Washington, D.C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission File Number
December 31, 1997 1-7107
LOUISIANA-PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 93-0609074
(State of Incorporation) (I.R.S. Employer
Identification No.)
111 S.W. Fifth Avenue Registrant's telephone number
Portland, Oregon 97204 (including area code)
(Address of principal 503-221-0800
executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock, $1 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant: $2,513,964,661 as of March 12, 1998.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock: 109,780,858 shares of Common Stock, $1 par value, outstanding as
of March 12, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement for 1998 Annual Meeting: Part III
<PAGE>
PART I
ITEM 1. Business
General
- -------
Louisiana-Pacific Corporation, a Delaware corporation since 1973, is a
major forest products firm headquartered in Portland, Oregon. It manufactures
lumber, pulp, structural and other panel products, hardwood veneers, and
cellulose insulation. It operates approximately 100 facilities throughout the
United States, Canada, and Ireland. It has approximately 12,000 employees. It
distributes its products primarily through distributors and home centers, and to
a minor extent through its own distribution centers.
The business of Louisiana-Pacific Corporation and its wholly owned
subsidiaries (except when the context otherwise requires, hereinafter referred
to collectively as "the registrant" or "L-P") is generally divided into two
industry segments: building products and pulp. For 1997, building products
accounted for approximately 95 percent of the registrant's sales revenues,
compared to approximately 5 percent for pulp.
Building Products
- -----------------
Panel Products. The registrant manufactures plywood and a variety of
reconstituted panel products, including oriented strand board ("OSB") and other
panel products such as industrial particleboard, medium density fiberboard
("MDF"), and hardboard. Panel products accounted for 44 percent of L-P's sales
in 1997.
The largest consumption of panel products is for structural uses in
building and remodeling such as subfloors, walls, and roofs. The total
structural panel market in North America (plywood, OSB and other waferboards) is
approximately 37 billion square feet annually, of which plywood currently
constitutes about 20 billion square feet. In recent years, environmental
pressure on timber harvesting, especially in the West, has resulted in reduced
supplies and higher costs, causing many plywood mills to close permanently. The
lost volume from those closed mills has been replaced by reconstituted
structural panel products.
The registrant is the largest North American producer of OSB through 16
OSB plants with an aggregate annual capacity of approximately 4.5 billion square
feet, including its three plants which manufacture OSB exterior siding. The
registrant also has an OSB plant in Ireland. The registrant operates five
plywood plants in the South with a combined annual capacity of 1.3 billion
square feet.
The registrant's other reconstituted panel products--industrial
particleboard, MDF, and hardboard--produced at a total of seven plants, are used
primarily in the manufacture of furniture and cabinets.
Lumber. The registrant is a large producer of lumber. The registrant
has 14 Western (whitewood and redwood) sawmills with an annual production
capacity of 1.1 billion board feet ("BBF"), while its 15 Southern sawmills have
an annual production capacity of .5 BBF. Lumber represented 28 percent of the
registrant's sales revenue in 1997. The registrant's sawmills produce a variety
of standard U.S. dimension lumber as well as specialty grades and sizes,
primarily for the North American home building market. A sawmill in Ketchikan,
Alaska, produces lumber for export in the traditional sizes used in the Japanese
building industry, but has the capability of switching to standard U.S.
dimensions. The registrant also operates a fingerjoint plant which produces
dimension lumber from low grade and short pieces of lumber. In
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<PAGE>
October 1997, the registrant announced its intention to sell its remaining
California redwood timberlands and related lumber and certain distribution
businesses.
Other Building Products. The registrant produces various hardwood
veneers at a plant in Wisconsin with both rotary and sliced manufacturing
processes. These veneers are sold to customers who overlay the veneers on other
materials for use in paneling, furniture and cabinets.
The registrant has four engineered I-joist plants located in
California, Nevada, North Carolina, and Oregon. OSB is cut into sections and
used as the web for the I-joists. The registrant also produces laminated veneer
lumber ("LVL") in Nevada, North Carolina and Oregon. LVL is a high-grade
structural product used where extra strength is required. It is also used as the
flange material in I-joists. In March 1997, the registrant acquired the assets
of Tecton Laminates Corp. ("Tecton"), which significantly increased the
registrant's LVL and I-joist capacity.
Nine plants produce cellulose residential insulation from recycled
newspaper. This insulation has a higher R-value than comparable thicknesses of
conventional fiberglass insulation. Other facilities operated by the registrant
include two wood chip mills, two coatings and chemical plants, seven
wood-treating plants, and six building materials distribution centers.
The registrant currently owns seven plants in Ohio which manufacture
windows and doors and their component parts. In February 1998, L-P announced it
had reached an agreement in principle to sell these facilities. L-P expects the
transaction to close during the second quarter of 1998.
In October 1997, the registrant also announced plans to sell certain
other facilities that it considers non-strategic to its core businesses,
including its Creative Point, Inc., subsidiary, its cement fiber roof shake
plant and the fiber gypsum plant in Nova Scotia. The Nova Scotia plant was sold
prior to year end.
Pulp
- ----
The registrant has two pulp mills located in Samoa, California, and
Chetwynd, British Columbia, Canada. The Chetwynd mill utilizes a
state-of-the-art mechanical pulping process and a zero effluent discharge system
to produce 100 percent aspen pulp and has an annual capacity of approximately
185 thousand short tons. The Samoa mill produces bleached and unbleached kraft
pulp by a chlorine-free process, thereby eliminating dioxins. In October 1997,
the registrant announced its intention to sell the Samoa pulp mill. A third mill
in Ketchikan, Alaska, which produced a high-grade dissolving pulp, was
permanently closed in March 1997. (See Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations.)
Competition
- -----------
The registrant competes internationally with several thousand forest
products firms, ranging from very large, fully integrated firms to smaller firms
that may manufacture only one or a few items. The registrant estimates that
approximately 25 forest products firms comprise its major competition. The
registrant also competes less directly with firms that manufacture substitutes
for wood building products. A majority of the products manufactured by the
registrant, including lumber, structural panels, and pulp, are commodity
products sold primarily on the basis of price in competition with numerous other
forest products companies.
The registrant has introduced a number of value-enhanced products to
complement its traditional lumber and panel products, such as the OSB
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<PAGE>
SmartStart(TM) system of siding and exterior products and flooring, and a
radiant barrier product known as TechShield(TM). The registrant's Cocoon(TM)
cellulosic insulation products utilize wood fiber from waste paper and are
believed to have better insulating and sound-deadening properties than
fiberglass insulation.
Environmental Compliance
- ------------------------
The registrant is subject to federal, state and local pollution control
laws and regulations in all areas in which it has operating facilities. The
registrant maintains an accounting reserve for environmental loss contingencies.
From time to time, the registrant undertakes construction projects for
environmental control facilities or incurs other environmental costs that extend
an asset's useful life, improve efficiency, or improve the marketability of
certain properties.
The registrant's policy is to comply fully with all applicable
environmental laws and regulations. In recent years, the registrant has devoted
increasing financial and management resources to achieving this goal. As part of
its efforts to ensure environmental compliance, the registrant conducts regular
internal environmental assessments. From time to time, the registrant becomes
aware of violations of applicable laws or regulations. In those instances, the
registrant's policy is to bring its operations promptly into full compliance
with applicable environmental laws and regulations. The registrant is not aware
of any instances in which its current operations are not in compliance with
applicable environmental laws and regulations that would be expected to have a
material adverse effect on the registrant.
Additional information concerning environmental compliance is set forth
under Item 3, Legal Proceedings and the Notes to Financial Statements in Item 8.
Additional Statistical Information
- ----------------------------------
Additional information regarding the business of the registrant,
including segment information, production volumes, and industry product price
trends, is presented in the following tables labeled "Sales and Operating Profit
by Major Product Group," "Summary of Production Volumes," "Industry Product
Price Trends," and "Logs by Source." Additional financial information about
industry segments is presented in Note 10 of the Notes to Financial Statements
in Item 8.
Reference is made to Item 2 for additional information as to sources
and availability of raw materials and the locations of the registrant's
manufacturing facilities.
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<PAGE>
Louisiana-Pacific Corporation and Subsidiaries
PRODUCT INFORMATION SUMMARY
SEE ADDITIONAL INFORMATION REGARDING INDUSTRY SEGMENTS IN NOTES TO FINANCIAL
STATEMENTS.
YEAR ENDED DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS)
<TABLE>
1997 1996 1995 1994 1993
------------ ------------ ------------- ------------ ------------
SALES AND PROFIT BY MAJOR PRODUCT GROUP
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES: Structural panel products $ 864 36% $ 1,006 40% $ 1,127 39% $ 1,208 40% $ 1,005 40%
===== Lumber 665 28 614 25 644 23 867 28 816 33
Industrial panel products 181 8 195 8 215 8 240 8 194 8
Other building products 563 23 494 20 523 18 505 17 411 16
-------- --- ------- --- -------- --- --------- --- --------- ---
Building products 2,273 95 2,309 93 2,509 88 2,820 93 2,426 97
Pulp 130 5 177 7 334 12 220 7 85 3
-------- --- -------- --- -------- --- --------- --- --------- ---
Total sales $ 2,403 100% $ 2,486 100% $ 2,843 100% $ 3,040 100% $ 2,511 100%
======== === ======== === ======== === ========= === ========= ===
Export sales (included
above) $ 240 10% $ 268 11% $ 457 16% $ 371 12% $ 252 10%
======== === ======== === ======== === ======== === ========= ==
PROFIT: Building products $ 20 $ 174 $ 346 $ 636 $ 562
Pulp (29) (91) 44 (5) (59)
Settlements, charges and other
unusual items, net (32) (350) (367) --- ---
General corporate and other
expense, net (80) (52) (121) (72) (70)
Interest, net (29) (8) 3 1 (5)
-------- -------- -------- -------- --------
Income (loss) before taxes,
minority interest and
accounting changes (1) $ (150) $ (327) $ (95) $ 560 $ 428
========= ========= ======== ========= ==========
SUMMARY OF PRODUCTION VOLUMES
- -----------------------------
OSB, million square feet 3/8" basis 4,000 4,008 3,445 3,404 3,100
Softwood plywood, million
square feet 3/8" basis 1,221 1,613 1,466 1,604 1,507
Lumber, million board feet 1,240 1,201 1,359 1,986 1,796
Industrial panel products
(particleboard, medium density
fiberboard and hardboard),
million square feet 3/4" basis 589 580 582 641 597
Engineered I-Joists,
million lineal feet 73 55
Laminated veneer lumber,
thousand cubic feet 5,800 3,900
Pulp, thousand short tons 377 439 486 441 224
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<PAGE>
1997 1996 1995 1994 1993
------------ ------------ ------------- ------------ ------------
INDUSTRY PRODUCT PRICE TRENDS (2)
- ---------------------------------
OSB, MSF, 7/16" -- 24/16 span
rating (North Central price) $ 143 $ 184 $ 245 $ 265 $ 236
Southern pine plywood,
MSF, 1/2" CDX (3 ply) 26 258 303 302 282
Framing lumber, composite
prices, MBF 417 398 337 405 394
Industrial particleboard,
3/4" basis, MSF 262 276 290 295 258
LOGS BY SOURCE (3)
- ------------------
Fee owned lands 19% 16% 13% 11% 12%
Private cutting contracts 14 14 12 14 15
Government contracts 7 6 9 8 10
Purchased logs 60 64 66 67 63
Total log volume -
million board feet 2,398 2,432 2,818 3,138 2,940
</TABLE>
- --------------------------
(1) Does not include cumulative effects of accounting changes in 1993.
(2) Prices represent yearly averages stated in dollars per thousand board feet
(MBF), thousand square feet (MSF) or short ton. Source: Random Lengths.
(3) Stated as a percent of total log volume.
SEE ADDITIONAL INFORMATION REGARDING INDUSTRY SEGMENTS IN THE NOTES TO FINANCIAL
STATEMENTS IN ITEM 8.
- 6 -
<PAGE>
ITEM 2. Properties
The following tables list the principal facilities of the registrant
and its subsidiaries. Information on production capacities reflects normal
operating rates and normal production mixes under current market conditions,
taking into account known constraints such as log supply. Unless otherwise
noted, capacities are in millions of units.
MANUFACTURING FACILITIES
------------------------
SAWMILLS METRIC 1) NORMAL 2)
(BOARD FEET, 2 SHIFTS, 5 DAYS; *1 SHIFT, 5 DAYS) CAPACITIES CAPACITIES
WESTERN LUMBER (14 plants)
Annette, AK 110 70
Belgrade, MT 150 90
Big Lagoon, CA 35 20*
Chilco, ID 205 125
Deer Lodge, MT (3 shifts) 155 95
Deer Lodge, MT (fingerjoint) 130 80
Fort Bragg, CA 115 70
Ketchikan, AK 100 60
Moyie Springs, ID (3 shifts) 220 135
Samoa, CA 165 100
Sandpoint, ID (remanufacturing) --- ---
Saratoga, WY 80 50
Tacoma, WA 100 60
Ukiah, CA 165 100
SOUTHERN LUMBER (15 plants)
Bernice, LA 65 40*
Bon Wier, TX 40 25*
Cleveland, TX 65 40*
Eatonton, GA 60 35*
Evergreen, AL 70 45*
Hattiesburg, MS 65 40*
Henderson, NC 65 40*
Jasper, TX 90 55*
Kountze, TX 25 15*
Lockhart, AL 35 20*
Marianna, FL 50 30*
New Waverly, TX 25 15*
Philadelphia, MS 65 40*
Statesboro, GA 50 30*
West Bay, FL 60 35*
----- ----
Total Lumber Capacity (29 plants) 2,560 1,560
===== =====
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<PAGE>
MANUFACTURING FACILITIES
PANEL PRODUCTS PLANTS
SOFTWOOD PLYWOOD PLANTS METRIC 1) METRIC 2)
(3/8-INCH BASIS, SQUARE FEET, 2 SHIFTS, 5 DAYS) CAPACITIES CAPACITIES
Bon Wier, TX 230 260
Cleveland, TX 250 280
Logansport, LA 195 220
New Waverly, TX 230 260
Urania, LA 220 250
----- -----
Total Softwood Plywood Capacity (5 plants) 1,125 1,270
===== =====
ORIENTED STRAND BOARD PANEL PLANTS
(3/8-INCH BASIS, SQUARE FEET, 3 SHIFTS,7 DAYS)
Athens, GA 295 335
Carthage, TX (under construction) 355 400
Corrigan, TX 135 150
Dawson Creek, B.C. Canada 335 375
Hanceville, AL 310 350
Hayward, WI (2 plants) 445 500
Houlton, ME 230 260
Jasper, TX 355 400
Montrose, CO 130 145
Roxboro, NC 335 375
Sagola, MI 310 350
Silsbee, TX 310 350
Swan Valley, MB, Canada 400 450
Waterford, Ireland 355 400
----- -----
Total OSB Capacity (15 plants) 4,300 4,840
===== =====
ORIENTED STRAND BOARD SIDING PLANTS
(3/8-INCH BASIS, SQUARE FEET, 3 SHIFTS, 7 DAYS)
Newberry, MI 115 130
Tomahawk, WI 135 150
Two Harbors, MN 125 140
----- -----
Total OSB Siding Capacity (3 plants) 375 420
===== =====
MEDIUM DENSITY FIBERBOARD PLANTS
(3/4-INCH BASIS, SQUARE FEET, 3 SHIFTS, 7 DAYS)
Eufaula, AL 230 130
Oroville, CA 90 50
Urania, LA 90 50
----- -----
Total MDF Capacity (3 plants) 410 230
===== =====
PARTICLEBOARD PLANTS
(3/4-INCH BASIS, SQUARE FEET, 3 SHIFTS, 7 DAYS)
Arcata, CA 220 125
Missoula, MT 275 155
Silsbee, TX 140 80
----- -----
Total Particleboard Capacity (3 plants) 635 360
===== =====
HARDBOARD PLANT
(1/8-INCH BASIS, SQUARE FEET, 3 SHIFTS, 7 DAYS)
Oroville, CA 62 210
===== =====
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<PAGE>
MANUFACTURING FACILITIES
------------------------
OTHER BUILDING PRODUCTS
HARDWOOD VENEER PLANTS NORMAL 2)
(SURFACE MEASURE, SQUARE FEET, 2 SHIFTS, 5 DAYS) CAPACITIES
Mellen, WI (2 plants) 250
======
I-JOIST PLANTS
(LINEAL FEET; 1 SHIFT, 5 DAYS)
Fernley, NV 21
Hines, OR 21
Red Bluff, CA 25
Wilmington, NC 20
-----
Total I-Joist Capacity (4 plants) 87
=====
LAMINATED VENEER LUMBER PLANTS
(THOUSAND CUBIC FEET; 2 SHIFTS, 7 DAYS)
Fernley, NV 1,600
Hines, OR 2,700
Wilmington, NC 1,600
-----
Total LVL Capacity (3 plants) 5,900
=====
PULP MILLS METRIC 1) NORMAL 2)
(THOUSAND SHORT TONS, 3 SHIFTS, 7 DAYS) CAPACITIES CAPACITIES
Samoa, CA 195 220
Chetwynd, B.C. Canada 170 185
----- -----
Total Pulp Capacity (2 plants) 365 405
===== =====
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<PAGE>
MANUFACTURING FACILITIES
OTHER MANUFACTURING FACILITIES (23 PLANTS)
Cellulose insulation plants: Phoenix, AZ, Vancouver, B.C.;
Sacramento, CA; Atlanta, GA; Fort
Wayne, IN; Norfolk, NE; Bucyrus, OH;
Portland, OR; Elkwood, VA
Cement fiber shake: Red Bluff, CA
Chip mills: Cleveland and Moscow, TX
Coatings and chemicals: Portland, OR; Orangeburg, SC
Consumer electronics storage: Oswego, IL
Softwood veneer plant: Rogue River, OR
Wood treating plants: Evergreen and Lockhart, AL;
Marianna, FL; Statesboro, GA; New
Waverly and Silsbee, TX; Ukiah, CA
DISTRIBUTION CENTERS (6 LOCATIONS)
Calpella, CA Riverside, CA
Rocklin, CA Dodge City, KS
Salina, KS Conroe, TX
TOTAL FACILITIES: 99
Note: The capacities above are based on normal operating rates and
normal production mixes. Market conditions, the availability
of logs, and the nature of current orders can cause actual
production rates to vary considerably from normal rates.
TIMBERLAND HOLDINGS
HECTARES ACRES
California: Whitewoods, Fir, Pine, Redwood 158,900 392,500
Idaho: Fir, Pine 16,700 41,200
Louisiana: Pine, Hardwoods 78,700 194,500
Minnesota: Hardwoods 11,400 28,200
North Carolina: Pine, Hardwoods 900 2,100
Texas: Pine, Hardwoods 283,800 701,100
Virginia: Pine, Hardwoods 2,300 5,700
Wisconsin: Hardwoods 600 1,500
Wyoming: Whitewoods 600 1,600
------- ---------
Total Fee 553,900 1,368,400
======= =========
1) Metric capacities in thousand cubic meters.
2) Normal capacities in millions of units unless otherwise noted.
Note: See Note 7 of the Notes to Financial Statements in Item 8 for
a discussion of an asset sale program involving certain of
these timberland holdings and manufacturing facilities. The
list does not include window and door manufacturing facilities
subject to sale under a letter of intent.
In addition to its fee-owned timberlands, the registrant has timber
cutting rights in the United States, under long-term contracts (five years and
over) on approximately 5,600 acres and under contracts for shorter periods on
approximately 240,800 acres, on government and privately owned timberlands in
the vicinities of certain of its manufacturing facilities. L-P's Canadian
subsidiary is a party to long-term timber license arrangements in Canada.
Information regarding the sources of the registrant's log requirements is
located under the table labeled "Logs by Source" in Item 1.
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<PAGE>
ITEM 3. Legal Proceedings
For a discussion of legal and environmental matters involving L-P and
the potential effect on L-P, refer to Note 8 of the Notes to Financial
Statements under the heading "Contingencies" in Item 8, which is incorporated
herein by reference.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the registrant's security holders
during the fourth quarter of 1997.
Executive Officers of the Registrant
- ------------------------------------
The following sets forth the name of each executive officer of the
registrant (including certain executives whose duties may cause them to be
classified as executive officers under applicable SEC rules), the age of the
officer, and all positions and offices held with the registrant as of March 20,
1998:
Mark A. Suwyn, age 55, has served as Chairman and Chief Executive
Officer of L-P since January 1996. Before joining L-P, Mr. Suwyn was Executive
Vice President of International Paper Company from 1992 through 1995.
Previously, Mr. Suwyn was Senior Vice President of E.I. du Pont de Nemours & Co.
Mr. Suwyn is also a director of the registrant.
Michael D. Hanna, age 45, joined L-P in June 1996 as Executive
Vice President after serving as President of Associated Chemists, Inc., for more
than five years previous.
Warren C. Easley, age 56, joined L-P as Vice President, Technology
and Quality in May 1996 after serving as Technical Manager--Nylon Division,
North America for E.I. du Pont de Nemours & Co. for more than five years
previous.
Richard W. Frost, age 46, joined L-P in May 1996 as Vice
President, Timberlands and Fiber Procurement. Mr. Frost worked for S.D. Warren
Company as Director of Timberlands prior to April 1992, as Vice President and
Manager, Westbrook Mill, from April 1992 to September 1995, and as Vice
President and General Manager, Somerset Operations for S.D. Warren Company from
September 1995 to 1996.
H. Ward Hubbell, age 37, joined L-P as Director, Corporate Affairs
in September 1997. Previously, Mr. Hubbell was employed by International Paper
Company beginning in October 1992, first as Communications Director and then as
Federal Affairs Manager. Before that, he was vice president of a Washington,
D.C., public relations firm.
Karen D. Lundquist, age 42, was named Vice President,
Manufacturing in January 1997. Before joining L-P, Ms. Lundquist was an
executive officer and director of Rapid Change Technologies, Inc. (formerly
known as Creative Breakthroughs, Inc.), from the fall of 1993 to January 1997,
and served as its chief executive officer from mid-1995 to 1997. From September
1991 to October 1993, Ms. Lundquist was a plant manager with E.I. du Pont de
Nemours & Co.
J. Keith Matheney, age 49, joined the registrant in March 1970 and
has served as Vice President, Sales and Marketing since January 26, 1997. Mr.
Matheney was General Manager--Western Division from February 1996 to January
1997 after serving as General Manager--Weather-Seal Division of the registrant
from May 1994 to February 1996, and as Director of Sales and Marketing for more
than five years previous.
- 11 -
<PAGE>
Elizabeth T. Smith, age 53, became Director, Environmental Affairs of
the registrant in March 1993. Ms. Smith has been employed by L-P in various
positions relating to environmental management since 1987.
Curtis M. Stevens, age 45, was appointed as Vice President, Chief
Financial Officer and Treasurer of L-P in September 1997. He previously spent 13
years as the senior financial executive of Planar Systems, Inc., a leading
manufacturer and supplier of electroluminescent flat panel displays, where he
was named Executive Vice President and General Manager in 1996.
Michael J. Tull, age 52, became Vice President, Human Resources of the
registrant in May 1996. Mr. Tull was previously employed by Sharp HealthCare, a
regional system of hospitals and related facilities in San Diego, California,
for more than 10 years, most recently as Corporate Vice President of Employee
Quality and Development beginning in 1991.
Gary C. Wilkerson, age 51, joined L-P as Vice President and General
Counsel in September 1997. Beginning in early 1997, Mr. Wilkerson served as
(acting) Senior Vice President, General Counsel and Secretary for the consumer
products division of IVAX Pharmaceuticals. For the previous seven years, he was
Senior Vice President, General Counsel and Secretary of Maybelline Co., a
cosmetics manufacturer.
All executive officers serve at the pleasure of the board of directors
of L-P. Unless earlier removed by the board of directors, the officers' terms of
office run until the next annual meeting of the board of directors.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The common stock is listed on the New York Stock Exchange, the
Dow-Jones newspaper quotations symbol is "LaPac," and the ticker symbol is
"LPX." Information regarding market prices for the registrant's common stock is
included in the table in Item 6 headed "High and Low Stock Prices." Holders of
the registrant's common stock may automatically reinvest dividends toward
purchase of additional shares of the registrant's common stock. At March 12,
1998, L-P had approximately 21,000 stockholders of record. Information regarding
cash dividends paid during 1996 and 1997 is included in the table in Item 6 with
respect to quarterly data.
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<PAGE>
ITEM 6. Selected Financial Data
DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE 1996 1997
- ------------------------------------------- ---- ----
ANNUAL DATA
Net sales $ 2,486.0 $ 2,402.5
Net income (loss) (200.7) (101.8)
Net income (loss) per share-basic and diluted (1.87) (.94)
Net cash provided by operating activities 22.8 88.2
Capital expenditures -- plants, logging
roads and timber (includes cash portion
of acquisitions) 266.0 204.5
Working capital 234.5 277.5
Ratio of current assets to
current liabilities 1.68 to 1 1.87 to 1
Total assets 2,622.4 2,578.4
Long-term debt, excluding current portion 458.6 572.3
Long-term debt as a percent of
total capitalization 24.3% 30.8%
Stockholders' equity 1,427.6 1,286.2
Per ending share of common stock 13.13 11.73
Number of employees 12,500 12,000
Number of stockholders of record 23,900 22,000
1ST QTR 2ND QTR 3RD QTR 4TH QTR YEAR
1997 QUARTERLY DATA
Net sales $ 554.6 $ 633.3 $ 619.5 $ 595.1 $ 2,402.5
Gross profit (loss) (1) (35.1) (8.2) (13.8) (31.4) (88.5)
Income (loss) before taxes
and minority interest 78.3(2) (14.7) (176.3)(2) (37.3) (150.0)
Net income (loss) 42.0(2) (10.1) (112.4)(2) (21.3) (101.8)
Net income (loss) per share-
basic and diluted .39(2) (.10) (1.03)(2) (.20) (.94)
Cash dividends per share .14 .14 .14 .14 .56
1996 QUARTERLY DATA
Net sales $ 584.1 $ 658.3 $ 676.3 $ 567.3 $2,486.0
Gross profit (loss) (1) (5.0) 35.0 21.9 (20.9) 31.0
Income (loss) before taxes
and minority interest (5.0) 34.5 (332.0)(2) (24.3) (326.8)
Net income (loss) (3.6) 21.0 (203.4)(2) (14.7) (200.7)
Net income (loss) per share-
basic and diluted (.03) .19 (1.89)(2) (.14) (1.87)
Cash dividends per share .14 .14 .14 .14 .56
HIGH AND LOW STOCK PRICES
1997 High $ 22.00 $ 21.56 $ 25.56 $ 25.88 $ 25.88
Low 19.88 17.00 20.50 17.54 17.00
1996 High $ 26.25 $ 28.13 $ 23.75 $ 23.00 $ 28.13
Low 23.00 22.13 19.63 20.63 19.63
- --------------------------
(1) Gross profit is income before settlements, charges and other unusual
items, taxes, minority interest and interest.
(2) Includes settlements, charges and other unusual items. See the Notes to
Financial Statements in Item 8 for explanation of these amounts.
- 13 -
<PAGE>
FORWARD LOOKING STATEMENTS
- --------------------------
Statements herein 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 set forth under the above captions, 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.
