or more of whom may be designated Executive Vice President or Senior Vice
President), a Secretary, and a Treasurer. Such officers shall be elected from
time to time by the Board of Directors, each to hold office until the meeting
of the Board of Directors following the next annual meeting of the
stockholders and until his successor is elected and qualified, or until his
earlier resignation or removal. The Board of Directors may from time to time
appoint such other officers (including a Chairman of the Executive Committee,
a Controller and one or more Assistant Vice Presidents, Assistant Secretaries,
Assistant Treasurers and Assistant Controllers), and such agents, as may be
necessary or desirable for the business of the Corporation. Such other
officers and agents shall have such duties as may be prescribed by the Board
of Directors and shall hold office during the pleasure of the Board of
Directors. Any two or more offices may be held by the same person. From and
after the distribution by G-P of the stock it presently holds in the
Corporation, no person who is serving as an officer or director of G-P shall
concurrently serve as an officer of the Corporation.
Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board of
Directors, the Chairman, the President or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3. Removal. Any officer or agent of the Corporation may be
removed either with or without cause, at any time, by the Board of Directors,
except that a vote of a majority of the entire Board of Directors shall be
necessary for the removal of an elected officer. Such removal shall be
without prejudice to the contractual rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
Section 4. Vacancies. A vacancy in any office may be filled for the
unexpired portion of the term of the office which shall be vacant, in the
manner prescribed in these Bylaws for the regular election or appointment of
such office.
Section 5. Chairman. The Chairman shall be the chief executive officer
of the Corporation, and shall have general direction over the management of
its business, properties and affairs. The Chairman shall preside, when
present, at all meetings of the stockholders and of the Board of Directors
and, in the absence of the Chairman of the Executive Committee, at all
meetings of the Executive Committee. He shall have general power to execute
bonds, deeds and contracts in the name of the Corporation and to affix the
corporate seal; to sign stock certificates; and to remove or suspend such
employees or agents as shall not have been elected or appointed by the Board
of Directors. In the absence or disability of the Chairman, his duties shall
be performed and his powers shall be exercised by the President.
Section 6. President. The President shall be the chief operating
officer of the Corporation and, subject to the direction of the Board of
Directors and the Chairman, he shall have general direction over the
operations of the Corporation. He shall have general power to execute bonds,
deeds and contracts in the name of the Corporation and to affix the corporate
seal; and to sign stock certificates.
Section 7. Vice Presidents. The several Vice Presidents shall perform
all such duties and services as shall be assigned to or required of them from
time to time, by the Board of Directors or the President, respectively, and
unless their authority be expressly limited shall act in the order of their
election in the place of the President, exercising all his powers and
performing his duties, during his absence or disability. The Board of
Directors however, may from time to time designate the relative positions of
the Vice Presidents of the Corporation and assign to any one or more of them
such particular duties as the Board of Directors may think proper.
Section 8. Secretary. The Secretary shall attend to the giving of
notice of all meetings of stockholders and of the Board of Directors and shall
record all of the proceedings of such meetings in a book to be kept for that
purpose. He shall have charge of the corporate seal and have authority to
attest any and all instruments or writings to which the same may be affixed.
He shall keep and account for all books, documents, papers and records of the
Corporation, except those which are hereinafter directed to be in charge of
the Treasurer. He shall have authority to sign stock certificates and shall
generally perform all the duties usually appertaining to the office of
secretary of a corporation. In the absence of the Secretary, an Assistant
Secretary or Secretary pro tempore shall perform his duties.
Section 9. Treasurer. The Treasurer shall have the care and custody of
all moneys, funds and securities of the Corporation, and shall deposit or
cause to be deposited all funds of the Corporation in and with such
depositaries as shall, from time to time, be designated by the Board of
Directors or by such officers of the Corporation as may be authorized by the
Board of Directors to make such designation. He shall have power to sign
stock certificates; to indorse for deposit or collection, or otherwise, all
checks, drafts, notes, bills of exchange or other commercial paper payable to
the Corporation, and to give proper receipts or discharges therefor. He shall
keep all books of account relating to the business of the Corporation, and
shall render a statement of the Corporation's financial condition whenever
required so to do by the Board of Directors, the Chairman or the President.
