<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Temple Inland Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[TEMPLE-INLAND LOGO]
303 SOUTH TEMPLE DRIVE
DIBOLL, TEXAS 75941
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, MAY 2, 1997
To the Stockholders of Temple-Inland Inc.
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of
Temple-Inland Inc., a Delaware corporation (the "Company"), will be held at the
principal executive offices of the Company, 303 S. Temple Dr., Diboll, Texas
75941, on Friday, May 2, 1997, at 9:00 a.m., local time, for the following
purposes:
1. To elect four (4) directors to the Board of Directors of the
Company to hold office until the expiration of their terms or until their
respective successors have been duly elected and have qualified;
2. To ratify the appointment by the Board of Directors of Ernst &
Young LLP as independent auditors for the Company for the fiscal year
ending January 3, 1998;
3. To ratify the adoption of the Company's 1997 Stock Option Plan;
4. To ratify the adoption of the Company's 1997 Restricted Stock Plan;
and
5. To transact such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on March 7, 1997 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting or any adjournment(s)
thereof. Only stockholders of record on the Record Date will be entitled to
notice of and to vote at the Annual Meeting.
By Order of the Board of Directors
M. RICHARD WARNER
Secretary
Diboll, Texas
March 17, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR NOT
YOU PLAN TO BE PRESENT AT THE MEETING, YOU ARE URGED TO MARK, SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED, SELF-ADDRESSED, STAMPED ENVELOPE
PROMPTLY SO THAT YOUR SHARES OF COMMON STOCK MAY BE VOTED IN ACCORDANCE WITH
YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED AT THE
MEETING. YOUR PROXY WILL BE RETURNED TO YOU IF YOU SHOULD REQUEST SUCH RETURN IN
THE MANNER PROVIDED FOR REVOCATION OF PROXIES ON THE INITIAL PAGE OF THE
ENCLOSED PROXY STATEMENT.
<PAGE> 3
[TEMPLE-INLAND LOGO]
303 SOUTH TEMPLE DRIVE
DIBOLL, TEXAS 75941
---------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Temple-Inland Inc. (the "Company") for use
at the 1997 Annual Meeting of Stockholders to be held on Friday, May 2, 1997, at
the time and place and for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders, and at any adjournment(s) thereof. This Proxy
Statement and form of proxy are first being sent to the stockholders of the
Company on or about March 17, 1997.
The accompanying form of proxy is designed to permit each stockholder
entitled to vote at the Annual Meeting to vote for or withhold voting for any or
all nominees for election as director, to vote for or against or to abstain from
voting on proposals 2, 3, and 4, and in the discretion of the proxies with
respect to any other proposal brought before the Annual Meeting. When a
stockholder's proxy card specifies a choice with respect to a voting matter, the
shares will be voted and will be voted as specified. If no such specifications
are made, the accompanying form of proxy will be voted at the Annual Meeting:
For the election of the nominees under the caption "Election of Directors;" For
ratification of the selection of Ernst & Young LLP as independent auditors for
the Company for the fiscal year ending January 3, 1998; For ratification of the
adoption of the Company's 1997 Stock Option Plan; and For ratification of the
adoption of the Company's 1997 Restricted Stock Plan.
Execution of the accompanying proxy will not affect a stockholder's right
to attend the Annual Meeting and vote in person. Any stockholder giving a proxy
has the right to revoke it by giving written notice of revocation to the
Secretary of the Company at its principal executive offices at any time before
the proxy is voted or by executing and delivering a later-dated proxy or by
attending the Annual Meeting and voting his or her shares in person. No such
notice of revocation or later-dated proxy, however, will be effective until
received by the Company at or prior to the Annual Meeting.
The Company has retained D.F. King & Co., Inc., a professional proxy
solicitation firm ("D.F. King"), to assist in the solicitation of proxies. In
addition to the solicitation of proxies by use of the mail, employees of D.F.
King and officers and regular employees of the Company may solicit the return of
proxies by personal interview, mail, telephone and telegraph. Officers and
employees of the Company will not receive additional compensation, but will be
reimbursed for out-of-pocket expenses. D.F. King will be reimbursed for its
expenses in soliciting proxies and, in addition, will receive a proxy
solicitation fee not to exceed $11,500. Brokerage houses and other custodians,
nominees and fiduciaries will be requested to forward solicitation material to
the beneficial owners of stock. All costs of solicitation are to be borne by the
Company.
The Annual Report to Shareholders, covering the Company's fiscal year ended
December 28, 1996 and including audited financial statements, is enclosed
herewith. The Annual Report does not form any part of the material for the
solicitation of proxies.
<PAGE> 4
PURPOSES OF THE MEETING
At the Annual Meeting, the stockholders of the Company will consider and
vote upon the following matters:
1. The election of four (4) directors to the Board of Directors of the
Company to hold office until the expiration of their terms or until their
respective successors have been duly elected and have qualified;
2. The ratification of the appointment by the Board of Directors of
Ernst & Young LLP as independent auditors for the Company for the fiscal
year ending January 3, 1998;
3. The ratification of the adoption of the Company's 1997 Stock Option
Plan;
4. The ratification of the adoption of the Company's 1997 Restricted
Stock Plan; and
5. Such other business as may properly come before the Annual Meeting
or any adjournment(s) thereof.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
GENERAL
The Board of Directors of the Company has fixed the close of business on
March 7, 1997 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. On the
Record Date, there were 55,437,073 shares of Common Stock of the Company issued
and outstanding. The Common Stock is the only class of stock outstanding and
entitled to vote at the Annual Meeting. Each share of Common Stock is entitled
to one vote on all matters to be acted on at the Annual Meeting. The attendance,
in person or by proxy, of the holders of a majority of the issued and
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum to transact business.
CONFIDENTIAL VOTING POLICY
On February 5, 1993, the Board of Directors of the Company adopted a
confidential voting policy. The policy provides that stockholder proxies,
ballots, and voting tabulations that identify the vote of the specific
stockholder will not be disclosed to the Company, its directors, officers, or
employees except in certain limited situations such as when legally necessary or
when expressly requested by a stockholder.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table and notes thereto indicate the name, address and stock
ownership of each person or group of persons known by the Company to own
beneficially more than five percent (5%) of the outstanding shares of Common
Stock as of March 7, 1997.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ---------- --------
<S> <C> <C>
Delaware Management Holdings, Inc........................... 3,161,941(1) 5.71%(2)
2005 Market Street
Philadelphia, PA 19103
Wellington Management Company, LLP.......................... 3,364,250(3) 6.07%(4)
75 State Street
Boston, Massachusetts 02109
</TABLE>
2
<PAGE> 5
- ---------------
(1) Based on a statement on Schedule 13G dated December 31, 1996 (the "Delaware
Management 13G") filed with the Securities and Exchange Commission, Delaware
Management Holdings, Inc. may be deemed beneficial owner of these shares,
which are owned by numerous investment funds.
(2) Based upon the calculation in the Delaware Management 13G, which assumes
55,375,499 shares of Common Stock outstanding.
(3) Based on a statement on Schedule 13G dated February 10, 1994 and Amendments
No. 1, 2, and 3 thereto dated January 30, 1995, February 1, 1996, and
January 24, 1997, respectively, (the "Wellington 13G") filed with the
Securities and Exchange Commission, Wellington Management Company, in its
capacity as investment advisor, may be deemed beneficial owner of these
shares, which are owned by numerous investment counseling clients.
(4) Based upon the calculation in the Wellington 13G, which assumes 55,424,217
shares of Common Stock outstanding.
SECURITY OWNERSHIP OF MANAGEMENT
The following table and notes thereto set forth certain information
regarding the beneficial ownership of the Common Stock as of March 7, 1997 by
(i) each of the Company's directors and nominees for director, (ii) the Chief
Executive Officer and the four other most highly compensated executive officers,
(iii) one former executive officer, and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2)
---------------- ----------------------- -----------
<S> <C> <C>
Paul M. Anderson.............................. 13,000(3)(4) *
David L. Ashcraft............................. 75,106(3)(4)(6) *
Robert Cizik.................................. 26,540(3)(4) *
Anthony M. Frank.............................. 14,500(3)(4) *
Clifford J. Grum.............................. 405,641(3)(4)(5)(6) *
William B. Howes.............................. 62,413(3)(4)(6) *
Bobby R. Inman................................ 10,500(3)(4) *
Kenneth M. Jastrow, II........................ 47,805(3)(4)(6) *
Harold C. Maxwell............................. 85,700(3)(4)(6) *
Herbert A. Sklenar............................ 17,000(3)(4) *
Walter P. Stern............................... 46,880(3)(4)(5) *
Arthur Temple III............................. 298,584(3)(4)(5)(7) *
Charlotte Temple.............................. 233,186(3)(4)(8) *
Larry E. Temple............................... 11,000(3)(4) *
M. Richard Warner............................. 63,833(3)(4)(5)(6) *
All directors and executive officers (20
persons) as a group......................... 1,524,661(3)(4)(5)(6)(7)(8) 2.75%
</TABLE>
- ---------------
* Represents less than one percent.
(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended ("Rule 13d-3"), with additional information included as set forth in
footnote (4) below. Unless otherwise indicated, beneficial ownership
includes both sole voting and sole dispositive power. Certain of the
directors and executive officers disclaim beneficial ownership with respect
to certain of these shares. Unless otherwise indicated, the above table does
not include any shares that may be held by pension and profit-sharing plans
of the corporations or endowment funds of educational and charitable
institutions for which various directors and officers serve as directors or
trustees.
(2) Based upon a total of 55,437,073 shares of Common Stock issued and
outstanding on March 7, 1997.
(3) Includes the following number of shares of Common Stock issuable upon the
exercise of options exercisable within a period of 60 days from March 7,
1997: Mr. Anderson -- 3,000; Mr. Ashcraft --
3
<PAGE> 6
19,991; Mr. Cizik -- 26,000; Mr. Frank -- 4,500; Mr. Grum -- 28,940; Mr.
Howes -- 32,732; Mr. Inman -- 10,000; Mr. Jastrow -- 18,051; Mr.
Maxwell -- 19,991; Mr. Sklenar -- 5,000; Mr. Stern -- 4,000; Mr. Temple
III -- 10,000; Ms. C. Temple -- 1,000; Mr. L. Temple -- 5,000; Mr.
Warner -- 10,398; and all directors and executive officers (20 persons) as a
group -- 261,838.
(4) Also includes the following number of shares of Common Stock issuable upon
the exercise of options with exercise dates ranging from approximately five
months to fifteen years from March 7, 1997: Mr. Anderson -- 9,000; Mr.
Ashcraft -- 11,433; Mr. Cizik -- 0; Mr. Frank -- 9,500; Mr. Grum -- 38,200;
Mr. Howes -- 25,380; Mr. Inman -- 0; Mr. Jastrow -- 23,913; Mr.
Maxwell -- 23,913; Mr. Sklenar -- 11,000; Mr. Stern -- 2,000; Mr. Temple
III -- 0; Ms. C. Temple -- 9,000; Mr. L. Temple -- 5,000; Mr.
Warner -- 17,606; and all directors and executive officers (20 persons) as a
group -- 243,035. These options are not required to be reported under Rule
13d-3 and the shares underlying these options are not considered
"beneficially owned" under Rule 13d-3.