- 14 -
<PAGE>
FIVE-YEAR SUMMARY
YEAR ENDED DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE)
<TABLE>
SUMMARY INCOME STATEMENT DATA (2) 1997(4) 1996(4) 1995(4) 1994 1993
- --------------------------------- ------------ ------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Net sales $ 2,402.5 $ 2,486.0 $ 2,843.2 $ 3,039.5 $ 2,511.3
Gross profit (loss) (1) (88.5) 31.0 268.9 558.6 423.6
Interest, net (29.0) (7.8) 2.9 1.0 5.0
Provision (benefit) for income taxes (43.6) (125.6) (45.8) 209.8 173.2
Income (loss) (3) (101.8) (200.7) (51.7) 346.9 254.4
Income (loss) per share (3) - basic (.94) (1.87) (.48) 3.15 2.32
Income (loss) per share (3) - diluted (.94) (1.87) (.48) 3.13 2.29
Cash dividends per share .56 .56 .545 .485 .43
Average shares of common stock
outstanding (thousands)-
Basic 108,450 107,410 107,040 110,140 109,670
Diluted 108,450 107,410 107,040 110,800 110,880
SUMMARY BALANCE SHEETS
Current assets $ 596.8 $ 612.9 $ 618.5 $ 721.9 $ 614.1
Timber and timberlands, at cost
less cost of timber harvested 634.2 648.6 689.6 693.5 673.5
Property, plant and equipment, net 1,191.8 1,278.5 1,452.3 1,273.2 1,145.9
Goodwill and other assets 155.6 82.4 45.0 55.1 32.8
------------ ----------- ------------- ------------ -------------
Total assets $ 2,578.4 $ 2,622.4 $ 2,805.4 $ 2,743.7 $ 2,466.3
============ =========== ============= ============= =============
Current liabilities 319.3 $ 378.4 $ 448.5 $ 344.8 $ 317.2
Long-term debt, excluding
current portion 572.3 458.6 201.3 209.8 288.6
Deferred income taxes and other 400.6 357.8 499.6 339.7 289.1
Stockholders' equity 1,286.2 1,427.6 1,656.0 1,849.4 1,571.4
------------ ----------- ------------- ------------- -----------
Total liabilities and
stockholders' equity $ 2,578.4 $ 2,622.4 $ 2,805.4 $ 2,743.7 $ 2,466.3
============ =========== ============= ============= =============
- 15 -
<PAGE>
KEY FINANCIAL TRENDS 1997(4) 1996(4) 1995 1994 1993
- -------------------- -------------- ----------- -------------- ------------- -------------
Working capital $ 277.5 $ 234.5 $ 170.0 $ 377.1 $ 296.9
============== =========== ============== ============= =============
Plant and logging road additions (5) $ 154.8 $ 244.0 $ 362.9 $ 286.0 $ 208.4
Timber additions, net 49.7 22.0 49.7 66.0 81.5
-------------- ----------- -------------- ------------- -------------
Total capital additions $ 204.5 $ 266.0 $ 412.6 $ 352.0 $ 289.9
============== =========== ============== ============= =============
Long-term debt as a percent
of total capitalization 31% 24% 11% 10% 16%
Income as a percent of average
equity (3) -8% -13% -3% 20% 17%
</TABLE>
- --------------------------
(1) Gross profit is income before settlements, charges and unusual items,
income taxes, minority interest, and interest.
(2) All per share amounts and number of shares have been retroactively
adjusted for a two-for-one stock split in 1993 and a three-for-two
stock split in 1992.
(3) Does not include cumulative effects of accounting changes in 1993.
(4) Includes settlements, charges and other unusual items, net. See the
Notes to Financial Statements in Item 8 for explanation of these
amounts.
(5) Includes cash paid in acquisitions.
- 16 -
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
GENERAL
L-P incurred a net loss in 1997 of $101.8 million ($.94 per share), which
included a pre-tax net charge of $32.5 million ($20.6 million after taxes, or
$.19 per share). L-P's net losses in 1996 and 1995 primarily resulted from
charges taken in the third quarter of each year. The charge in 1996 was $350.0
million pre-tax ($215.0 million after tax, or $2.00 per share) and the 1995
charge was $366.6 million pre-tax ($221.8 million after tax, or $2.07 per
share). These charges are discussed in further detail in Note Seven to the
financial statements. Prior to the settlements, charges and other unusual items,
L-P had an after-tax loss of $81.2 million ($.75 per share) in 1997, after-tax
income of $14.3 million in 1996 ($.13 per share) and after-tax income of $170.1
million in 1995 ($1.59 per share).
Sales in 1997 were $2.40 billion, a 3% decline from 1996 sales of $2.49
billion. Sales in 1996 were 13% lower than 1995 sales of $2.84 billion.
L-P operates in two major business segments: building products and pulp.
Building products is the most significant segment, accounting for more than 88
percent of net sales in each of the past three years. The results of operations
are discussed below for each of these segments separately. Additional
information about the factors affecting L-P's segments is presented in the
"Selected Financial Data" in Item 6 and the "Product Information Summary" in
Item 1.
In 1997, the building products segment had a decline in sales and
profitability, largely the result of an industry-wide oversupply of structural
panel products in North America. In 1997, the pulp segment lost money, but
improved from the large losses suffered in 1996. However, the economic crisis in
Asia negatively impacted pulp segment results late in the year. Both the
building products and pulp segments declined in sales and profitability in 1996
compared to 1995. The weakness in building products was primarily due to the
structural panel oversupply, while pulp markets remained very weak throughout
1996 due to high world-wide inventories. The Ketchikan Pulp Company contract
issue (discussed further below) also negatively impacted pulp segment results in
1996.
BUILDING PRODUCTS
INCREASE
YEAR ENDED DEC. 31, (DECREASE)
---------------------------------------------
1997 1996 1995 97-96 96-95
- --------------------------------------------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS)
Sales:
Structural panel products $ 864 $1,006 $1,127 -14% -11%
Lumber 665 614 644 +8% -5%
Industrial panel products 181 195 215 -7% -9%
Other building products 563 494 523 +14% -6%
------ ------ ------
Total building products $2,273 $2,309 $2,509 -2% -8%
====== ====== ======
Profit $ 20 $ 174 $ 346 -89% -50%
====== ====== ======
Sales of structural panel products (plywood and oriented strand board
(OSB)) suffered in both 1997 and 1996 from industry wide over-capacity. The
over-capacity is the result of new OSB plants built by the industry throughout
North America at a rate greater than the growth in demand. Average selling
prices in 1997 fell approximately 13% compared to 1996, while 1996 average
prices were approximately 20% lower than 1995. During the latter part of 1997,
L-P's net sales realization was also negatively impacted by increased shipping
costs caused by interrupted rail service. Structural panel sales volumes in 1997
decreased 3% from 1996 levels as a result of the permanent closure of two
- 17 -
<PAGE>
plywood plants and four OSB plants in 1997 and late 1996. Sales volumes in 1996
increased approximately 14% compared to 1995 due to new OSB plants started-up in
that year, despite temporary market-related shut-downs at some of L-P's OSB
plants.
Lumber sales increased in 1997 due to a 6% increase in average sales
prices and a slight increase in volume sold. Lumber markets experienced strong
demand through the first three quarters of 1997, benefiting from a robust U.S.
economy, relatively low interest rates and strong housing starts. Late in the
year, weakening currencies in Asia limited shipments from North America to those
markets which put supply pressure on domestic markets, causing lumber prices to
decline. This trend will likely continue into 1998. Lumber sales were lower in
1996 than 1995 as a result of sales volume, which decreased approximately 12%.
L-P permanently closed a number of unprofitable sawmills around the country in
1995 and 1996. Average selling prices rose about 9% in 1996 due to a strong U.S.
economy, lower production volumes industry wide and lower volumes of lumber
imported from Canada.
Industrial panels consist of particleboard, medium density fiberboard
(MDF) and hardboard. These sales decreased in 1997 compared to 1996 primarily
because of lower sales prices of approximately 6%. The price decline was due
primarily to increased industry production relative to demand. Industrial panel
sales volumes in 1997 decreased slightly after a slight increase in 1996
compared to 1995. Prices fell approximately 11% in 1996. This price decline was
also due to excess industry production.
The increase in other building products sales in 1997 was primarily due to
the acquisition of Associated Chemists, Inc. (coatings and chemicals) in
mid-1996, GreenStone Industries, Inc. (cellulose insulation) in early 1997 and
the assets of Tecton Laminates (engineered I-Joists and LVL) in early 1997.
Other building products sales decreased in 1996 due to lower wood chip sales.
L-P was producing fewer wood chips due to lower sawmill and plywood production,
and wood chip prices weakened significantly, particularly on the West Coast.
The primary factor in the decrease in building products profits in 1997
was further erosion of OSB sales prices. Also, higher log costs in the southern
region of the country caused plywood earnings to be significantly reduced.
Industrial panel profits also declined in 1997 as a result of lower sales
prices. Lumber profits increased in 1997 due to higher average sales prices,
which helped offset the profitability declines in structural and industrial
panels. Building products profits decreased in 1996 from 1995 due to the lower
prices discussed above for structural panel products and industrial panel
products. Raw material costs were generally lower in 1996 than in 1995, but did
not fully offset the lower sales prices.
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 two of which are the cost and
availability of raw materials. 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.
- 18 -
<PAGE>
PULP
INCREASE
YEAR ENDED DEC. 31, (DECREASE)
-------------------------------------------------------
1997 1996 1995 97-96 96-95
- --------------------------------------------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS)
Pulp sales $130 $177 $334 -27% -47%
==== ==== ====
Profit (loss) $(29) $(91) $ 44 +68% -207%
==== ==== ====
The single largest factor in the decline in pulp sales in 1997 was the
closure in March 1997 of the pulp mill owned by L-P's Ketchikan Pulp Company
(KPC) subsidiary. Pulp sales volumes decreased approximately 10%, while average
prices dropped approximately 19%. However, KPC pulp had a higher sales average
than L-P's two remaining pulp mills. Excluding KPC, L-P's remaining pulp
business showed an increase of 11% in sales volume and a price decrease of
approximately 6%. The Asian economic crisis caused pulp prices to decline late
in 1997, which will likely continue into 1998. Pulp sales plummeted in 1996 as
sales prices fell an average of 44% while volumes decreased about 5%. Large pulp
inventories around the world created very weak pulp markets throughout 1996. L-P
took intermittent downtime at the pulp mills during the year, which caused the
volume decrease.
Pulp segment profits improved significantly in 1997 due in large part to
the shut-down of the KPC mill which had been suffering losses due to market
conditions and changes in the timber supply contract. At the two remaining
mills, L-P successfully cut its operating costs through a concentrated cost
reduction effort, both from more efficient operations and a central purchasing
program. After making a profit in 1995, the pulp mills returned to losses in
1996 due to the downturn in the markets and problems experienced with the KPC
contract. Raw material costs decreased in 1996 after experiencing an increase in
1995.
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 two of which are the cost and availability of
raw materials. 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 economic crisis in Asia has continued into
1998, which has negatively impacted pulp markets. A significant portion of L-P's
pulp is sold to countries in that region.
L-P pulp products are sold primarily to export customers and represent the
majority of L-P's export sales. Therefore, the decline in pulp sales was the
primary reason for L-P's decreased export sales in 1997 and 1996, both in amount
and as a percent of total sales. Information regarding L-P's geographic segments
and export sales are provided in the notes to financial statements under the
caption "Segment Information."
GENERAL CORPORATE EXPENSE, NET
Net general corporate expense was $80 million in 1997, compared to $52
million in 1996, and an unusually high amount of $121 million in 1995. In 1997
and 1996, the recurring level of general corporate expense has increased largely
due to corporate-wide training programs undertaken by current management and the
addition of key personnel to drive future growth and improvement initiatives. In
1996, $17 million of credits, resulting from a gain on the sale of assets, were
netted into this expense. The most significant factor in the 1995 amount was
higher expenses associated with litigation against the company of approximately
$48 million, including
- 19 -
<PAGE>
legal fees and increases in contingency reserves (it did not, however, include
amounts recorded in the line item "Settlements, Charges and Other Unusual Items,
Net" which is discussed in Note Seven to the financial statements).
SETTLEMENTS, CHARGES AND OTHER UNUSUAL ITEMS, NET
- -------------------------------------------------
For a discussion of settlements, charges and other unusual items, net,
refer to Note Seven to the financial statements.
INTEREST, NET
- -------------
Net interest expense rose significantly in 1997 and 1996 as L-P borrowed
funds to cover its settlement obligations and fund capital expenditures.
Additionally, interest capitalized has decreased in 1997 and 1996 as
construction projects have been completed. Also, interest income was lower in
each of the past two years due to lower levels of cash available for investing.
LEGAL AND ENVIRONMENTAL MATTERS
- -------------------------------
For a discussion of legal and environmental matters involving L-P and the
potential effect on the company, refer to Note Eight to the financial
statements.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
- ---------------------------------------------------
Net cash provided by operations increased to $88 million in 1997 from $23
million in 1996, down from $335 million in 1995. These fluctuations primarily
correlate to changes in the company's net loss. In 1997, L-P received a
settlement from the U.S. Government of $135 million for claims related to the
KPC long-term timber supply contract. In 1997 and 1996, L-P paid out $205
million and $263 million for obligations related to litigation settlements.
Net cash used in investing activities decreased to $140 million from $213
million in 1996 and $387 million in 1995. Capital expenditures peaked in 1995
with the addition of several new OSB plants and other projects. In 1997 and
1996, L-P received $64 million and $62 million of cash for assets sold. L-P has
also spent significant amounts on environmental projects (such as pollution
control equipment), upgrades of existing production facilities, and timber to
supply its operations and logging roads.
L-P increased its net borrowings by $114 million in 1997 and $196 million
in 1996. The borrowings financed the payments of settlement obligations and
capital expenditures. L-P purchased only $3 million of treasury shares in 1997
and no treasury shares in 1996 after purchasing $120 million of treasury stock
in 1995.
L-P has a revolving credit facility of $300 million, which was fully
borrowed at year-end. Subsequent to year-end, L-P entered into an additional
credit facility with a group of banks for an additional $100 million, which is
available to fund cash needs. This additional credit facility must be repaid
upon the sale of assets described below.
In October 1997, L-P announced that it intends to sell assets that
management considers non-strategic to L-P's core businesses. These assets
include, among others, the remaining California redwood timberlands, related
lumber and certain distribution businesses, the Samoa, California, pulp mill,
the Weather-Seal window and door manufacturing business, the Creative Point,
Inc., subsidiary, the Red Bluff, California, cement fiber roof shake plant and
the fiber gypsum plant in Nova Scotia. As of year-end, L-P was actively
marketing all of these assets and had sold the fiber gypsum plant. L-P presently
estimates the proceeds from these sales at $800 million to
- 20 -
<PAGE>
$1 billion. However, there can be no assurance that net proceeds within the
foregoing range will be realized. The proceeds realized will initially be used
to fund operations and reduce or eliminate outstanding borrowings on L-P's
revolving credit facility. Management is currently studying alternative uses of
the proceeds to maximize the long-term value to L-P and its stockholders.
L-P has budgeted capital expenditures, including timber and logging road
additions, for 1998 of approximately $150 million. These expenditures are
primarily to complete an OSB plant currently under construction, continue
environmental improvements to existing plants, upgrade production facilities and
provide timber to operations.
Contingency reserves, which represent an estimate of future cash needs for
various contingencies (principally, payments for siding litigation settlements),
total $224 million, of which $40 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. As described in the notes to
the financial statements under the heading "Contingencies," the amounts
ultimately paid in settling all of the outstanding litigation could exceed the
current reserves by a material amount.
L-P continues to be in a strong financial condition with a relatively low
ratio of long-term debt as a percent of total capitalization. Management
believes that existing cash and cash equivalents combined with additional
borrowing available on lines of credit, expected income tax refunds, the
significant cash inflow expected from the asset sale program described above and
cash to be generated from operations will be sufficient to meet projected cash
needs including the payments related to the siding litigation settlement
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.
YEAR 2000 COMPLIANCE
As the year 2000 approaches, an issue impacting most companies has emerged
regarding the ability of computer applications and systems to properly interpret
the year. This is a pervasive and complex issue.
L-P is in the process of identifying significant applications that will
require modification to ensure Year 2000 compliance. Internal and external
resources are being used to make this assessment, the required modifications and
test Year 2000 compliance. L-P plans on completing the assessment of all
significant applications and developing a plan for appropriate action by
September 30, 1998.
In addition, L-P will begin communicating with others with whom it does
significant business to determine their Year 2000 compliance readiness and the
extent to which L-P is vulnerable to any third party Year 2000 issues. However,
there can be no guarantee that the systems of other companies on which L-P's
systems rely will be timely converted, or that a failure to convert by another
company, or a conversion that is incompatible with L-P's systems, would not have
a material adverse effect on L-P.
The total cost to L-P of these Year 2000 compliance activities has not
been and is not anticipated to be material to its financial position or results
of operations in any given year. These costs and the date on which L-P plans to
complete the Year 2000 assessment process are based on management's best
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third-party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ from those
plans.
- 21 -
<PAGE>
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
No disclosure is required under this item.
ITEM 8. Financial Statements and Supplementary Data
The consolidated financial statements and accompanying notes to financial
statements together with the reports of independent public accountants are
located on the following pages. Quarterly data for the registrant's latest two
fiscal years is located in the table labeled "Quarterly Data" in Item 6.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS) 1997 1996
- ---------------------------------------- --------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 31.9 $ 27.8
Accounts receivable, less reserves of $2.0 and $1.4 146.2 136.2
Inventories 258.8 264.3
Prepaid expenses 8.9 12.0
Income tax refunds receivable 78.0 99.5
Deferred income taxes 73.0 73.1
--------- ---------
Total current assets 596.8 612.9
Timber and Timberlands, at cost
less cost of timber harvested 634.2 648.6
Property, Plant and Equipment, at cost:
Land, land improvements and logging roads,
net of road amortization 185.6 182.5
Buildings 262.5 269.5
Machinery and equipment 1,876.3 1,953.9
Construction in progress 109.5 80.1
--------- ---------
2,433.9 2,486.0
Less accumulated depreciation (1,242.1) (1,207.5)
--------- ---------
Net property, plant and equipment 1,191.8 1,278.5
Goodwill, net of amortization 70.7 45.9
Other Assets 84.9 36.5
--------- ---------
TOTAL ASSETS $ 2,578.4 $ 2,622.4
========= =========
See notes to financial statements.
- 22 -
<PAGE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE)
1997 1996
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 22.9 $ 18.7
Short-term notes payable 22.0 35.4
Accounts payable and accrued liabilities 234.4 224.3
Current portion of contingency reserves 40.0 100.0
--------- ---------
Total current liabilities 319.3 378.4
Long-term Debt, excluding current portion 572.3 458.6
Deferred Income Taxes 178.6 163.2
Contingency Reserves, excluding current portion 184.0 159.8
Other Long-term Liabilities and Minority Interest 38.0 34.8
Commitments and Contingencies
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 200,000,000 shares
authorized, 116,937,022 shares issued 117.0 117.0
--------- ---------
Preferred stock, $1 par value, 15,000,000 shares
authorized, no shares issued
Additional paid-in capital 472.2 472.7
Retained earnings 977.5 1,140.0
Treasury stock, 7,309,360 shares
and 8,170,799 shares, at cost (163.4) (183.3)
Loans to Employee Stock Ownership Trusts (37.7) (61.6)
Other (79.4) (57.2)
--------- ---------
Total stockholders' equity 1,286.2 1,427.6
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,578.4 $ 2,622.4
========= =========
See notes to financial statements.
- 23 -
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE)
1997 1996 1995
---- ---- ----
NET SALES $ 2,402.5 $ 2,486.0 $ 2,843.2
--------- --------- ---------
COSTS AND EXPENSES:
Cost of sales 2,138.7 2,123.5 2,250.3
Depreciation and amortization 142.8 150.6 152.0
Cost of timber harvested 41.1 41.2 50.6
Selling and administrative 168.4 139.7 121.4
Settlements, charges and other
unusual items, net 32.5 350.0 366.6
Interest expense, net of
capitalized interest 30.9 14.2 5.3
Interest income (1.9) (6.4) (8.2)
--------- --------- ---------
Total costs and expenses 2,552.5 2,812.8 2,938.0
Income (loss) before taxes and
minority interest (150.0) (326.8) (94.8)
Provision (benefit) for income taxes (43.6) (125.6) (45.8)
Minority interest in net income (loss)
of consolidated subsidiaries (4.6) (.5) 2.7
--------- --------- ---------
NET INCOME (LOSS) $ (101.8) $ (200.7) $ (51.7)
========= ========= =========
NET INCOME (LOSS) PER SHARE - BASIC $ (.94) $ (1.87) $ (.48)
========== ========== ==========
AND DILUTED
CASH DIVIDENDS PER SHARE OF COMMON STOCK $ .56 $ .56 $ .545
========== ========== ===========
AVERAGE SHARES OF COMMON
STOCK (thousands) 108,450 107,410 107,040
========== ========= ===========
See notes to financial statements.
- 24 -
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
(DOLLAR AMOUNTS IN MILLIONS) 1997 1996 1995
- ---------------------------- ------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(101.8) $(200.7) $ (51.7)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, amortization and
cost of timber harvested 183.9 191.8 202.6
Settlements, charges
and other unusual items, net 216.6 350.0 366.6
Cash settlements of contingencies (204.8) (263.4) (13.6)
Other adjustments (54.5) 3.8 26.9
Decrease (increase) in receivables (4.0) 31.9 28.7
Decrease (increase) in inventories 12.8 31.1 (103.9)
Decrease (increase) in income tax
refunds receivable 21.8 (99.5) ---
Decrease (increase) in prepaid expenses 4.7 1.4 (7.0)
Increase (decrease) in accounts payable
and accrued liabilities (1.8) (1.6) 38.2
Increase (decrease) in income taxes payable --- --- (7.5)
Increase (decrease) in deferred income taxes 15.3 (22.0) (144.7)
------- ------- -------
Net cash provided by operating activities 88.2 22.8 334.6
CASH FLOWS FROM INVESTING ACTIVITIES
Plant, equipment and logging road additions,
including cash used in acquisitions (154.8) (244.0) (362.9)
Timber and timberland additions (49.7) (22.0) (49.7)
Assets sold 63.6 62.4 23.5
Other investing activities, net 1.0 (9.1) 1.8
------- ------- -------
Net cash used in investing activities (139.9) (212.7) (387.3)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term
notes payable (13.4) (12.9) 47.8
Long-term borrowings 228.4 262.7 30.0
Repayment of long-term debt (101.0) (53.4) (82.0)
Cash dividends (60.7) (60.1) (58.2)
Purchase of treasury stock (2.9) --- (120.2)
Other financing activities, net 5.4 6.0 (5.2)
------- ------- -------
Net cash provided by (used in)
financing activities 55.8 142.3 (187.8)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 4.1 (47.6) (240.5)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 27.8 75.4 315.9
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 31.9 $ 27.8 $ 75.4
======= ======= =======
See notes to financial statements.
- 25 -
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
ADD'L
DOLLAR AMOUNTS IN MILLIONS COMMON STOCK TREASURY STOCK PAID-IN RETAINED
EXCEPT PER SHARE SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
---------------------- ------------------------- ------- --------
BALANCE
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1994 116,937,022 $ 117.0 4,944,804 $ (86.3) $ 478.4 $ 1,510.7
Net income (loss) --- --- --- --- --- (51.7)
Cash dividends, $.545 per share --- --- --- --- --- (58.2)
Issuance of shares for employee
stock plans and for
other purposes --- --- (689,744) 13.8 (6.0) ---
Purchase of treasury stock --- --- 4,333,397 (120.2) --- ---
Employee stock ownership
trust contribution --- --- --- --- --- ---
Currency translation adjustment
and pension
liability adjustment, net --- --- --- --- --- ---
--- --- --- --- --- ---
BALANCE
AS OF DECEMBER 31, 1995 116,937,022 $ 117.0 8,588,427 $ (192.7) $ 472.4 $ 1,400.8
Net income (loss) --- --- --- --- --- (200.7)
Cash dividends, $.56 per share --- --- --- --- --- (60.1)
Issuance of shares for employee
stock plans and for
other purposes --- --- (417,628) 9.4 .3 ---
Employee stock ownership
trust contribution --- --- --- --- --- ---
Currency translation adjustment,
pension liability adjustment and
deferred compensation, net --- --- --- --- --- ---
--- --- --- --- --- ---
BALANCE
AS OF DECEMBER 31, 1996 116,937,022 $ 117.0 8,170,799 $ (183.3) $ 472.7 $ 1,140.0
Net income (loss) --- --- --- --- --- (101.8)
Cash dividends, $.56 per share --- --- --- --- --- (60.7)
Issuance of shares for employee
stock plans and for
other purposes --- --- (1,016,534) 22.8 (.5) ---
Purchase of treasury stock --- --- 155,095 (2.9) --- ---
Employee stock ownership
trust contribution --- --- --- --- --- ---
Currency translation adjustment,
pension liability adjustment and
deferred compensation, net --- --- --- --- --- ---
--- --- --- --- --- ---
BALANCE
AS OF DECEMBER 31, 1997 116,937,022 $ 117.0 7,309,360 $ (163.4) $ 472.2 $ 977.5
----------- -------- --------- - -------- -------- ---------
</TABLE>
[Table continued on next page of EDGARized text.]
<PAGE>
OTHER TOTAL
LOANS EQUITY STOCK-
DOLLAR AMOUNTS IN MILLIONS TO ADJUST- HOLDERS'
EXCEPT PER SHARE ESOTs MENTS EQUITY
-------- ---------- ---------
BALANCE
AS OF DECEMBER 31, 1994 $ (114.0) $ (56.4) $ 1,849.4
Net income (loss) --- --- (51.7)
Cash dividends, $.545 per share --- --- (58.2)
Issuance of shares for employee
stock plans and for
other purposes --- --- 7.8
Purchase of treasury stock --- --- (120.2)
Employee stock ownership
trust contribution 28.5 --- 28.5
Currency translation adjustment
and pension
liability adjustment, net --- .4 .4
-------- ---------- ---------
BALANCE
AS OF DECEMBER 31, 1995 $ (85.5) $ (56.0) $ 1,656.0
Net income (loss) --- --- (200.7)
Cash dividends, $.56 per share --- --- (60.1)
Issuance of shares for employee
stock plans and for
other purposes --- --- 9.7
Employee stock ownership
trust contribution 23.9 --- 23.9
Currency translation adjustment,
pension liability adjustment and
deferred compensation, net --- (1.2) (1.2)
-------- ---------- ---------
BALANCE
AS OF DECEMBER 31, 1996 $ (61.6) $ (57.2) $ 1,427.6
Net income (loss) --- --- (101.8)
Cash dividends, $.56 per share --- --- (60.7)
Issuance of shares for employee
stock plans and for
other purposes --- --- 22.3
Purchase of treasury stock --- --- (2.9)
Employee stock ownership
trust contribution 23.9 --- 23.9
Currency translation adjustment,
pension liability adjustment and
deferred compensation, net --- (22.2) (22.2)
-------- ---------- ---------
BALANCE
AS OF DECEMBER 31, 1997 $ (37.7) $ (79.4) $ 1,286.2
-------- ---------- ---------
See notes to financial statements.
- 26 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
- --------------------
Louisiana-Pacific Corporation is a U.S.-based company principally engaged
in the manufacture of building products, and to a lesser extent, market pulp.
Through its foreign subsidiaries, the Company also maintains manufacturing
facilities in Canada and Ireland. The principal customers for the Company's
building products are retail home centers, builders, manufactured housing
producers, distributors and wholesalers in North America, with minor sales to
Asia and Europe. The principal customers for its pulp products are brokers in
Asia and Europe, with minor sales in North America.
A significant portion of L-P's sales are derived from structural panel
products and lumber. Structural panel sales were 36% of total 1997 sales and
lumber sales were 28% of the total.
Use of Estimates in the Preparation of Financial Statements
- -----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. See
discussion of specific estimates in footnotes entitled "Income Taxes,"
"Retirement Plans," "Stock Options and Plans," "Settlements, Charges and Other
Unusual Items, Net" and "Contingencies."
Principles of Presentation
- --------------------------
The consolidated financial statements include the accounts of
Louisiana-Pacific Corporation and all of its subsidiaries (L-P), after
elimination of intercompany balances and transactions.
Earnings Per Share
- ------------------
Basic and diluted earnings per share have been computed based on the
weighted average number of shares of common stock outstanding during the
periods. The effect of potentially dilutive common stock equivalents is not
included in the calculation of dilutive earnings per share because it is
currently anti-dilutive as a result of L-P's net losses. Shares held by L-P's
Employee Stock Ownership Trusts (ESOTs) which were acquired by the ESOTs on or
after January 1, 1994 and are not allocated to participants' accounts, are not
considered outstanding for purposes of computing earnings per share (763,786
shares at December 31, 1997).
Cash and Cash Equivalents
- -------------------------
L-P considers all highly liquid securities with an original maturity of
three months or less to be cash equivalents. Cash paid during 1997, 1996 and
1995 for interest (net of capitalized interest) was $29.2 million, $13.4 million
and $4.6 million. Net cash paid (received) during 1997, 1996 and 1995 for income
taxes was $(80.7) million, $(4.1) million and $109.0 million.
L-P invests its excess cash with high quality financial institutions and,
by policy, limits the amount of credit exposure at any one financial
institution. In addition, L-P holds its cash investments until maturity and is
therefore not subject to significant market risk.
- 27 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Inventory Valuation
- -------------------
Inventories are valued at the lower of cost or market. Inventory costs
include material, labor and operating overhead. The LIFO method is used for most
log and lumber inventories with remaining inventories valued at FIFO or average
cost. Inventory quantities are determined on the basis of physical inventories,
adjusted where necessary for intervening transactions from the date of the
physical inventory to the end of the year. The major types of inventories are as
follows:
DECEMBER 31 (IN MILLIONS) 1997 1996
------------------------- ---- ----
Logs $ 112.4 $ 106.4
Lumber 37.6 47.4
Panel products 56.6 54.4
Other building products 82.1 70.0
Pulp 15.3 25.4
Other raw materials 25.1 26.3
Supplies 21.3 23.0
LIFO reserve (91.6) (88.6)
------- -------
Total $ 258.8 $ 264.3
======= =======
Timber
- ------
L-P follows an overall policy on fee timber that amortizes timber costs
over the total fiber available during the estimated growth cycle. Timber
carrying costs, such as reforestation and forest management, are generally
expensed as incurred. Cost of timber harvested includes not only the cost of fee
timber but also the amortization of the cost of long-term timber deeds.