In the absence of the Treasurer, the Board of Directors shall appoint an
Assistant Treasurer to perform his duties.
Section 10. Additional Powers and Duties. In addition to the foregoing
enumerated duties and powers, the several officers of the Corporation shall
perform such other duties and exercise such further powers as may be provided
by these Bylaws or as the Board of Directors may from time to time determine
or as may be assigned to them by any competent superior officer.
Section 11. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to
time by the Board of Directors. An officer of the Corporation shall not be
prevented from receiving compensation by reason of the fact that he is also a
director of the Corporation, but any such officer who shall also be a director
shall not have any vote in the determination of the amount of compensation
paid to him.
ARTICLE VI. INDEMNIFICATION
Section 1. General. The Corporation shall, to the full extent
permitted by Section 145 of the Delaware General Corporation Law, as amended
from time to time, indemnify all persons whom it may indemnify pursuant
thereto against all expenses (including, without limitation, attorney's fees),
judgments, fines (including excise taxes) and amounts paid in settlement
(collectively, "Losses") incurred in connection with any action, suit, or
proceeding, whether threatened, pending, or completed (collectively,
"Proceedings") to which such person was or is a party or is threatened to be
made a party by reason of the fact that such person is or was a director,
officer, employee, or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise;
provided, however, that the Corporation shall indemnify any such person
seeking indemnification in connection with a Proceeding initiated by such
person only if such Proceeding was authorized by the Board of Directors of the
Corporation.
Section 2. Employee Benefit or Welfare Plan Fiduciary Liability. In
addition to any indemnification pursuant to Section 1 of this Article, but
subject to the express exclusions set forth in Section 3 of this Article, the
Corporation shall indemnify any natural person who is or was serving at the
direction or request of the Corporation in a fiduciary capacity with respect
to an employee benefit or welfare plan covering one or more employees of the
Corporation or of an affiliate of the Corporation, or who is or was performing
any service or duty on behalf of the Corporation with respect to such a plan,
its participants or beneficiaries, against all Losses incurred by such person
in connection with any Proceeding arising out of or in any way connected with
such service or performance, to the extent such Losses are insurable under
applicable law but are not covered by collectible insurance or indemnified
pursuant to Section 1 of this Article. This Section is intended to provide a
right to indemnification as permitted by Section 145(f) of the Delaware
General Corporation Law.
Section 3. Persons Not to be Indemnified Under Section 2. No
indemnification shall be made under Section 2 of this Article to any person
(other than an employee of the Corporation or of an affiliate of the
Corporation) who was or is acting as a lawyer, accountant, actuary, investment
adviser or arbitrator with respect to an employee benefit or welfare plan
against any expense, judgment, fine or amount paid in settlement incurred by
such person in connection with any action, suit or proceeding arising out of
or in any way connected with his actions in such capacity. No indemnification
shall be made under Section 2 of this Article to any person determined (in the
manner prescribed by Section 145(d) of the Delaware General Corporation Law)
to have participated in, or to have had actual knowledge of and have failed to
take appropriate action with respect to, any violation of any of the
responsibilities, obligations or duties imposed upon fiduciaries by the
Employee Retirement Income Security Act of 1974 or amendments thereto or by
the common or statutory law of the United States of America or any state or
jurisdiction therein, knowing such in either case to have been a violation of
such responsibilities, obligations or duties.