(5) Includes 57,102, 2,680, 1,000, and 26,735 shares of Common Stock owned by
certain relatives of Messrs. Grum, Stern, Temple III, and Warner,
respectively. Also includes, with respect to Mr. Grum, 3,550 shares of
Common Stock held by a corporation controlled by a relative of Mr. Grum and
4,000 shares held by a family foundation. All of these shares are considered
by the Securities and Exchange Commission to be beneficially owned for
purposes of this Proxy Statement. Certain of the named individuals disclaim
any beneficial interest in such shares.
(6) Includes 5,419, 3,562, 315, 1,276, 1,287, and 189 shares of Common Stock
held for Messrs. Ashcraft, Grum, Howes, Jastrow, Maxwell, and Warner,
respectively, and 18,913 shares of Common Stock held for all directors and
executive officers (20 persons) as a group by trusts under three (3)
employee stock plans of the Company's subsidiaries. These shares are
considered by the Securities and Exchange Commission to be beneficially
owned for purposes of this Proxy Statement.
(7) Includes 134,460 shares of Common Stock held in a trust over which Mr.
Temple III is trustee. Mr. Temple III has a future income interest with
respect to 33,615 of these shares and a remainder interest with respect to
33,615 of these shares. Also includes 10,608 shares held by various trusts
and custodial accounts, with respect to which Mr. Temple III has sole voting
and dispositive power. Mr. Temple III disclaims any beneficial ownership
with respect to these 10,608 shares. Includes 137,190 shares held in two
trusts for Mr. Temple III and certain of his relatives with respect to which
he has a present income interest but no voting or dispositive power. Mr.
Temple III has a remainder interest with respect to 58,500 of the shares
held in one of these trusts. Does not include 10,536 shares held by various
trusts and custodial accounts, with respect to which Mr. Temple III has sole
voting and dispositive power. Mr. Temple III disclaims any beneficial
ownership with respect to these 10,536 shares. Does not include 1,260,626
shares of Common Stock held by the T.L.L. Temple Foundation, a charitable
trust, of which Mr. Temple III is one of five trustees and shares voting and
dispositive power. Mr. Temple III disclaims any beneficial ownership with
respect to such shares.
(8) Includes 67,230 shares of Common Stock held in a trust. Ms. C. Temple has a
future income interest with respect to 33,615 of these shares and a
remainder interest with respect to 33,615 of these shares. Also includes
137,190 shares held in two trusts for Ms. C. Temple and certain of her
relatives with respect to which she has a present income interest but no
voting or dispositive power. Ms. C. Temple has a remainder interest with
respect to 58,500 of the shares held in one of these trusts.
4
<PAGE> 7
ELECTION OF DIRECTORS
The By-laws of the Company provide that the number of directors that
constitutes the Board of Directors shall be established by vote of the Board of
Directors and that the directors shall be classified with respect to the time
for which they severally hold office into three classes, which classes shall as
nearly as possible be equal in size. The Board of Directors has set the number
of directors at eleven (11), with two classes of four (4) directors each and one
class of three (3) directors.
Directors are elected by a plurality of the votes cast by the holders of
the Company's Common Stock at a meeting at which a quorum is present.
"Plurality" means that the individuals who receive the largest number of votes
cast are elected as directors up to the maximum number of directors to be chosen
at the meeting. Consequently, any shares not voted (whether by abstention,
broker nonvote or otherwise) have no impact in the election of directors except
to the extent the failure to vote for an individual results in another
individual receiving a larger number of votes.
NOMINEES
Unless otherwise indicated in the enclosed form of proxy, the persons named
in such proxy intend to nominate and vote for the election of the following
nominees for the office of director of the Company, to serve as directors for
three (3) years or until their respective successors have been duly elected and
have qualified. All nominees are presently serving as directors.
NOMINEES FOR DIRECTOR TO BE ELECTED AT THE 1997 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------------- ------------------------------------------
<S> <C>
Paul M. Anderson.... President, Chief Executive Officer, and director of
1994 PanEnergy Corp. Mr. Anderson, 51, has served as President of
PanEnergy Corp since 1993 and as Group Vice President from
1991 through 1993. From February 1990 until 1991, he served
as Vice President, Finance and Chief Financial Officer of
Inland Steel Industries, Inc. Mr. Anderson served in a
number of management positions with Texas Eastern
Corporation beginning in 1977 and was Senior Vice President
when that company was acquired by Panhandle Eastern
Corporation (now known as PanEnergy Corp) in 1989. He serves
on the boards of TEPPCO Partners, L.P. and Kerr-McGee
Corporation.
Robert Cizik........ Mr. Cizik, 65, is the former Chairman and Chief Executive
1984 Officer of Cooper Industries, Inc., Houston, Texas, a
diversified international manufacturing company (1975-1996).
He currently serves as Non-Executive Chairman of Easco,
Inc., Girard, Ohio. Director of Air Products and Chemicals,
Inc., Harris Corporation and PanEnergy Corp.
Arthur Temple III... Chairman of the Board and Chief Executive Officer of Exeter
1984 Investment Company. Mr. Temple III, 55, has served as
Chairman of the Board of Exeter Investment Company from 1975
to early 1982 and since March 1986. From 1973 until 1980 Mr.
Temple III served as a member of the Texas legislature and
from January 1981 until March 1986 he served as a member of
the Railroad Commission of Texas, which regulates mineral
resources and for-hire highway transportation in Texas. Mr.
Temple III is also Chairman of the Board of First Bank &
Trust, East Texas.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------------- ------------------------------------------
<S> <C>
Larry E. Temple..... Mr. Temple, 61, is an attorney and during the last five
1991 years has been in private practice. He has served as
Chairman of the Texas Select Committee on Higher Education,
as Chairman of the Texas Higher Education Coordinating
Board, and as a member of the Texas Guaranteed Student Loan
Corporation. Mr. Temple has also served on several boards of
the University of Texas and is a member of the Board of the
Lyndon B. Johnson Foundation. Mr. Temple formerly served as
Special Counsel to President Lyndon B. Johnson and as an
Executive Assistant to Texas Governor John Connally.
</TABLE>
Although the Company does not anticipate that any of the above-named
nominees will refuse or be unable to accept or serve as a director of the
Company, the persons named in the enclosed form of proxy intend, if any nominee
becomes unavailable, to vote the shares represented by the proxy for the
election of such other person or persons as may be nominated or designated by
management, unless they are directed by the proxy to do otherwise.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF MESSRS.
ANDERSON, CIZIK, TEMPLE III AND L. TEMPLE AS DIRECTORS OF THE COMPANY.
CONTINUING DIRECTORS
The following information is provided with respect to directors who will
continue to serve as directors of the Company until the expiration of their
terms at the times indicated.
DIRECTORS TO SERVE UNTIL THE 1998 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------------- ------------------------------------------
<S> <C>
Clifford J. Grum.... Chairman and Chief Executive Officer of the Company. Mr.
1983 Grum, 62, served as President and Chief Executive Officer of
the Company from October 1983 until his election as Chairman
in 1991. Mr. Grum is also a director of Cooper Industries,
Inc., Trinity Industries, Inc. and Tupperware Corporation.
Bobby R. Inman...... Admiral Inman, 65, served as Chairman of the Board of
1987 Westmark Systems, Inc., a Texas-based electronics industry
holding company, from September 1986, and as its Chief
Executive Officer from December 31, 1986, until December 31,
1989. From January 1983 until December 1986, Admiral Inman
was President and Chief Executive Officer of the
Microelectronics and Computer Technology Corp. in Austin,
Texas. Admiral Inman retired from active duty with the
United States Navy with permanent four star rank on July 1,
1982. Admiral Inman served as Chairman of the Federal
Reserve Bank of Dallas from January 1987 to December 1990.
He is a director of Fluor Corporation, SBC Communications
Inc., Science Applications International Corp. and Xerox
Corporation.
Herbert A. Chairman of the Board of Vulcan Materials Company, a
Sklenar............. producer of construction materials and chemicals. Mr.
1993 Sklenar, 65, served as President of Vulcan Materials Company
from 1983 until his election as Chairman in 1992 and served
as its Chief Executive Officer from 1986 until February
1997. In addition to being a director of Vulcan Materials
Company, he is also a director of AmSouth Bancorporation and
Protective Life Corporation.
</TABLE>
6
<PAGE> 9
DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------------- ------------------------------------------
<S> <C>
Anthony M. Frank.... Chairman of Belvedere Partners. Mr. Frank, 65, served as
1992 Postmaster General of the United States from 1988 until
1992. Prior to his appointment as Postmaster General, Mr.
Frank served as Chairman of the Board and Chief Executive
Officer of the San Francisco-based First Nationwide Bank. He
has also served as Chairman of the Federal Home Loan Bank of
San Francisco and Chairman of the California Housing Finance
Agency, and was the first Chairman of the Federal Home Loan
Mortgage Corporation Advisory Board. Mr. Frank is also a
director of The Charles Schwab Corporation, General American
Investors Company, Inc., Bedford Properties, Inc., Crescent
Real Estate Equities, Irvine Apartment Communities, Living
Centers of America, and Financial Security Assurance.
William B. Howes.... Executive Vice President of the Company. Mr. Howes, 59,
1996 served as Group Vice President of the Company from July 1993
until his election as Executive Vice President in 1996. Mr.
Howes was elected Chairman of the Board and Chief Executive
Officer of the Company's Inland Paperboard and Packaging,
Inc. subsidiary ("Inland") in 1993 after serving as the
President and Chief Operating Officer of Inland since April
1992. From August 1990 until April 1992, Mr. Howes served as
Executive Vice President of Inland.
Walter P. Stern..... Chairman of the Board of Capital Group International, Inc.
1984 ("CGII"), a wholly-owned subsidiary of The Capital Group
Companies, Inc., since March 1988. Mr. Stern, 68, has been
serving as Chairman of Capital International, Inc., a
registered investment advisor with the U.S. Securities and
Exchange Commission and wholly-owned subsidiary of CGII,
since 1988. Mr. Stern is the Vice Chairman of the Board of
Capital Research International, a partially-owned subsidiary
(also owned by subsidiaries of The Capital Group Companies,
Inc.) of Capital Research and Management Company, an
investment management organization that serves as an
investment advisor to over thirty mutual investment funds,
including The American Balanced Fund, The Growth Fund of
America, The AMCAP Fund, The Income Fund of America, Inc.,
Fundamental Investors, Inc., EuroPacific Growth Fund and New
Perspective Fund, Inc., of which Mr. Stern is Chairman of
the Board. Mr. Stern is also Chairman and a director of the
Emerging Markets Growth Fund, Inc., and a director of Birla
Capital International AMC Ltd. (Bombay).
Charlotte Temple.... Investor. During the past five years, Ms. Temple, 57, has
1994 been associated with various civic organizations while
pursuing private interests. Prior to that time, her
experience was in the commercial real estate investment
area. Ms. Temple is also a director of Exeter Investment
Company.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is no family relationship between any of the nominees, continuing
directors and executive officers of the Company other than Mr. Temple III and
Ms. C. Temple, who are brother and sister.