Property, Plant, and Equipment
- ------------------------------
L-P uses the units of production method of depreciation for most machinery
and equipment which amortizes the cost of equipment over the estimated units
that will be produced during its useful life. Provisions for depreciation of
buildings and the remaining machinery and equipment have been computed using
straight-line rates based on the estimated service lives. The effective
straight-line rates for the principal classes of property range from
approximately 5 percent to 20 percent.
Logging road construction costs are capitalized and included in land and
land improvements. These costs are amortized as the timber volume adjacent to
the road system is harvested.
L-P capitalizes interest on borrowed funds during construction periods.
Capitalized interest is charged to machinery and equipment accounts and
amortized over the lives of the related assets. Interest capitalized during
1997, 1996 and 1995 was $4.8 million, $7.1 million and $10.9 million.
L-P defers start-up costs on major construction projects during the
start-up phase. No start-up costs were deferred in 1997. Start-up costs deferred
during 1996 and 1995 were $3.8 million and $3.1 million.
Asset Impairments
- -----------------
Long-lived assets to be held and used by the Company are reviewed for
impairment when events and circumstances indicate costs may not be recoverable.
Losses are recognized when the book values exceed expected undiscounted future
cash flows. If impairment exists, the asset's book value
- 28 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
is written down to its estimated fair value. Assets to be disposed are written
down to their estimated fair value, less sales costs. See Note Seven for a
discussion of charges in 1997, 1996 and 1995 related to impairment of property,
plant and equipment.
Derivative Financial Instruments
- --------------------------------
L-P has only limited involvement with derivative financial instruments. At
December 31, 1997, L-P had no material exposure to derivative financial
instruments.
Foreign Currency Translation
- ----------------------------
Assets and liabilities denominated in foreign currencies are translated to
U.S. dollars at the exchange rate on the balance sheet date. Revenues, costs,
and expenses are translated at average rates of exchange prevailing during the
year. Translation adjustments resulting from this process are shown in
stockholders' equity.
Goodwill
- --------
Goodwill has resulted from the purchase of subsidiaries and is being
amortized on a straight-line basis over 10 to 25 years. The amortization period
and recoverability of this goodwill are periodically reviewed by the Company.
Notes Receivable
- ----------------
Included in other assets are notes receivable related to a timber and
timberland sale that occurred during 1997. The Company received $47.9 million in
notes from a third party. The notes are due in principal payments of $20 million
in 2008, $20 million in 2009, and $7.9 million in 2012. Interest is to be
received in semi-annual installments with rates varying from 5.62% to 7.5%.
These notes provide collateral for L-P's senior secured notes.
Acquisitions
- ------------
Acquisitions are accounted for under the purchase method of accounting,
whereby the results of acquired companies are included in L-P's consolidated
results from the date of their acquisition.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified to conform to the
current year presentation.
2. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
DECEMBER 31 (IN MILLIONS) 1997 1996
------------------------- ---- ----
Accounts payable $ 153.0 $ 124.0
Salaries and wages payable 27.4 36.6
Taxes other than income taxes 8.7 12.2
Workers' compensation 13.5 12.0
Other accrued liabilities 31.8 39.5
------- -------
$ 234.4 $ 224.3
======= =======
- 29 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. INCOME TAXES
Income (loss) before taxes and minority interest for the years ended
December 31, was taxed under the following jurisdictions:
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995
------------------------------------ ---- ---- ----
Domestic $(87.0) $(255.1) $(123.0)
Foreign (63.0) (71.7) 28.2
------- ------- -------
$(150.0) $(326.8) $ (94.8)
======= ======= =======
Provision (benefit) for income taxes includes the following:
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995
------------------------------------ ---- ---- ----
Current tax provision (benefit):
U.S. federal $(65.0) $(87.4) $ 74.4
State and local (4.3) (10.0) 14.7
Foreign 3.6 12.2 6.1
------ ------ -------
Total current tax provision
(benefit) $(65.7) $(85.2) $ 95.2
====== ====== =======
Deferred tax provision (benefit):
U.S. federal 32.2 $ 2.6 $(129.2)
State and local 3.4 .3 (16.4)
Foreign (13.5) (43.3) 4.6
------ ------ -------
Total deferred tax provision
(benefit) $ 22.1 $(40.4) $(141.0)
====== ====== =======
The tax effects of significant temporary differences creating deferred tax
(assets) and liabilities at December 31 were as follows:
DECEMBER 31 (IN MILLIONS) 1997 1996
------------------------- ---- ----
Property, plant and equipment $ 134.0 $ 95.3
Timber and timberlands 156.9 143.0
Inventories (4.2) (1.2)
Accrued liabilities (84.1) (33.7)
Contingency reserves (86.7) (100.5)
Benefit of foreign capital loss
and NOL carryover (27.8) (13.6)
Benefit of foreign ITC carryover (62.3) (68.4)
Other 41.6 26.0
Valuation allowance 38.2 43.2
-------- --------
Net deferred tax liability 105.6 90.1
Less net current deferred
tax assets (73.0) (73.1)
-------- --------
Net noncurrent deferred
tax liabilities $ 178.6 $ 163.2
======== ========
The reduction in the valuation allowance reflects the expiration of tax credits
and a change in the foreign currency exchange rate between balance sheet dates.
L-P's Canadian subsidiary, Louisiana-Pacific Canada Ltd. (LPC), has
unrealized foreign investment tax credits (ITC) of approximately C$89 million
(Canadian dollars). These credits can be carried forward to offset future tax
- 30 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
of LPC and reduce LPC's basis in the related property, plant and equipment. The
credits expire C$18 million in 1999, C$6 million in 2000, C$47 million in 2001,
C$4 million in 2003, C$13 million in 2004 and C$1 million in 2005. In addition,
LPC has a capital loss carryover of C$29 million available to offset capital
gains in future years which does not expire.
The following table summarizes the differences between the statutory
U.S. federal and effective income tax rates:
YEAR ENDED DECEMBER 31 1997 1996 1995
---------------------- ---- ---- ----
Federal tax rate (35)% (35)% (35)%
Tax-exempt investment income --- --- 2
State and local income taxes (4) (4) (4)
Exempt foreign sales corporation income --- --- (3)
Foreign losses not benefited 6
Other, net 4 1 (4)
--- --- ---
(29)% (38)% (48)%
=== === ===
4. LONG-TERM DEBT
INTEREST RATE DECEMBER 31,
(IN MILLIONS) AT 12/31/97 1997 1996
- ------------- ------------- ---- ----
Project Bank Financings --
Chetwynd, B.C. pulp mill, repaid in 1997, ---% $ --- $ 51.0
Nova Scotia fiber gypsum plant,
repaid in 1997, --- --- 34.7
Waterford, Ireland, OSB plant, payable
1998-2003, interest rate variable 8.3 32.9 41.4
Project Revenue Bond Financings, payable
1998-2009, interest rates variable 4.4-7.3 26.0 26.1
Employee Stock Ownership Trust (ESOT) Loans --
Hourly ESOT, payable annually through
1999, interest rate variable 8.3 17.0 25.5
Salaried ESOT, payable annually through
1999, interest rate variable 4.9 12.0 18.0
Senior Secured Notes, payable 2008-2112,
interest rates fixed 7.1-7.5 47.9 ---
Bank Credit Facility --
Revolving credit facility, payable in
2002, interest rate variable 6.3 300.0 275.0
Term loan facility, payable in 2002,
interest rate variable 6.3 125.0 ---
Other, including capital lease obligations,
payable in varying amounts through 2010,
interest rates vary 4.0-8.5 34.4 5.6
------- -------
595.2 477.3
Less current portion (22.9) (18.7)
------- -------
$ 572.3 $ 458.6
======= =======
The carrying amounts of L-P's long-term debt approximates fair market value
since the debt is primarily variable rate debt. Project bank financings are
typically secured by the underlying assets of the related project. The senior
secured notes are collateralized by notes receivable related to timber and
timberland sales. Many of L-P's loan agreements contain lender's standard
covenants and restrictions. L-P was in compliance with all of the covenants and
restrictions of these agreements at December 31, 1997.
- 31 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
At December 31, 1997, L-P had a $425 million bank credit facility with
a group of banks which is due in 2002. This facility includes a $300 million
revolving credit facility and a $125 million term loan facility. Interest on
borrowings under the facility is computed on one of numerous variable interest
rate formulas at L-P's option. L-P pays a commitment fee on the unused credit
line. Borrowings in 1997 are classified as long-term debt as amounts are not
expected or required to be repaid during 1998. Additionally, L-P's subsidiary,
L-P Canada Ltd. has a $30 million (Canadian) revolving credit facility which is
classified as short-term notes payable. Subsequent to year-end, L-P entered into
an additional credit facility with a group of banks for an additional $100
million, which must be repaid upon the sale of assets described in Note Seven.
The weighted average interest rate for all debt at December 31, 1997
and 1996 was 6.4 percent and 6.2 percent. Required repayment of principal for
long-term debt is as follows:
YEAR ENDED DECEMBER 31 (IN MILLIONS)
1998 $ 22.9
1999 34.5
2000 6.6
2001 6.4
2002 456.2
2003 and after 68.6
---------
$ 595.2
=========
5. RETIREMENT PLANS
L-P maintains tax-qualified Employee Stock Ownership Trusts (ESOTs),
for eligible salaried and hourly employees in the U.S. under which 10 percent of
the eligible employees' annual earnings are contributed to the plans.
Approximately 9,800 L-P employees participate in the ESOTs.
The annual allocation of shares to participant accounts and
compensation expense are generally based on the ESOTs' cost of the shares.
However, as required, compensation expense for the 1,843,621 shares purchased by
the ESOTs in 1994 is based on the market value of the shares at the time of
allocation. L-P's ESOTs held a total of approximately 11,868,000 shares at
December 31, 1997 of which approximately 9,734,000 were allocated to
participants' accounts. ESOT expense is included in the retirement plan expense
table below.
L-P also maintains other defined contribution pension plans covering
various groups of hourly and salaried employees in the U.S. and other countries.
Contributions to the plans are generally computed by one of three methods: 1)
L-P contribution required based upon a defined formula with no employee
contributions allowed; 2) L-P contribution required based upon a defined formula
with elective or mandatory employee contributions; and 3) elective employee
contributions only with no L-P contribution allowed.
L-P also has a number of defined benefit pension plans covering its
hourly employees, most of which were frozen in 1994. Contributions to these
plans are based on actuarial calculations of amounts to cover current pension
and amortization of prior service costs over periods ranging from 10 to 20
years. Contributions to multiemployer defined benefit plans are specified in
applicable collective bargaining agreements.
- 32 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
In 1997, L-P adopted the L-P Supplemental Executive Retirement Plan
(SERP), a non-qualified defined benefit plan intended to provide supplemental
retirement benefits to key executives. Benefits are generally based on
compensation in the years prior to retirement. The projected benefit obligation
was $1.4 million at December 31, 1997. Expense for this plan is included in the
retirement plan expense table below. L-P established a grantor trust to
informally provide funding for the benefits payable under the SERP. During 1997,
L-P contributed $4.2 million to the trust. The funds were invested in
corporate-owned life insurance policies. At December 31, 1997, the trust assets
were valued at $3.9 million and included in other assets in L-P's consolidated
balance sheet.
The status of L-P administered qualified defined benefit pension plans
is as follows:
<TABLE>
1997 1996
---- ----
Plan with Plan with Plans with Plans with
Assets in Accumulated Assets in Accumulated
Excess of Benefits Excess of Benefits
Accumulated In Excess Accumulated In Excess
Benefits of Assets Benefits of Assets
DECEMBER 31 (IN MILLIONS)
Accumulated benefit obligation
<S> <C> <C> <C> <C>
Vested portion $ 11.2 $ 101.1 $ 19.9 $ 89.8
Non-vested portion -- 2.1 .2 2.9
--------- --------- -------- ---------
Total 11.2 103.2 20.1 92.7
Effect of future compensation -- -- -- --
--------- --------- -------- ---------
Projected benefit obligation 11.2 103.2 20.1 92.7
Plan assets 13.2 89.1 39.6 87.3
--------- --------- -------- ---------
Net funded (unfunded)
status 2.0 (14.1) 19.5 (5.4)
Unrecognized asset at
transition (.3) (6.5) (5.1) (8.0)
Unrecognized net loss
and other 3.9 29.3 .2 20.9
Adjustment to recognize
minimum liability -- (22.9) -- (9.7)
--------- --------- -------- ---------
Net prepaid (accrued)
pension expense $ 5.6 $ (14.2) $ 14.6 $ (2.2)
========= ========= ======== =========
</TABLE>
The actuarial assumptions used to determine pension expense and the
funded status of the plans for 1997 and 1996 were: a discount rate on benefit
obligations of 7.25 percent and 7.75 percent, and an 8.75 percent expected
long-term rate of return on plan assets.
The assets of the plans at December 31, 1997 and 1996 consist mostly of
government obligations, and minor amounts in equity securities and cash and cash
equivalents.
Retirement plan expense included the following components:
- 33 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995
------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Benefits earned by employees $ .2 $ .5 $ .4
Interest cost on projected
benefit obligation 7.9 8.3 7.9
Return on plan assets (9.0) (10.9) (10.2)
Net amortization and deferral (1.0) (1.7) (2.4)
---------- ---------- ----------
Net periodic pension expense (income) (1.9) (3.8) (4 .3)
Expense related to ESOTs multiemployer,
defined contribution and
non-qualified plans 28.8 29.1 30.1
Loss from settlement of pension plan 7.3 --- ---
---------- ---------- ----------
Net retirement plan expense $ 34.2 $ 25.3 $ 25.8
========== ========== ==========
</TABLE>
L-P has several plans which provide minimal postretirement benefits
other than pensions. Net expense related to these plans was not significant. L-P
does not generally provide post-employment benefits.
6. STOCK OPTIONS AND PLANS
The Financial Accounting Standards Board issued SFAS 123, "Accounting
for Stock-Based Compensation" which establishes a fair value approach to
measuring compensation expense related to employee stock plans for grants on or
after January 1, 1995. As allowed by SFAS 123, L-P has elected to adopt only the
disclosure provisions of the standard and therefore recorded no compensation
expense for certain stock option plans and all stock purchase plans. Had
compensation expense for L-P's stock-based compensation plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS Statement 123, L-P's net income (loss) and
net income (loss) per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
YEAR ENDED DECEMBER 31
(IN MILLIONS, EXCEPT PER SHARE) 1997 1996 1995
------------------------------- ---- ---- ----
<S> <C> <C> <C>
Net income (loss)
As reported $ (101.8) $ (200.7) $ (51.7)
Pro forma (108.6) (206.0) (53.6)
Net income (loss) per share
As reported $ (.94) $ (1.87) $ (.48)
Pro forma (1.00) (1.92) (.50)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model using the actual option terms with
the assumptions of a 2.5 percent to 3.2 percent dividend yield, expected
volatility of 29 percent in 1997 and 27 percent in 1996 and 1995, and a risk
free interest rate of 6.6 percent in 1997 and 6.7 percent in 1996 and 1995.
Stock Option Plans
- ------------------
L-P grants options to key employees to purchase L-P common stock. Past
options were granted at 85 to 100 percent of market price. The current stock
award plan requires that options be granted at 100 percent of market price. The
options become exercisable over 3 or 5 years beginning one year after the grant
date and expire 5 or 10 years after the date of grant. Compensation expense
recognized for stock options was $.7 million in 1997, $.7 million in 1996 and
$1.0 million in 1995. At December 31, 1997, 4.5 million shares were available
under the current stock award plan for future option grants and all other
stock-based awards.
- 34 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Changes in options outstanding and exercisable were as follows:
<TABLE>
NUMBER OF SHARES
YEAR ENDED DECEMBER 31 1997 1996 1995
---------------------- ---- ---- ----
<S> <C> <C> <C>
Options outstanding at January 1 1,647,530 1,370,410 2,611,123
Options granted 789,505 605,000 114,000
Options exercised (154,880) (196,530) (1,046,412)
Options canceled (78,300) (131,350) (308,301)
------------- ------------ --------------
Options outstanding at December 31 2,203,855 1,647,530 1,370,410
============= ============ ==============
Options exercisable at December 31 912,144 762,850 668,900
============= ============ ==============
WEIGHTED AVERAGE PRICE PER SHARE
YEAR ENDED DECEMBER 31 1997 1996 1995
---------------------- ---- ---- ----
EXERCISE PRICE
Options granted $ 19.97 $ 22.18 $ 21.57
======== ======== ========
Options exercised $ 13.91 $ 12.13 $ 11.55
======== ======== ========
Options canceled $ 24.21 $ 21.39 $ 12.73
======== ======== ========
Options outstanding $ 21.09 $ 21.14 $ 19.40
======== ======== ========
Options exercisable $ 21.09 $ 19.05 $ 17.05
======== ======== ========
FAIR VALUE AT DATE OF GRANT
Options granted $ 6.05 $ 8.38 $ 8.98
======== ======== ========
</TABLE>
Performance-Contingent Stock Awards
- -----------------------------------
L-P has granted performance-contingent stock awards to senior
executives as allowed under the current stock award plan. The awards entitle the
participant to receive a number of shares of L-P common stock determined by
comparing L-P's cumulative total stockholder return to the mean total
stockholder return of five other forest products companies for the four-year
period beginning in the year of the grant. During 1997, a target of 54,569
performance-contingent awards were granted. Depending on L-P's four-year total
stockholder return, the actual number of shares issued at the end of the
four-year period could range from zero to 200 percent of this target.
Restricted Stock Plans
- ----------------------
L-P has also granted awards under the Louisiana-Pacific Corporation Key
Employee Restricted Stock Plan. Shares are issued, at no cost to the employee,
only after certain annual performance criteria are met. The expense is recorded
in the year to which the performance criteria relate. L-P did not meet the
performance criteria in 1997, 1996 or 1995 and therefore recognized no
compensation expense for restricted stock awards.
Changes in the Restricted Stock Awards outstanding were as follows:
<TABLE>
NUMBER OF SHARES
YEAR ENDED DECEMBER 31 1997 1996 1995
-------------------- --------------------------------------------
<S> <C> <C> <C>
Restricted awards outstanding
at January 1 109,458 251,208 664,500
Restricted awards granted 73,000 --- 145,000
Restricted awards exercised --- --- (42,875)
Restricted awards canceled (110,334) (141,750) (515,417)
----------- ------------ ------------
Restricted awards outstanding
at December 31 72,124 109,458 251,208
=========== ============ ============
Fair value at date of grant $ 21.13 $ N/A $ 27.00
=========== ============ ============
</TABLE>
- 35 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
L-P has also granted restricted stock in which the shares are issued at
the date of grant. The shares are non-transferable until the time period
specified lapses. There are no other performance criteria. 150,000 of such
shares were granted and issued in 1996. In 1997, 30,000 shares vested and became
transferable. The remaining shares vest 30,000 shares in 1998, 30,000 shares in
1999 and 60,000 shares in 2006. Deferred compensation was recorded in the other
equity line in the balance sheet in the amount of $3.8 million based on the
market value of the stock at the date of issuance. The deferred compensation
balance is amortized to expense over the years during which the certificates
vest. The amount of expense recorded in 1997 and 1996 related to these
restricted shares was $.8 million.
Stock Purchase Plans
- --------------------
L-P offers employee stock purchase plans to most employees. Under each
plan, employees may subscribe to purchase shares of L-P stock over 24 months at
85 percent of the market price. At December 31, 1997, 671,196 shares and 498,185
shares were subscribed at $18.89 and $18.59 per share under the 1997 and 1996
Employee Stock Purchase Plans. During 1997, L-P issued 259,141 shares to
employees at an average price of $22.36 under all Employee Stock Purchase Plans,
including the completion of the purchase period for the 1995 Plan.
7. SETTLEMENTS, CHARGES AND OTHER UNUSUAL ITEMS, NET
The major components of "Settlements, Charges and Other Unusual Items,
Net" in the statements of income for the years ended December 31, were as
follows:
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
KPC settlement $ 135.0 $ --- $ ---
Charges for litigation, property
impairments and other (223.1) (350.0) (374.6)
Gains on asset sales 55.6 --- 8.0
----------- ----------- ------------
$ (32.5) $ (350.0) $ (366.6)
=========== =========== ============
</TABLE>
1997
- ----
In the first quarter of 1997, L-P's Ketchikan Pulp Company subsidiary
recorded a net gain of $121.9 million ($73.7 million after taxes, or $.68 per
share) to reflect the initial proceeds of $135 million received under a
settlement agreement with the U.S. Government over KPC's claims related to the
long-term timber supply contract in Alaska. Adjustments to pulp mill closure-
related accruals were netted against this gain. The agreement also provides KPC
with sufficient timber volumes to run its two sawmills through the end of 1999.
In the third quarter of 1997, L-P recorded a $210.0 million charge
($128.3 million after taxes, or $1.18 per share) to reflect the write-down of
certain properties which L-P intends to sell, to adjust reserves for litigation
settlements and to accrue for certain other costs. Gains from the sale of 79,000
acres of timber and timberland in California during the third quarter of 1997 in
the amount of $55.6 million ($34.0 million after taxes, or $.31 per share) were
netted against the charges.
- 36 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
In October 1997, L-P announced that it intends to sell assets that
management considers non-strategic to L-P's business. These assets include,
among others, the remaining California redwood timberlands, related lumber and
certain distribution businesses, the Samoa, California, pulp mill, the
Weather-Seal window and door manufacturing business, the Creative Point, Inc.,
subsidiary, the Red Bluff, California, cement fiber roof shake plant and the
fiber gypsum plant in Nova Scotia. As of year-end, L-P was actively marketing
all of these assets and had sold the fiber gypsum plant. The total third quarter
charge related to property and equipment write-downs, was $35.0 million. The
facilities covered by this charge incurred operating losses of approximately $17
million in 1997, all of which was related to the building products related
assets.
1996
- ----
In the third quarter of 1996, L-P recorded pre-tax charges of $350.0
million ($215.0 million after tax, or $2.00 per share) to reflect expected costs
to be incurred in the shut-down of the pulp mill owned and operated by L-P's
Ketchikan Pulp Company (KPC) subsidiary as well as the settlement of all
outstanding shareholder securities class action claims, a reserve for other
litigation and a reserve for the planned shut-down and other costs related to
certain other non-strategic facilities.
The charge for the shut-down of the Ketchikan pulp mill included the
Company's best estimates of all costs related to the closing of operations
including the write-down of property, plant and equipment to estimated salvage
value, severance costs, inventory write-downs, environmental and general
property clean-up and other costs.
In 1996, as part of the implementation of management's strategic plan,
L-P evaluated the viability of all its current operations and made plans for the
closure or sale of certain other manufacturing facilities including several
sawmills, structural panel products plants and other operations. The facilities
were written down to their estimated salvage or sales value. The total charge
related to property and equipment write-downs, including the KPC facilities, was
$191.1 million. The facilities covered by this charge incurred operating losses
of approximately $64 million in 1996, of which approximately $40 million related
to pulp segment assets and $24 million related to building products related
assets.
L-P reached an agreement on behalf of all defendants to settle all
outstanding shareholder securities class action claims brought in 1995 against
the Company and four former and current officers. The settlement required a
payment of approximately $65 million, of which approximately $20 million was
covered by insurance. L-P also reserved additional amounts related to other
outstanding litigation, including plaintiffs who opted out of the siding class
action settlements.
Detail regarding the industry segments to which this $350.0 million
charge relates is presented in Note Ten entitled "Segment Information." Broken
down by type of expense, $191.1 million related to property and equipment
write-downs, $19.3 million related to inventory write-downs and $139.6 million
related to reserves taken for severance and other shut-down charges as well as
litigation costs.
1995
- ----
In the third quarter of 1995, L-P recorded a pre-tax charge of $366.6
million ($221.8 million after tax, or $2.07 per share). This charge included
$345.0 million for class action settlements related to the Company's siding
- 37 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
product, as well as write-downs on planned disposals by mid-1996 of certain
facilities, principally sawmills. The historical results of these operations
were not significant. A gain on the sale of a non-strategic asset was netted
against this charge.
8. CONTINGENCIES
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. In addition to civil and criminal penalties that have
been paid, 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.
With the closure of the pulp mill, KPC is currently seeking the EPA's and
court's guidance regarding the necessity of these expenditures. 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. It is anticipated that KPC will 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. KPC negotiated an
administrative order with the state and EPA to conduct investigative and
clean-up activities at the pulp mill. Total costs for these activities are
unknown at this time, but KPC has recorded its initial estimated amount.
The United States Forest Service (USFS) has named KPC as a potentially
responsible party for costs related to the capping of a landfill near Thorne
Bay, Alaska. Total costs may range up to $8 million.
EPA and the Department of Justice have indicated their intent to seek
penalties for alleged civil violations of the Clean Water Act. The maximum
penalty associated with such an action could total up to $625,000.
Certain of L-P's plant sites have or are suspected of having substances
in the ground or in the groundwater that are considered pollutants. Appropriate
corrective action or plans for corrective action are underway. Where the
pollutants were caused by previous owners of the property, L-P is vigorously
pursuing those parties through legal channels and is vigorously pursuing
insurance coverage under all applicable policies.
L-P maintains a reserve for estimated environmental loss contingencies.
The balance of the reserve was $29.3 million and $49.9 million at December 31,
1997 and 1996. The decrease during 1997 was primarily the result of expenditures
related to the closure of operations at the KPC pulp mill. As with all
accounting estimates, significant uncertainty exists in the reliability and
precision of the estimates because the facts and circumstances surrounding each
contingency vary from case to case. L-P continually monitors its estimated
exposure for environmental liabilities and adjusts its accrual accordingly. As
additional information about the environmental contingencies becomes known,
L-P's estimate of its liability for environmental loss contingencies may change
significantly, although no estimate of the range of any potential adjustment of
the liability can be made at this time. L-P cannot estimate the time frame over
which these accrued amounts are likely to be paid out. A portion of L-P's
environmental reserve is related to liabilities for clean-up of properties which
are currently owned or have been owned in the past by L-P. Certain of these
sites are subject to cost-sharing arrangements with other parties who were also
involved with the site. L-P does not believe that any of these cost-sharing
arrangements will result in additional material liability to L-P due to
non-performance by the other
- 38 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
party. L-P has not reduced its liability for any anticipated insurance
recoveries.
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, results of
operations or liquidity 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, which was subsequently expanded
to include the taking 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.
In November 1995, the Court bifurcated the environmental and fraud
felony counts. A trial date of April 13, 1998, had been set in the environmental
case. However, a Notice of Disposition and Joint Motion to Vacate Trial Date was
filed with the Court.
After pleading guilty to one environmental count, on February 18, 1998,
the former superintendent of the mill was sentenced to six months of home
detention, five years probation and a fine of $10,000. The former plant manager
pled guilty to one environmental count and is scheduled to be sentenced in April
1998.
In December 1995, L-P received a notice of suspension from the 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 an interim
period in recognition of L-P's environmental compliance efforts. Under recently
revised regulations of the United States Department of Agriculture,
- 39 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
the EPA suspension will also have the effect of prohibiting L-P's Montrose
facility from purchasing timber directly, but not indirectly, from the USFS.
L-P maintains a reserve for its estimate of the cost of the Montrose
criminal proceedings, although as with any estimate, there is uncertainty
concerning the actual costs to be incurred. At the present time, L-P cannot
predict whether or to what extent the circumstances described above will result
in further civil litigation or investigation by government authorities, or the
potential financial impact of any such current or future proceedings, in which
case 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 numerous class action and
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.
The United States District Court for the District of Oregon has given
final approval to a settlement between L-P and a nationwide class composed of
all persons who own, have owned, or subsequently acquire property on which L-
P's OSB siding was installed prior to January 1, 1996, excluding persons who
timely opted out of the settlement and persons who are members of the settlement
class in the Florida litigation described below. 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 of $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 is 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. As of December
31, 1997, L-P had funded the first three installments. If at any time after the
fourth year of the settlement period the amount of approved
- 40 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 Inner-Seal 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 Inner-Seal siding or damage
to utility grade OSB siding (sold without any express warranty), either of which
could create 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 was 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 and certain other costs. As
of December 31, 1997, approximately $40 million remained of the $195 million
paid into the fund to date, after accruing interest on undisbursed funds and
deducting class notification costs, prior claims costs (including payments
advanced to homeowners in urgent circumstances) and payment of claims under the
settlement.