Section 4. Advances of Expenses. Except as limited by the other
provisions of this Section, the Corporation shall pay promptly (and in any
event within 60 days of receipt of the written request of the person who may
be entitled to such payment) all expenses (including but not limited to
attorneys' fees) incurred in connection with any Proceeding by any person who
may be entitled to indemnification under Sections 1 or 2 of this Article in
advance of the final disposition of such Proceeding. Notwithstanding the
foregoing, any advance payment of expenses on behalf of a director or officer
of the Corporation shall be, and if the Board of Directors so elects, any
advance payment of expenses on behalf of any other person who may be entitled
to indemnification under Sections 1 or 2 of this Article may be, conditioned
upon the receipt by the Corporation of an undertaking by or on behalf of such
director, officer, or other person to repay the amount advanced in the event
that it is ultimately determined that such director, officer, or person is not
entitled to indemnification; provided that such advance payment of expenses
shall be made without regard to the ability to repay the amounts advanced.
Notwithstanding the foregoing, no advance payment of expenses shall be made by
the Corporation if a determination is reasonably and promptly made by a
majority vote of directors who are not parties to such Proceeding, even though
less than a quorum, or if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, that, based upon
the facts known to such directors or counsel at the time such determination is
made following due inquiry, (a) in the case of a person who may be entitled to
indemnification under Section 1, such person did not act in good faith and in
a manner that such person reasonably believed to be in or not opposed to the
best interests of the Corporation or, with respect to any criminal proceeding,
such person had reasonable cause to believe his conduct was unlawful, or
(b) in the case of a person who may be entitled to indemnification under
Section 2, such person is not entitled to indemnification under the standard
set forth in the second sentence of Section 3. Nothing in this Article VI
shall require any such determination to be made as a condition to making any
advance payment of expenses, unless the Board of Directors so elects.
Section 5. Mandatory Indemnification in Certain Circumstances. To the
extent that a director, officer, employee, or agent has been successful on the
merits or otherwise in the defense of any Proceeding referred to Section 1 or
Section 2 of this Article, or in the defense of any claim, issue, or matter
therein, he shall be indemnified against expenses (including attorneys fees)
actually and reasonably incurred by him in connection therewith.
Section 6. Right to Indemnification upon Application; Procedure upon
Application. Any indemnification under Sections 1 or 2 shall be made
promptly, and in any event within 60 days of receipt of the written request of
the person who may be entitled thereto following the conclusion of such
person's participation in any Proceeding for which indemnity is sought, unless
with respect to such written request, a determination is reasonably and
promptly made by a majority vote of directors who are not parties to the
Proceeding, even though less than a quorum, or if there are no such directors,
or if such directors so direct, by independent legal counsel that, based upon
the facts known to such directors or counsel at the time such determination is
made following due inquiry, (a) in the case of a person who may be entitled to
indemnification under Section 1, such person did not act in good faith and in
a manner that such person reasonably believed to be in or not opposed to the
best interests of the Corporation or, with respect to any criminal proceeding,
such person had reasonable cause to believe his conduct was unlawful, or
(b) in the case of a person who may be entitled to indemnification under
Section 2, such person is not entitled to indemnification under the standard
set forth in the second sentence of Section 3.
Section 7. Enforcement of Rights. The right to indemnification or to
an advance of expenses as granted by this Article shall be enforceable by any
person entitled thereto in any court of competent jurisdiction, if the Board
of Directors or independent legal counsel denies the claim, in whole or in
part, or if no disposition of such claim is made within 100 days of receipt by
the Board of Directors of such person's written request for indemnification or
an advance of expenses. Such person's expenses (including but not limited to
attorneys' fees) incurred in connection with successfully establishing his
right to indemnification or an advance of expenses, in whole or in part, in
any such proceedings shall also be indemnified by the Corporation.
Section 8. Bylaws as Contract; Non-Exclusivity. All rights to
indemnification and advances of expenses under this Article shall be deemed to
be provided by a contract between the Corporation and each person entitled
thereto. Any repeal or modification of these bylaws shall not impair or
diminish any rights or obligations existing at the time of such repeal or
modification. The rights granted by this Article shall not be deemed
exclusive of any other rights to which any person seeking indemnification or
an advance of expenses may be entitled under any bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. The rights granted by this Article VI shall extend to the estate,
heirs or legal representatives of any person entitled to indemnification or an
advance of expenses hereunder who is deceased or incompetent.