Mr. Temple III is a director, officer and 66 2/3% stockholder of Demco
Manufacturing Company ("Demco"). During 1996, Demco performed machinery repair
services for Temple-Inland Forest Products Corporation ("Forest Products"), a
wholly-owned subsidiary of the Company, in the ordinary course of business at an
aggregate cost to Forest Products of $84,139. It is expected that Demco will
continue to perform services for subsidiaries of the Company in the future.
7
<PAGE> 10
In 1995, Forest Products purchased several tracts of timber from Mr. Arthur
Temple, who is the father of Mr. Temple III and Ms. C. Temple, as disclosed in
last year's proxy statement. In 1996, payments totaling $168,578 were made for
this timber. The value of the timber was determined by an appraisal conducted by
the Company's foresters.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) during its most recent fiscal
year and Forms 5 and amendments thereto or written representations in lieu of
Form 5 furnished to the Company with respect to its most recent fiscal year, the
Company has not identified any person who failed to file on a timely basis, as
disclosed in the above forms, reports required by Section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years except for Mr.
Grum, who inadvertently failed to report a charitable gift of 1,600 shares in
November of 1989. Due to a subsequent two-for-one stock split, Mr. Grum's
subsequent Form 4s and 5s overstated his ownership by 3,200 shares as a result
of this omission.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has six standing committees of the Board. Set forth below is a
description of the functions of those committees and the members of the Board
serving on such committees.
Audit Committee. The primary responsibility of the Audit Committee is to
provide the Board of Directors assistance in fulfilling its fiduciary
responsibility to the stockholders, and the investment community, relating to
the accounting and reporting practices of the Company, the adequacy of corporate
financial controls, and the quality and integrity of the consolidated financial
statements of the Company and all of its wholly and majority owned subsidiaries,
except for Guaranty Federal Bank, F.S.B., which has an audit committee
consisting of outside directors from its own board of directors. The functions
of the Audit Committee include the review of the professional services and
independence of the Company's independent auditors; the review, in consultation
with the independent and internal auditors, of the plan and results of the
annual audit, the adequacy of the Company's internal control systems and the
results of the Company's internal audits; and the review, with management and
the independent auditors, of the Company's annual report to stockholders and
financial reporting practices. The Audit Committee annually considers the
qualifications of the Company's independent auditors and makes recommendations
to the Board as to their selection. The members of the Audit Committee are
Messrs. Sklenar (Chairman), Frank, L. Temple and Ms. C. Temple. During 1996, the
Audit Committee met three (3) times.
Executive Committee. The Executive Committee may exercise all the authority
of the Board of Directors in the management of the business and affairs of the
Company, except for matters related to the composition of the Board, changes in
the By-laws and certain other significant corporate matters. The members of the
Executive Committee are the Chairman of the Board, who will serve as Chairman of
the Executive Committee, and the Chairman of each standing committee of the
Board. The Executive Committee did not meet in 1996.
Finance Committee. The Finance Committee reviews the Company's financial
planning, structure, condition and requirements for funds; makes recommendations
to the Board of Directors concerning all forms of major financing, including the
issuance of securities, corporate borrowings, and investments; monitors the
Company's relationship with its lenders, compliance with financing agreements,
and financial disclosure policies; reviews capital expenditures and makes
recommendations to the Board concerning the financing thereof; makes
recommendations to the Board concerning the Company's dividend policy; makes
recommendations to the Board concerning the stock repurchase program; and
oversees the Company's employee benefit plan investment committee and policies.
The members of the Finance Committee are Messrs. Cizik (Chairman), Anderson,
Stern, and Temple III. The Chairman of the Board is a nonvoting ex-officio
member. The Finance Committee met three (3) times during 1996.
Management Development and Executive Compensation Committee. The Management
Development and Executive Compensation Committee ("Compensation Committee") is
responsible for ensuring that a
8
<PAGE> 11
proper system of short and long-term compensation is in place to provide
performance-oriented incentives to management; overseeing management succession
and development programs; making recommendations concerning compensation
programs, retirement plans and other employee benefit programs; approving the
salaries and bonuses of all officers of the Company and certain other personnel;
and making recommendations with respect to bonus, stock option, restricted
stock, phantom stock, stock performance, stock appreciation right or other
current or proposed incentive plans. Certain of the foregoing plans are
administered by a subcommittee composed solely of those members of the
Compensation Committee who meet the definition of "outside director" under
Section 162(m) of the Internal Revenue Code and the definition of "non-employee
director" under Section 16 of the Securities Exchange Act of 1934 with respect
to those employees who are covered by such laws. The members of the Compensation
Committee are Messrs. Frank (Chairman), Cizik, Inman, Sklenar, and Temple III.
The Chairman of the Board is a nonvoting ex-officio member. During 1996, the
Compensation Committee met four (4) times.
Nominating Committee. The Nominating Committee periodically reviews the
structure of the Board to assure that the proper skills and experience are
represented on the Board, recommends nominees to serve on the Board of
Directors, reviews potential conflicts of prospective Board members, recommends
the size of the Board, recommends the membership of the committees, and reviews
outside directorships in other publicly held companies by senior officers of the
Company. Nominees to serve on the Board of Directors are selected on the basis
of recognized achievements and their ability to bring various skills and
experience to the deliberations of the Board. In carrying out its
responsibilities, the Nominating Committee considers candidates recommended by
other directors and employees of the Company. The members of the Nominating
Committee are Messrs. Inman (Chairman), Sklenar, and Stern. The Chairman of the
Board is a nonvoting ex-officio member. The Nominating Committee met three (3)
times during 1996.
Pursuant to the Company's By-laws, notice of a stockholder's intent to make
a nomination for the Board of Directors must contain certain specified
information regarding the nominating stockholder and the nominee and must be
received by the Secretary of the Company not less than 75 days nor more than 100
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders (or in the case of an annual meeting called for a date more than
50 days prior to such anniversary date or in the case of a special meeting of
stockholders, not later than the close of business on the 10th day following the
date on which notice of such annual meeting or special meeting is first mailed
to stockholders or made public, whichever occurs first.)
Public Policy/Environmental Committee. The Public Policy/Environmental
Committee acts in an advisory and consulting capacity to the Board of Directors
regarding the Company's activities that relate to matters of public policy and
the environment. In fulfilling its responsibilities, the committee considers and
reviews from time to time the Company's policies and practices that address
issues of social and public concern, as well as significant legislative,
regulatory and social trends. The members of the Public Policy/Environmental
Committee are Messrs. L. Temple (Chairman), Anderson, Cizik and Ms. C. Temple.
The Chairman of the Board is a nonvoting ex-officio member. The Public
Policy/Environmental Committee met two (2) times during 1996.
BOARD MEETINGS
During 1996, the Board of Directors held four (4) meetings. Each director
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and the total number of meetings held by all committees of
the Board on which he served.
DIRECTOR COMPENSATION
Directors who are not employees of the Company will receive in 1997 an
annual retainer of $35,000 and a $2,000 fee for attendance at regular and
special Board meetings. Directors who serve on committees of the Board receive
$1,000 for each committee meeting held in conjunction with a Board meeting and
$2,000 for each other committee meeting. The chairmen of committees of the Board
receive an additional annual retainer of $2,500. Directors are reimbursed for
expenses incurred in attending Board and committee
9
<PAGE> 12
meetings, including those for travel, food and lodging. Directors and members of
committees of the Board who are employees of the Company are not compensated for
their Board and committee activities.
Under the Company's Stock Option Plan, each person who is first elected a
non-employee director is automatically granted upon such election a nonqualified
stock option covering 10,000 shares of Common Stock at an exercise price per
share equal to the fair market value of the stock on the date the option is
granted. Any non-employee director may also, pursuant to the terms of the
Company's Stock Option Plan, make an election to receive nonqualified stock
options in lieu of his annual retainer fees.
Under the Retirement and Deferred Compensation Plan for Directors of
Temple-Inland Inc. (the "Directors' Retirement Plan"), a non-employee director
who remains a member of the Board until retirement age or who retires earlier
after serving on the Board for a period of at least ten (10) years is entitled
to receive an annual retirement benefit equal to the then current annual
retainer fee. The benefit will be paid for a number of years equal to the
greater of (i) the number of years the director served as a member of the Board,
or (ii) five (5) years. In the event of the director's death, the remainder of
the benefit will be paid to his spouse if living.
In lieu of the retirement benefits previously described, if a non-employee
director ceases to be a member of the Board at any time within two (2) years
after the occurrence of a change in control of the Company for any reason other
than the director's retirement or death, the director will be paid a lump-sum
retirement benefit equal to the product of (A) and (B), where (A) is the greater
of five (5) or the number of years the director served as a member of the Board,
and(B) is the greater of the annual retainer fee being paid to directors at the
time the director ceases to be a member of the Board or the annual retainer fee
in effect immediately prior to the change in control. In the event that the
retirement benefit payable to a director is subject to the 20% excise tax
imposed under the Internal Revenue Code of 1986 with respect to certain payments
made in connection with a change in control, the Directors' Retirement Plan
provides for an additional payment to be made to the director such that he
retains on an after-tax basis the same amount as he would have if no excise tax
had been imposed.
Under the Directors' Retirement Plan, a non-employee director may also
elect to defer his Board fees until the earlier of retirement, death, or, in
certain circumstances, termination of membership on the Board. Any Board fees
that are deferred accrue interest at the prime commercial lending rate.
EXECUTIVE COMPENSATION
Report of the Management Development and Executive Compensation Committee on
Executive Compensation
The Company's executive compensation program is designed to align
compensation with business strategy, performance, and stockholder values. The
program includes salary, short term cash incentives, and a long term program
based on stock options. The Committee considers all elements of the compensation
package in total, rather than any one element in isolation. In 1996, for
example, salaries were increased for one of the top five executive officers in
connection with his promotion and assumption of increased responsibilities,
while incentive bonuses were used to reward performance and long term incentive
awards were made as motivation for future performance. In making compensation
decisions, the Committee uses a general process and exercises its business
judgment to determine the amounts.
It is the Company's policy to obtain the maximum deduction on its tax
return for compensation paid to its executive officers consistent with the
Company's compensation goals. The Committee has adopted a policy requiring the
deferral of any compensation that exceeds the permissible deduction under
Section 162(m) of the Internal Revenue Code until such time as the maximum
deduction under Section 162(m) may be taken. All compensation paid in 1996
should qualify for a deduction under Section 162(m).
Since its inception in 1984, Temple-Inland's compensation philosophy has
been to ensure that shareholder returns are a top priority in evaluating the
effectiveness of the compensation program. The following paragraphs outline the
Compensation Committee's objectives.
10
<PAGE> 13
Base Salary. Base salaries are maintained at competitive levels considering
the performance and longevity of the employee. To ensure that the Company's
compensation remains competitive, the Committee from time to time reviews
information from several independent surveys of comparably-sized companies.
Since the market for executive talent extends beyond any particular industry,
the survey data includes both companies in the industry as well as companies
outside the industrial classification represented in the Paper Industry Index
referred to below under "Performance Graph." While the Committee does not target
salary levels to the high, median or low end of the ranges or to any particular
percentile, surveys indicate base salaries for the Company's named executive
officers are currently below the 50th percentile for the average of similar
companies. Base salaries are usually reviewed every two years and were not
increased in 1996, except for one of the top five executive officers who
received an increase in connection with his promotion and assumption of
increased responsibilities. In making its salary decisions, the Committee places
its emphasis on the particular executive's experience, responsibilities, and
performance. No specific formula is applied to determine the weight of each
factor. However, the Company has historically followed a policy of using the
incentive bonus rather than base salary to reward outstanding performance.