The claims submitted to the claims administrator substantially exceed
the $275 million of payments that L-P is required to make under the settlement
agreement. As calculated under the terms of the settlement, claims submitted and
inspected exceed $325 million. There are insufficient data to project the future
volume of claims or the total dollar value of additional claims that may be made
against the settlement fund. L-P has not decided whether it will provide the
optional funding discussed above in excess of the required $275 million after
the fourth year of the settlement. Alternatively, L-P could elect to pursue
other options, including allowing the settlement agreement to terminate, thereby
entitling claimants with unsatisfied claims to pursue available legal remedies
against L-P.
A settlement of a Florida class action was 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 Inner-Seal 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 is $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,
- 41 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
finishing, painting, or lack of maintenance, and also subject to reduction for
age of siding more than three years old. L-P has agreed that 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 described above. Class members will be entitled to make claims for up
to five years after October 4, 1995.
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 herein 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. Due to the various uncertainties, L-P cannot predict to what degree
actual payments under the settlement agreements will exceed the recorded
liability related to these matters, although it is possible that in the near
term, total estimated payments will exceed the recorded liabilities.
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.
On February 27, 1998, the United States District Court for the Northern
District of California entered an order approving a settlement that would
resolve the above actions. The settlement class is composed of all persons who
purchased L-P OSB sheathing or acquired real property or structures in the
United States containing L-P OSB sheathing between January 1, 1984, and October
22, 1997. However, persons who purchased L-P sheathing during the class period,
but who do not retain ownership of the product, are not included in the class.
Under the settlement agreement, an eligible claimant whose claim is filed prior
to October 22, 2017, and is reviewed by the claims administrator will be
entitled to recover the reasonable cost of repair or replacement of any L-P OSB
sheathing determined to have failed to perform its essential function as
warranted and not occasioned by misuse, negligent or intentional misconduct of a
third party or an event over which L-P had no control.
Independent adjusters will determine the extent of damage to the OSB
sheathing at each claimant's property. There will be an adjustment to the
settlement payments for improper installation and maintenance. If a class member
is dissatisfied with the result, he or she may reject the award and request a
second inspection, or elect arbitration or initiate a civil suit for
compensatory damages (but not for multiple or punitive damages). If a class
member rejects the award, elects arbitration and recovers a greater sum than was
found to be owing by the independent adjuster, L-P will pay for the
administrative cost of the arbitration.
An independent, professional ombudsperson will oversee the
implementation of the settlement and receive and consider complaints from class
members with respect to L-P's performance of the settlement.
- 42 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Additionally, the settlement agreement provides that L-P will pay a
$1.5 million grant to the University of California Forest Products Laboratory,
will pay reasonable attorneys' fees of class counsel, and will consent to an
injunction prohibiting it from failing to comply with product testing protocols
or falsely representing that its products comply with certain testing
requirements.
As with most class action settlements, a number of opt out notices were
received. Those who opted out retain all rights which were available to them
prior to the settlement.
L-P maintains a reserve for its estimate of the cost of these other OSB
matters, including the sheathing settlement, although as with any estimate,
there is uncertainty concerning the actual costs to be incurred. Based on a
review of its claims records to date, L-P believes that known reports of damage
to installed L-P OSB sheathing have been immaterial in number and amount.
Executive Employment Matter
- ---------------------------
On June 19, 1997, the United States District Court for the Southern
District of New York entered a judgment in favor of Mark Suwyn and L-P in the
action entitled International Paper Company v. Mark A. Suwyn and Louisiana-
Pacific Corporation. The complaint had alleged that Mr. Suwyn's employment as
chief executive officer of L-P violated the terms of a previous employment
agreement with the plaintiff and sought an injunction prohibiting Mr. Suwyn from
continuing his employment with L-P for 18 months and other relief.
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, results of
operations or liquidity of L-P.
Contingency Reserves
- --------------------
The balance of contingency reserves, exclusive of the environmental
reserves discussed above, was $194.7 million and $209.9 million at December 31,
1997 and 1996. As L-P receives additional information regarding actual claim
rates and average claim amounts, L-P will monitor its estimated exposure and
adjust its accrual accordingly. The amounts ultimately paid for these
contingencies could differ materially from the amount currently recorded,
although no estimate of the timing or range of any potential adjustment can be
made at this time.
9. COMMITMENTS
L-P is obligated to purchase timber under certain cutting contracts
which extend to 2002. L-P's best estimate of its commitment at current contract
rates under these contracts is approximately $20.2 million for approximately 113
million board feet of timber.
Payments under all operating leases that were charged to expense during
1997, 1996, and 1995 were $17.5 million, $17.0 million and $10.7 million. Future
minimum rental payments under non-cancelable operating leases are not
significant.
- 43 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
10. SEGMENT INFORMATION
L-P operates in two major industry segments. The major products
included in each segment are detailed further in the "Product Information
Summary" in Item 1. Intersegment sales are chips transferred from company-owned
building products plants to company-owned pulp mills. All transfers are made at
prevailing market prices. Timber and related assets and capital expenditures for
such assets have not been allocated to the industry segments as these are a
prime source of raw materials for both segments. The cost of logs delivered to
the plants and residual fibers are included in the operating results of the
segments.
Export sales are primarily to customers in Asia and Europe. Information
about L-P's geographic segments is as follows:
<TABLE>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995
------------------------------------ ---- ---- ----
Total sales -- point of origin
U.S. $ 2,330 $ 2,389 $ 2,703
Canada and other 128 162 191
Intersegment sales to U.S. (55) (65) (51)
--------- --------- ---------
Total sales $ 2,403 $ 2,486 $ 2,843
========= ========= =========
Export sales (included above) $ 240 $ 268 $ 457
========= ========= =========
Profit (loss)
U.S. $ 39 $ 107 $ 353
Canada and other (48) (24) 37
Settlements, charges and other
unusual items, net (32) (350) (367)
General corporate expense and
interest, net (109) (60) (118)
--------- --------- ---------
Income (loss) before taxes and
minority interest $ (150) $ (327) $ (95)
========= ========= =========
Identifiable assets
U.S. $ 2,220 $ 2,195 $ 2,305
Canada 285 308 434
All other 73 86 66
--------- --------- ---------
Total assets $ 2,578 $ 2,589 $ 2,805
========= ========= =========
</TABLE>
- 44 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
Information about L-P's industry segments is as follows:
YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995
------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Total sales
Building products $ 2,280 $ 2,328 $ 2,535
Pulp 130 177 334
Intersegment sales to pulp (7) (19) (26)
--------- --------- ---------
Total sales $ 2,403 $ 2,486 $ 2,843
========= ========= =========
Profit (loss)
Building products $ 20 $ 174 $ 346
Pulp (29) (91) 44
Settlements, charges and
other unusual items, net (1) (32) (350) (367)
General corporate expense, net (80) (52) (121)
Interest, net (29) (8) 3
--------- --------- ---------
Income (loss) before taxes and
minority interest $ (150) $ (327) $ (95)
========= ========= =========
Identifiable assets
Building products $ 1,420 $ 1,346 $ 1,389
Pulp 294 341 457
Timber, timberlands, logging
equipment and roads 671 682 727
General corporate assets 193 220 232
--------- --------- ---------
Total assets $ 2,578 $ 2,589 $ 2,805
========= ========= =========
Depreciation, amortization and
cost of timber harvested
Building products $ 164 $ 164 $ 158
Pulp 17 25 36
Capital expenditures
Building products 145 203 286
Pulp 4 36 47
Timber, timberlands, logging
equipment and roads 63 38 69
</TABLE>
- --------------------------
(1) In 1997, of the net $32 million charge, a $122 million gain relates to
a gain from a settlement received by a subsidiary from the U.S.
Government and is not allocable to a segment, a $56 million gain
relates to timber and timberland sold and a $210 million charge relates
to building products.
In 1996, of the total $350 million charge, $171 million related to the
pulp segment, $134 million related to the building products segment
(including litigation costs related to building products) and $45
million was not allocable to either industry segment.
In 1995, the substantial majority of the $367 million charge related to
class action settlements concerning the Company's siding product and
therefore would be primarily allocated to building products.
- 45 -
<PAGE>
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS AND MANAGEMENT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------
The Board of Directors and Stockholders of Louisiana-Pacific Corporation:
We have audited the accompanying consolidated balance sheet of
Louisiana-Pacific Corporation and subsidiaries as of December 31, 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Louisiana-Pacific Corporation and
subsidiaries as of December 31, 1997, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
Portland, Oregon
February 6, 1998
- 46 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders and Board of Directors of Louisiana-Pacific Corporation:
We have audited the accompanying consolidated balance sheets of
Louisiana-Pacific Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the two years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Louisiana-Pacific
Corporation and subsidiaries as of December 31, 1996, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Portland, Oregon
January 31, 1997
- 47 -
<PAGE>
Report of Management
- --------------------
The management of Louisiana-Pacific Corporation has prepared the
consolidated financial statements and related financial data contained in this
Annual Financial Report. The financial statements were prepared in accordance
with generally accepted accounting principles appropriate in the circumstances
and by necessity include some amounts determined using management's best
judgments and estimates with appropriate consideration to materiality.
Management is responsible for the integrity and objectivity of the financial
statements and other financial data included in the report. To meet this
responsibility management maintains a system of internal accounting controls to
provide reasonable assurance that assets are safeguarded and that accounting
records are reliable. Management supports a program of internal audits and
internal accounting control reviews to provide assurance that the system is
operating effectively.
The Board of Directors pursues its responsibility for reported
financial information through its Audit Committee, composed of five outside
directors. The Audit Committee meets periodically with management, the internal
auditors and the independent public accountants to review the activities of
each.
MARK A. SUWYN CURTIS M. STEVENS
Chairman and Chief Executive Officer Vice President, Treasurer and
Chief Financial Officer
February 6, 1998
- 48 -
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
--------------------
A change in auditors was reported in the registrant's current report on
Form 8-K dated October 26, 1997.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Information regarding the directors of the registrant is incorporated
herein by reference to the material included under the caption "Item 1--Election
of Directors" and "General" in the definitive proxy statement filed by the
registrant for its 1998 annual meeting of stockholders (the "1998 Proxy
Statement"). Information regarding the executive officers of the registrant is
located in Part I of this report under the caption "Executive Officers of the
Registrant." Information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 is incorporated herein by reference to the
material included under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the 1998 Proxy Statement.
ITEM 11. Executive Compensation
----------------------
Information regarding executive compensation is incorporated herein by
reference to the material under the captions "Compensation Committee--Interlocks
and Insider Participation," "Compensation of Executive Officers," "Retirement
Benefits," "Directors' Compensation," and "Agreements with Executive Officers"
in the 1998 Proxy Statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------
Information regarding security ownership of certain beneficial owners
and management is incorporated herein by reference to the material under the
caption "Holders of Common Stock" in the 1998 Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions
----------------------------------------------
Information regarding management transactions is incorporated herein by
reference to the material under the captions "Compensation Committee--Interlocks
and Insider Participation" and "Management Transactions" in the 1998 Proxy
Statement.
- 49 -
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
A. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements are included in this report:
Consolidated Balance Sheets--December 31, 1997, and 1996.
Consolidated Statements of Income--years ended December 31, 1997, 1996, and
1995.
Consolidated Statements of Cash Flows--years ended December 31, 1997, 1996, and
1995.
Consolidated Statements of Stockholders' Equity--years ended December 31, 1997,
1996, and 1995.
Notes to Financial Statements.
Reports of Independent Public Accountants.
No financial statement schedules are required to be filed.
B. REPORTS ON FORM 8-K
The registrant filed a Form 8-K dated October 26, 1997, reporting a
change in auditors.
C. EXHIBITS
The exhibits filed as part of this report or incorporated by reference
herein are listed in the accompanying exhibit index. Each management contract or
compensatory plan or arrangement is identified in the index.
- 50 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Louisiana-Pacific Corporation, a Delaware corporation (the
"registrant"), has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 27, 1998
LOUISIANA-PACIFIC CORPORATION
(Registrant)
/s/ CURTIS M. STEVENS
Curtis M. Stevens
Vice President, Chief Financial
Officer and Treasurer
----------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date Signature and Title
- ---- -------------------
March 27, 1998 /s/ MARK A. SUWYN
------------------
Mark A. Suwyn
Chairman, Chief Executive Officer
and Director
(Principal Executive Officer)
March 27, 1998 /s/ CURTIS M. STEVENS
----------------------
Curtis M. Stevens
Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
March 27, 1998 /s/ RUSSELL S. PATTEE
----------------------
Russell S. Pattee
(Principal Accounting Officer)
- 51 -
<PAGE>
Date Signature and Title
- ---- -------------------
March 27, 1998 /s/ WILLIAM C. BROOKS
-----------------------------------
William C. Brooks
Director
March 27, 1998 /s/ ARCHIE W. DUNHAM
-----------------------------------
Archie W. Dunham
Director
March 27, 1998 /s/ PIERRE S. DU PONT IV
-----------------------------------
Pierre S. du Pont IV
Director
March 27, 1998 /s/ WILLIAM E. FLAHERTY
-----------------------------------
William E. Flaherty
Director
March 27, 1998 /s/ BONNIE G. HILL
-----------------------------------
Bonnie G. Hill
Director
March 27, 1998 /s/ DONALD R. KAYSER
-----------------------------------
Donald R. Kayser
Director
March 27, 1998 /s/ LEE C. SIMPSON
-------------------
Lee C. Simpson
Director
March 27, 1998 /s/ CHARLES E. YEAGER
----------------------
Charles E. Yeager
Director
- 52 -
<PAGE>
EXHIBIT INDEX
On written request, the registrant will furnish to any record holder or
beneficial holder of the registrant's common stock any exhibit to this report
upon the payment of a fee equal to the registrant's costs of copying such
exhibit plus postage. Any such request should be sent to: Ward Hubbell, Director
of Corporate Affairs, Louisiana-Pacific Corporation, 111 S.W. Fifth Avenue,
Portland, Oregon 97204.
Items identified with an asterisk (*) are management contracts or
compensatory plans or arrangements.
Exhibit Description of Exhibit
- ------- ----------------------
3.A Restated Certificate of Incorporation of the registrant as
amended to date. Incorporated by reference to Exhibit 3(a)
to the registrant's Form 10-Q report for the quarter ended
June 30, 1993.
3.B Bylaws of the registrant as amended July 29, 1997.
Incorporated by reference to Exhibit 3 to the registrant's
Form 10-Q report for the quarter ended June 30, 1997.
4.A.1 Rights Agreement as Restated as of February 3, 1991,
between the registrant and First Chicago Trust Company of
New York as Rights Agent, as amended by Amendment No. 1
dated as of July 28, 1995, and Amendment No. 2 dated as of
October 30, 1995. Incorporated by reference to Exhibit
4.A.1 to the registrant's Form 10-K report for 1996.
Pursuant to Item 601 (b)(4)(iii) of Regulation S-K, the
registrant is not filing certain instruments with respect
to its long-term debt because the amount authorized under
any such instrument does not exceed 10 percent of the total
consolidated assets of the registrant at December 31, 1997.
The registrant agrees to furnish a copy of any such
instrument to the Securities and Exchange Commission upon
request.
4.A.2 Credit Agreement dated as of January 31, 1997, among the
registrant, Louisiana-Pacific Canada Ltd., Bank of America
National Trust and Savings Association and the other
financial institutions party thereto. Incorporated by
reference to Exhibit 4.A.2 to the registrant's Form 10-K
report for 1996.
10.A 1984 Employee Stock Option Plan as amended. Incorporated by
reference to Exhibit 10.A to the registrant's Form 10-K
report for 1996.*
10.B 1991 Employee Stock Option Plan. Incorporated by reference
to Exhibit 10.B to the registrant's Form 10-K report for
1996.*
10.C 1992 Non-Employee Director Stock Option Plan and Related
Form of Option Agreement as amended February 1, 1997.*
10.D Non-Employee Directors' Deferred Compensation Plan
effective July 1, 1997.*
10.E(1) The registrant's Key Employee Restricted Stock Plan as
amended. Incorporated by reference to Exhibit 10.E(1) to
the registrant's Form 10-K report for 1996.*
- 53 -
<PAGE>
Exhibit Description of Exhibit
- ------- ----------------------
10.E(2) Form of Restricted Stock Award Agreement under Exhibit
10.E(1). Incorporated by reference to Exhibit 10.H(2) to
the registrant's Form 10-K report for 1992.*
10.F(1) 1997 Incentive Stock Award Plan. Incorporated by reference
to Exhibit 10 to the registrant's Form 10-Q report for the
quarter ended June 30, 1997.*
10.F(2) Form of Award Agreements for Non-Qualified Stock Options
and Performance Shares under the Louisiana-Pacific 1997
Incentive Stock Award Plan. Incorporated by reference to
Exhibit 10.F(2) to the registrant's Form 10-K report for
1996.*
10.G Annual Cash Incentive Award Plan effective March 1, 1997.
Incorporated by reference to Exhibit 10.F(3) to the
registrant's Form 10-K report for 1996.*
10.H The registrant's Supplemental Executive Retirement Plan
effective July 1, 1997.*
10.I Employment Agreement between the registrant and Mark A.
Suwyn dated January 2, 1996. Incorporated by reference to
Exhibit 10.L to the registrant's Form 10-K report for
1995.*
10.J Restricted Stock Award Agreement between the registrant and
Mark A. Suwyn dated January 31, 1996.*
10.K 1997 Cash Incentive Award for Mark A. Suwyn adopted March
11, 1997. Incorporated by reference to Exhibit 10.K to the
registrant's Form 10-K report for 1996.*
10.L Letter agreement dated April 19, 1996, with Michael D.
Hanna, with respect to attached employment agreement dated
January 15, 1995, between Mr. Hanna and Associated
Chemists, Inc. Incorporated by reference to Exhibit 10.L to
the registrant's Form 10-K report for 1996.*
10.M Executive Employment Agreement effective as of January 1,
1997, by and between the registrant and Karen D. Lundquist.
Incorporated by reference to Exhibit 10.M to the
registrant's Form 10-K report for 1996.*
10.N Letter agreement dated August 14, 1997, relating to the
employment of Gary C. Wilkerson with the registrant.*
10.0 Letter agreement dated July 16, 1997, relating to the
employment of Curtis M. Stevens with the registrant.*
10.P Executive Deferred Compensation Plan effective May 1,
1997.*
21 List of subsidiaries of the registrant.
23.A Consent of Arthur Andersen LLP.
23.B Consent of Deloitte & Touche LLP.
27 Financial data schedule.
- 54 -
LOUISIANA-PACIFIC CORPORATION
1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Restated as of February 1, 1997)
1. PURPOSE. The continued growth and success of Louisiana-Pacific
Corporation (the "Corporation") are dependent upon the efforts of members of the
Corporation's board of directors (the "Board of Directors"). Those members of
the Board of Directors who are not employees of Corporation or any of its
subsidiaries ("Non- Employee Directors") are not eligible to participate in the
stock option and other stock incentive plans maintained for employees of the
Corporation. The purpose of this 1992 Non-Employee Director Stock Option Plan
(the "Plan") is to provide an incentive to Non- Employee Directors to remain as
members of the Board of Directors and also to afford them the opportunity to
acquire, or increase, stock ownership in the Corporation in order that they may
have a direct proprietary interest in its success. Options granted under the
Plan shall be nonqualified options which are not intended to qualify as
incentive stock options under Section 422 of the Internal Revenue Code.
2. STOCK. The stock subject to options granted under the Plan shall be
shares of the Corporation's authorized but unissued, or reacquired, $1 par value
common stock ("Common Stock"). The total number of shares of Common Stock with
respect to which options may be granted shall not exceed in the aggregate
600,000, provided that such aggregate number of shares shall be subject to
adjustment in accordance with the provisions of paragraph 6(g).
In the event that any outstanding option under the Plan shall be
canceled or terminate or expire prior to the end of the period during which
options may be granted under the Plan, the shares of Common Stock allocable to
the unexercised portion of such option may be made the subject of additional
options granted under the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors which shall have full power and authority, subject to the provisions
of the Plan, to adopt, amend, and rescind rules and regulations for carrying out
the Plan. The interpretation and decision of the Board of Directors with regard
to any question arising under the Plan shall be final and conclusive. No member
of the Board of Directors shall be liable for any action taken or determination
made in good faith with
1
<PAGE>
respect to the Plan or to any options granted pursuant to the Plan.
4. ELIGIBILITY. The persons eligible to receive options under the Plan
are the Non-Employee Directors of the Corporation.
5. GRANT OF OPTIONS.
(a) INITIAL GRANT. Each person who is an Non-Employee Director on June
15, 1992, automatically shall be granted, as of June 15, 1992, an option to
purchase 22,500 shares of Common Stock, subject to the terms and conditions
described in paragraph 6.
(b) NEW NON-EMPLOYEE DIRECTORS. Each person who becomes a Non-Employee
Director after June 15, 1992, automatically shall be granted, as of the date
such person becomes a Non-Employee Director, an option to purchase 22,500 shares
of Common Stock (45,000 shares after May 18, 1993), subject to the terms and
conditions described in paragraph 6.
(c) SUBSEQUENT GRANTS. Each Non-Employee Director who has been granted
an option under paragraphs 5(a) or 5(b) who remains as a Non-Employee Director
on the fifth anniversary of the date such option was granted (the "Anniversary")
automatically shall be granted, as of such Anniversary, an option to purchase
45,000 shares of Common Stock, subject to the terms and condition described in
paragraph 6.
6. TERMS AND CONDITIONS OF OPTIONS. Each option granted pursuant to the
Plan shall be subject to the following terms and conditions:
(a) PAYMENT. Upon exercise of an option, in whole or in part, the
option price for shares to which the exercise relates may be made, at the
election of the optionee, either in cash or by delivering to the Corporation
shares of Common Stock having a Fair Market Value (as defined below) equal to
the option price, or any combination of cash and Common Stock having a combined
value equal to the option price. Shares of Common Stock may not be used in
payment or partial payment unless an option is being exercised for at least
2,000 shares. Payment in shares of Common Stock shall be made by delivering to
the Corporation certificates, duly endorsed for transfer, representing shares of
Common Stock having an aggregate Fair Market Value on the date of exercise equal
to that portion of the option price which is to be paid in Common Stock. The
Fair Market Value of a share of Common Stock on the date of exercise shall be
deemed to be the closing price per share of Common Stock on the New York Stock
Exchange on
2
<PAGE>
the date of exercise or, if no sale of Common Stock shall have been made on that
Exchange on that date, on the next preceding business day on which there was a
sale of such stock on that Exchange. Whenever payment of the option price would
require delivery of a fractional share, the optionee shall deliver the next
lower whole number of shares of Common Stock and a cash payment shall be made by
the optionee for the balance of the option price.
(b) OPTION PRICE. The option price for each option shall be the greater
of (i) 85 percent of the Fair Market Value on the date the option is granted, or
(ii) the book value per share as of the last day of the last calendar quarter
ending on or before the date the option is granted (the "Book Value"); provided,
however, that if the Fair Market Value per share is less than the Book Value per
share, the option price shall be the Fair Market Value per share.
(c) TERM OF OPTION. Each option shall expire ten years from the date
the option is granted, unless the option is terminated earlier in accordance
with the Plan.
(d) DATE OF EXERCISE. Unless an option is terminated or the time of its
exercisability is accelerated in accordance with the Plan, each option may be
exercised in whole or in part from time to time to purchase shares as follows:
Each option shall not be exercisable until the first anniversary
of the date the option was granted. On such first anniversary, the
option shall become exercisable as to 20 percent of the shares covered
by the option, and on each of the second through the fifth such
anniversaries, the option shall become exercisable as to an additional
20 percent of the shares covered by the option. However, no option
shall be exercisable in part with respect to a number of shares fewer
than 100.
(e) ACCELERATION OF EXERCISABILITY. Notwithstanding the limitations on
exercisability pursuant to paragraph 6(d), an option shall become immediately
and fully exercisable:
(i) In the event of the death of the optionee Non-Employee
Director; or
(ii) Upon the later of (A) the occurrence of a "Change in Control"
(as defined below) of the Corporation or (B) six months after the date
of grant; or
(iii) On the date an optionee Non-Employee Director retires
pursuant to Section 15 of the bylaws of
3
<PAGE>
the Corporation; provided, however, that this paragraph 6(e)(iii) shall only
apply to an additional 20 percent of the shares covered by such Non-Employee
Director's option.
For purposes of the Plan, a change of control shall be deemed to occur if (x)
any person or group, together with its affiliates and associates (other than the
Corporation or any of its subsidiaries or employee benefit plans), acquires
direct or indirect beneficial ownership of 20 percent or more of the then
outstanding shares of Common Stock or commences a tender or exchange offer for
30 percent or more of the then outstanding shares of Common Stock, or (y) the
Corporation is to be liquidated or dissolved. The terms "group," "affiliates,"
"associates" and "beneficial ownership" shall have the meanings ascribed to them
in the rules and regulations promulgated under the Exchange Act.
(f) CONTINUATION AS A DIRECTOR. Notwithstanding the option term
provided in paragraph 6(c), in the event that an optionee Non-Employee Director
ceases to be a member of the Board of Directors:
(i) By reason of death, the estate, personal representative, or
beneficiary of the Non-Employee Director shall have the right to
exercise the option at any time within 12 months from the date of death
and the option shall terminate as of the last day of such 12-month
period; or
(ii) By reason of the retirement of an optionee Non-Employee
Director pursuant to Section 15 of the bylaws of the Corporation, the
Non-Employee Director's option shall remain exercisable, to the extent
it had become exercisable on the date of said retirement, for a period
of 24 months following the date of said retirement and the option shall
terminate as of the last day of such 24-month period; or
(iii) For any other reason, the Non-Employee Director's option
shall remain exercisable, to the extent it had become exercisable on
the date the optionee ceased to be a member of the Board of Directors
(the "Termination Date"), for a period of three months following the
Termination Date and the option shall terminate as of the last day of
such three-month period.
(g) RECAPITALIZATION. In the event of any change in capitalization
which affects the Common Stock, whether by stock dividend, stock distribution,
stock split, subdivision or
4
<PAGE>
combination of shares, merger or consolidation or otherwise, such proportionate
adjustments, if any, as the Board of Directors in its good faith discretion
deems appropriate to reflect such change shall be made with respect to the total
number of shares of Common Stock in respect of which options may be granted
under the Plan, the number of shares covered by each outstanding option, and the
exercise price per share under each such option; however, any fractional shares
resulting from any such adjustment shall be eliminated.
A dissolution of the Corporation, or a merger or consolidation in which
the Corporation is not the resulting or surviving corporation (or in which the
Corporation is the resulting or surviving corporation but becomes a subsidiary
of another corporation), shall cause every option outstanding hereunder to
terminate concurrently with consummation of any such dissolution, merger or
consolidation, except that the resulting or surviving corporation (or, in the
event the Corporation is the resulting or surviving corporation but has become a
subsidiary of another corporation, such other corporation) may, in its absolute
and uncontrolled discretion, tender an option or options to purchase its shares
on terms and conditions, both as to number of shares and otherwise, which will
substantially preserve the rights and benefits of any option then outstanding
hereunder.
In the event of a change in the Corporation's presently authorized
Common Stock which is limited to a change of all its presently authorized shares
with par value into the same number of shares with a different par value or into
the same number of shares without par value, the shares resulting from any such
change shall be deemed to be Common Stock within the meaning of this Plan.
(h) TRANSFERABILITY. No option shall be assignable or transferable
other than by will or the laws of descent and distribution. During an optionee's
lifetime, only he or his guardian or legal representative may exercise any such
option or right.
(i) RIGHTS AS A STOCKHOLDER. An optionee Non-Employee Director shall
have no rights as a stockholder with respect to shares covered by the option
until the date of the issuance or transfer of the shares to him and only after
such shares are fully paid. Except as provided in paragraph 6(g), no adjustment
shall be made for dividends or other rights for which the record date is prior
to the date of such issuance or transfer.
(j) PROVISION FOR TAXES. It shall be a condition to the Corporation's
obligation to issue or reissue shares of Common Stock upon exercise of any
option that the optionee pay, or make provision satisfactory to the Corporation
for payment of, any
5
<PAGE>
federal and state income and other taxes which the Corporation is obligated to
withhold or collect with respect to the issue or reissue of such shares.
(k) OPTION AGREEMENT. Each option shall be evidenced by an option
agreement substantially in the form attached to the Plan as Appendix A.
7. EFFECTIVE DATE AND TERM OF PLAN. Options shall be granted pursuant
to the Plan from time to time beginning June 15, 1992, the date of adoption of
the Plan by the Board of Directors. The Plan shall continue in effect until
options have been granted covering all available shares of Common Stock as
specified in paragraph 2 or until the Plan is terminated by the Board of
Directors, whichever is earlier, except as provided below.