ARTICLE VII. STOCK AND TRANSFER OF STOCK
Section 1. Stock Certificates. Every holder of stock in this
corporation shall be entitled to have a certificate, in such form as shall be
approved by the Board of Directors, certifying the number of shares of stock
of this corporation owned by him signed by or in the name of this corporation
by the Chairman, or the President or a Vice President, and by the Secretary or
an Assistant Secretary, or the Treasurer or an Assistant Treasurer. Any of or
all the signatures on the certificate may be facsimiles. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may nevertheless be
issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 2. Transfers of Shares. Transfers of Shares of stock of the
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary or
with a transfer agent, and on surrender of the certificate or certificates for
such shares properly indorsed or accompanied by a duly executed stock transfer
power and the payment of all taxes thereon. Except as otherwise provided by
law, the Corporation shall be entitled to recognize the exclusive right of a
person in whose name any share or shares stand on the record of stockholders
as the owner of such share or shares for all purposes, including, without
limitation, the rights to receive dividends or other distributions, and to
vote as such owner, and the Corporation may hold any such stockholder of
record liable for calls and assessments and the Corporation shall not be bound
to recognize any equitable or legal claim to or interest in any such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof. Whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact shall be stated in the
entry of the transfer if, when the certificates are presented for transfer,
both the transferor and transferee request the Corporation to do so.
Section 3. Regulations, Transfer Agents and Registrars. The Board of
Directors may make such additional rules and regulations, not inconsistent
with these Bylaws, as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the Corporation. It may
appoint and change from time to time one or more transfer agents and one or
more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 4. Replacement of Certificates. In the event of the loss,
theft, mutilation or destruction of any certificate for shares of stock of the
Corporation, a duplicate thereof may be issued and delivered to the owner
thereof, provided he makes a sufficient affidavit setting forth the material
facts surrounding the loss, theft, mutilation or destruction of the original
certificates and gives a bond to the Corporation, in such sum limited or
unlimited, and in such form and with such surety as the Board of Directors may
authorize indemnifying the Corporation, its officers and, if applicable, its
transfer agents and registrars, against any losses, costs and damages suffered
or incurred by reason of such loss, theft, mutilation or destruction of the
original certificate and replacement thereof.
Section 5. Fixing of Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than
ten days before the date of such meeting, nor more than sixty days prior to
any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
ARTICLE VIII. FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year.
ARTICLE IX. SEAL
The Board of Directors shall provide a corporate seal, which shall be in
such form as the Board of Directors shall determine.
ARTICLE X. AMENDMENTS
These Bylaws may be amended or repealed, or new Bylaws may be adopted,
at any annual or special meeting of the stockholders, by the affirmative vote
of the holders of at least 75 percent of the outstanding Common Stock of the
Corporation; provided, however, that the notice of such meeting shall have
been given as provided in these Bylaws, which notice shall mention that
amendment or repeal of these Bylaws, or the adoption of new Bylaws, is one of
the purposes of such meeting. These Bylaws may also be amended or repealed or
new Bylaws may be adopted, by the Board of Directors by the vote of two-thirds
of the entire Board of Directors
<PAGE>
EXHIBIT 10.A
PERFORMANCE-BASED INCENTIVE BONUS PLAN
MARK A. SUWYN
Subject to approval by the stockholders of Louisiana-Pacific Corporation
("L-P"), the following business criteria will serve as a basis for performance
bonus payments to Mark A. Suwyn, Chairman and Chief Executive Officer of L-P:
Strategic Performance Criteria
1. Success in developing and implementing strategic plans, management
plans, or systems (such as quality management plans, budgeting systems, or
other internal controls).