Incentive Bonus. Short term cash incentive awards are largely based on
individual performance and on the performance of the group or business segment
in which the individual is a key employee. Included in the evaluation of an
employee are the current earnings of the group, personal performance, and the
degree to which the employee's actions have laid the groundwork for future
earnings. Financial performance of the business segment is given greater weight
than other business accomplishments in determining bonus payments. The types and
relative importance of specific financial and other business factors vary among
the Company's executives depending on their positions and the particular
operations or functions for which they are responsible. The evaluation of the
CEO and of the Vice President, General Counsel, and Secretary is based on the
consolidated results of the Company.
The Committee does not establish targeted award levels or goals at the
beginning of the year. Instead, the Committee reviews actual earnings and
performance (including comparisons to competitors where appropriate) after the
end of the year and determines in its business judgment the size of each
executive's award. During 1996, the Company reorganized its paper operations
into one business segment under the direction of the Executive Vice President.
The Paper Group had earnings of $113 Million in 1996 and the Executive Vice
President received a bonus of $200,000. Prior to the reorganization, these
operations were reported separately. The Corrugated Container Group had earnings
of $344 Million in 1995 and the Group Vice President of that segment received a
bonus of $400,000. The Bleached Paperboard Group had earnings of $18.6 Million
in 1995 and the Group Vice President of that segment received a bonus of
$125,000. The Financial Services Group had earnings of $107 Million in 1996
(exclusive of a one-time $44 Million assessment levied in connection with the
recapitalization of the Savings Association Insurance Fund) compared to $98.1
Million in 1995, and the Group Vice President of this segment received a bonus
of $425,000 in 1996 compared to $400,000 in 1995. The Building Products Group
had earnings of $102 Million in 1996 compared to $61 Million in 1995, and the
Group Vice President of this segment received a bonus of $250,000 in 1996
compared to $225,000 in 1995. The Company's 1996 earnings per share were $2.39,
compared to the prior year's $5.01 (net of accounting changes), and the Vice
President, General Counsel, and Secretary received a bonus of $135,000 in 1996
compared to his bonus of $175,000 in 1995. No specific weightings have been
assigned under the bonus program to the factors considered by the Committee in
the exercise of its business judgment.
Long Term Incentive Awards. In 1996, the key executives listed in the proxy
statement received an annual grant of stock options under a long term incentive
program. There is no other long term incentive program. The program is based
exclusively on the stock option grant, which is a dollar value of options based
on the executive's position and importance to the Company's long range
performance. These options are granted at market and expire in ten (10) years.
The options will vest 15% per year on the second, third, fourth, and fifth
anniversaries and 40% on the sixth anniversary following the date of grant.
Option awards are basically set at a percentage of targeted compensation.
However, within these guidelines, the Committee also considers previous option
grants, tenure, and responsibilities of the executive. In the case of a new key
executive, an initial grant may be made above targeted levels.
11
<PAGE> 14
To further align executives' financial interests with those of the Company
and its shareholders, the Committee has adopted minimum stock ownership
guidelines for these executives:
VALUE OF OWNERSHIP OF STOCK AS A MULTIPLE OF ANNUAL SALARY
<TABLE>
<CAPTION>
MULTIPLE
POSITION OF SALARY
-------- ---------
<S> <C>
Chief Executive Officer..................................... 5x
Group Vice Presidents....................................... 3x
Other Tier I Executives..................................... 3x
Tier II Executives.......................................... 2x
</TABLE>
Generally, "Tier I" includes the Company's senior executive officers (including
the five executives listed in the proxy statement) and "Tier II" includes the
next highest level of Company management. Executives will be encouraged to meet
50% of this goal within three years of February 6, 1997, the date of the
adoption of this policy, and to meet the full guidelines within five years of
such date.
Although annual awards were made from 1984 through 1995 under the Company's
Performance Unit Plan, the specified formulas have only generated one (1) cash
payment which occurred in 1991. In all other years, including 1996, the
performance unit awards have been terminated without payment, although the
related stock option awards continued for another year. The plan was
discontinued after 1995 and no grants were made in 1996.
With the exception of an initial award to Mr. Howes upon his employment in
1990 to replace awards from his former employer that were forfeited, the key
executives included in the proxy statement do not receive restricted stock
awards. The Company maintains a policy of having this alternative available to
attract new executives.
The Chief Executive Officer. In reviewing Mr. Grum's performance, the
Committee considers all of the factors set forth in the above paragraphs.
However, the Committee focuses primarily on the Company's performance, measured
in large part by its net earnings. The Company's 1996 earnings per share were
$2.39, compared to the prior year's $5.01 (net of accounting changes), and Mr.
Grum received a bonus of $300,000 in 1996 compared to his bonus of $500,000 in
1995. A comparison of Mr. Grum's cash compensation for the last three (3) years
with the Company's net earnings during that period is set forth in the following
table:
<TABLE>
<CAPTION>
INCENTIVE NET EARNINGS
YEAR SALARY COMPENSATION TOTAL OF THE COMPANY
---- -------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
1996.............................. 600,000 $300,000 $ 900,000 $132.8 Million
1995.............................. 588,808 $500,000 $1,088,808 $281.0 Million
1994.............................. 503,000 $300,000 $ 803,000 $131.4 Million
</TABLE>
As noted above, the size of long term incentive awards is set in accordance
with the individual executive's responsibilities, other awards, and performance.
Mr. Grum's awards were determined in this same manner. He received 11,428
options in 1994, 12,800 in 1995, and 35,000 in 1996. The difference in the
number of options granted from year to year is due to variations in the stock
price on the date of award ($52.50 in 1994, $46.88 in 1995 and $42.81 in 1996),
as well as adjustments made by the Committee in consideration of previous
grants. In 1994 and 1995, Mr. Grum received a tandem performance unit award
equal to one-half ( 1/2) the number of options. No performance units were
awarded in 1996 due to the discontinuance of the plan.
12
<PAGE> 15
Other Information. Reference is made to the following charts and tables for
actual compensation grants and awards to key executives, as well as the
Company's performance for the last five (5) years, and to pages 1 and 25 of the
Company's Annual Report to Shareholders for information concerning the Company's
profitability.
Anthony M. Frank, Chairman
Robert Cizik
Bobby R. Inman
Herbert A. Sklenar
Arthur Temple III
The following table summarizes all compensation earned with respect to the
Company's last fiscal year by (i) the Chief Executive Officer, (ii) the four
other most highly compensated executive officers who were serving as executive
officers at the end of the last completed fiscal year, and (iii) one former
executive officer:
TABLE 1: SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ----------------------- -------
------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION($) AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (1) ($) SARS($) ($) ($)(2)
------------------ ---- -------- -------- --------------- ---------- ---------- ------- ------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clifford J. Grum, Chairman and 1996 $600,000 $300,000 N/A $0 35,000 $0 $ 3,000
Chief Executive Officer 1995 588,808 500,000 N/A 0 12,800 0 3,000
1994 503,000 300,000 N/A 0 11,428 0 2,500
William B. Howes, Director and 1996 $379,589 $200,000 N/A $0 10,500 $0 $ 3,000
Executive Vice President 1995 361,722 400,000 N/A 0 9,600 0 3,000
1994 325,620 175,000 N/A 0 7,620 0 2,500
Kenneth M. Jastrow, II, Group
Vice President and Chief 1996 $300,000 $425,000 N/A $0 9,300 $0 $ 3,000
Financial Officer 1995 288,462 400,000 N/A 0 8,532 0 3,000
1994 200,000 250,000 N/A 0 5,716 0 2,500
Harold C. Maxwell, Group Vice 1996 $280,000 $250,000 N/A $0 9,300 $0 $ 3,000
President 1995 274,577 225,000 N/A 0 8,532 0 3,000
1994 233,000 275,000 N/A 0 6,668 0 2,500
M. Richard Warner, Vice
President, General Counsel 1996 $215,000 $135,000 N/A $0 7,000 $0 $ 3,000
and Secretary 1995 213,269 175,000 N/A 0 13,864 0 3,000
1994 130,769 100,000 N/A 0 0 0 2,500
David L. Ashcraft, formerly
Group Vice President 1996 $156,154 $ 0 N/A $0 9,300 $0 $129,000
1995 275,731 125,000 N/A 0 8,532 0 3,000
1994 243,000 75,000 N/A 0 6,668 0 2,500
</TABLE>
- ---------------
(1) Not applicable. The dollar value of perquisites and other personal benefits,
or securities or property paid or earned during the fiscal year other than
pursuant to a plan, does not exceed the lesser of $50,000 or 10% of the
annual salary and bonus reported for each officer and is therefore not
reported.
(2) Amounts shown for the current executives are annual contributions or other
allocations to defined contribution plans. With respect to Mr. Ashcraft,
amounts shown include $3,000 in annual contributions or other allocations to
a defined contribution plan and $126,000 paid to Mr. Ashcraft during 1996 in
connection with his resignation effective May 31, 1996.
13
<PAGE> 16
Effective May 31, 1996, David L. Ashcraft resigned as Group Vice President
of the Company. In connection with his resignation, Mr. Ashcraft will receive
from the Company up to twenty (20) quarterly payments each in the amount of
Forty-two Thousand and No/100 Dollars ($42,000.00) (three (3) of which were paid
in 1996). Mr. Ashcraft may continue to exercise his stock options (which become
exercisable on the earlier of May 31, 1999 or the dates specified in the
original grants) until the earlier of the last business day in August 1999 or
the expiration dates specified in the original grants.
None of the five (5) current executive officers named above has an
employment contract with the Company or an agreement providing for severance
payments in the event his employment is terminated.
During 1996, the Company had a stock option plan in place under which
options were granted to employees. Employees also exercised options granted
under a prior plan. Each of the plans was approved by the stockholders and
administered by non-employee members of the Board of Directors. The options were
granted at full market value on the date of the grant, and these exercise prices
have never been reduced. Options have been granted to approximately 375 current
middle and upper level company employees who have direct responsibilities to
improve the profitability of the Company.
The following table summarizes the stock options granted to the five (5)
named executive officers and one former executive officer in the last fiscal
year:
TABLE 2: OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE(2)
- --------------------------------------------------------------------------------------------- ----------
PERCENT OF TOTAL
OPTIONS/ GRANT
NUMBER OF SECURITIES SARS GRANTED EXERCISE OR DATE
UNDERLYING OPTIONS/ TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME SARS GRANTED(#) FISCAL YEAR ($/SH) DATE VALUE($)
---- -------------------- ---------------- ----------- ---------- ----------
(A) (B) (C) (D) (E) (F)
--- -------------------- ---------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Clifford J. Grum......... 35,000 7.8% $42.81 02/02/2006 $338,520
William B. Howes......... 10,500 2.3 42.81 02/02/2006 101,556
Kenneth M. Jastrow, II... 9,300 2.1 42.81 02/02/2006 89,950
Harold C. Maxwell........ 9,300 2.1 42.81 02/02/2006 89,950
M. Richard Warner........ 7,000 1.6 42.81 02/02/2006 67,704
David L. Ashcraft........ 9,300 2.1 42.81 02/02/2006 89,950
</TABLE>
- ---------------
(1) Options to purchase Temple-Inland Inc. common stock. The exercise price is
the average of the high and low sales price of a share of Company Common
Stock on the New York Stock Exchange on the date of grant. Exercise prices
have never been repriced. Withholding taxes may be paid with exercised
shares. No general or freestanding stock appreciation rights ("SARs") were
granted. All grants to the named executive officers under the Stock Option
Plan include a provision for acceleration of vesting in certain change of
control situations. Options become exercisable in 15% increments on
02/02/98, 02/02/99, 02/02/2000, 02/02/2001, and the remaining 40% becomes
exercisable on 02/02/2002. Options granted to Mr. Grum that have not already
become exercisable in accordance with the foregoing schedule become
exercisable on the date of his retirement, provided he has attained age 65
on or before such date.