The Plan shall be subject to approval by the affirmative vote of the
holders of at least a majority of the securities of the Corporation present, or
represented by proxy, and entitled to vote at a meeting (to be duly held in
accordance with the applicable laws of the state of Delaware) for which proxies
are solicited substantially in accordance with rules and regulations, if any, as
are then in effect under Section 14(a) of the Exchange Act, which approval must
occur within twelve months after said date of adoption of the Plan by the Board
of Directors. Options granted pursuant to the Plan prior to such approval shall
be subject to such approval.
8. AMENDMENT OR TERMINATION. The Board of Directors may alter, amend,
suspend or terminate the Plan at any time. However, the Plan shall not be
amended more often than once every six months other than amendments to comport
with changes in income tax laws or the requirements of Rule 16b-3 under the
Exchange Act. Amendments to the Plan shall be subject to stockholder approval to
the extent required to comply with any exemption to the short swing profit
provisions of Section 16(b) of the Exchange Act pursuant to rules and
regulations promulgated thereunder or with the rules and regulations of any
securities exchange on which the Common Stock is listed. Expiration or
termination of the Plan shall not affect outstanding options except as provided
in paragraph 7. The Board of Directors may also modify the terms and conditions
of any outstanding option, subject to the consent of the optionee and consistent
with the provisions of the Plan.
9. APPLICATION OF PROCEEDS. The proceeds received by the Corporation
from the sale of Common Stock pursuant to options shall be available for general
corporate purposes.
6
<PAGE>
10. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
impose no obligation upon the optionee to exercise the same, in whole or in
part.
11. RESTRICTIONS ON EXERCISE. Any provision of the Plan to the contrary
notwithstanding, no option granted pursuant to the Plan shall be exercisable at
any time, in whole or in part, (i)prior to the shares of Common Stock subject to
the option being authorized for listing on the New York Stock Exchange, or
(ii)if issuance and delivery of the shares of Common Stock subject to the option
would be in violation of any applicable laws or regulations.
7
LOUISIANA-PACIFIC CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
Effective July 1, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
--------
ARTICLE I--PURPOSE; EFFECTIVE DATE.........................................1
ARTICLE II--DEFINITIONS....................................................1
2.1 Account..........................................................1
2.2 Acquiring Person.................................................1
2.3 Actuarial Equivalent.............................................2
2.4 Beneficiary......................................................2
2.5 Board............................................................2
2.6 Change in Control................................................2
2.7 Committee........................................................3
2.8 Compensation.....................................................3
2.9 Corporation......................................................3
2.10 Deferral Commitment..............................................3
2.11 Deferral Period..................................................4
2.12 Determination Date...............................................4
2.13 Elective Deferred Compensation...................................4
2.14 Financial Hardship...............................................4
2.15 Interest.........................................................4
2.16 Participant......................................................4
2.17 Participation Agreement..........................................5
2.18 Plan Benefit.....................................................5
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS........................5
3.1 Eligibility and Participation....................................5
3.2 Form of Deferral.................................................5
3.3 Elections for Part Years.........................................5
3.4 Limitation on Deferral...........................................5
3.5 Modification of Deferral Commitment..............................5
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT..................................6
4.1 Accounts.........................................................6
4.2 Initial Account Balance..........................................6
4.3 Elective Deferred Compensation...................................6
4.4 Interest.........................................................6
4.5 Determination of Accounts........................................6
4.6 Vesting of Accounts..............................................6
4.7 Statement of Accounts............................................7
(i)
<PAGE>
TABLE OF CONTENTS
PAGE
--------
ARTICLE V--PLAN BENEFITS...................................................7
5.1 Plan Benefit.....................................................7
5.2 Death Benefit....................................................7
5.3 In-Service Withdrawals...........................................7
5.4 Hardship Distributions...........................................7
5.5 Form of Benefit Payment..........................................8
5.6 Small Accounts...................................................8
5.7 Accelerated Distribution.........................................8
5.8 Payment to Guardian..............................................8
ARTICLE VI--BENEFICIARY DESIGNATION........................................9
6.1 Beneficiary Designation..........................................9
6.2 Changing Beneficiary.............................................9
6.3 Community Property...............................................9
6.4 No Beneficiary Designation......................................10
6.5 Effect of Payment...............................................10
ARTICLE VII--ADMINISTRATION...............................................10
7.1 Committee; Duties...............................................10
7.2 Agents..........................................................10
7.3 Binding Effect of Decisions.....................................10
7.4 Indemnity of Committee..........................................11
ARTICLE VIII--CLAIMS PROCEDURE............................................11
8.1 Claim...........................................................11
8.2 Denial of Claim.................................................11
8.3 Review of Claim.................................................11
8.4 Final Decision..................................................11
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN.............................11
9.1 Amendment.......................................................11
9.2 Corporation's Right to Terminate................................12
(ii)
<PAGE>
TABLE OF CONTENTS
PAGE
--------
ARTICLE X--MISCELLANEOUS..................................................12
10.1 Unfunded Plan..................................................12
10.2 Unsecured General Creditor.....................................13
10.3 Trust Fund.....................................................13
10.4 Nonassignability...............................................13
10.5 Not a Contract of Future Service on Board......................13
10.6 Protective Provisions..........................................13
10.7 Terms..........................................................13
10.8 Captions.......................................................14
10.9 Governing Law; Arbitration.....................................14
10.10 Validity.......................................................14
10.11 Notice.........................................................14
10.12 Successors.....................................................14
(iii)
<PAGE>
LOUISIANA-PACIFIC CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
ARTICLE I--PURPOSE; EFFECTIVE DATE
The purpose of this Directors' Deferred Compensation Plan (the"Plan")
is to provide current tax planning opportunities as well as supplemental funds
for retirement or death for Directors of Louisiana- Pacific Corporation (the
"Corporation"). It is intended that the Plan will aid in attracting and
retaining Directors of exceptional ability by providing them with these
benefits. The Plan shall be effective as of July 1, 1997. The terms of this Plan
supersede and replace the terms of the Louisiana-Pacific Corporation Director's
Deferred Compensation Plan dated August 1, 1985 ("Prior Plan"), and, effective
on and after July 1, 1997, the amount of any Director's deferred account under
the Prior Plan, computed as of June 30, 1997, shall be subject to and governed
by the terms of this Plan.
ARTICLE II--DEFINITIONS
For the purposes of this Plan, the following terms shall have the
meanings indicated unless the context clearly indicates otherwise:
2.1 Account
"Account" means an Account maintained by the Corporation in accordance
with Article IV with respect to any deferral of Compensation pursuant to the
Plan. A Participant's Account shall be utilized solely as a device for the
determination and measurement of the amounts to be paid to the Participant
pursuant to the Plan. A Participant's Account shall not constitute or be treated
as a trust fund of any kind.
2.2 Acquiring Person
"Acquiring Person" means any person or related person or related
persons which constitute a "group" for purposes of Section 13(d) and Rule 13d-5
under the Securities Exchange Act of 1934 as amended (the "Exchange Act");
provided, however, that the term Acquiring Person shall not include:
(a) Corporation or any of its Subsidiaries;
(b) Any employee benefit plan or related trust of Corporation or
any of its Subsidiaries;
(c) Any entity holding voting capital stock of Corporation for or
pursuant to the terms of any such employee benefit plan; or
(d) Any person or group solely because such person or group has
voting power with respect to capital stock of Corporation arising from
a revocable proxy or consent given in response to a public proxy or
consent solicitation made pursuant to the Exchange Act.
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2.3 Actuarial Equivalent
"Actuarial Equivalent" means equivalence in value between two (2) or
more forms and/or times of payment based on a determination by an actuary chosen
by the Corporation, using sound actuarial assumptions at the time of such
determination.
2.4 Beneficiary
"Beneficiary" means the person, persons or entity entitled under
Article VI to receive any Plan benefits payable after a Participant's death.
2.5 Board
"Board" means the Board of Directors of the Corporation.
2.6 Change in Control
A "Change in Control" shall occur upon:
(a) The acquisition by any Acquiring Person of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of the then
outstanding Voting Securities; provided, however, that for purposes of
this paragraph (a), the following acquisitions will not constitute a
Change in Control:
(i) Any acquisition directly from Corporation;
(ii) Any acquisition by Corporation;
(iii) Any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Corporation or any
corporation controlled by Corporation; or
(iv) Any acquisition by any corporation pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of
paragraph (c) of this definition of Change in Control; or
(b) During any period of twelve (12) consecutive calendar months,
individuals who at the beginning of such period constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual who
becomes a director during the period whose election, or nomination for
election, by Corporation's shareholders was approved by vote of at
least a majority of the directors then constituting the Incumbent Board
will be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all of the assets of
Corporation (a "Business Combination") in each case, unless, following
such Business Combination:
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(i) All or substantially all of the individuals and entities
who were the beneficial owners of the Voting Securities outstanding
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50%) of, respectively,
the then outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns Corporation or all or substantially all of Corporation's assets
either directly or through one (1) or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination, of the Voting Securities;
(ii) No person (excluding any employee benefit plan, or
related trust, of Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, twenty
percent (20%) or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination; and
(iii) At least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such
Business Combination;
(d) Approval by the shareholders of Corporation of any plan or
proposal for the liquidation or dissolution of Corporation.
2.7 Committee
"Committee" means the Committee appointed by the Chief Executive
Officer to administer the Plan pursuant to Article VII.
2.8 Compensation
"Compensation" means Board and meeting fees payable to a Participant
during the calendar year. Compensation does not include expense reimbursements,
or any form of noncash compensation or benefits.
2.9 Corporation
"Corporation" means Louisiana-Pacific Corporation, a Delaware
corporation, or any successor to the business thereof.
2.10 Deferral Commitment
"Deferral Commitment" means a Deferral Commitment made by a Participant
pursuant to Article III and for which a Participation Agreement has been
submitted by the Participant to the Committee.
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2.11 Deferral Period
"Deferral Period" means the period over which a Participant has elected
to defer a portion of his or her Compensation. The Deferral Period shall be one
(1) calendar year. The initial Deferral Period shall be from July 1, 1997
through December 31, 1997. The Deferral Period may be modified pursuant to
Section 3.3 or Section 3.5.
2.12 Determination Date
"Determination Date" means the last day of each calendar month.
2.13 Elective Deferred Compensation
"Elective Deferred Compensation" means the amount of Compensation that
a Participant elects to defer pursuant to a Deferral Commitment.
2.14 Financial Hardship
"Financial Hardship" means severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a dependent (as defined in Section 152(a) of the Internal Revenue Code) of
the Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will
constitute an unforeseeable emergency will depend upon the facts of each case,
but in any case, payment may not be made to the extent that such hardship is or
may be relieved:
(a) Through reimbursement or compensation by insurance or
otherwise;
(b) By liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial
hardship;
(c) By cessation of deferrals under the Plan;
(d) By borrowing from commercial sources on reasonable commercial
terms.
2.15 Interest
"Interest" on a Determination Date shall be equal to the monthly
equivalent of the annual yield plus two (2) percentage points of the Moody's
Average Corporate Bond Yield Index for the preceding calendar month as published
by Moody's Investor Service, Inc. (or any successor thereto) or, if such index
is no longer published, a substantially similar index selected by the Board.
2.16 Participant
"Participant" means any individual who is participating or has
participated in the Plan as provided in Article III.
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2.17 Participation Agreement
"Participation Agreement" means the agreement submitted by a
Participant to the Committee prior to the beginning of the Deferral Period, with
respect to one or more Deferral Commitments made for such Deferral Period.
2.18 Plan Benefit
"Plan Benefit" means the benefit payable to a Participant as calculated
in Article V.
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 Eligibility and Participation
(a) ELIGIBILITY. Eligibility to participate in the Plan shall be
limited to the Directors of the Corporation.
(b) PARTICIPATION. An eligible Director who elects to participate
in the Plan with respect to any Deferral Period must submit a
Participation Agreement to the Committee prior to the Deferral Period.
(c) PART-YEAR PARTICIPATION. In the event that a Director first
becomes eligible to participate during a Deferral Period, a
Participation Agreement must be submitted to the Committee no later
than thirty (30) days following notification of the Director of
eligibility to participate. Such Participation Agreement shall be
effective only with regard to Compensation earned or payable following
the submission of the Participation Agreement to the Committee.
3.2 Form of Deferral
DEFERRAL COMMITMENT. A Participant may elect to defer any portion of
his or her compensation for the Deferral Period. The amount to be deferred shall
be stated as a percentage or dollar amount and may not be less than two thousand
four hundred dollars ($2,400) per year.
3.3 Elections for Part Years
In the event a Director becomes eligible to participate in the Plan at
any time other than January 1 of any calendar year, the amount which must be
completed under the appropriate minimum Deferral Commitment stated in Section
3.2 during the initial partial year of participation shall be the pro-rata
portion based upon complete months left in the initial calendar year.
3.4 Limitation of Deferral
A Participant may defer up to one hundred percent (100%) of the
Participant's Compensation. However, the Committee may impose another maximum
deferral amount or increase the minimum deferral amount under Section 3.2 from
time to time by giving written notice to all Participants, provided, however,
that no such changes may affect a Deferral Commitment made prior to the
Committee's action.
3.5 Modification of Deferral Commitment
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A Deferral Commitment shall be irrevocable except that the Committee
may permit a Participant to reduce the amount to be deferred, or waive the
remainder of the Deferral Commitment, upon a finding that the Participant has
suffered a Financial Hardship. If a Participant ceases receiving Compensation
during a Deferral Period due to Disability, the Deferral Commitment shall cease
at that time.
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT
4.1 Accounts
For recordkeeping purposes only, an Account shall be maintained for
each Participant.
4.2 Initial Account Balance
Each Participant shall be deemed to have an initial balance in his
Account equal to the balance (if any) in the Prior Plan as of June 30, 1997.
4.3 Elective Deferred Compensation
A Participant's Elective Deferred Compensation shall be credited to the
Participant's Account as the corresponding nondeferred portion of the
Compensation becomes or would have become payable. Any withholding of taxes or
other amounts with respect to deferred Compensation that is required by state,
federal, or local law shall be withheld from the Participant's nondeferred
Compensation to the maximum extent possible with any excess being withheld from
the Participant's Account.
4.4 Interest
The Accounts shall be credited monthly with the appropriate Interest
earned based on the interest rates specified in Section 2.15. Interest earned
shall be calculated as of each Determination Date based upon the average daily
balance of the Account since the preceding Determination Date and shall be
credited to the Participant's Accounts at that time.
4.5 Determination of Accounts
Each Participant's Account as of each Determination Date shall consist
of the balance of the Participant's Accounts as of the immediately preceding
Determination Date, plus the Participant's Elective Deferred Compensation
credited, and the appropriate Interest earned, minus the amount of any
withdrawals or distributions made since the immediately preceding Determination
Date.
4.6 Vesting of Accounts
Each Participant shall be one hundred percent (100%) vested at all
times in the amount of Compensation elected to be deferred under the Plan and
Interest thereon.
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4.7 Statement of Accounts
The Committee shall submit to each Participant, within one hundred
twenty (120) days after the close of each calendar year and at such other time
as determined by the Committee, a statement setting forth the balance to the
credit of each Account maintained for a Participant.
ARTICLE V--PLAN BENEFITS
5.1 Plan Benefit
If a Participant terminates service on the Board for any reason other
than death, the Corporation shall pay a Plan benefit equal to the Participant's
Account as determined in accordance with Article IV.
5.2 Death Benefit
Upon the death of a Participant, the Corporation shall pay to the
Participant's Beneficiary an amount determined as follows:
(a) POSTTERMINATION. If the Participant dies after termination of
service on the Board, the amount payable shall be equal to the
remaining unpaid balance of the Participant's Account.
(b) PRETERMINATION. If the Participant dies prior to termination
of service, the amount payable shall be the Participant's Account
balance.
5.3 In-Service Withdrawals
Participants shall be permitted to elect to withdraw amounts from their
Account subject to the following restrictions:
(a) ELECTION TO WITHDRAW. An election to make an in-service
withdrawal must be made at the same time the Participant enters into a
Participation Agreement for a Deferral Commitment. The date of the
in-service withdrawal cannot be earlier than five (5) years after the
date the Deferral Period begins under the Deferral Commitment. Such
election may be modified no later than the end of the calendar year two
(2) calendar years prior to the calendar year the Participant was
scheduled to receive the benefits.
(b) AMOUNT OF WITHDRAWAL. The amount which a Participant can elect
to withdraw with respect to any Deferral Commitment shall be limited to
one hundred percent (100%) of the amount of such Deferral Commitment
plus interest.
(c) FORM OF IN-SERVICE WITHDRAWAL PAYMENT. The amount elected to
be withdrawn shall be paid in a lump sum unless the Committee approves
an alternative form of payment at the time elected by the Participant
in the Participation Agreement wherein he or she elected the in-service
withdrawal.
5.4 Hardship Distributions
Upon a finding that a Participant has suffered a Financial Hardship or
a Disability, the Committee may, in its sole discretion, make distributions from
the Participant's Account prior to the time specified for
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<PAGE>
payment of benefits under the Plan. The amount of such distribution shall be
limited to the amount reasonably necessary to meet the Participant's
requirements during the Financial Hardship or Disability.
5.5 Form of Benefit Payment
(a) All Plan Benefits other than In-Service Withdrawals or
Hardship Distributions shall be paid in the form selected by the
Participant at the time of the Deferral Commitment from among the
following alternatives:
(i) Lump sum payment
(ii) Substantially equal annual installments of the Account
and Interest amortized over a period of five (5) years
(iii) Substantially equal annual installments of the Account
and Interest amortized over a period of ten (10) years
(iv) Substantially equal annual installments of the Account
and Interest amortized over a period of fifteen (15) years
(v) Any other method that is the Actuarial Equivalent of
the Participant's appropriate Account balance
(b) Payment shall commence as elected by the Participant, which
shall be either within sixty-five (65) days of termination or in
January following the Participant's termination.
(c) The Participant may modify the form or timing of benefit
payment as long as such modification is made before the end of the
calendar year two (2) calendar years prior to when the Participant's
benefits were scheduled to commence had the modification not been made.
5.6 Small Accounts
Notwithstanding Section 5.5(a), if a Participant's Account is less than
twenty thousand dollars ($20,000), the Committee may, in its sole discretion,
pay the Participant in a lump sum.
5.7 Accelerated Distribution
Notwithstanding any other provision of the Plan, at any time, a
Participant shall be entitled to receive, upon written request to the Committee,
a lump-sum distribution equal to ninety percent (90%) of the vested Account
balance as of the Determination Date immediately preceding the date on which the
Committee receives the written request. The remaining balance shall be forfeited
by the Participant and the Participant will not be allowed to participate in the
Plan in the future. The amount payable under this section shall be paid in a
lump sum within thirty (30) days following the receipt of the notice by the
Committee from the Participant.
5.8 Payment to Guardian
If a Plan benefit is payable to a minor or a person declared
incompetent or to a person incapable of handling the disposition of his or her
property, the Committee may direct payment of such Plan Benefit to
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<PAGE>
the guardian, legal representative, or person having the care and custody of
such minor, incompetent, or person. The Committee may require proof of
incompetency, minority, incapacity or guardianship as it may deem appropriate
prior to distribution of the Plan Benefit. Such distribution shall completely
discharge the Committee from all liability with respect to such benefit.
ARTICLE VI--BENEFICIARY DESIGNATION
6.1 Beneficiary Designation
Subject to Section 6.3, each Participant shall have the right, at any
time, to designate one or more persons or an entity as Beneficiary (both primary
as well as secondary) to whom benefits under the Plan shall be paid in the event
of Participant's death prior to complete distribution of the Participant's
Account. Each Beneficiary designation shall be in a written form prescribed by
the Committee and shall be effective only when filed with the Committee during
the Participant's lifetime.
6.2 Changing Beneficiary
Subject to Section 6.3, any Beneficiary designation may be changed by a
Participant without the consent of the previously named Beneficiary by the
filing of a new designation with the Committee. The filing of a new designation
shall cancel all designations previously filed. If a Participant's Compensation
is community property, any Beneficiary designation shall be valid or effective
only as permitted by applicable law.
6.3 Community Property
If the Participant resides in a community property state, the following
rules shall apply:
(a) Designation by a married Participant of a Beneficiary other
than the Participant's spouse shall not be effective unless the spouse
executes a written consent that acknowledges the effect of the
designation, or it is established the consent cannot be obtained
because the spouse cannot be located.
(b) A married Participant's Beneficiary designation may be
changed by a Participant with the consent of the Participant's spouse
as provided for in Section 6.3(a) by the filing of a new designation
with the Committee.
(c) If the Participant's marital status changes after the
Participant has designated a Beneficiary, the following shall apply:
(i) If the Participant is married at the time of death but
was unmarried when the designation was made, the designation shall be
void unless the spouse has consented to it in the manner prescribed in
Section 6.3(a).
(ii) If the Participant is unmarried at the time of death but
was married when the designation was made:
a) The designation shall be void if the spouse was named
as Beneficiary unless Participant had submitted a change of
beneficiary listing the former spouse as the beneficiary.
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<PAGE>
b) The designation shall remain valid if a nonspouse
Beneficiary was named.
(iii)If the Participant was married when the designation was
made and is married to a different spouse at death, the designation
shall be void unless the new spouse has consented to it in the manner
prescribed above.
6.4 No Beneficiary Designation
In the absence of an effective Beneficiary Designation, or if all
designated Beneficiaries predecease the Participant or dies prior to complete
distribution of the Participant's benefits, then the Participant's designated
Beneficiary shall be deemed to be the person in the first of the following
classes in which there is a survivor:
(a) The surviving spouse;
(b) The Participant's children, except that if any of the children
predeceases the Participant but leaves issue surviving, then such issue
shall take by right of representation the share the parent would have
taken if living;
(c) The Participant's estate.
6.5 Effect of Payment
The payment to the deemed Beneficiary shall completely discharge the
Corporation's obligations under the Plan.
ARTICLE VII--ADMINISTRATION
7.1 Committee; Duties
The Plan shall be administered by the Committee, which shall consist of
not less than three (3) persons appointed by the Chief Executive Officer and
which may include the CEO as a member. The Committee shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and all questions,
including interpretations of the Plan, as may arise in connection with the Plan.
A majority vote of the Committee members shall control any decision. Members of
the Committee may be Participants under the Plan.
7.2 Agents
The Committee may, from time to time, employ other agents and delegate
to them such administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Corporation.
7.3 Binding Effect of Decisions
The decision or action of the Committee with respect to any question
arising out of or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated hereunder
shall be final, conclusive and binding upon all persons having any interest in
the Plan.
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7.4 Indemnity of Committee
The Corporation shall indemnify and hold harmless the members of the
Committee against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to the Plan, except in the case
of gross negligence or willful misconduct.
ARTICLE VIII--CLAIMS PROCEDURE
8.1 Claim
Any person claiming a benefit, requesting an interpretation or ruling
under the Plan, or requesting information under the Plan shall present the
request in writing to the Committee, which shall respond in writing as soon as
practicable.
8.2 Denial of Claim
If the claim or request is denied, the written notice of denial shall
state:
(a) The reasons for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
8.3 Review of Claim
Any person whose claim or request is denied or who has not received a
response within thirty (30) days may request review by notice given in writing
to the Committee. The claim or request shall be reviewed by the Committee which
may, but shall not be required to, grant the claimant a hearing. On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.
8.4 Final Decision
The decision on review shall normally be made within sixty (60) days.
If an extension of time is required for a hearing or other special
circumstances, the claimant shall be notified and the time limit shall be one
hundred twenty (120) days. The decision shall be in writing and shall state the
reasons and the relevant Plan provisions. All decisions on review shall be final
and bind all parties concerned.
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment
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The Corporation may at any time amend the Plan in whole or in part;
provided, however, that any such amendment that would materially increase the
benefits provided under the Plan shall be subject to the prior approval of the
Board. Provided, further, that no amendment shall be effective to decrease or
restrict the amount accrued to the date of Amendment in any Account maintained
under the Plan. Changes in the definition of "Interest" shall be subject to the
following restrictions:
(a) NOTICE. A change shall not become effective before the first
day of the calendar year which follows the adoption of the amendment
and at least thirty (30) days written notice of the amendment to the
Participant.
(b) CHANGE IN CONTROL. Any change in the definition of Interest
after a Change in Control shall apply only to those amounts credited to
the Participant's Account as a result of Deferral Commitments made
after the Change in Control.
9.2 Corporation's Right to Terminate
The Corporation may at any time partially or completely terminate the
Plan if, in its judgment, the tax, accounting or other effects of the
continuance of the Plan, or potential payments thereunder would not be in the
best interests of the Corporation.
(a) PARTIAL TERMINATION. The Corporation may partially terminate
the Plan by instructing the Committee not to accept any additional
Deferral Commitments. In the event of such a Partial Termination, the
Plan shall continue to operate and be effective with regard to Deferral
Commitments entered into prior to the effective date of such Partial
Termination.
(b) COMPLETE TERMINATION. The Corporation may completely terminate
the Plan by instructing the Committee not to accept any additional
Deferral Commitments, and by terminating all ongoing Deferral
Commitments. In the event of Complete Termination, the Plan shall cease
to operate and the Corporation shall pay out to each Participant their
Account as if the Participant had terminated service as of the
effective date of the Complete Termination. Payments shall be made in
equal annual installments over the period listed below, based on the
Account balance:
RETIREMENT ACCOUNT BALANCE PAYOUT PERIOD
-----------------------------------------------------------------------
Less than $10,000 1 Year
$10,000 but less than $50,000 3 Years
More than $50,000 5 Years
=======================================================================
ARTICLE X--MISCELLANEOUS
10.1 Unfunded Plan
The Plan is intended to be an unfunded plan maintained solely for
Directors and is not an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and as such is not
intended to be covered by ERISA. In the event of such termination, all ongoing
Deferral Commitments shall terminate, no additional Deferral Commitments will be
accepted by the Committee, and the amount of each Participant's vested Account
balance shall be distributed to such Participant at such time and in such manner
as the Committee, in its sole discretion, determines.
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10.2 Unsecured General Creditor
In the event of Corporation's insolvency, Participants and their
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of the Corporation, nor
shall they be Beneficiaries of, or have any rights, claims or interests in any
life insurance policies, annuity contracts or the proceeds therefrom owned or
which may be acquired by the Corporation. In that event, any and all of the
Corporation's assets and policies shall be, and remain, the general, unpledged,
unrestricted assets of the Corporation. The Corporation's obligation under the
Plan shall be that of an unfunded and unsecured promise of the Corporation to
pay money in the future.
10.3 Trust Fund
The Corporation shall be responsible for the payment of all benefits
provided under the Plan. At its discretion, the Corporation may establish one or
more trusts, with such trustees as the Board may approve, for the purpose of
providing for the payment of such benefits. Such trust or trusts may be
irrevocable, but the assets thereof shall be subject to the claims of the
Corporation's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Corporation shall have no further
obligation with respect thereto, but to the extent not so paid, such benefits
shall remain the obligation of, and shall be paid by, the Corporation.
10.4 Nonassignability
Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate or convey in advance of actual receipt the
amounts, if any, payable hereunder, or any part thereof, which are, and all
rights to which are, expressly declared to be unassignable and nontransferable.
No part of the amounts payable shall, prior to actual payment, be subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.
10.5 Not a Contract of Future Service on Board
The terms and conditions of the Plan shall not be deemed to constitute
a contract of future service between the Corporation and the Participant, and
the Participant (or his or her Beneficiary) shall have no rights against the
Corporation except as may otherwise be specifically provided herein. Moreover,
nothing in the Plan shall be deemed to give a Participant the right to be
retained in the service of the Corporation.
10.6 Protective Provisions
A Participant will cooperate with the Corporation by furnishing any and
all information requested by the Corporation, in order to facilitate the payment
of benefits hereunder, and by taking such physical examinations as the
Corporation may deem necessary and taking such other action as may be requested
by the Corporation.
10.7 Terms
Whenever any words are used herein in the masculine, they shall be
construed as though they were
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used in the feminine in all cases where they would so apply; and wherever any
words are used herein in the singular or in the plural, they shall be construed
as though they were used in the plural or the singular, as the case may be, in
all cases where they would so apply.
10.8 Captions
The captions of the articles, sections and paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or construction
of any of its provisions.
10.9 Governing Law; Arbitration
The provisions of the Plan shall be construed and interpreted according
to the laws of the State of Oregon. Any dispute or claim that arises out of or
that relates to the Plan or to the interpretation, breach, or enforcement of the
Plan, must be resolved by mandatory arbitration in accordance with the then
effective arbitration rules of Arbitration Service of Portland, Inc., and any
judgment upon the award rendered pursuant to such arbitration may be entered in
any court having jurisdiction thereof
10.10 Validity
In case any provision of the Plan shall be held illegal or invalid for
any reason, said illegality or invalidity shall not affect the remaining parts
hereof, but the Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
10.11 Notice
Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, to any member of the Committee or the Secretary of
the Corporation. Such notice shall be deemed given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
10.12 Successors
The provisions of the Plan shall bind and inure to the benefit of the
Corporation and its successors and assigns. The term successors as used herein
shall include any corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or substantially all of
the business and assets of the Corporation, and successors of any such
corporation or other business entity.