2. Success in filling board or executive positions or reorganizing
reporting relationships.
3. Success in resolving legal proceedings.
Financial Performance Criteria
Goals may be based upon earnings, earnings per share, operating profit,
stock price, costs of production or overhead, or other measures of earnings,
profitability, efficiency, or return to stockholders (for L-P as a whole, or
for particular divisions or business units), expressed as absolute amounts or
as ratios or percentages of other amounts and may be measured against various
standards including arbitrary targets, budget targets, prior years'
performance, or performance of other companies.
Within the time periods specified under Section 162(m) of the Internal
Revenue Code, the compensation committee will determine specific objective
performance goals based on one or more of the above business criteria and will
specify the amount of bonus or the method of calculating the bonus payable if
some or all of the performance goals are met to specified degrees. The bonus
payable for any year pursuant to this plan will not exceed $1 million.
Adopted by the Compensation Committee
March 20, 1996
<PAGE>
EXHIBIT 10.B
PERFORMANCE-BASED INCENTIVE BONUS AWARD
MARK A. SUWYN
1996
The Compensation Committee of the board of directors of
Louisiana-Pacific Corporation ("L-P") has adopted this performance-based
incentive bonus award for Mark A. Suwyn, Chairman and Chief Executive Officer
of L-P ("Suwyn"), pursuant to the performance-based incentive bonus plan.
Subject to approval by stockholders of the terms of the performance goals
under the plan, L-P will pay to Suwyn as additional cash compensation the
amounts set forth below if the corresponding performance goals are attained by
the dates indicated.
Primary Performance Goals
1. New Directors. A non-employee director identified by Suwyn after
March 20, 1995, shall have been added to the board of directors of L-P by
December 31, 1996. A person is "identified" by Suwyn if Suwyn makes the
initial recommendation that such individual be considered as a candidate for a
position.
2. New Executive Officers. Two new executive officers of L-P
identified by Suwyn shall have been elected to office by December 31, 1996.
"Executive officer" shall have the same meaning as in Rule 3b-7 of the
Securities and Exchange Commission and shall include, without limitation, a
director of human resources, a director of quality control, a division general
manager, or any vice president having policy-making responsibility for a
principal business division, function, or unit.
3. Strategic Plan. A multi-year, strategic plan for L-P shall have
been prepared under the direction of Suwyn and presented to and approved by
the board of directors of L-P on or before the regular quarterly meeting of
the board of directors in July 1996. A "strategic plan" is a document
analyzing broad areas of L-P's business (including product lines, facilities,
production and marketing methods, personnel, and financial results), and
identifying strategic objectives for management to enhance L-P's performance
and value.
If all three of the above primary performance goals are satisfied by the
dates indicated, then L-P will pay Suwyn a bonus of $400,000. If any one or
more of such goals is not fully satisfied by the dates indicated, Suwyn will
not receive any portion of the $400,000 bonus.
Additional Performance Goals
1. Siding Settlement. If the proposed settlement of the nationwide
siding class action litigation presently pending in the United States District
Court for the District of Oregon receives final approval by the court by
December 31, 1996 (substantially as proposed), then L-P will pay Suwyn a bonus
of $20,000.
2. EPA Suspension and Debarment. If the Environmental Protection
Agency suspension and debarment proceeding (case number 95-0156-00) is finally
settled by December 31, 1996, with the result that there is no continuing
suspension or debarment with respect to any facilities of L-P, then L-P will
pay Suwyn a bonus of $20,000.
3. TQM Program. If a total quality management ("TQM") program is
implemented as described below by December 31, 1996, then L-P will pay Suwyn a
bonus of $20,000. A TQM program includes preparation, under Suwyn's
direction, of a written plan for quality management and control within L-P
based upon TQM principles of continuous improvement of processes, employee
involvement, identification of customer needs, and measurement. A TQM program
is "implemented" if a written plan is approved by the board of directors of
L-P, the plan is communicated to managers of all United States facilities of
L-P, together with appropriate direction to begin taking actions contemplated
by the plan, and managers at such facilities have commenced taking such
actions either through preparation of action plans specific for their
respective facilities or communication of the objectives of the TQM plan to
appropriate personnel at their respective facilities.