(2) The Grant Date Present Value was determined using the Black-Scholes option
pricing model. The expected volatility was measured by the Standard
Deviation of a statistical distribution using daily closing stock prices for
the last nine years for an assumed expected volatility of 26.45%. The annual
risk free rate of return during the expected life of the option (ten years)
was 6.50%. The expected dividend yield or dividend adjusted stock prices was
assumed to be 2.60%. The time of exercise was assumed to be at the
expiration of the options. All values are expressed on an after-tax basis.
14
<PAGE> 17
The following table summarizes the stock option exercises and value of
options held at year-end of the five (5) named executive officers and one former
executive officer:
TABLE 3: AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS
ACQUIRED YEAR-END(#)(2) AT FISCAL YEAR-END($)(3)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
(A) (B) (C) (D) (E)
--- ----------- -------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Clifford J. Grum.......... 19,510 $103,598 28,883 44,257 $ 84,269 $438,848
William B. Howes.......... 0 0 33,039 17,205 275,760 153,496
Kenneth M. Jastrow, II.... 4,372 7,126 18,181 14,995 56,355 135,685
Harold C. Maxwell......... 0 0 21,727 15,233 60,723 136,027
M. Richard Warner......... 0 0 6,932 13,932 48,940 126,850
David L. Ashcraft......... 0 0 21,727 15,233 60,723 136,027
</TABLE>
- ---------------
(1) Value based on the average of the high and low sales prices of a share of
Temple-Inland Inc. Common Stock on the New York Stock Exchange on the date
of exercise, which is the valuation used in the Stock Option Plan.
(2) Some of the options listed in the chart include an equal number of tandem
limited SARs, which can only be exercised in certain change of control
situations. The number of options with tandem limited SARs held by Messrs.
Grum, Howes, Jastrow, Maxwell, Warner, and Ashcraft at fiscal year-end was
13,912, 12,524, 9,628, 12,460, 0, and 12,460, respectively. Since there have
been no change of control situations, none of these SARs have ever been
exercised. Tandem limited SARs are not granted under the Company's current
Stock Option Plan.
(3) Value based on the average of the high and low sales prices of a share of
Temple-Inland Inc. Common Stock on the New York Stock Exchange on December
27, 1996.
15
<PAGE> 18
PERFORMANCE GRAPH
During the five preceding fiscal years, the Company's cumulative total
stockholder return compared to the Standard & Poor's 500 Stock Index and to the
Standard & Poor's Paper Industry Index was as shown in the following Table 4:
TABLE 4:
TEMPLE-INLAND INC.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
S&P PAPER &
MEASUREMENT PERIOD TEMPLE-IN- FOREST PROD-
(FISCAL YEAR COVERED) LAND INC. S&P 500 UCTS
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 101.91 107.62 114.34
1993 101.83 118.46 126.01
1994 93.08 120.03 131.30
1995 92.71 165.13 144.57
1996 117.37 203.05 159.92
</TABLE>
ASSUMES $100 INVESTED ON THE LAST TRADING DAY IN FISCAL YEAR 1991
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
16
<PAGE> 19
The five (5) named executive officers and one former executive officer also
participate in defined benefit pension plans of the Company's subsidiaries, with
estimated benefits shown below.
TABLE 5: PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------
REMUNERATION 10 15 20 25 30 35
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 350,000........................... $ 54,000 $ 81,000 $108,000 $135,000 $162,000 $189,000
400,000........................... 62,000 93,000 124,000 155,000 186,000 217,000
450,000........................... 70,000 105,000 140,000 175,000 210,000 245,000
500,000........................... 78,000 117,000 156,000 195,000 234,000 273,000
550,000........................... 86,000 129,000 172,000 215,000 258,000 301,000
600,000........................... 94,000 141,000 188,000 235,000 282,000 329,000
700,000........................... 110,000 165,000 220,000 275,000 330,000 385,000
750,000........................... 118,000 177,000 236,000 295,000 354,000 413,000
800,000........................... 126,000 189,000 252,000 315,000 378,000 441,000
900,000........................... 142,000 213,000 284,000 355,000 426,000 497,000
1,000,000........................... 158,000 237,000 316,000 395,000 474,000 553,000
1,100,000........................... 174,000 261,000 348,000 435,000 522,000 609,000
1,150,000........................... 182,000 273,000 364,000 455,000 546,000 637,000
1,200,000........................... 190,000 285,000 380,000 475,000 570,000 665,000
1,250,000........................... 198,000 297,000 396,000 495,000 594,000 693,000
1,300,000........................... 206,000 309,000 412,000 515,000 618,000 721,000
1,350,000........................... 214,000 321,000 428,000 535,000 642,000 749,000
</TABLE>
The above table shows the estimated annual pension payable upon retirement
to employees in specified remuneration and years-of-service classifications.
Retirement benefits are calculated using final average pay based on the highest
five (5) of the employee's last ten (10) years of service. Compensation covered
by the Company's retirement plans includes salaries and bonuses, but excludes
all other forms of compensation shown in the foregoing tables such as stock
options. Messrs. Grum, Howes, Jastrow, Maxwell, and Warner are currently
credited with approximately 28, 6 1/2, 18, 33, and 10 1/2 years of service,
respectively. If such officers continue in the employ of the Company until their
respective retirement dates, at such time they would be credited with
approximately 31, 11 1/2, 33, 42, and 30 years of service, respectively. Mr.
Ashcraft was credited with 27 years of service at the time of his resignation.
The estimated amounts are based on the assumption that payments under the
Company's retirement plans will commence upon normal retirement (age 65), that
the Company's retirement plans will continue in force and that the benefit
payment will be in the form of a life annuity. Amounts shown in the table above
are not subject to any deduction for Social Security or other offset amounts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Temple III is a director, officer and 66 2/3% stockholder of Demco
Manufacturing Company ("Demco"). During 1996, Demco performed machinery repair
services for Temple-Inland Forest Products Corporation ("Forest Products"), a
wholly-owned subsidiary of the Company, in the ordinary course of business at an
aggregate cost to Forest Products of $84,139. It is expected that Demco will
continue to perform services for subsidiaries of the Company in the future.
In 1995, Forest Products purchased several tracts of timber from Mr. Arthur
Temple, who is the father of Mr. Temple III and Ms. C. Temple, as disclosed in
last year's proxy statement. In 1996, payments totaling $168,578 were made for
this timber. The value of the timber was determined by an appraisal conducted by
the Company's foresters.
17
<PAGE> 20
PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR
ENDING JANUARY 3, 1998
Upon the recommendation of the Audit Committee of the Board of Directors,
none of whose members is an officer of the Company, the Board of Directors has
selected Ernst & Young LLP as independent auditors for the Company to examine
its consolidated financial statements for the fiscal year ending January 3, 1998
and has determined that it would be desirable to request that the stockholders
ratify such selection. Ernst & Young LLP currently serves the Company and its
subsidiaries as independent auditors. Representatives of Ernst & Young LLP will
be present at the Annual Meeting with the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions
from stockholders.
Stockholder ratification is not required for the selection of Ernst & Young
LLP, since the Board of Directors has the responsibility for selecting the
Company's independent auditors. The selection, however, is being submitted for
ratification at the Annual Meeting. No determination has been made as to what
action the Board of Directors would take if stockholders do not ratify the
selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING
JANUARY 3, 1998.
NEW PLAN BENEFITS
The Company is asking the stockholders to ratify the adoption of the
Company's 1997 Stock Option Plan and the 1997 Restricted Stock Plan (the "1997
Plans"). The 1997 Plans are similar to the Company's current plans (the "Current
Plans"), which expire next year. Stockholder approval is being requested in 1997
to coincide with new requirements under Section 162(m) of the Internal Revenue
Code. The purpose of the 1997 Plans is to promote the interests of the Company
and its stockholders by providing additional incentives to key employees (and in
the case of stock options, directors) to continue providing services to the
Company, to increase their interest in the success of the Company, and to
further the identity of interest between such key employees and the Company's
stockholders through opportunities for increased stock ownership.
The Compensation Committee, which administers the Current Plans, will also
administer the 1997 Plans. The Compensation Committee has the discretion to
determine the total amount of awards that will be made each year, as well as the
amount awarded to each individual employee. Therefore, it is not possible at
this time to determine the level of awards that will be made to any particular
individual or group under the 1997 Plans. However, the following chart sets
forth the amount of awards that would have been made during the 1996 fiscal year
if the 1997 Plans had been in effect instead of the Current Plans for (i) each
of the five (5) executive officers named in the foregoing Executive Compensation
tables, (ii) all current executive officers as a group, (iii) all current
directors who are not executive officers as a group, and (iv) all employees
(including officers who are not executive officers) as a group.
18
<PAGE> 21
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1997 RESTRICTED STOCK PLAN 1997 STOCK OPTION PLAN
--------------------------- ----------------------
DOLLAR NUMBER DOLLAR NUMBER
NAME AND POSITION VALUE($)(1) OF UNITS VALUE($)(2) OF UNITS
----------------- ------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Clifford J. Grum, Chairman and Chief Executive
Officer...................................... 0 0 $ 338,520 35,000
William B. Howes, Director and Executive Vice
President.................................... 0 0 $ 101,556 10,500
Kenneth M. Jastrow, II, Group Vice President
and Chief Financial Officer.................. 0 0 $ 89,950 9,300
Harold C. Maxwell, Group Vice President........ 0 0 $ 89,950 9,300
M. Richard Warner, Vice President, General
Counsel and Secretary........................ 0 0 $ 67,704 7,000
Executive Group................................ $ 6,336 148 $ 838,543 86,698
Non-Executive Director Group................... 0 0 $ 107,224 8,000
Non-Executive Officer Employee Group........... $2,601,221 60,762 $2,631,797 361,082
</TABLE>
- ---------------
(1) The dollar value stated is the number of units multiplied by $42.81, the
fair market value of one share of Temple-Inland Inc. common stock on
February 2, 1996, the date of the award.
(2) The dollar value stated is the grant date present value using the
Black-Scholes option pricing model with the assumptions set forth in
footnote 2 to Table 2 on page 14, and the additional assumption that 10% of
the Non-Executive Officer Employee Group grants will result in forfeitures.
More specific information about each of the 1997 Plans is set forth under the
following individual plan proposals.