LOUISIANA-PACIFIC CORPORATION
By: /s/ Mark A. Suwyn
----------------------------------------
Chairman and Chief Executive Officer
By: /s/ Anton C. Kirchhof
----------------------------------------
Secretary
Dated: March 13, 1998
----------------------------------------
PAGE 14 - DIRECTORS' DEFERRED COMPENSATION PLAN
LOUISIANA-PACIFIC CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective July 1, 1997
<PAGE>
TABLE OF CONTENTS PAGE
ARTICLE I--PURPOSE; EFFECTIVE DATE.............................................1
ARTICLE II--DEFINITIONS........................................................1
2.1 Acquiring Person ..........................................................1
2.2 Actuarial Equivalent ......................................................1
2.3 Beneficiary ...............................................................1
2.4 Change in Control..........................................................2
2.5 Committee..................................................................3
2.6 Compensation...............................................................3
2.7 Corporation................................................................3
2.8 Deferred Retirement Date...................................................3
2.9 Disability.................................................................3
2.10 Early Retirement Date.....................................................3
2.11 Employer..................................................................3
2.12 Final Average Compensation................................................4
2.13 Final Compensation........................................................4
2.14 Involuntarily Terminated..................................................4
2.15 Normal Retirement Date....................................................4
2.16 Participant...............................................................4
2.17 Participation Agreement...................................................4
2.18 Qualified Retirement Plan.................................................4
2.19 Retirement................................................................4
2.20 Spouse....................................................................4
2.21 Supplemental Retirement Benefit...........................................5
2.22 Target Retirement Percentage..............................................5
2.23 Years of Credited Service.................................................5
2.24 Years of Participation....................................................5
ARTICLE III--PARTICIPATION AND VESTING.........................................5
3.1 Eligibility and Participation..............................................5
3.2 Vesting....................................................................5
3.3 Cessation of Eligibility...................................................5
ARTICLE IV--PRERETIREMENT SURVIVOR BENEFIT.....................................6
4.1 Pretermination Survivor Benefit............................................6
(i)
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE V--SUPPLEMENTAL RETIREMENT BENEFITS....................................6
5.1 Normal Retirement Benefit..................................................6
5.2 Deferred Retirement Benefit................................................6
5.3 Early Retirement Benefit...................................................6
5.4 Early Termination Retirement Benefit.......................................7
5.5 Change in Control Benefits.................................................7
5.6 Minimum Benefit............................................................7
5.7 Disability Retirement Benefit..............................................7
5.8 Payment of Benefits........................................................8
5.9 Accelerated Distribution...................................................8
5.10 Excise Tax and Lost Benefit Makeup........................................9
5.11 Withholding; Payroll Taxes................................................9
5.12 Payment to Guardian.......................................................9
ARTICLE VI--BENEFICIARY DESIGNATION............................................9
6.1 Beneficiary Designation....................................................9
6.2 Changing Beneficiary.......................................................9
6.3 Community Property........................................................10
6.4 No Beneficiary Designation................................................10
ARTICLE VII--ADMINISTRATION...................................................11
7.1 Committee; Duties.........................................................11
7.2 Agents....................................................................11
7.3 Binding Effect of Decisions...............................................11
7.4 Indemnity of Committee....................................................11
7.5 Binding Effect of Decisions...............................................12
7.6 Indemnity of Committee....................................................12
ARTICLE VIII--CLAIMS PROCEDURE................................................12
8.1 Claim.....................................................................12
8.2 Denial of Claim...........................................................12
8.3 Review of Claim...........................................................12
8.4 Final Decision............................................................12
ARTICLE IX--TERMINATION, SUSPENSION OR AMENDMENT..............................13
9.1 Termination, Suspension or Amendment of Plan..............................13
(ii)
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE X--MISCELLANEOUS......................................................13
10.1 Unfunded Plan............................................................13
10.2 Unsecured General Creditor...............................................13
10.3 Trust Fund...............................................................13
10.4 Nonassignability.........................................................13
10.5 Not a Contract of Employment.............................................14
10.6 Protective Provisions....................................................14
10.7 Terms....................................................................14
10.8 Captions.................................................................14
10.9 Governing Law; Arbitration...............................................14
10.10 Validity................................................................14
10.ll Notice..................................................................14
10.12 Successors..............................................................15
(iii)
<PAGE>
LOUISIANA-PACIFIC CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I--PURPOSE; EFFECTIVE DATE
The purpose of this Supplemental Executive Retirement Plan (the "Plan")
is to provide supplemental retirement and death benefits for certain key
employees of Louisiana-Pacific Corporation (the "Corporation"). It is intended
that the Plan will aid in retaining and attracting employees of exceptional
ability by providing them with these benefits. This Plan shall be effective as
of July 1, 1997.
ARTICLE II--DEFINITIONS
For the purposes of this Plan, the following terms shall have the
meanings indicated, unless the context clearly indicates otherwise:
2.1 Acquiring Person
"Acquiring Person" means any person or related person or related
persons which constitute a "group" for purposes of Section 13(d) and Rule 13d-5
under the Securities Exchange Act of 1934, as amended (the "Exchange Act");
provided, however, that the term Acquiring Person shall not include:
(a) Corporation or any of its Subsidiaries;
(b) Any employee benefit plan or related trust of Corporation or
any of its Subsidiaries;
(c) Any entity holding voting capital stock of Corporation for or
pursuant to the terms of any such employee benefit plan; or
(d) Any person or group solely because such person or group has
voting power with respect to capital stock of Corporation arising from
a revocable proxy or consent given in response to a public proxy or
consent solicitation made pursuant to the Exchange Act.
2.2 Actuarial Equivalent
"Actuarial Equivalent" means equivalence in value between two (2) or
more forms and/or times of payment based on a determination by an actuary chosen
by the Corporation, using sound actuarial assumptions at the time of such
determination.
2.3 Beneficiary
"Beneficiary" means the person, persons or entity entitled under
Article VI to receive any Plan benefits payable after a Participant's death.
PAGE 1-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
2.4 Change in Control
A "Change in Control" shall occur upon:
(a) The acquisition by any Acquiring Person of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of the then
outstanding securities which vote generally in the election of
directors ("Voting Securities"); provided, however, that for purposes
of this paragraph (a), the following acquisitions will not constitute a
Change in Control:
(i) Any acquisition directly from Corporation;
(ii) Any acquisition by Corporation;
(iii) Any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Corporation or any
corporation controlled by Corporation; or
(iv) Any acquisition by any corporation pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of
paragraph (c) of this definition of Change in Control; or
(b) During any period of twelve (12) consecutive calendar months,
individuals who at the beginning of such period constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual who
becomes a director during the period whose election, or nomination for
election, by Corporation's shareholders was approved by a vote of at
least a majority of the directors then constituting the Incumbent
Board will be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person (as such term is used in Section
3(d) and 14(d) of the Exchange Act) other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all of the assets of
Corporation (a "Business Combination") in each case, unless, following
such Business Combination:
(i) All or substantially all of the individuals and entities
who were the beneficial owners of the Voting Securities
outstanding immediately prior to such Business Combination
beneficially own, directly or indirectly, more than fifty percent
(50%) of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Corporation
or all or substantially all of Corporation's assets either
directly or through one (1) or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such
Business Combination, of the Voting Securities;
(ii) No Person (excluding any employee benefit plan, or
related trust, of Corporation or such corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, twenty percent (20%) or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
PAGE 2-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior
to the Business Combination; and
(iii) At least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of Corporation of any plan or
proposal for the liquidation or dissolution of Corporation.
2.5 Committee
"Committee" means the Committee appointed by the Chief Executive
Officer to administer the Plan pursuant to Article VII.
2.6 Compensation
"Compensation" means base pay and annual incentives paid to a
Participant during the calendar year, before reduction for amounts deferred
under the Louisiana-Pacific Executive Deferred Compensation Plan or any other
salary reduction program. Compensation does not include expense reimbursements,
any form of noncash Compensation or benefits, group life insurance premiums, or
any other payments or benefits other than normal Compensation.
2.7 Corporation
"Corporation" means Louisiana-Pacific Corporation, a Delaware
corporation, or any successor to the business thereof.
2.8 Deferred Retirement Date
"Deferred Retirement Date" means the first day of the month coincident
with or next following the Participant's severance of employment if it occurs
after the Participant's Normal Retirement Date.
2.9 Disability
"Disability" means a physical or mental condition which, in the opinion
of the Committee, prevents an employee from satisfactorily performing employee's
usual duties for Employer. The Committee's decision as to Disability will be
based upon medical reports and/or evidence satisfactory to the Committee. In no
event shall a Disability be deemed to occur or to continue after a Participant's
Normal Retirement Date.
2.10 Early Retirement Date
"Early Retirement Date" means the date on which the Participant
terminates employment if it occurs on or after the first day of the month
coincidental with or next following a Participant's attainment of age fifty-
five (55) and completion of five (5) Years of Participation, but prior to his
Normal Retirement Date.
2.11 Employer
PAGE 3-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
"Employer" means the Corporation and any affiliated or subsidiary
corporation of the Corporation which is incorporated under the laws of any state
of the United States.
2.12 Final Average Compensation
"Final Average Compensation" means the Participant's Compensation
during the sixty (60) consecutive calendar months out of the last one hundred
twenty (120) months of employment with the Employer in which the Participant's
Compensation is the highest divided by sixty (60).
2.13 Final Compensation
"Final Compensation" means a Participant's base pay for the twelve (12)
months prior to termination of employment with the Employer, plus the average
annual incentive paid the last three (3) years, divided by twelve (12). If the
Participant has not been a Participant in the Employer's annual incentive plan
for three (3) full years or been an employee for a full twelve (12) months, then
the preceding determination shall be adjusted pro rata.
2.14 Involuntarily Terminated
"Involuntarily Terminated" means a Participant is discharged or resigns
in response to a change in day-to-day duties, or reduction in Compensation or
benefits, to a downward change of title, or to a relocation requested by
Employer.
2.15 Normal Retirement Date
"Normal Retirement Date" means the first day of the month coincident
with or next following the Participant's attainment of age sixty-two (62).
2.16 Participant
"Participant" means any individual who is participating or has
participated in this Plan as provided in Article III.
2.17 Participation Agreement
"Participation Agreement" means the agreement filed by a Participant
which acknowledges assent to the terms of the Plan.
2.18 Qualified Retirement Plan
"Qualified Retirement Plan" means the Louisiana-Pacific Corporation
Salaried Employees' Stock Ownership Trust and any successor thereof.
2.19 Retirement
"Retirement" means a Participant's separation from employment with the
Employer at the Participant's Early Retirement Date, Normal Retirement Date, or
Deferred Retirement Date.
2.20 Spouse
PAGE 4-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
"Spouse" means a Participant's wife or husband who is lawfully married
to the Participant at the time of the Participant's death.
2.21 Supplemental Retirement Benefit
"Supplemental Retirement Benefit" means the benefit determined under
Article V of this Plan.
2.22 Target Retirement Percentage
"Target Retirement Percentage" means the percentage of Final Average
Compensation which will be used as a target from which other forms of retirement
benefits are subtracted, as provided in Article V, to arrive at the amount of
the Supplemental Retirement Benefit actually payable to a Participant. This
percentage shall equal fifty percent (50%) multiplied by a fraction, the
numerator of which is the Participant's Years of Credited Service, not to exceed
fifteen (15), and the denominator of which is fifteen (15). The adjusted Target
Retirement Percentage shall be rounded to four (4) decimal places.
2.23 Years of Credited Service
"Years of Credited Service" means the number of years of credited
vesting service determined under the provisions of the Employer's Qualified
Retirement Plan.
2.24 Years of Participation
"Years of Participation" means the number of twelve (12) month periods
the Participant has been a Participant in the Plan as set out in Section 3.1(b)
of this Plan. For the initial Participants, as set out in Appendix A, Years of
Participation shall be measured from January 1, 1997.
ARTICLE III--PARTICIPATION AND VESTING
3.1 Eligibility and Participation
(a) ELIGIBILITY. Eligibility to participate in the Plan shall be
limited to those employees who are designated by the Committee.
(b) PARTICIPATION. An employee's participation in the Plan shall
be effective upon notification of the employee of his status as a
Participant by the Committee. Participation in the Plan shall continue
until such time as the Participant terminates employment with the
Employer, and as long thereafter as the Participant is eligible to
receive benefits under this Plan.
3.2 Vesting
Each Participant shall be one hundred percent (100%) vested in benefits
under this Plan after completing five (5) Years of Participation in the Plan.
The preceding notwithstanding, each Participant shall be one hundred percent
(100%) vested in benefits under this Plan upon death, Disability or a Change in
Control.
3.3 Cessation of Eligibility
PAGE 5-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
Notwithstanding Section 3.1(b) of this Plan, if a Participant ceases to
be designated by the Committee as eligible to participate in the Plan, by reason
of a change in employment status or otherwise, participation herein and
eligibility to receive benefits hereunder shall be limited to the Participant's
interest in such benefits as of the date designated by the Committee.
ARTICLE IV--PRERETIREMENT SURVIVOR BENEFIT
4.1 Pretermination Survivor Benefit
If a Participant dies while employed by the Employer, the Employer
shall pay a supplemental survivor benefit to the Participant's Spouse. The
amount of this benefit shall be equal to one-half (1/2) of the monthly accrued
Supplemental Retirement Benefit payable monthly for the life of the Spouse.
ARTICLE V--SUPPLEMENTAL RETIREMENT BENEFITS
5.1 Normal Retirement Benefit
If a Participant retires on their Normal Retirement Date, the Employer
shall pay to the Participant a monthly Supplemental Retirement Benefit equal to
the Target Retirement Percentage multiplied by the Participant's Final Average
Compensation, less
(a) Fifty percent (50%) of the Participant's primary Social
Security benefit determined at age sixty-two (62), and
(b) An amount equal to the Participant's Qualified Retirement Plan
balance converted to a monthly life annuity. Such conversion shall be
at the PBGC immediate annuity rate;
times the vesting percentage determined under Section 3.2 of this Plan.
5.2 Deferred Retirement Benefit
If a Participant retires at a Deferred Retirement Date, the Employer
shall pay to the Participant a Supplemental Retirement Benefit calculated
pursuant to Section 5.1, except that 5.1(a) and 5.1(b) shall be measured at the
Participant's date of termination.
5.3 Early Retirement Benefit
If a Participant retires at an Early Retirement Date, the Employer
shall pay to the Participant a monthly Supplemental Retirement Benefit equal to
the Target Retirement Percentage multiplied by the Participant's Final Average
Compensation, less
(a) Fifty percent (50%) of the Participant's primary Social
Security benefit projected to be paid at age sixty-two (62) based on
the then current law and assuming no future increases in Compensation,
and
(b) An amount equal to the Participant's Qualified Retirement Plan
balance at termination converted to a life annuity using the PBGC
immediate annuity rate;
PAGE 6-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
times the vesting percentage determined under Section 3.2 of this Plan.
If a Participant retires with the approval of the Committee, the above
Early Retirement Benefit shall be reduced by three percent (3%) for each year by
which the benefit commencement date precedes the Participant's sixty-second
(62nd) birthday (prorated for partial years on a monthly basis). If a
Participant retires without the approval of the Committee, the above Early
Retirement Benefit shall be reduced by five percent (5%) for each year by which
the benefit commencement date precedes the Participant's sixty-second (62nd)
birthday (prorated for partial years on a monthly basis). For Participants who
retire without approval of the Committee, this benefit shall be further reduced
by a fraction equal to the Participant's Actual Years of Service at termination
over Years of Service the Participant would have had at age sixty-two (62). The
Participant may elect to delay the receipt of Early Retirement benefits if the
election is filed ninety (90) days before termination. Benefits may not be
delayed beyond age sixty-five (65).
5.4 Early Termination Retirement Benefit
If a Participant terminates employment prior to Early Retirement, the
Employer shall pay to the Participant a monthly Supplemental Retirement Benefit
equal to the product of (a) times (b) times (c) where:
(a) is an amount equal to the Target Retirement Percentage
multiplied by the Participant's Final Average Compensation, less
(i) Fifty percent (50%) of the Participant's primary Social
Security benefit determined at age sixty-two (62), and
(ii) An amount equal to the Qualified Retirement Plan balance
at age sixty-two (62) converted to life annuity using the PBGC
immediate annuity rate;
(b) is the vesting percentage determined under Section 3.2 of this
Plan; and
(c) is a fraction equal to the Participant's Years of Service at
termination over Years of Service the Participant would have had at age
sixty-two (62).
5.5 Change in Control Benefits
If a Participant is Involuntarily Terminated within thirty-six (36)
months of a Change in Control, such Participant shall be granted two (2) extra
Years of Service under the Plan, and the greater of Final Compensation or Final
Average Compensation shall be used in determining the Participant's benefit. For
such Involuntarily Terminated Participants, benefits shall be payable at the
later of age fifty-five (55) or their date of termination. Such benefit shall be
calculated pursuant to Section 5.3 and as if the Participant Retired with the
approval of the Committee. In Section 5.3(b), the measurement date of the
Qualified Retirement Plan balance shall be the date benefits commence.
5.6 Minimum Benefit
All Participants shall receive a minimum benefit under this Plan equal
to any benefit payable from the Louisiana-Pacific Supplemental Benefit Plan,
payable in the form of a life annuity.
5.7 Disability Retirement Benefit
PAGE 7-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
If a person terminates employment prior to Normal Retirement as a
result of Disability, the Employer shall pay to the Participant a Supplemental
Retirement Benefit commencing at the Participant's Normal Retirement Date equal
to the amount the Participant would have received at such time under the Normal
Retirement provisions of this Article. For purposes of this calculation, Years
of Credited Service and Years of Participation shall continue to accrue during
the period of Disability and the Participant's Final Average Compensation shall
be based only on the amounts earned during the sixty (60) months prior to
Disability if this provides the Participant with a greater benefit.
5.8 Payment of Benefits
(a) FORM OF BENEFIT PAYMENTS. The normal form of benefit payment
shall be a life annuity. Any other form of benefit elected by the
Participant shall be the Actuarial Equivalent to a life annuity. At the
time of enrollment the Participant shall elect the form of benefit
payment. The form of benefit payments available to the Participant
shall be:
(i) Life Annuity.
(ii) 10-Year Certain and Life.
(iii) 50% Joint and Survivor.
(iv) 100% Joint and Survivor.
Participants may amend their form of benefit election by filing a
change form with the Committee at least ninety (90) days before
termination of employment.
(b) COMMENCEMENT OF BENEFIT PAYMENTS. The Supplemental Retirement
Benefits payable to a Participant under the Normal and Deferred
Retirement provisions of this Article shall commence within thirty (30)
days of the Participant's termination of employment. The Early
Retirement Benefit payable to a Participant shall commence within
thirty (30) days of Participant's termination. However, the Participant
may elect to delay the commencement of the benefit if such election is
made at least ninety (90) days prior to termination (may not be delayed
beyond sixty-second (62nd) birthday). The Supplemental Retirement
Benefits payable to a Participant under the Early Termination or
Disability provisions of this Article shall commence within thirty (30)
days of the Participant attaining age sixty-two (62).
5.9 Accelerated Distribution
Notwithstanding any other provision of the Plan, at any time a
Participant shall be entitled to receive, upon written request to the Committee,
a lump-sum distribution of the Actuarial Equivalent of the Participant's unpaid
vested accrued benefits under this Plan on the date on which the Committee
receives the written request. The vested accrued benefit for active Participants
shall be calculated assuming the Participant had terminated without permission
on the date the distribution is requested. Each accelerated distribution shall
be subject to a penalty equal to ten percent (10%) of the amount that would
otherwise be distributed, and that amount shall be forfeited by the Participant.
The amount payable under this section shall be paid in a lump sum within
sixty-five (65) days following the receipt of the notice by the Committee from
the Participant. In the event a Participant requests and obtains an accelerated
distribution under this section and remains employed by the Employer,
participation will cease and there will be no future benefit accruals under this
Plan for a period of one (1) year.
PAGE 8-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
5.10 Excise Tax and Lost Benefit Makeup
If as a result of participating in the Plan the Participant is required
to pay additional excise tax under Section 4999 of the Internal Revenue Code
("IRC"), or receives a smaller benefit from any other Employer plan as a result
of any IRC Section 280G Golden Parachute limitations, then a makeup amount shall
be payable from the Plan. This amount shall be equal to the amount of Section
4999 excise tax payable and any lost benefit from other Employer Plans due to
IRC Section 280G Golden Parachute limitation, as a result of participation in
the Plan, plus any excise tax and income taxes payable due to this payment. The
Corporation and Participant shall cooperate in good faith in making such
determination and in providing the necessary information for this purpose.
5.11 Withholding; Payroll Taxes
The Employer shall withhold from payments made hereunder any taxes
required to be withheld from a Participant's wages for the federal or any state
or local government. However, a Beneficiary may elect not to have withholding
for federal income tax purposes pursuant to Section 3405 of the Internal Revenue
Code, or any successor provision.
5.12 Payment to Guardian
If a Plan benefit is payable to a minor or a person declared
incompetent or to a person incapable of handling the disposition of his
property, the Committee may direct payment of such Plan benefit to the guardian,
legal representative or person having the care and custody of such minor,
incompetent or person. The Committee may require proof of incompetency,
minority, incapacity or guardianship as it may deem appropriate prior to
distribution of the Plan benefit. Such distribution shall completely discharge
the Committee and the Employer from all liability with respect to such benefit.
ARTICLE VI--BENEFICIARY DESIGNATION
6.1 Beneficiary Designation
Each Participant shall have the right, at any time, to designate any
person or persons as his Beneficiary or Beneficiaries (both primary as well as
secondary) to whom benefits under this Plan shall be paid in the event of his
death prior to complete distribution to Participant of the benefits due under
the Plan. Each Beneficiary designation shall be in a written form prescribed by
the Committee, and will be effective only when filed with the Committee during
the Participant's lifetime.
6.2 Changing Beneficiary
Subject to Section 6.3, any Beneficiary designation may be changed by a
Participant without the consent of the previously named Beneficiary by the
filing of a new designation with the Committee. The filing of a new designation
shall cancel all designations previously filed. If a Participant's Compensation
is community property, any Beneficiary designation shall be valid or effective
only as permitted by applicable law.
PAGE 9-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
6.3 Community Property
If the Participant resides in a community property state, the following
rules shall apply:
(a) Designation by a married Participant of a Beneficiary other
than the Participant's Spouse shall not be effective unless the Spouse
executes a written consent that acknowledges the effect of the
designation, or it is established the consent cannot be obtained
because the Spouse cannot be located.
(b) A married Participant's Beneficiary designation may be changed
by a Participant with the consent of the Participant's Spouse as
provided for in Section 6.3(a) by the filing of a new designation with
the Committee.
(c) If the Participant's marital status changes after the
Participant has designated a Beneficiary, the following shall apply:
(i) If the Participant is married at the time of death but
was unmarried when the designation was made, the designation shall
be void unless the Spouse has consented to it in the manner
prescribed in Section 6.3(a).
(ii) If the Participant is unmarried at the time of death but
was married when the designation was made:
a) The designation shall be void if the Spouse was named
as Beneficiary unless Participant had submitted a change of
beneficiary listing the former Spouse as the beneficiary.
b) The designation shall remain valid if a non-Spouse
Beneficiary was named.
(iii)If the Participant was married when the designation was
made and is married to a different Spouse at death, the
designation shall be void unless the new Spouse has consented to
it in the manner prescribed above.
6.4 No Beneficiary Designation
In the absence of an effective Beneficiary Designation, or if all
designated Beneficiaries predecease the Participant or dies prior to complete
distribution of the Participant's benefits, then the Participant's designated
Beneficiary shall be deemed to be the person in the first of the following
classes in which there is a survivor:
(a) the surviving Spouse;
(b) the Participant's children, except that if any of the children
predeceases the Participant but leaves issue surviving, then such issue
shall take by right of representation the share the parent would have
taken if living;
(c) the Participant's estate.
PAGE 10-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
ARTICLE VII--ADMINISTRATION
7.1 Committee; Duties
The Plan shall be administered by the Committee, which shall consist of
not less than three (3) persons appointed by the Chief Executive Officer and
which may include the CEO as a member. The Committee shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and all questions,
including interpretations of the Plan, as may arise in connection with the Plan.
A majority vote of the Committee members shall control any decision. Members of
the Committee may be Participants under the Plan.
7.2 Agents
The Committee may, from time to time, employ other agents and delegate
to them such administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Employer.
7.3 Binding Effect of Decisions
The decision or action of the Committee with respect to any question
arising out of or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated hereunder
shall be final, conclusive and binding upon all persons having any interest in
the Plan.
7.4 Indemnity of Committee
The Employer shall indemnify and hold harmless the members of the
Committee against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to the Plan, except in the case
of gross negligence or willful misconduct.
PAGE 11-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
7.5 Binding Effect of Decisions
The decision or action of the Committee in respect of any question
arising out of or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated hereunder
shall be final and conclusive and binding upon all persons having any interest
in the Plan.
7.6 Indemnity of Committee
The Employer shall indemnify and hold harmless the members of the
Committee and the against any and all claims, loss, damage, expense or liability
arising from any action or failure to act with respect to this Plan, except in
the case of gross negligence or willful misconduct.
ARTICLE VIII--CLAIMS PROCEDURE
8.1 Claim
Any person claiming a benefit, requesting an interpretation or ruling
under the Plan, or requesting information under the Plan shall present the
request in writing to the Committee which shall respond in writing within thirty
(30) days.
8.2 Denial of Claim
If the claim or request is denied, the written notice of denial shall
state:
(a) The reason for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
8.3 Review of Claim
Any person whose claim or request is denied or who has not received a
response within thirty (30) days may request review by notice given in writing
to the Committee. The claim or request shall be reviewed by the Committee who
may, but shall not be required to, grant the claimant a hearing. On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.
8.4 Final Decision
The decision on review shall normally be made within sixty (60) days.
If an extension of time is required for a hearing or other special
circumstances, the claimant shall be notified and the time limit shall be one
hundred twenty (120) days. The decision shall be in writing and shall state the
reason and the relevant plan provisions. All decisions on review shall be final
and bind all parties concerned.
PAGE 12-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
ARTICLE IX--TERMINATION, SUSPENSION OR AMENDMENT
9.1 Termination, Suspension or Amendment of Plan
The Board may, in its sole discretion, terminate or suspend this Plan
at any time or from time to time, in whole or in part. Any amendment may provide
different benefits or amounts of benefits from those herein set forth. However,
no such termination suspension or amendment shall adversely affect the benefits
of Participants which have accrued prior to such action or the benefits of any
Beneficiary of a Participant who has previously died.
ARTICLE X--MISCELLANEOUS
10.1 Unfunded Plan
The Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly-compensated employees" within the meaning of Sections 201, 301 and 401 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
Accordingly, the Plan shall terminate and no further benefits shall accrue
hereunder in the event it is determined by a court of competent jurisdiction or
by an opinion of counsel that the Plan constitutes an employee pension benefit
plan within the meaning of Section 3(2) of ERISA which is not so exempt. In the
event of such termination, all ongoing Deferral Commitments shall terminate, no
additional Deferral Commitments will be accepted by the Committee, and the
amount of each Participant's vested Account balance shall be distributed to such
Participant at such time and in such manner as the Committee, in its sole
discretion, determines.
10.2 Unsecured General Creditor
In the event of Employer's insolvency, Participants and their
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of the Employer, nor shall
they be Beneficiaries of, or have any rights, claims or interests in any life
insurance policies, annuity contracts or the proceeds therefrom owned or which
may be acquired by the Employer. In that event, any and all of the Employer's
assets and policies shall be, and remain, the general, unpledged, unrestricted
assets of the Employer. The Employer's obligation under the Plan shall be that
of an unfunded and unsecured promise of the Employer to pay money in the future.
10.3 Trust Fund
The Employer shall be responsible for the payment of all benefits
provided under the Plan. At its discretion, the Employer may establish one or
more trusts, with such trustees as the Board may approve, for the purpose of
providing for the payment of such benefits. Such trust or trusts may be
irrevocable, but the assets thereof shall be subject to the claims of the
Employer's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto, but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Employer.
10.4 Nonassignability
Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate or convey in advance of actual
PAGE 13-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
receipt the amounts, if any, payable hereunder, or any part thereof, which are,
and all rights to which are, expressly declared to be unassignable and
nontransferable. No part of the amounts payable shall, prior to actual payment,
be subject to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.