4. Operating Profit. L-P will pay Suwyn a bonus as described below
if L-P is among the highest four members of its peer group ranked by
percentage increase in total operating profit for 1996 as compared to 1995.
The peer group consists of L-P, Georgia-Pacific, Weyerhaeuser, Boise Cascade,
Potlatch, Champion International, and Willamette Industries. Total operating
profit is the total of the operating profits of all business segments as
publicly reported by each member of the peer group. L-P will pay Suwyn a
bonus of $40,000 if L-P ranks first in percentage increase, $30,000 if L-P
ranks second, $20,000 if L-P ranks third, and $10,000 if L-P ranks fourth.
Certification of Performance
No part of the above bonuses will be paid until the Compensation
Committee has certified in writing that the relevant performance goals have
been attained.
Adopted by the Compensation Committee
March 20, 1996
<PAGE>
EXHIBIT 11
Louisiana-Pacific Corporation and Subsidiaries
Calculation of Net Income Per Share
For the Six Months Ended June 30, 1996
Number of shares
-----------------------------------
Including Excluding
Common Stock Common Stock
Equivalents Equivalents (1)
------------ ---------------
Weighted average number of shares
of common stock outstanding 116,937,022 116,937,022
Weighted average number
of shares sold to ESOTs subsequent
to January 1, 1994, not allocated
to participants' accounts(2) (1,305,349) (1,305,349)
Weighted average number of
shares of treasury stock held
during the period (8,374,375) (8,374,375)
Common stock equivalents:
Application of the "treasury
stock" method to stock option
and purchase plans 150,231 ---
------------ ------------
Weighted average number of shares
of common stock and common stock
equivalents 107,407,529 107,257,298
============ ============
Rounded to 107,410,000 107,260,000
============ ============
Net income $ 17,400,000 $ 17,400,000
============ ============
Net income per share $ .16 $ .16
============ ============
(1) Accounting Principles Board Opinion No. 15, "Earnings Per Share," allows
companies to disregard dilution of less than three percent in the
computation of earnings per share. Therefore, shares used in computing
earnings per share for financial reporting purposes is 107,260,000
shares.
(2) American Institute of Certified Public Accountants Statement of Position
No. 93-6, "Employers' Accounting for Employee Stock Ownership Plans"
requires that shares held by the registrant's ESOTs which were acquired
by the ESOTs on or after January 1, 1994, which are not allocated to
participants' accounts, are not considered outstanding for purposes of
computing earnings per share. Shares held by the ESOTs which were
acquired by the ESOTs prior to January 1, 1994, continue to be considered
outstanding (whether or not allocated to participants' accounts) for
purposes of computing earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from Consolidated Summary Financial Statements and
Notes included in this Form 10-Q and is qualified in its
entirety by reference to such financial statements.
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<S> <C>
<CASH> 54,200
<SECURITIES> 0
<RECEIVABLES> 190,900
<ALLOWANCES> 0
<INVENTORY> 252,500
<CURRENT-ASSETS> 588,500
<PP&E> 2,672,200
<DEPRECIATION> (1,178,600)
<TOTAL-ASSETS> 2,821,500
<CURRENT-LIABILITIES> 385,200
<BONDS> 347,500
0
0
<COMMON> 117,000
<OTHER-SE> 1,541,300
<TOTAL-LIABILITY-AND-EQUITY> 2,821,500
<SALES> 1,242,400
<TOTAL-REVENUES> 1,242,400
<CGS> 1,051,700
<TOTAL-COSTS> 1,212,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,300
<INCOME-PRETAX> 29,500
<INCOME-TAX> 11,100
<INCOME-CONTINUING> 17,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,400
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