PROPOSAL TO RATIFY THE ADOPTION
OF THE COMPANY'S 1997 STOCK OPTION PLAN
The Company is asking the stockholders to ratify the adoption of the
Company's 1997 Stock Option Plan (the "1997 Stock Option Plan"). A total of 2.4
million shares of the Company's Common Stock, $1.00 par value, has been reserved
for issuance pursuant to the 1997 Stock Option Plan. On March 7, 1997, the
closing price of a share of Common Stock on the New York Stock Exchange was
$55.25.
On February 7, 1997, the Board of Directors adopted the 1997 Stock Option
Plan, subject to stockholder ratification. The purpose of the plan is to promote
the interests of the Company and its stockholders by providing an incentive to
directors and key employees to continue providing services to, and to increase
their interest in the success of, the Company and its subsidiaries by offering
them an opportunity to acquire a proprietary interest in the Company. The
following summary of the principal features of the 1997 Stock Option Plan is
qualified in its entirety by reference to the full text of the 1997 Stock Option
Plan as set forth in Appendix A to this Proxy Statement.
The 1997 Stock Option Plan will be administered by the Compensation
Committee. The Compensation Committee has authority to determine the terms of
all options and to interpret the 1997 Stock Option Plan.
Under the terms of the 1997 Stock Option Plan, options may be granted to
selected key employees of the Company and its subsidiaries in the sole
discretion of the Compensation Committee at an exercise price not less than the
fair market value of the Common Stock on the date of the grant. Each option will
be exercisable only after the period or periods specified in the option
agreement, and may not be exercised after the expiration of the award (which may
not be longer than ten years from the date of grant). The exercise price of any
stock option may be paid in cash or, unless otherwise provided in the option
agreement, in whole shares of Common Stock already owned for a period of at
least six months, or partly in cash and partly in such Common Stock.
19
<PAGE> 22
Generally, each employee who is granted an option under the 1997 Stock
Option Plan will, in consideration for such grant, agree that he will remain in
the employ of the Company or one of its subsidiaries for a period of at least
two years from the date of grant of the option. In the event of the occurrence
of certain transactions related to a change in control of the Company, all
outstanding stock options awarded under the plan to employees become fully
vested and exercisable. It is currently expected that approximately 375 middle
and upper level salaried employees will participate in the 1997 Stock Option
Plan.
Information cannot be provided with respect to the number of options to be
received by any individual or group of individuals pursuant to the 1997 Stock
Option Plan, since the grant of such options is within the discretion of the
Compensation Committee. However, the maximum number of shares with respect to
which stock options may be granted during any year to any eligible employee is
the amount which, when added to the number of shares covered by stock option
grants made to the eligible employee over the preceding four years (whether
under the 1997 Stock Option Plan or any prior stock option plan) does not exceed
a total cumulative exercise price of $5 million. The Compensation Committee has
the discretion to grant less than the maximum number of stock options and is not
required to grant any stock options to any particular employee. No stock options
will be granted under the 1997 Stock Option Plan if its adoption is not ratified
by the stockholders. Please refer to the chart on page 19 for further
information.
Each person who is first elected a Non-employee Director after the
effective date of the 1997 Stock Option Plan will be granted automatically upon
such election a nonqualified stock option covering 10,000 shares of Common Stock
at an exercise price per share equal to the fair market value of the Common
Stock at the time the option is granted. Such options become exercisable in
installments (1,000 shares after the first year of service as a member of the
Board of Directors; 1,500 shares after four years of service; and 2,500 shares
each after the fifth, sixth and seventh years of service) and expire ten years
from the date of grant, subject to earlier termination in the event the
Non-employee Director ceases to be a member of the Board. There are currently
nine Non-employee Directors. None of the current Non-employee Directors is
eligible for this award, since each has received a similar award under previous
Company plans.
Before the end of each year, a Non-employee Director may elect to receive,
in lieu of his annual retainer fee for the next year, a nonqualified stock
option covering 2,000 shares of Common Stock with an exercise price determined
as follows:
<TABLE>
<C> <C> <C> <C> <C>
Fair Market Value Annual Retainer Exercise Price
of a Share of - --------------- = Per Share
Common Stock 2,000
</TABLE>
Any such options will be granted on the first date on or after January 1 of the
following year on which the Common Stock is traded on the New York Stock
Exchange. A Non-employee Director's "Annual Retainer" is the amount that the
Non-employee Director would be entitled to receive for serving as a director in
the relevant year, but does not include fees for attendance at meetings of the
Board or any committee of the Board or for any other services to be provided to
the Company. Options granted to Non-employee Directors in lieu of annual
retainer fees become fully exercisable on the first anniversary of the date of
grant and expire 15 years after the date of grant, subject to earlier
termination if the Non-employee Director ceases to be a member of the Board.
New Section 16 rules of the Securities and Exchange Commission ("SEC")
permit companies to grant stock options to their Non-employee Directors without
jeopardizing the directors' status as Non-employee Directors for purposes of
administering the Company's Stock Option Plans. While no such awards are
presently contemplated, the 1997 Stock Option Plan provides the flexibility to
award options to Non-employee Directors at an exercise price equal to the fair
market value of the Common Stock on the date of grant, with a term of up to ten
years, in consideration for such services as the Compensation Committee may
approve.
20
<PAGE> 23
Unless the 1997 Stock Option Plan is terminated earlier as hereinafter
described, the 1997 Stock Option Plan terminates on December 31, 2002. The 1997
Stock Option Plan may be terminated, modified or amended at an earlier date by
the stockholders of the Company. The Board of Directors may also terminate the
1997 Stock Option Plan, or modify or amend the 1997 Stock Option Plan in such
respects as it deems advisable, except that certain plan amendments will be
subject to such stockholder approval as may be required under the Section 16
rules of the SEC from time to time or under Section 422 or Section 162(m)(4) of
the Internal Revenue Code. No termination, modification or amendment of the 1997
Stock Option Plan may, without the consent of the employee or Non-employee
Director to whom any option has been granted, adversely affect the rights of
such employee or Non-Employee Director under such option.
The 1997 Stock Option Plan provides for the granting of both "incentive
stock options" (as defined in section 422 of the Internal Revenue Code) and
nonqualified stock options to employees. In general, an employee will not
recognize income at the time of grant of a nonqualified stock option. At the
time of exercise of a nonqualified stock option, an employee will generally
recognize income equal to the excess of the fair market value of the shares of
Common Stock purchased over the aggregate exercise price paid for the shares,
regardless of whether the exercise price is paid in cash or in shares of Common
Stock. The Company is entitled to a deduction equal to the amount of ordinary
income an employee recognizes, subject to satisfying tax withholding
requirements.
An employee will not generally recognize income at the time of the grant or
exercise of an incentive stock option. However, the difference between the
exercise price and the fair market value of the Common Stock on the date of
exercise is an adjustment item for purposes of the alternative minimum tax. If
an employee does not exercise an incentive stock option within certain specified
periods after termination of employment, an incentive stock option will be
treated for tax purposes as a nonqualified stock option, as described above.
Gain or loss from the sale or exchange of shares acquired upon exercise of
an incentive stock option will normally be taxed as capital gain or loss.
However, if certain holding period requirements with respect to the shares
acquired upon exercise of an incentive stock option are not satisfied, an
employee will be required to recognize ordinary income at the time of
disposition. Any gain recognized on disposition in excess of the ordinary income
resulting therefrom will be capital gain, and any loss recognized will be a
capital loss.
If an employee recognizes ordinary income upon exercise of an incentive
stock option or as a result of a disposition of shares prior to the expiration
of the applicable holding periods, the Company will be entitled to a deduction
in the same amount, subject to satisfying applicable tax withholding
requirements.
The affirmative vote of a majority of the votes cast by the stockholders
present in person or represented by proxy is required for ratification of the
1997 Stock Option Plan. Any shares not voted (whether by abstention, broker
nonvote or otherwise) will not be counted as votes cast for this purpose.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE ADOPTION
OF THE COMPANY'S 1997 STOCK OPTION PLAN.
21
<PAGE> 24
PROPOSAL TO RATIFY THE ADOPTION
OF THE COMPANY'S 1997 RESTRICTED STOCK PLAN
The Company is asking the stockholders to ratify the adoption of the
Company's 1997 Restricted Stock Plan (the "1997 Restricted Stock Plan"). A total
of 300,000 shares of the Company's Common Stock, $1.00 par value, has been
reserved for issuance pursuant to the 1997 Restricted Stock Plan. On March 7,
1997, the closing price of a share of Common Stock on the New York Stock
Exchange was $55.25.
The 1997 Restricted Stock Plan was adopted by the Board of Directors on
February 7, 1997, subject to stockholder ratification. The purpose of the 1997
Restricted Stock Plan is to provide additional incentives to key employees
(including officers) of the Company and its subsidiaries to continue in the
employ of, and to increase their efforts for, the Company or its subsidiaries,
and to further the identity of interests of such key employees and the Company's
stockholders through opportunities for increased stock ownership by such key
employees. The following summary of the principal features of the 1997
Restricted Stock Plan is qualified in its entirety by reference to the full text
of the 1997 Restricted Stock Plan as set forth in Appendix B to this Proxy
Statement.
The 1997 Restricted Stock Plan is administered by the Compensation
Committee. The Compensation Committee has authority to award shares of
Restricted Stock under the 1997 Restricted Stock Plan and to determine the terms
and conditions upon which Restricted Stock will be awarded. Restricted Stock may
be awarded only to salaried employees (including officers) who at the time of
the award are regularly employed by the Company or a subsidiary on a full-time
basis. It is currently expected that approximately 330 middle management
employees will participate in the 1997 Restricted Stock Plan. Non-employee
Directors are not eligible to participate in the 1997 Restricted Stock Plan.
While all eligible employees may be considered for an award of Restricted Stock,
it is contemplated that only those employees who, in the determination of the
Compensation Committee, perform services of special importance to the Company in
the management, operation and development of the business of the Company or a
subsidiary will be selected to receive Restricted Stock in consideration for
continuing such services.
The Compensation Committee designates a vesting date with respect to each
award of Restricted Stock and may prescribe restrictions, terms and conditions
applicable to the vesting of such Restricted Stock in addition to those provided
in the 1997 Restricted Stock Plan. While the Compensation Committee is not
obligated to continue its past practices, prior awards under the Company's 1993
Restricted Stock Plan vested one-half at the end of four years and one-half at
the end of five years from the date of grant. Other than continuing employment,
first-time awardees have not been subject to other vesting conditions in the
past. However, the Compensation Committee has imposed an additional vesting
condition for subsequent awards.
Shares of Restricted Stock awarded to an employee under the 1997 Restricted
Stock Plan will not be delivered to the employee until the vesting date and may
not be sold, traded, or otherwise assigned by the employee prior to the vesting
date. However, prior to the vesting date the employee is entitled to vote such
shares and receive cash dividends paid on such shares. Any non-cash
distributions made with respect to shares of Restricted Stock are subject to the
same restrictions as the Restricted Stock, unless the Compensation Committee
determines otherwise. On the vesting date, and upon the satisfaction of any
other applicable restrictions, terms and conditions, all or a portion of an
award of Restricted Stock becomes vested and any non-cash distributions made
with respect to such Restricted Stock that were retained by the Company become
vested to the extent that the related shares of Restricted Stock become vested.