10.5 Not a Contract of Employment
The terms and conditions of the Plan shall not be deemed to constitute
a contract of employment between the Employer and the Participant, and the
Participant (or his or her Beneficiary) shall have no rights against the
Employer except as may otherwise be specifically provided herein. Moreover,
nothing in the Plan shall be deemed to give a Participant the right to be
retained in the service of the Employer or to interfere with the right of the
Employer to discipline or discharge the Participant at any time.
10.6 Protective Provisions
A Participant will cooperate with the Employer by furnishing any and
all information requested by the Employer, in order to facilitate the payment of
benefits hereunder, and by taking such physical examinations as the Employer may
deem necessary and taking such other action as may be requested by the Employer.
10.7 Terms
Whenever any words are used herein in the masculine, they shall be
construed as though they were used in the feminine in all cases where they would
so apply; and wherever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural or the
singular, as the case may be, in all cases where they would so apply.
10.8 Captions
The captions of the articles, sections and paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or construction
of any of its provisions.
10.9 Governing Law; Arbitration
The provisions of the Plan shall be construed and interpreted according
to the laws of the State of Oregon. Any dispute or claim that arises out of or
that relates to the Plan or to the interpretation, breach, or enforcement of the
Plan, must be resolved by mandatory arbitration in accordance with the then
effective arbitration rules of Arbitration Service of Portland, Inc., and any
judgment upon the award rendered pursuant to such arbitration may be entered in
any court having jurisdiction thereof.
10.10 Validity
In case any provision of the Plan shall be held illegal or invalid for
any reason, said illegality or invalidity shall not affect the remaining parts
hereof, but the Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
10.11 Notice
PAGE 14-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, to any member of the Committee or the Secretary of
the Employer. Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
10.12 Successors
The provisions of the Plan shall bind and inure to the benefit of the
Employer and its successors and assigns. The term successors as used herein
shall include any corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or substantially all of
the business and assets of the Employer, and successors of any such corporation
or other business entity.
LOUISIANA-PACIFIC CORPORATION
By: /s/ William L. Hebert
Vice President, Treasurer
and Controller
By: /s/ Anton C. Kirchhof
Secretary
Dated: July 15, 1997
PAGE 15-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
RESTRICTED STOCK AWARD AGREEMENT
This RESTRICTED STOCK AWARD AGREEMENT ("Award Agreement") is entered
into effective as of January 31, 1996, between Louisiana-Pacific Corporation, a
Delaware corporation ("Company"), and Mark A. Suwyn, Chairman and Chief
Executive Officer of the Company ("Executive").
WHEREAS, the Company and the Executive have entered into an Employment
Agreement dated as of January 2, 1996 ("Employment Agreement"), pursuant to
which the Executive became Chairman and Chief Executive Officer of the Company;
and
WHEREAS, the Employment Agreement provides, among other matters, that
the Executive will receive from the Company, within 30 days of the date of the
Employment Agreement, a grant of 150,000 restricted shares of common stock of
the Company; and
WHEREAS, the parties have entered into this Award Agreement in order to
evidence the grant and award of restricted shares pursuant to the Employment
Agreement;
NOW, THEREFORE, the parties agree as follows:
Section 1. Definitions.
"Certificate" means a stock certificate representing Restricted Shares.
"Common Stock" means shares of common stock, $1.00 par value, of the
Company.
"Restricted Shares" means the shares of Common Stock issued to
Executive pursuant to this Award Agreement and, unless the context otherwise
requires, includes any shares of Common Stock or other equity security of the
Company (or any successor issuer) issued in respect of the Restricted Shares as
a stock dividend, stock split, or similar distribution, or issued in exchange or
substitution therefore by reason of any reorganization, recapitalization,
merger, or other similar transaction.
"Securities Act" means the Securities Act of 1933, as amended.
"Vest," "Vested," or any similar word, means, with respect to the
Restricted Shares represented by any Certificate, the expiration or termination
of the period during which the Restricted Shares may be forfeited pursuant to
Section 3(d) hereof and during which transfer of the Restricted Shares is
restricted pursuant to Section 4(b) hereof.
Other capitalized terms used in this Award Agreement without definition
shall have the meanings ascribed thereto in the Employment Agreement.
- 1 -
<PAGE>
Section 2. Award of Restricted Shares.
The Company has, effective the date of this Award Agreement, granted
and awarded to the Executive, subject to possible forfeiture as provided in
Section 3(d) hereof, 150,000 Restricted Shares initially represented by four
Certificates as follows:
Certificate Number of Shares Scheduled Date of Vesting
1 30,000 January 1, 1997
2 30,000 January 1, 1998
3 30,000 January 1, 1999
4 60,000 August 12, 2004
The Certificate numbers referred to above are used for convenient reference
only, it being understood that each Certificate shall bear a number assigned by
the Company's transfer agent.
Section 3. Vesting and Forfeiture.
(a) Unless sooner Vested or forfeited, the Restricted Shares evidenced
by each Certificate (including, without limitation, any Restricted Shares issued
in respect of the shares originally represented thereby) will become Vested and
non-forfeitable on the respective dates set forth in Section 2; provided, in
each case, that the Executive is employed by the Company on such date.
(b) Unless sooner Vested or forfeited, the Restricted Shares evidenced
by Certificates 1, 2, and 3 (including, without limitation, any Restricted
Shares issued in respect of the shares originally represented thereby) will
become immediately Vested and non-forfeitable upon the occurrence of any one of
the following: a Change in Control, a "change of control" as defined in the
Option Plan, the termination of the Term of Employment by the Company pursuant
to Section 2 of the Employment Agreement, the Executive's death or Disability,
termination of employment by the Executive for Good Reason, or termination of
employment by the Company without Cause; provided, in each case, that the
Executive is employed by the Company on the date of such event.
(c) Unless sooner Vested or forfeited, the Restricted Shares evidenced
by Certificate 4 (including, without limitation, any Restricted Shares issued in
respect of the shares originally represented thereby) will become Vested and
non-forfeitable upon the occurrence of any of the following: a Change in
Control, a "change of control" as defined in the Option Plan, the termination of
the Term of Employment by the Company pursuant to Section 2 of the Employment
Agreement, termination of employment by the Executive for Good Reason, or
termination of employment by the Company without Cause; provided, in each case,
that the Executive is employed by the Company on the date of such event.
(d) Upon the termination of Executive's employment with the Company,
the rights of the Executive with respect to any Restricted Shares which are not
Vested pursuant to
- 2 -
<PAGE>
paragraph (a), (b), or (c) above on or prior to the date of such termination
shall be forfeited and shall revert to the ownership of the Company.
Section 4. Rights as Stockholder; Restrictions on Transfer.
(a) Except as expressly provided in this Award Agreement, the
Executive shall be entitled to all rights as a stockholder with respect to the
Restricted Shares, including the right to vote the Restricted Shares and to
receive any dividends and other distributions with respect to the Restricted
Shares; provided, however, that certain dividends and distributions, as
specified in Section 1 hereof, shall themselves constitute Restricted Shares,
subject to possible forfeiture as provided herein.
(b) None of the Restricted Shares, the Certificates representing
Restricted Shares, or the Executive's rights with respect thereto under this
Award Agreement may be sold, assigned, pledged, or otherwise transferred,
disposed of, or encumbered, voluntarily or involuntarily, until they have become
Vested. Any purported sale, assignment, pledge, or other transfer, disposition,
or encumbrance of Restricted Shares in violation of this Award Agreement shall
be null and void.
(c) Each Certificate for Restricted Shares shall be issued in the
name of the Executive and shall be held by the Company until the Restricted
Shares represented thereby have become Vested or until such Restricted Shares
are forfeited, as provided in this Award Agreement. The Executive shall execute
and deliver to the Company a stock transfer power with respect to the Restricted
Shares. All Certificates for Restricted Shares that have not become Vested shall
bear a legend in substantially the following form:
"The shares evidenced by this Certificate were issued as
Restricted Shares pursuant to a Restricted Stock Award Agreement dated
as of January 31, 1996, and are subject to possible forfeiture and
restrictions on transfer, disposition, or encumbrance until [scheduled
date of vesting] pursuant to the terms of said agreement."
When any Restricted Shares become Vested, they shall no longer be subject to
possible forfeiture pursuant to Section 3(d), the transfer thereof shall no
longer be restricted by the provisions of Section 4(b), and the Company shall
promptly cause a new Certificate or Certificates representing such shares to be
issued in the name of the Executive, without the foregoing legend, and shall
deliver such Certificate or Certificates to the Executive.
Section 5. Income Taxes.
The Company shall have the right to withhold from any amounts payable
to the Executive, as compensation or otherwise, or to require the Executive to
make other provision satisfactory to the Company for payment of an amount
sufficient to satisfy all federal, state, and local withholding tax requirements
with respect to the award or the Vesting of the Restricted Shares. The Company
shall not be obligated to deliver any Certificates to the Executive until
- 3 -
<PAGE>
any such withholding or payment requirement shall have been satisfied. The
Executive agrees to promptly notify the Company if the Executive makes an
election under Section 83(b) of the Internal Revenue Code with respect to any of
the Restricted Shares.
Section 6. Securities Law Restrictions.
(a) The Executive acknowledges that the Restricted Shares have not
been registered under the Securities Act or any applicable state securities law,
and that the Restricted Shares may not be sold or otherwise transferred in the
absence of an effective registration statement under the Securities Act or an
available exemption from such registration, and upon compliance with the
requirements of any applicable state securities law. The Executive further
acknowledges that transfer of shares owned by affiliates of the Company is
restricted under the Securities Act. The Executive represents that the
Restricted Shares are being acquired for his own account without any view to the
distribution thereof.
(b) All Certificates for the Restricted Shares shall bear the following
legend:
"The securities represented hereby have not been registered under
the Securities Act of 1933, and they may not be sold or otherwise
transferred in the absence of an effective registration statement under
the Securities Act of 1933 or an available exemption from such
registration."
(c) At any time after the Vesting of Restricted Shares, upon the
written request of the Executive or, if he is deceased, his estate, the Company
shall prepare and file a registration statement under the Securities Act
covering an offering and sale of such number of Vested Restricted Shares as
shall have been requested by the Executive or his estate, and shall use its
reasonable efforts to cause such registration statement to become effective;
provided, however, that the Company shall not be required to prepare and file
more than four registration statements pursuant to this Award Agreement.
(d) Notwithstanding the provisions of paragraph (c), the Company shall
not be obligated to file a registration statement with respect to the sale of
Restricted Shares (i) if the Company shall deliver to the Executive (or to his
estate if he is deceased) an opinion of counsel to the effect that the proposed
sale of the Restricted Shares for which registration was requested does not
require registration under the Securities Act, or that such sale may be effected
immediately pursuant to the exemption from registration afforded by Rule 144 or
any similar exemption, or (ii) if the Company shall undertake to purchase and
purchases the Restricted Shares for which registration is requested, on a date
specified by the Company (not later than 30 days after the date of the
Executive's or his estate's request), at a price per share equal to the reported
closing price for a share of Common Stock (or any successor security) on the New
York Stock Exchange (or if not traded on the New York Stock Exchange, on the
principal market on which Common Stock (or any successor security) is then
traded) for the last day immediately preceding the date of purchase on which
Common Stock (or any successor security) is traded.
- 4 -
<PAGE>
(e) Whenever Restricted Shares are to be registered hereunder:
(i) The parties shall cooperate in supplying one another with
all information and documents as may be reasonably necessary in
connection with such registration and shall execute and deliver
such representations, indemnity agreements, underwriting
agreements, and other undertakings as are reasonable and customary
in connection with similar transactions.
(ii) The Company shall prepare and file a registration statement
and such exhibits, amendments, and supplements thereto as may be
necessary to cause such registration statement to become effective
as promptly as reasonably practicable and to remain effective for
a reasonable period of time not exceeding 30 days; provided,
however, that the Company may, in its discretion, delay the filing
or effectiveness of a registration statement for a reasonable time
not exceeding 180 days if, in the good faith judgment of its board
of directors, the filing or effectiveness of such registration
statement would be unreasonably detrimental to the interests of
the Company.
(iii) The Company shall prepare such prospectuses and other
documents as may be reasonably required in connection with such
registration and shall register or qualify the Restricted Shares
covered by such registration statement under such blue sky laws as
may be reasonably necessary, and do such other acts as may be
reasonably necessary or advisable in order to enable the Executive
to consummate the sale of the Restricted Shares.
(iv) The Company shall pay all expenses in connection with the
registration, other than underwriters' discounts, brokers' commissions,
or similar fees.
Section 7. Miscellaneous.
(a) Subject to the restrictions on transfer of the Restricted Shares
set forth herein, this Award Agreement shall be binding upon and benefit the
parties hereto and their respective successors and assigns.
(b) Any notices under this Award Agreement shall be in writing and
shall be effective if given as provided in the Employment Agreement.
(c) This Award Agreement will be governed by the laws of the state of
Delaware without regard to its conflict of laws rules. (d) This Award Agreement
(together with the Employment Agreement to the extent referred to herein)
constitutes the entire understanding of the parties with respect to the subject
matter hereof, and supersedes all prior agreements between the parties hereto
with
- 5 -
<PAGE>
respect to its subject matter. This Award Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original, but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Award
Agreement as of the date first set forth above.
LOUISIANA-PACIFIC CORPORATION
By /s/ Lee C. Simpson
Title President
EXECUTIVE
/s/ Mark A. Suwyn
Mark A. Suwyn
- 6 -
L-P
Louisiana-Pacific Corporation
111 S.W. Fifth Avenue
Portland, Oregon 97204
503/221-0800
FAX: 503/796-0204
August 14, 1997
Mr. Gary Wilkerson
9021 Forest Meadow
Memphis TN 38125
Dear Gary:
I am pleased to offer you the position of Vice President and General Counsel at
Louisiana-Pacific. This offer is extended on the assurance that you are not
entered into any employment contracts which may prevent you from working at
Louisiana-Pacific and that you are eligible to work in the United States as
regulated by Federal Immigration Laws.
In this position you will work in the Portland Oregon office and report directly
to me. Your start date will be September 15, 1997. This position will include
the following compensation package:
A. An annual base salary of $275,000 paid semi-monthly.
B. A first year bonus target equal to 50% of your annual base salary with
total earnings based on mutually established performance criteria. The
1997 bonus will be prorated for the balance of the time in this
position.
C. A stock option award of 20,000 shares that will vest over three years,
(6,667 each on 9/1/98, 9/1/99 and 6,666 on 9/1/2000) with a life of ten
years. These stock options are subject to board approval.
D. A signing bonus of $75,000 to be paid within 30 days of your start
date.
E. A severance package that in the event of a change of control during
your first year of employment, you will be eligible to receive 24
months salary plus bonus.
F. Four weeks of vacation annually.
<PAGE>
Mr. Gary Wilkerson
August 14, 1997
Page 2
As a salaried employee of Louisiana-Pacific, you will be eligible to participate
in all salaried employee benefit programs: Health Care Coverage, Life and
Accidental Death & Dismemberment Insurance, Long Term Disability coverage,
Personal Accident Insurance, Employee Stock Ownership Trust, and Employee Stock
Purchase Plans. A summary providing a brief description of these is enclosed.
To assist your move to the Portland area you may participate in the Employee
Relocation Program. This will include two house hunting trips for you and your
family, packing and transportation of all household goods, and up to three
months temporary living allowance. In addition during the three months you are
in temporary living Louisiana-Pacific will pay your travel expenses for two
visits each month to visit your home in Memphis.
If you decide to accept this position and have questions regarding any of the
L-P benefits, Please call Dennis Christen in the Portland office at (503)
221-0800.
I hope you will find this offer acceptable as we look forward to having you as a
key member of the Louisiana-Pacific Senior Management Team.
Sincerely,
/s/ Mark Suwyn Accepted: /s/ Gary Wilkerson
Chairman and CEO,
Louisiana-Pacific
cc: Mike Tull
Bryan Miller
Dennis Christen
L-P
Louisiana-Pacific Corporation
111 S.W. Fifth Avenue
Portland, Oregon 97204
503/221-0800
503/796-0204 FAX
July 16, 1997
Mr. Curt Stevens
13930 SW Tennessee Lane
Beaverton, Oregon 97008
Dear Curt,
I am very pleased to offer you the position of Chief Financial Officer. This
offer is extended on the assurance that you are not entered into any employment
contracts which may prevent you from working at Louisiana-Pacific and that you
are eligible to work in the United States as regulated by Federal Immigration
Laws. You will begin work in the Portland office on August 1, 1997 and report
directly to me.
In this position, your responsibilities will include the following.
- - Directs the activities of 16 staff in the Regional Controller, Business
Financial Analyst, Corporate Accounting and Finance staff functions,
including six regional Controllers, Director of Taxes, Credit Manager, Risk
Manager, four Financial Analysts and Corporate Accounting and Finance
personnel.
- - Directs organization-wide formal budget process to include four levels: 1)
five-year strategic plan, 2) annual budgeting, 3) quarterly budgeting and
4) monthly budgeting activities.
- - Together with other top management, determines, mission, direction, goals
and objectives of assigned areas and ensures implementation of strategic
and operating plans. Directs the development of short and long range plans
and budgets. Develops metrics and goal setting process for the financial
function.
- - Establishes capital needs for the corporation and ensures ongoing financial
support for Louisiana-Pacific by determining appropriate sources such as
liquidity, long term planning for capital, and banking relationships
(commercial and investment banks).
- - Sets financial policies, reporting mechanisms from the field and standard
controls for internal and external financial activity. Responsible for all
disclosures, shareholder disclosures and government filings.
- - Reviews and analyzes opportunities for acquisitions and dispositions of
properties.
<PAGE>
Mr. Curt Stevens
July 16, 1997
Page 2
- -------------------------------------------------------
- - Communicates the company's business objectives to the investment community,
and works closely with the retail and wholesale investors and rating
agencies.
- - Determines overall corporate stance on risk tolerance policies, what to
insure inside or outside.
- - Works closely with outside insurance brokers.
- - Also works closely and proactively with board members, and responsible for
all financial reporting presentations at board meetings.
This position will include the following compensation package:
A. An annual base salary of $210,000.
B. A first year bonus in the 40% to 50% range, with a guaranteed amount of
$84,000.
C. A four-year relative total shareholder return plan. The program grants
annual contingent awards of stock that have the potential to pay out at
the end of a four-year performance cycle.
D. A stock option award of 36,000 shares that will vest over three years,
(12,000 each on 8/1/98, 8/1/99 and 8/1/2000 with a life of five years.
E. A Supplemental Executive Retirement Plan (SERP). The SERP is designed to
provide a competitive level target retirement benefit to the senior
management group.
F. A severance package that in the event of a change of control during your
first two years of employment, you will have the option of electing two
years salary plus bonus. If you choose to remain with the successor
company, two months after the change of control, this severance package
option is revoked.
G. A vacation allowance of four weeks per year.
<PAGE>
- --------------------------------------------------------------------------------
Mr. Curt Stevens
July 16, 1997
Page 3
As an Officer of Louisiana-Pacific, you will be eligible to participate in all
salaried employee benefit programs: Health Care Coverage, Life and Accidental
Death & Dismemberment Insurance, Long Term Disability coverage, Personal
Accident Insurance, Employee Stock Ownership Trust, and Employee Stock Purchase
Plans. Please refer to the accompanying L-P Benefits Summary for more
information about the company benefit programs.
If you decide to accept this position and have questions regarding any of the
L-P benefits, please call Dennis Christen in the Human Resources Department,
Portland office at 221-0800.
I hope you will find this offer acceptable as we look forward to having you as
the Chief Financial Officer at Louisiana-Pacific.
Sincerely,
/s/ Mark A. Suwyn /s/ Curt Stevens
Mark A. Suwyn Accepted: ------------------
Chairman and CEO Curt Stevens
Enclosures
cc: Mike Tull-Portland
LOUISIANA-PACIFIC CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective May 1, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--PURPOSE; EFFECTIVE DATE.............................................1
ARTICLE II--DEFINITIONS........................................................1
2.1 Account....................................................................1
2.2 Acquiring Person...........................................................1
2.3 Actuarial Equivalent.......................................................1
2.4 Beneficiary................................................................2
2.5 Board......................................................................2
2.6 Change in Control..........................................................2
2.7 Committee..................................................................3
2.8 Compensation...............................................................3
2.9 Corporation................................................................3
2.10 Deferral Commitment.......................................................3
2.11 Deferral Period...........................................................4
2.12 Determination Date........................................................4
2.13 Disability................................................................4
2.14 Early Retirement Date.....................................................4
2.15 Elective Deferred Compensation............................................4
2.16 Employee..................................................................4
2.17 Employer..................................................................4
2.18 Employer Plans............................................................4
2.19 Employment................................................................4
2.20 Financial Hardship........................................................5
2.21 Interest..................................................................5
2.22 Normal Retirement Date....................................................5
2.23 Participant...............................................................5
2.24 Participation Agreement...................................................5
2.25 Plan Benefit..............................................................6
2.26 Qualified Plan............................................................6
2.27 Retirement................................................................6
2.28 Years of Service..........................................................6
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS............................6
3.1 Eligibility and Participation..............................................6
3.2 Form of Deferral; Minimum Deferral.........................................6
3.3 Elections for Part Years...................................................7
3.4 Limitation on Deferral.....................................................7
3.5 Modification of Deferral Commitment........................................7
3.6 Cessation of Eligibility...................................................7
(i)
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT......................................7
4.1 Accounts...................................................................7
4.2 Elective Deferred Compensation.............................................7
4.3 Qualified Plan Makeup Credit...............................................7
4.4 Interest...................................................................8
4.5 Determination of Accounts..................................................8
4.6 Vesting of Accounts........................................................8
4.7 Statement of Accounts......................................................8
ARTICLE V--PLAN BENEFITS.......................................................8
5.1 Retirement Benefit.........................................................8
5.2 Termination Benefit........................................................8
5.3 Death Benefit..............................................................9
5.4 In-Service Withdrawals.....................................................9
5.5 Hardship Distributions.....................................................9
5.6 Form of Benefit Payment....................................................9
5.7 Small Accounts............................................................10
5.8 Accelerated Distribution..................................................10
5.9 Excise Tax and Lost Benefit Makeup........................................10
5.10 Withholding; Payroll Taxes...............................................10
5.11 Payment to Guardian......................................................11
ARTICLE VI--BENEFICIARY DESIGNATION...........................................11
6.1 Beneficiary Designation...................................................11
6.2 Changing Beneficiary......................................................11
6.3 Community Property........................................................11
6.4 No Beneficiary Designation................................................12
6.5 Effect of Payment.........................................................12
ARTICLE VII--ADMINISTRATION...................................................12
7.1 Committee; Duties.........................................................12
7.2 Agents....................................................................13
7.3 Binding Effect of Decisions...............................................13
7.4 Indemnity of Committee....................................................13
ARTICLE VIII--CLAIMS PROCEDURE................................................13
8.1 Claim.....................................................................13
(ii)
<PAGE>
TABLE OF CONTENTS
PAGE
8.2 Denial of Claim...........................................................13
8.3 Review of Claim...........................................................13
8.4 Final Decision............................................................13
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN.................................14
9.1 Amendment.................................................................14
9.2 Employer's Right to Terminate.............................................14
ARTICLE X--MISCELLANEOUS......................................................15
10.1 Unfunded Plan............................................................15
10.2 Unsecured General Creditor...............................................15
10.3 Trust Fund...............................................................15
10.4 Nonassignability.........................................................15
10.5 Not a Contract of Employment.............................................15
10.6 Protective Provisions....................................................16
10.7 Terms....................................................................16
10.8 Captions.................................................................16
10.9 Governing Law; Arbitration...............................................16
10.10 Validity................................................................16
10.11 Notice..................................................................16
10.12 Successors..............................................................16
(iii)
<PAGE>
LOUISIANA-PACIFIC CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I--PURPOSE; EFFECTIVE DATE
The purpose of this Executive Deferred Compensation Plan (the "Plan")
is to provide current tax planning opportunities as well as supplemental funds
for retirement or death for selected employees of Louisiana-Pacific Corporation
(the "Corporation"). It is intended that the Plan will aid in attracting and
retaining employees of exceptional ability by providing them with these
benefits. The Plan shall be effective as of May 1, 1997.
ARTICLE II--DEFINITIONS
For the purposes of this Plan, the following terms shall have the
meanings indicated unless the context clearly indicates otherwise:
2.1 ACCOUNT
"Account" means the Retirement Account or the Moody's Account, where
appropriate, as maintained by the Employer in accordance with Article IV with
respect to any deferral of Compensation pursuant to this Plan. A Participant's
Retirement Account or Moody's Account shall be utilized solely as a device for
the determination and measurement of the amounts to be paid to the Participant
pursuant to the Plan. A Participant's Account shall not constitute or be treated
as a trust fund of any kind.
2.2 ACQUIRING PERSON
"Acquiring Person" means any person or related person or related
persons which constitute a "group" for purposes of Section 13(d) and Rule 13d-5
under the Securities Exchange Act of 1934 (the "Exchange Act"), as such Section
and Rule are in effect as of the Grant Date; provided, however, that the term
Acquiring Person shall not include:
(a) Corporation or any of its Subsidiaries;
(b) Any employee benefit plan or related trust of Corporation or
any of its Subsidiaries;
(c) Any entity holding voting capital stock of Corporation for or
pursuant to the terms of any such employee benefit plan; or
(d) Any person or group solely because such person or group has
voting power with respect to capital stock of Corporation arising from
a revocable proxy or consent given in response to a public proxy or
consent solicitation made pursuant to the Exchange Act.
2.3 ACTUARIAL EQUIVALENT
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"Actuarial Equivalent" means equivalence in value between two (2) or
more forms and/or times of payment based on a determination by an actuary chosen
by the Corporation, using sound actuarial assumptions at the time of such
determination.
2.4 BENEFICIARY
"Beneficiary" means the person, persons or entity entitled under
Article VI to receive any Plan benefits payable after a Participant's death.
2.5 BOARD
"Board" means the Board of Directors of the Corporation.
2.6 CHANGE IN CONTROL
A "Change in Control" shall occur upon:
(a) The acquisition by any Acquiring Person of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of the then
outstanding Voting Securities; provided, however, that for purposes of
this paragraph (a), the following acquisitions will not constitute a
Change in Control:
(i) Any acquisition directly from Corporation;
(ii) Any acquisition by Corporation;
(iii) Any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Corporation or any
corporation controlled by Corporation; or
(iv) Any acquisition by any corporation pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of
paragraph (c) of this definition of Change in Control; or
(b) During any period of twelve (12) consecutive calendar months,
individuals who at the beginning of such period constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual who
becomes a director during the period whose election, or nomination for
election, by Corporation's shareholders was approved by a vote of at
least a majority of the directors then constituting the Incumbent Board
will be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all of the assets of
Corporation (a "Business Combination") in each case, unless, following
such Business Combination:
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(i) All or substantially all of the individuals and
entities who were the beneficial owners of the Voting Securities
outstanding immediately prior to such Business Combination
beneficially own, directly or indirectly, more than fifty percent
(50%) of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Corporation
or all or substantially all of Corporation's assets either
directly or through one (1) or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such
Business Combination, of the Voting Securities;
(ii) No Person (excluding any employee benefit plan, or
related trust, of Corporation or such corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, twenty percent (20%) or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior
to the Business Combination; and
(iii) At least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of Corporation of any plan or
proposal for the liquidation or dissolution of Corporation.
2.7 COMMITTEE
"Committee" means the Committee appointed by the Chief Executive
Officer to administer the Plan pursuant to Article VII.
2.8 COMPENSATION
"Compensation" means total cash compensation, including bonuses paid by
the Employer, and before reduction for amounts deferred under the Plan or any
tax qualified plan sponsored by the Employer which permits deferral of current
compensation. Compensation does not include expense reimbursements, overtime,
any form of noncash compensation or benefits.
2.9 CORPORATION
"Corporation" means Louisiana-Pacific Corporation, a Delaware
corporation, or any successor to the business thereof.
2.10 DEFERRAL COMMITMENT
"Deferral Commitment" means a Salary Deferral Commitment or a Bonus
Deferral Commitment made by a Participant pursuant to Article III and for which
a Participation Agreement has been submitted by the Participant to the
Committee.
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<PAGE>
2.11 DEFERRAL PERIOD
"Deferral Period" means the period over which a Participant has elected
to defer a portion of his or her Compensation. The Deferral Period shall be one
(1) calendar year for a Salary Deferral Commitment, or a Bonus Deferral
Commitment. The Deferral Period may be modified pursuant to Section 3.3 or
Section 3.5.
2.12 DETERMINATION DATE
"Determination Date" means the last day of each calendar month.
2.13 DISABILITY
"Disability" means a physical or mental condition which, in the opinion
of the Committee, prevents an Employee from satisfactorily performing Employee's
usual duties for Employer. The Committee's decision as to Disability will be
based upon medical reports and/or other evidence satisfactory to the Committee.