Any shares of Restricted Stock and retained distributions that have not become
vested are forfeited to the Company.
Information cannot be provided with respect to the amount of Restricted
Stock to be received by any individual or group of individuals pursuant to the
1997 Restricted Stock Plan, since the award of Restricted Stock is within the
discretion of the Compensation Committee. However, the maximum number of shares
with respect to which Restricted Stock may be granted to any eligible employee
(including any shares granted under prior plans) is 35,000 shares. The
Compensation Committee has the discretion to grant less than the maximum number
of shares of Restricted Stock and is not required to grant any shares of
Restricted Stock to any particular employee. Historically, the largest grant to
any employee was 6,000 shares of Restricted Stock awarded to Mr. Howes upon his
employment with the Company in 1990 to replace awards from his previous
22
<PAGE> 25
employer that were forfeited. While it is not required to follow past practices,
the Compensation Committee has never granted awards of Restricted Stock to the
top tier of the Company's management, with the exception of the one-time award
to Mr. Howes in 1990. The Compensation Committee would retain the flexibility to
use these awards to attract new executives. The Compensation Committee has also
adopted a policy limiting the number of grants that may be made to second-tier
management to seven grants and making grants to all other selected employees
every other year. No shares of Restricted Stock will be granted under the 1997
Restricted Stock Plan if its adoption is not ratified by the stockholders.
Please refer to the chart on page 19 for further information.
Unless the 1997 Restricted Stock Plan is terminated earlier as hereinafter
described, the 1997 Restricted Stock Plan terminates on December 31, 2002. The
1997 Restricted Stock Plan may be terminated, modified or amended at an earlier
date by the stockholders of the Company. The Board of Directors may also
terminate the 1997 Restricted Stock Plan or make such amendments thereto as it
deems advisable, except that certain plan amendments will be subject to such
stockholder approval as may be required under the Section 16 rules of the
Securities and Exchange Commission from time to time or under Section 162(m)(4)
of the Internal Revenue Code. No termination or amendment of the 1997 Restricted
Stock Plan shall adversely affect the rights of any holder of shares of
Restricted Stock (without his or her consent) under any award previously made.
An employee who receives an award of Restricted Stock is not required to
include the value of such shares in ordinary income until the shares become
vested, unless the employee makes a special tax election to recognize income
upon award of the shares. In either case, the amount of income the employee will
recognize will be equal to the fair market value of the shares of Common Stock
at the time the shares vest. The Company will be entitled to a deduction equal
to the amount of income recognized by the employee, subject to satisfying
applicable tax withholding requirements.
The affirmative vote of a majority of the votes cast by the stockholders
present in person or represented by proxy is required for ratification of the
1997 Restricted Stock Plan. Any shares not voted (whether by abstention, broker
nonvote or otherwise) will not be counted as votes cast for this purpose.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE ADOPTION
OF THE COMPANY'S 1997 RESTRICTED STOCK PLAN.
OTHER BUSINESS
The Board of Directors knows of no other business that may properly be, or
that is likely to be, brought before the Annual Meeting. If, however, any other
business should properly be presented to the Annual Meeting, the persons named
in the accompanying proxy will vote the proxy as in their discretion they may
deem appropriate.
23
<PAGE> 26
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, stockholders may present proper proposals for inclusion in the
Company's proxy statement and for consideration at its Annual Meeting of
Stockholders by submitting their proposals to the Company in a timely manner. In
order to be so included for the 1998 Annual Meeting, stockholder proposals must
be received by the Company by November 17, 1997 and must otherwise comply with
the requirements of Rule 14a-8.
The Company's By-laws contain an advance notice procedure with regard to
items of business to be brought before an Annual Meeting of Stockholders by a
stockholder. These procedures require that notice be made in writing to the
Secretary of the Company and that such notice be received at the executive
offices of the Company not less than 75 days nor more than 100 days prior to the
anniversary date of the immediately preceding Annual Meeting of Stockholders (or
in the case of an annual meeting called for a date more than 50 days prior to
such anniversary date, not later than the close of business on the 10th day
following the date on which notice of such annual meeting is first mailed to
stockholders or made public, whichever occurs first). The By-laws require that
the notice of the proposal contain certain information concerning the proposing
stockholder and the proposal. The Company's By-laws also contain an advance
notice procedure for the nomination of candidates for election to the Board of
Directors by stockholders. For a brief description of such procedures, see
"Committees of the Board of Directors -- Nominating Committee." A copy of the
By-law advance notice provision may be obtained, without charge, upon written
request to the Secretary of the Company at the address set forth on page 1 of
this Proxy Statement.
By Order of the Board of Directors
M. RICHARD WARNER
Secretary
Diboll, Texas
March 17, 1997
24
<PAGE> 27
APPENDIX "A"
TEMPLE-INLAND INC.
1997 STOCK OPTION PLAN
<PAGE> 28
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purpose of the Plan......................................... A-1
2. Definitions................................................. A-1
3. Stock Subject to the Plan................................... A-2
4. Administration.............................................. A-2
5. Eligibility for Award of Stock Options...................... A-3
6. Terms of Options............................................ A-3
7. Time of Grant of Options; Stock Option Agreements........... A-3
8. Agreement of Employees to Continue Employment............... A-3
Grant of Options to Non-Employee Directors Upon Election to
9. Board....................................................... A-4
Grants of Options To Non-Employee Directors in Lieu of
10. Annual Retainer Fees........................................ A-4
11. Nontransferability of Options............................... A-5
12. Exercise of Options:........................................ A-5
13. Withholding................................................. A-5
14. Termination of Employment................................... A-6
15. Death of a Participant...................................... A-6
16. Adjustments upon Changes in Capitalization.................. A-6
17. Substituted Options......................................... A-6
18. Effect of Change in Control................................. A-7
19. Miscellaneous............................................... A-7
20. Non-Exclusivity of the Plan................................. A-8
21. Effectiveness of the Plan................................... A-8
22. Government and Other Regulations............................ A-8
23. Termination and Amendment................................... A-8
</TABLE>
A-i
<PAGE> 29
TEMPLE-INLAND INC.
1997 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN:
The purpose of the Temple-Inland Inc. 1997 Stock Option Plan (the "Plan")
is to promote the interests of Temple-Inland Inc. (the "Company") and its
stockholders by providing an incentive to directors and key employees of the
Company and its Subsidiaries to continue providing services and to increase
their interest in the Company's success by offering them an opportunity to
acquire a proprietary interest in the Company through the grant of Stock
Options.
2. DEFINITIONS:
For purposes of the Plan, the following terms shall have the meanings set
forth below:
a. Board: means the Board of Directors of the Company.
b. Code: means the Internal Revenue Code of 1986, as amended from time
to time, or any successor thereto.
c. Committee: means the Management Development and Executive
Compensation Committee of the Board, and/or any other committee or
subcommittee the Board may appoint to administer this Plan as provided
herein. A Committee composed solely of two or more members of the Board who
meet (i) the definition of "outside director" under Section 162(m) of the
Code and regulations thereunder, (ii) the definition of "non-employee
director" under Section 16 of the Exchange Act and regulations thereunder,
and (iii) any similar or successor laws hereinafter enacted, shall
administer the Plan with respect to persons who are "covered employees"
(within the meaning of Section 162(m) of the Code) or who are subject to
Section 16 of the Exchange Act at the time of the relevant Committee
action. If at any time no Committee shall be in office, then the functions
of the Committee specified in this Plan shall be exercised by the members
of the Board who are Non-Employee Directors.
d. Common Stock: means shares of the common stock, $1.00 par value, of
the Company.
e. Company: means Temple-Inland Inc., a corporation organized under
the laws of the State of Delaware (or any successor corporation).
f. Disability: means total disability as defined in (i) any long-term
disability plan or retirement plan sponsored by the Company or a Subsidiary
and applicable to the Participant, or (ii) the Federal Social Security Act,
as any of such may be amended from time to time.
g. Eligible Employee: means any salaried employee (including an
officer) of the Group.
h. Exchange Act: means the Securities Exchange Act of 1934, as
amended.
i. Fair Market Value: means, except as specifically provided otherwise
in this Plan, the average of the high and low sales prices of a share of
Common Stock on the New York Stock Exchange. Notwithstanding the foregoing,
the Committee may, in its discretion, prescribe alternative methods of
determining Fair Market Value that satisfy the regulations under Section
422 of the Code.
j. Grant Date: has the meaning set forth in paragraph 7 hereof.
k. Group: means the Company and its Subsidiaries.
l. Incentive Stock Option: means a Stock Option that is intended to
qualify as an incentive stock option within the meaning of Section 422 of
the Code.
m. Maximum Annual Amount: has the meaning set forth in paragraph 5
hereof.
n. Non-Employee Director: means a member of the Board who is not an
employee of the Group.
o. Nonqualified Stock Option: means a Stock Option that is not an
Incentive Stock Option.
A-1
<PAGE> 30
p. Participant: means any Eligible Employee or Non-Employee Director
who has been granted a Stock Option, or any transferee of a Stock Option by
reason of the death of the Eligible Employee or Non-Employee Director or
pursuant to the requirements of applicable law.
q. Retirement: means a Participant's retirement from active service at
early or normal retirement age under any pension plan maintained by the
Group whereby the Participant commences receipt of benefits (as opposed to
deferring receipt thereof); provided, however, that in the case of a
Participant who has attained age 55 and is not eligible to participate in a
pension plan maintained by the Group, "Retirement" shall mean the
Participant's Termination of Service with the written consent of the
Company or applicable Subsidiary.
r. SEC Rules: means the rules and regulations promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange Act.
s. Stock Option: means any option to purchase shares of Common Stock
granted under this Plan.
t. Stock Option Agreement: means the written agreement executed by the
Company and an Eligible Employee or Non-Employee Director in accordance
with paragraph 7 hereof which sets forth the terms of a Stock Option
granted hereunder.
u. Subsidiary: means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
v. Termination of Service: means with respect to an Eligible Employee,
the Eligible Employee's termination of employment by the Group for any
reason, and, with respect to a Non-Employee Director, the Non-Employee
Director's termination of membership on the Board for any reason.
3. STOCK SUBJECT TO THE PLAN:
There will be reserved for issuance upon the exercise of Stock Options to
be granted from time to time under the Plan an aggregate of 2,400,000 shares of
the Common Stock. Such shares may be, in whole or in part, as the Board shall
from time to time determine, authorized and unissued shares of Common Stock or
issued shares of Common Stock which shall have been re-acquired by the Company.
If any Stock Option expires or otherwise terminates without being fully
exercised, the shares of Common Stock with respect to which the Stock Option was
not exercised shall again be available for issuance in connection with
subsequent awards under the Plan.
4. ADMINISTRATION:
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have plenary authority, in its
discretion, to determine the terms of all Stock Options granted under the Plan
(which need not be identical), including, without limitation, the exercise price
of a Stock Option, the individuals to whom, and the time or times at which,
Stock Options shall be granted, the number of shares to be subject to each Stock
Option, whether a Stock Option shall be an Incentive Stock Option or a
Nonqualified Stock Option, when a Stock Option can be exercised and whether in
whole or in installments. In making such determinations, the Committee may take
into account the nature of the services rendered by the respective Eligible
Employees or Non-Employee Directors, their present and potential contributions
to the success of the Company and its Subsidiaries, and such other factors as
the Committee in its discretion shall deem relevant. Subject to the express
provisions of the Plan, the Committee shall have plenary authority to interpret
the Plan, to prescribe, amend and rescind the rules and regulations relating to
it and to make all other determinations deemed necessary or advisable for the
administration of the Plan. The determinations of the Committee on the matters
referred to in this paragraph 4 shall be conclusive.