2.14 EARLY RETIREMENT DATE
"Early Retirement Date" means the date prior to a Participant's Normal
Retirement Date on which the Participant actually terminates Employment
following the attainment of age fifty-five (55) and completion of five (5) Years
of Service.
2.15 ELECTIVE DEFERRED COMPENSATION
"Elective Deferred Compensation" means the amount of Compensation that
a Participant elects to defer pursuant to a Deferral Commitment.
2.16 EMPLOYEE
"Employee" shall mean a person, other than an independent contractor,
who is receiving remuneration for services rendered to, or labor performed for,
the Employer (or who would be receiving such remuneration except for an
authorized leave of absence) with respect to such person's duties as a key
employee of the Employer as determined by the Committee under Article III.
2.17 EMPLOYER
"Employer" means the Corporation and any affiliated or subsidiary
corporation of the Corporation which is incorporated under the laws of any state
of the United States.
2.18 EMPLOYER PLANS
"Employer Plans" shall mean any employee benefit plan or contract from
which benefits may be payable to the Participant.
2.19 EMPLOYMENT
"Employment" means a Participant's ongoing service with the Employer.
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<PAGE>
2.20 FINANCIAL HARDSHIP
"Financial Hardship" means severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a dependent (as defined in Section 152(a) of the Internal Revenue Code) of
the Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will
constitute an unforeseeable emergency will depend upon the facts of each case,
but in any case, payment may not be made to the extent that such hardship is or
may be relieved:
(a) Through reimbursement or compensation by insurance or
otherwise;
(b) By liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial
hardship; or
(c) By cessation of deferrals under the Plan.
(d) By borrowing from commercial sources on reasonable commercial
terms.
2.21 INTEREST
"Interest" on a Determination Date means interest computed at the rate
provided below:
(a) MOODY'S ACCOUNT INTEREST. The interest yield credited to a
Moody's Account shall be equal to the monthly equivalent of the annual
yield of the Moody's Average Corporate Bond Yield Index for the
preceding calendar month as published by Moody's Investor Service, Inc.
(or any successor thereto) or, if such index is no longer published, a
substantially similar index selected by the Board.
(b) RETIREMENT ACCOUNT INTEREST. The interest yield credited to a
Retirement Account shall be equal to the monthly equivalent of the
effective annual yield on the Moody's Account plus two (2) percentage
points.
2.22 NORMAL RETIREMENT DATE
"Normal Retirement Date" means the first day of the month coinciding
with or next following the date on which the Participant attains age sixty-five
(65).
2.23 PARTICIPANT
"Participant" means any individual who is participating or has
participated in the Plan as provided in Article III.
2.24 PARTICIPATION AGREEMENT
"Participation Agreement" means the agreement submitted by a
Participant to the Committee prior to the beginning of the Deferral Period, with
respect to one or more Deferral Commitments made for such Deferral Period.
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<PAGE>
2.25 PLAN BENEFIT
"Plan Benefit" means the benefit payable to a Participant as calculated
in Article V.
2.26 QUALIFIED PLAN
"Qualified Plan" means the Louisiana-Pacific Corporation Salaried
Employees' Stock Ownership Trust and any successor thereof.
2.27 RETIREMENT
"Retirement" means severance of Employment at the Participant's Normal
Retirement Date or Early Retirement Date as applicable.
2.28 YEARS OF SERVICE
"Years of Service" shall have the meaning provided for such term for
vesting purposes under the Qualified Plan, whether or not the Participant
participates in that Plan.
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 ELIGIBILITY AND PARTICIPATION
(a) ELIGIBILITY. Employees eligible to participate in the Plan
shall be those key management employees of the Employer who are
designated, from time to time, by the Committee as eligible to
participate in the Plan.
(b) PARTICIPATION. An eligible Employee who elects to participate
in the Plan with respect to any Deferral Period must submit a
Participation Agreement to the Committee prior to the Deferral Period.
(c) PART-YEAR PARTICIPATION. In the event that an Employee first
becomes eligible to participate during a Deferral Period, a
Participation Agreement must be submitted to the Committee no later
than thirty (30) days following notification of the Employee of
eligibility to participate. Such Participation Agreement shall be
effective only with regard to Compensation earned or payable following
the submission of the Participation Agreement to the Committee.
3.2 FORM OF DEFERRAL; MINIMUM DEFERRAL
A Participant may elect in the Participation Agreement any of the
following Deferral Commitments:
(a) SALARY DEFERRAL COMMITMENT. A Participant may elect to defer
any portion of his or her base salary for the Deferral Period. The
amount to be deferred shall be stated as a percentage of base salary or
dollar amount and may not be less than two thousand four hundred
dollars ($2,400).
(b) BONUS DEFERRAL COMMITMENT. A Participant may elect to defer
all or a portion of the bonus amounts to be paid by the Employer in the
Deferral Period. The amount to be
PAGE 6 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE>
deferred shall be stated as an even percentage of such bonus and must
not be less than two thousand four hundred dollars ($2,400), unless the
Participant also elects to make a Salary Deferral Commitment, in which
case there shall be no minimum Bonus Deferral Commitment.
3.3 ELECTIONS FOR PART YEARS
In the event an Employee becomes eligible to participate in the Plan at
any time other than January 1 of any calendar year, the amount which must be
completed under the appropriate minimum Deferral Commitment stated in Section
3.2 during the initial partial year of participation shall be the pro-rata
portion based upon complete months left in the initial calendar year.
3.4 LIMITATION ON DEFERRAL
A Participant may defer up to one hundred percent (100%) of the
Participant's Compensation. However, the Committee may impose another maximum
deferral amount or increase the minimum deferral amount under Section 3.2 from
time to time by giving written notice to all Participants, provided, however,
that no such changes may affect a Deferral Commitment made prior to the
Committee's action.
3.5 MODIFICATION OF DEFERRAL COMMITMENT
A Deferral Commitment shall be irrevocable except that the Committee
may permit a Participant to reduce the amount to be deferred, or waive the
remainder of the Deferral Commitment, upon a finding that the Participant has
suffered a Financial Hardship. If a Participant ceases receiving Compensation
during a Deferral Period due to Disability, the Deferral Commitment shall cease
at that time.
3.6 CESSATION OF ELIGIBILITY
In the event a Participant ceases to be designated by the Committee as
eligible to participate in the Plan by reason of a change in employment status
or otherwise, no further amounts of his or her Compensation shall be deferred
under a Deferral Commitment after the date of such cessation of eligibility.
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT
4.1 ACCOUNTS
For recordkeeping purposes only, two (2) Accounts shall be maintained
for each Participant, a Retirement Account and a Moody's Account, only one of
which shall be payable to the Participant under Section 5.1, Section 5.2 or
Section 5.3.
4.2 ELECTIVE DEFERRED COMPENSATION
A Participant's Elective Deferred Compensation shall be credited to the
Participant's Account as the corresponding nondeferred portion of the
Compensation becomes or would have become payable. Any withholding of taxes or
other amounts with respect to deferred Compensation that is required by state,
federal, or local law shall be withheld from the Participant's nondeferred
Compensation to the maximum extent possible with any excess being withheld from
the Participant's Account.
4.3 QUALIFIED PLAN MAKEUP CREDIT
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<PAGE>
The Employer shall credit to each Participant's Account on the last day
of each year a Qualified Plan Makeup Credit ("Makeup"), which shall be the
difference between:
(a) The amount which would have been contributed to the Qualified
Plan if no deferrals had been made under this Plan; and
(b) The amounts actually contributed to the Qualified Plan for
such Participant.
4.4 INTEREST
The Accounts shall be credited monthly with the appropriate Interest
earned based on the interest rates specified in Section 2.21. Interest earned
shall be calculated as of each Determination Date based upon the average daily
balance of the Account since the preceding Determination Date and shall be
credited to the Participant's Accounts at that time.
4.5 DETERMINATION OF ACCOUNTS
Each Participant's Retirement Account and Moody's Account as of each
Determination Date shall consist of the balance of the Participant's Accounts as
of the immediately preceding Determination Date, plus the Participant's Elective
Deferred Compensation credited, any Makeup credited and the appropriate Interest
earned, minus the amount of any withdrawals or distributions made since the
immediately preceding Determination Date.
4.6 VESTING OF ACCOUNTS
Each Participant shall be one hundred percent (100%) vested at all
times in the amount of Compensation elected to be deferred under this Plan and
Interest thereon. Any Makeup credited to the Participant's Account shall vest at
the same rate as the underlying Qualified Plan, except upon a Change in Control,
Disability, or death, in which case the Participant shall be one hundred percent
(100%) vested in the Makeup. However, the Participant shall be entitled to
receive either the Retirement Account or the Moody's Account, as determined
under Article V, but not both.
4.7 STATEMENT OF ACCOUNTS
The Committee shall submit to each Participant, within one hundred
twenty (120) days after the close of each calendar year and at such other time
as determined by the Committee, a statement setting forth the balance to the
credit of each Account maintained for a Participant.
ARTICLE V--PLAN BENEFITS
5.1 RETIREMENT BENEFIT
The Employer shall pay a Plan Benefit equal to the Participant's
Retirement Account to a Participant who terminates Employment by reason of
Retirement, Disability or within twenty-four (24) months of a Change in Control.
5.2 TERMINATION BENEFIT
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<PAGE>
Except as may otherwise be provided in Section 5.3, the Employer shall
pay a Plan Benefit equal to the Participant's vested Moody's Account to a
Participant who terminates Employment for any reason other than those provided
for in Section 5.1.
5.3 DEATH BENEFIT
Upon the death of a Participant, the Employer shall pay to the
Participant's Beneficiary an amount determined as follows:
(a) POSTTERMINATION. If the Participant dies after termination of
Employment, the amount payable shall be equal to the remaining unpaid
balance of the Participant's appropriate Account.
(b) PRETERMINATION. If the Participant dies prior to termination
of Employment, the amount payable shall be the Participant's Retirement
Account balance.
5.4 IN-SERVICE WITHDRAWALS
Participants shall be permitted to elect to withdraw amounts from their
Account subject to the following restrictions:
(a) ELECTION TO WITHDRAW. An election to make an in-service
withdrawal must be made at the same time the Participant enters into a
Participation Agreement for a Deferral Commitment. The date of the
in-service withdrawal cannot be earlier than five years after the date
the Deferral Period begins under the Deferral Commitment. Such election
may be modified no later than the end of the calendar year two (2)
calendar years prior to the calendar year the Participant was scheduled
to receive the benefits.
(b) AMOUNT OF WITHDRAWAL. The amount which a Participant can elect
to withdraw with respect to any Deferral Commitment shall be limited to
one hundred percent (100%) of the amount of such Deferral Commitment
plus interest.
(c) FORM OF IN-SERVICE WITHDRAWAL PAYMENT. The amount elected to
be withdrawn shall be paid in a lump sum unless the Committee approves
an alternative form of payment at the time elected by the Participant
in the Participation Agreement wherein he or she elected the in-
service withdrawal.
5.5 HARDSHIP DISTRIBUTIONS
Upon a finding that a Participant has suffered a Financial Hardship or
a Disability, the Committee may, in its sole discretion, make distributions from
the Participant's Account prior to the time specified for payment of benefits
under the Plan. The amount of such distribution shall be limited to the amount
reasonably necessary to meet the Participant's requirements during the Financial
Hardship or Disability.
5.6 FORM OF BENEFIT PAYMENT
(a) All Plan Benefits other than In-Service Withdrawals or
Hardship Distributions shall be paid in the form selected by the
Participant at the time of the Deferral Commitment from among the
following alternatives:
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<PAGE>
(i) Lump sum payment
(ii) Substantially equal annual installments of the Account
and Interest amortized over a period of five (5) years
(iii) Substantially equal annual installments of the Account
and Interest amortized over a period often (10) years
(iv) Substantially equal annual installments of the Account
and Interest amortized over a period of fifteen (15) years
(v) Any other method that is the Actuarial Equivalent of
the Participant's appropriate Account balance
(b) Payment shall commence as elected by the Participant, which
shall be either within sixty-five (65) days of termination or in
January following the Participant's termination.
(c) The Participant may modify the form or timing of benefit
payment as long as such modification is made before the end of the
calendar year two (2) calendar years prior to when the Participant's
benefits were scheduled to commence had the modification not been made.
5.7 SMALL ACCOUNTS
Notwithstanding Section 5.6(a), if a Participant's Account is less than
twenty thousand dollars ($20,000), the Committee may, in its sole discretion,
pay the Participant in a lump sum.
5.8 ACCELERATED DISTRIBUTION
Notwithstanding any other provision of the Plan, at any time, a
Participant shall be entitled to receive, upon written request to the Committee,
a lump-sum distribution equal to ninety percent (90%) of the vested Account
balance as of the Determination Date immediately preceding the date on which the
Committee receives the written request. The remaining balance shall be forfeited
by the Participant and the Participant will not be allowed to participate in
this Plan in the future. The amount payable under this section shall be paid in
a lump sum within thirty (30) days following the receipt of the notice by the
Committee from the Participant.
5.9 EXCISE TAX AND LOST BENEFIT MAKEUP
If as a result of participating in this Plan the Participant is
required to pay additional excise tax under Section 4999 of the Internal Revenue
Code ("IRC"), or receives a smaller benefit from any other Employer Plan as a
result of any IRC Section 280G Golden Parachute limitations, then a makeup
amount shall be payable from this Plan. This amount shall be equal to the amount
of Section 4999 excise tax payable and any lost benefit from other Employer
Plans due to IRC Section 280G Golden Parachute limitation, as a result of
participation in this Plan, plus any excise tax or income taxes payable due to
this payment. The Company and Participant shall cooperate in good faith in
making such determination and in providing the necessary information for this
purpose.
5.10 WITHHOLDING; PAYROLL TAXES
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<PAGE>
The Employer shall withhold from payments made hereunder any taxes
required to be withheld from such payments under federal, state or local law.
However, a Beneficiary may elect not to have withholding for federal income tax
pursuant to Section 3405(a)(2) of Internal Revenue Code, or any successor
provision thereto.
5.11 PAYMENT TO GUARDIAN
If a Plan benefit is payable to a minor or a person declared
incompetent or to a person incapable of handling the disposition of his or her
property, the Committee may direct payment of such Plan Benefit to the guardian,
legal representative, or person having the care and custody of such minor,
incompetent, or person. The Committee may require proof of incompetency,
minority, incapacity or guardianship as it may deem appropriate prior to
distribution of the Plan Benefit. Such distribution shall completely discharge
the Committee from all liability with respect to such benefit.
ARTICLE VI--BENEFICIARY DESIGNATION
6.1 BENEFICIARY DESIGNATION
Subject to Section 6.3, each Participant shall have the right, at any
time, to designate one or more persons or an entity as Beneficiary (both primary
as well as secondary) to whom benefits under this Plan shall be paid in the
event of Participant's death prior to complete distribution of the Participant's
Account. Each Beneficiary designation shall be in a written form prescribed by
the Committee and shall be effective only when filed with the Committee during
the Participant's lifetime.
6.2 CHANGING BENEFICIARY
Subject to Section 6.3, any Beneficiary designation may be changed by a
Participant without the consent of the previously named Beneficiary by the
filing of a new designation with the Committee. The filing of a new designation
shall cancel all designations previously filed. If a Participant's Compensation
is community property, any Beneficiary designation shall be valid or effective
only as permitted by applicable law.
6.3 COMMUNITY PROPERTY
If the Participant resides in a community property state, the following
rules shall apply:
(a) Designation by a married Participant of a Beneficiary other
than the Participant's spouse shall not be effective unless the spouse
executes a written consent that acknowledges the effect of the
designation, or it is established the consent cannot be obtained
because the spouse cannot be located.
(b) A married Participant's Beneficiary designation may be changed
by a Participant with the consent of the Participant's spouse as
provided for in Section 6.3(a) by the filing of a new designation with
the Committee.
(c) If the Participant's marital status changes after the
Participant has designated a Beneficiary, the following shall apply:
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(i) If the Participant is married at the time of death but
was unmarried when the designation was made, the designation shall
be void unless the spouse has consented to it in the manner
prescribed in Section 6.3(a).
(ii) If the Participant is unmarried at the time of death
but was married when the designation was made:
a) The designation shall be void if the spouse was named
as Beneficiary unless Participant had submitted a change of
beneficiary listing the former spouse as the beneficiary
b) The designation shall remain valid if a nonspouse
Beneficiary was named.
(iii) If the Participant was married when the designation was
made and is married to a different spouse at death, the
designation shall be void unless the new. spouse has consented to
it in the manner prescribed above.
6.4 NO BENEFICIARY DESIGNATION
In the absence of an effective Beneficiary Designation, or if all
designated Beneficiaries predecease the Participant or dies prior to complete
distribution of the Participant's benefits, then the Participant's designated
Beneficiary shall be deemed to be the person in the first of the following
classes in which there is a survivor:
(a) the surviving spouse;
(b) the Participant's children, except that if any of the children
predeceases the Participant but leaves issue surviving, then such issue
shall take by right of representation the share the parent would have
taken if living;
(c) the Participant's estate.
6.5 EFFECT OF PAYMENT
The payment to the deemed Beneficiary shall completely discharge
Employer's obligations under the Plan.
ARTICLE VII--ADMINISTRATION
7.1 COMMITTEE; DUTIES
The Plan shall be administered by the Committee, which shall consist of
not less than three (3) persons appointed by the Chief Executive Officer and
which may include the CEO as a member. The Committee shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations for the
administration of this Plan and decide or resolve any and all questions,
including interpretations of this Plan, as may arise in connection with the
Plan. A majority vote of the Committee members shall control any decision.
Members of the Committee may be Participants under this Plan.
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<PAGE>
7.2 AGENTS
The Committee may, from time to time, employ other agents and delegate
to them such administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Employer.
7.3 BINDING EFFECT OF DECISIONS
The decision or action of the Committee with respect to any question
arising out of or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated hereunder
shall be final, conclusive and binding upon all persons having any interest in
the Plan.
7.4 INDEMNITY OF COMMITTEE
The Employer shall indemnify and hold harmless the members of the
Committee against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to this Plan, except in the case
of gross negligence or willful misconduct.
ARTICLE VIII--CLAIMS PROCEDURE
8.1 CLAIM
Any person claiming a benefit, requesting an interpretation or ruling
under the Plan, or requesting information under the Plan shall present the
request in writing to the Committee, which shall respond in writing as soon as
practicable.
8.2 DENIAL OF CLAIM
If the claim or request is denied, the written notice of denial shall
state:
(a) The reasons for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
8.3 REVIEW OF CLAIM
Any person whose claim or request is denied or who has not received a
response within thirty (30) days may request review by notice given in writing
to the Committee. The claim or request shall be reviewed by the Committee which
may, but shall not be required to, grant the claimant a hearing. On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.
8.4 FINAL DECISION
PAGE 13 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE>
The decision on review shall normally be made within sixty (60) days.
If an extension of time is required for a hearing or other special
circumstances, the claimant shall be notified and the time limit shall be one
hundred twenty (120) days. The decision shall be in writing and shall state the
reasons and the relevant Plan provisions. All decisions on review shall be final
and bind all parties concerned.
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN
9.1 AMENDMENT
The Corporation may at any time amend the Plan in whole or in part;
provided, however, that any such amendment that would materially increase the
benefits provided under the Plan shall be subject to the prior approval of the
Board. Provided, further, that no amendment shall be effective to decrease or
restrict the amount accrued to the date of Amendment in any Account maintained
under the Plan. Changes in the definition of "Interest" shall be subject to the
following restrictions:
(a) NOTICE. A change shall not become effective before the first
day of the calendar year which follows the adoption of the amendment
and at least thirty (30) days written notice of the amendment to the
Participant.
(b) CHANGE IN CONTROL. Any change in the definition of Interest
after a Change in Control shall apply only to those amounts credited to
the Participant's Account as a result of Deferral Commitments made
after the Change in Control.
9.2 EMPLOYER'S RIGHT TO TERMINATE
The Corporation may at any time partially or completely terminate the
Plan if, in its judgment, the tax, accounting or other effects of the
continuance of the Plan, or potential payments thereunder would not be in the
best interests of the Employer.
(a) PARTIAL TERMINATION. The Corporation may partially terminate
the Plan by instructing the Committee not to accept any additional
Deferral Commitments. In the event of such a Partial Termination, the
Plan shall continue to operate and be effective with regard to Deferral
Commitments entered into prior to the effective date of such Partial
Termination.
(b) COMPLETE TERMINATION. The Corporation may completely terminate
the Plan by instructing the Committee not to accept any additional
Deferral Commitments, and by terminating all ongoing Deferral
Commitments. In the event of Complete Termination, the Plan shall cease
to operate and the Employer shall pay out to each Participant their
Retirement Account as if the Participant had terminated service as of
the effective date of the Complete Termination. Payments shall be made
in equal annual installments over the period listed below, based on the
Retirement Account balance:
RETIREMENT ACCOUNT BALANCE PAYOUT PERIOD
----------------------------------------------------
Less than $10,000 1 Year
$10,000 but less than $50,000 3 Years
More than $50,000 5 Years
====================================================
PAGE 14 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE>
ARTICLE X--MISCELLANEOUS
10.1 UNFUNDED PLAN
This Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly-compensated employees" within the meaning of Sections 201, 301 and 401 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
Accordingly, the Plan shall terminate and no further benefits shall accrue
hereunder in the event it is determined by a court of competent jurisdiction or
by an opinion of counsel that the Plan constitutes an employee pension benefit
plan within the meaning of Section 3(2) of ERISA which is not so exempt. In the
event of such termination, all ongoing Deferral Commitments shall terminate, no
additional Deferral Commitments will be accepted by the Committee, and the
amount of each Participant's vested Account balance shall be distributed to such
Participant at such time and in such manner as the Committee, in its sole
discretion, determines.
10.2 UNSECURED GENERAL CREDITOR
In the event of Employer's insolvency, Participants and their
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of the Employer, nor shall
they be Beneficiaries of, or have any rights, claims or interests in any life
insurance policies, annuity contracts or the proceeds therefrom owned or which
may be acquired by the Employer. In that event, any and all of the Employer's
assets and policies shall be, and remain, the general, unpledged, unrestricted
assets of the Employer. The Employer's obligation under the Plan shall be that
of an unfunded and unsecured promise of the Employer to pay money in the future.
10.3 TRUST FUND
The Employer shall be responsible for the payment of all benefits
provided under the Plan. At its discretion, the Employer may establish one or
more trusts, with such trustees as the Board may approve, for the purpose of
providing for the payment of such benefits. Such trust or trusts may be
irrevocable, but the assets thereof shall be subject to the claims of the
Employer's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto, but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Employer.
10.4 NONASSIGNABILITY
Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate or convey in advance of actual receipt the
amounts, if any, payable hereunder, or any part thereof, which are, and all
rights to which are, expressly declared to be unassignable and nontransferable.
No part of the amounts payable shall, prior to actual payment, be subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.
10.5 NOT A CONTRACT OF EMPLOYMENT
The terms and conditions of the Plan shall not be deemed to constitute
a contract of employment between the Employer and the Participant, and the
Participant (or his or her Beneficiary) shall have no
PAGE 15 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE>
rights against the Employer except as may otherwise be specifically provided
herein. Moreover, nothing in the Plan shall be deemed to give a Participant the
right to be retained in the service of the Employer or to interfere with the
right of the Employer to discipline or discharge the Participant at any time.
10.6 PROTECTIVE PROVISIONS
A Participant will cooperate with the Employer by furnishing any and
all information requested by the Employer, in order to facilitate the payment of
benefits hereunder, and by taking such physical examinations as the Employer may
deem necessary and taking such other action as may be requested by the Employer.
10.7 TERMS
Whenever any words are used herein in the masculine, they shall be
construed as though they were used in the feminine in all cases where they would
so apply; and wherever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural or the
singular, as the case may be, in all cases where they would so apply.
10.8 CAPTIONS
The captions of the articles, sections and paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or construction
of any of its provisions.
10.9 GOVERNING LAW; ARBITRATION
The provisions of the Plan shall be construed and interpreted according
to the laws of the State of Oregon. Any dispute or claim that arises out of or
that relates to the Plan or to the interpretation, breach, or enforcement of the
Plan, must be resolved by mandatory arbitration in accordance with the then
effective arbitration rules of Arbitration Service of Portland, Inc., and any
judgment upon the award rendered pursuant to such arbitration may be entered in
any court having jurisdiction thereof.
10.10 VALIDITY
In case any provision of the Plan shall be held illegal or invalid for
any reason, said illegality or invalidity shall not affect the remaining parts
hereof, but the Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
10.11 NOTICE
Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, to any member of the Committee or the Secretary of
the Employer. Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
10.12 SUCCESSORS
The provisions of the Plan shall bind and inure to the benefit of the
Employer and its successors and assigns. The term successors as used herein
shall include any corporate or other business entity which
PAGE 16 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE>
shall, whether by merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of the Employer, and successors of
any such corporation or other business entity.
LOUISIANA-PACIFIC CORPORATION
By: /s/ Mark A. Suwyn
Chairman and Chief Executive Officer
By: /s/ Anton C. Kirchhof
Secretary
Dated: July 1, 1997
PAGE 17 - EXECUTIVE DEFERRED COMPENSATION PLAN
LOUISIANA-PACIFIC CORPORATION
AND SUBSIDIARIES
STATE/
PROVINCE/COUNTRY
OF DOMICILE
-----------
LOUISIANA-PACIFIC CORPORATION DELAWARE
DOMESTIC SUBSIDIARIES
---------------------
ASSOCIATED CHEMISTS, INC. OREGON
CREATIVE POINT, INC. CALIFORNIA
GREENSTONE INDUSTRIES, INC. DELAWARE
PACIFIC RIM RECYCLING, INC. DELAWARE
GREENSTONE INDUSTRIES-FT. WAYNE, INC. INDIANA
KETCHIKAN PULP COMPANY WASHINGTON
LOUISIANA-PACIFIC CORPORATION (W. VA.) WEST VIRGINIA
LOUISIANA-PACIFIC POLYMERS, INC. OREGON
LOUISIANA-PACIFIC TIMBER COMPANY OREGON
L-PSPV, INC. DELAWARE
LPS CORPORATION OREGON
L-P REDWOOD, LLC DELAWARE
LOUISIANA-PACIFIC SAMOA, INC. OREGON
NEW WAVERLY TRANSPORTATION, INC. TEXAS
FOREIGN SUBSIDIARIES
--------------------
LOUISIANA-PACIFIC CANADA LTD. BRITISH COLUMBIA,
CANADA
LOUISIANA-PACIFIC CANADA DAWSON CREEK LTD BRITISH COLUMBIA,
CANADA
LOUISIANA-PACIFIC CANADA PULP CO. NOVA SCOTIA,
CANADA
LOUISIANA-PACIFIC DE MEXICO, S.A. DE C.V. MEXICO
LOUISIANA-PACIFIC, S.A. DE C.V. MEXICO
LOUISIANA-PACIFIC DE VENEZUELA, C.A. VENEZUELA
LOUISIANA-PACIFIC COILLTE IRELAND LIMITED IRELAND
L-P FOREIGN SALES CORPORATION GUAM
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K into the registratnt's previously filed
Registration Statement File Nos. 2-97014, 33-42276, 33-62944, 33-62317 and
333-10987.
ARTHUR ANDERSEN LLP
Portland, Oregon
March 27, 1998
Deloitte &
Touche LLP
- ----------- --------------------------------------------------
Suite 3900 Telephone: (503) 222-1341
111 S.W. Fifth Avenue Facsimile: (503) 224-2172
Portland, Oregon 97204-3698
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
2-97014, 33-42276, 33-62944, 33-62317, and 333-10987 of Louisiana-Pacific
Corporation on Form S-8 of our report dated February 6, 1998, appearing in this
Annual Report on Form 10-K of Louisiana-Pacific Corporation for the year ended
December 31, 1997.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Portland, Oregon
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Consolidated
Financial Statements and Notes included in
this Form 10-K and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 31,900
<SECURITIES> 0
<RECEIVABLES> 146,200
<ALLOWANCES> (2,000)
<INVENTORY> 258,800
<CURRENT-ASSETS> 596,800
<PP&E> 2,433,900
<DEPRECIATION> (1,242,100)
<TOTAL-ASSETS> 2,578,400
<CURRENT-LIABILITIES> 319,300
<BONDS> 572,300
0
0
<COMMON> 117,000
<OTHER-SE> 1,169,200
<TOTAL-LIABILITY-AND-EQUITY> 2,578,400
<SALES> 2,402,500
<TOTAL-REVENUES> 2,402,500
<CGS> 2,322,600
<TOTAL-COSTS> 2,523,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,900
<INCOME-PRETAX> (150,000)
<INCOME-TAX> (43,600)
<INCOME-CONTINUING> (101,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,800)
<EPS-PRIMARY> (.94)
<EPS-DILUTED> 0
</TABLE>