A-2
<PAGE> 31
5. ELIGIBILITY FOR AWARD OF STOCK OPTIONS:
Stock Options may be granted to Eligible Employees and/or Non-Employee
Directors whether or not they hold or have held options granted under other
stock option plans sponsored by the Company. An Eligible Employee or
Non-Employee Director who has been granted a Stock Option under the Plan shall
continue to be eligible to receive subsequent grants of Stock Options under the
Plan; provided, however, that the maximum number of shares with respect to which
Stock Options may be granted during any year to any Eligible Employee is the
amount which, when added to the number of shares covered by stock option grants
made to the Eligible Employee over the preceding four years (whether under this
Plan or any other plan of the Company or agreement with the Company), does not
exceed a total cumulative exercise price of $5 Million (determined by
multiplying the Fair Market Value on each Grant Date by the number of options
awarded on that date) ("Maximum Annual Amount"). The Committee shall have the
discretion to grant Stock Options that cover less than the maximum number of
shares set forth above, and shall not be required to grant any Stock Options to
any Eligible Employee.
6. TERMS OF OPTIONS:
a. Except as otherwise provided in paragraphs 10 or 17 hereof, the price
per share of the Common Stock at which a Stock Option may be exercised shall be
determined by the Committee, but shall not be less than 100% of the Fair Market
Value of the Common Stock at the time of the granting of such option.
Notwithstanding the foregoing, in the case of an Incentive Stock Option granted
to a Participant who (applying the rules of Section 424(d) of the Code) owns
stock possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or a Subsidiary (a "Ten-Percent Shareholder"),
the exercise price per share shall not be less than one hundred and ten percent
of the Fair Market Value of the Common Stock on the date on which the option is
granted.
b. Except as otherwise provided in paragraph 10 hereof, the maximum term of
a Stock Option granted hereunder shall be ten years (five years in the case of
an Incentive Stock Option granted to a Ten-Percent Shareholder) from the Grant
Date, subject to the provisions of paragraphs 8, 14 and 15.
c. Unless otherwise provided in the applicable Stock Option Agreement, and
except as otherwise provided in the Plan, Stock Options granted under the Plan
shall be exercisable in whole, or in part, at any time during the term of the
option.
7. TIME OF GRANT OF OPTIONS; STOCK OPTION AGREEMENTS:
Except in the case of substituted options and Stock Options granted
pursuant to paragraphs 9 and 10 hereof, the effective date of the granting of an
option (the "Grant Date") shall be the date on which the Committee approves the
granting of such option or, if ratified by the Board, the date of such
ratification. Each Participant who is granted a Stock Option shall be notified
promptly of the grant of the option and a Stock Option Agreement shall promptly
be executed and delivered by or on behalf of the Company and the Participant,
provided that such grant of a Stock Option shall expire if the Stock Option
Agreement is not signed by such Participant (or his or her agent or attorney)
and delivered to the Company within 60 days after the Grant Date.
8. AGREEMENT OF EMPLOYEES TO CONTINUE EMPLOYMENT:
Each Eligible Employee who is granted a Stock Option hereunder shall, as
one of the terms of the Stock Option Agreement, agree that he will remain in the
employ of the Company or one of its Subsidiaries for a period of not less than
two years from the date of grant of the Stock Option (or, if the Eligible
Employee is already obligated to remain in the employ of the Company or one of
its Subsidiaries for a period of time, for a period of not less than two years
after expiration of such period of time). In lieu of such agreement to serve,
the Committee may, in its discretion, in special cases, authorize such different
terms and conditions regarding employment (including, without limitation,
requiring an Eligible Employee to serve for a shorter period of time) as the
Committee may deem appropriate. Notwithstanding the foregoing, if any Eligible
Employee is granted more than one Stock Option, the period of time during which
such employee shall be obligated to
A-3
<PAGE> 32
remain in the employ of the Company or one of its Subsidiaries under the terms
of each Stock Option Agreement shall run concurrently and not consecutively.
Such employment shall be at the pleasure of the Company or of such Subsidiary
and at such compensation as the Company or such Subsidiary shall determine from
time to time. Any Termination of Service by such employee during such period
without the written consent of the Company or such Subsidiary shall be deemed a
violation by the individual of such Stock Option Agreement. In the event of such
violation, any Stock Option (or Stock Options) held by such person under the
Plan, to the extent not theretofore exercised, shall forthwith terminate.
Termination of Service by reason of Retirement, death or Disability shall be
deemed to be with the written consent of the Company or the applicable
Subsidiary for purposes of this paragraph 8.
9. GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS UPON ELECTION TO BOARD:
a. Each Non-Employee Director who is first elected a member of the Board on
or after the effective date of this Plan (as provided in paragraph 21 hereof)
shall be granted automatically upon such election a Nonqualified Stock Option
covering 10,000 shares of Common Stock (subject to adjustment pursuant to
paragraph 16 hereof) at an exercise price equal to the Fair Market Value of the
Common Stock at the time the option is granted.
b. Nonqualified Stock Options granted to Non-employee Directors pursuant to
this paragraph 9 shall be exercisable in accordance with the following schedule:
<TABLE>
<CAPTION>
NUMBER OF SHARES AS
COMPLETED YEARS OF TO WHICH OPTION
SERVICE AS A DIRECTOR BECOMES EXERCISABLE
--------------------- -------------------
<S> <C>
One Year................................................... 1,000 shares
Four Years................................................. 1,500 shares
Five Years................................................. 2,500 shares
Six Years.................................................. 2,500 shares
Seven Years................................................ 2,500 shares
</TABLE>
c. All Stock Options granted pursuant to this paragraph 9 shall expire ten
years after the date of grant of the option, subject to prior termination
pursuant to the terms of the Plan.
10. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS IN LIEU OF ANNUAL RETAINER FEES:
a. Each Non-Employee Director who prior to the end of any year files with
the Company an election to receive a Nonqualified Stock Option in lieu of his
Annual Retainer to be earned in the following year shall be granted, on the
first day on or after January 1 of the next succeeding year on which the Common
Stock is traded on the New York Stock Exchange, a Nonqualified Stock Option
covering 2,000 shares of Common Stock with an exercise price determined as
follows:
<TABLE>
<C> <C> <C> <C> <C>
Fair Market Value Annual Retainer Exercise Price
of a Share of - --------------- = Per Share
Common Stock 2,000
</TABLE>
For purposes of this paragraph 10, "Annual Retainer" shall mean the amount which
a Non-Employee Director would be entitled to receive for serving as a
Non-Employee Director in the relevant year, but shall not include fees for
attendance at meetings of the Board or any committee of the Board or for any
other services to be provided to the Company. A Non-Employee Director shall be
permitted to make an election to receive a Nonqualified Stock Option in lieu of
his Annual Retainer that is effective for more than one year.
b. Stock Options granted pursuant to this paragraph 10 shall first become
exercisable on the first anniversary of the date upon which the option was
granted and shall terminate upon the expiration of fifteen years from the date
of grant, subject to earlier termination pursuant to the terms of the Plan.
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<PAGE> 33
11. NONTRANSFERABILITY OF OPTIONS:
No Stock Option granted under the Plan shall be transferable other than by
will or the laws of descent and distribution, except as required by applicable
law. A Stock Option may be exercised during the lifetime of an Eligible Employee
or Non-Employee Director only by the Eligible Employee or Non-Employee Director,
except as required by applicable law.
12. EXERCISE OF OPTIONS:
a. The Committee shall be authorized to establish the procedure for the
exercise of a Stock Option, provided that the Company shall not be required to
deliver certificates for shares with respect to which a Stock Option is
exercised until the exercise price for the shares of Common Stock being
purchased has been paid in full.
b. In order to exercise a Stock Option, written notice must be provided to
the Company. Such notice shall state that the Participant elects to exercise a
specified Stock Option, the number of shares of Common Stock in respect of which
it is being exercised, and the manner of payment of the exercise price of the
Stock Option.
c. The written notice shall be accompanied by payment of the full exercise
price of the Stock Option with respect to the number of shares being purchased.
The exercise price shall be paid in cash, or unless otherwise provided in the
applicable Stock Option Agreement, in whole shares of Common Stock already owned
by the Participant for a period of at least six months, or partly in cash and
partly in such Common Stock. Cash payments shall be made by certified or bank
cashier's check, or by the wire transfer of immediately available funds, in each
case payable to the order of the Company. Payments of the exercise price of a
Stock Option that are made in the form of Common Stock (which shall be valued at
Fair Market Value) may be made by (i) delivery of stock certificates in
negotiable form with an issue date at least six months prior to the date of
exercise, or (ii) unless otherwise determined by the Committee, delivery of the
Participant's representation that on the date of exercise he owns the requisite
number of shares which he has owned for a period of at least six months and,
unless such shares are registered in the Participant's name as verified by the
Company's transfer agent's records, a representation executed by the
Participant's brokerage firm or other entity in whose name such shares are
registered that on the date of exercise the Participant beneficially owns the
requisite number of shares and has owned such shares for a period of at least
six months ("Certificateless Exercise"). Delivery of such a representation
pursuant to a Certificateless Exercise shall be treated as the delivery of the
specified number of shares of Common Stock; provided, however, that the number
of shares issued to the Participant upon exercise of the Stock Option shall be
reduced by the number of shares specified in the representation.
d. Except as provided in paragraphs 14 and 15 hereof, no option may be
exercised at any time unless the holder thereof is then (i) an employee of the
Group or (ii) a Non-Employee Director.
13. WITHHOLDING:
The Company's obligation to deliver shares of Common Stock upon the
exercise of any Stock Option granted under the Plan shall be subject to the
satisfaction of applicable federal, state and local tax withholding
requirements. Unless otherwise prohibited by the Committee, and in accordance
with rules prescribed by the Committee, each Participant may satisfy any such
withholding tax obligation by any of the following means or by a combination of
such means: (a) tendering a cash payment; (b) authorizing the Company to
withhold shares of Common Stock from the shares otherwise issuable to the
Participant as the result of the exercise of a Stock Option, or (c) delivering
to the Company unencumbered shares of Common Stock already owned by the
Participant for a period of at least six months. For purposes of this paragraph
13, shares of Common Stock that are withheld or delivered to satisfy applicable
withholding taxes shall be valued at their Fair Market Value on the date the
withholding tax obligation arises.
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<PAGE> 34
14. TERMINATION OF EMPLOYMENT:
In the event of the Termination of Service of a Participant to whom a Stock
Option has been granted under this Plan, other than by reason of death, such
Stock Option may, subject to the provisions of paragraph 8 hereof and this
paragraph 14, be exercised (to the extent of the number of shares exercisable
under the Stock Option by the Participant at the time of Termination of Service)
at any time (a) within one year after a Termination of Service by reason of
Disability, (b) within three years after a Termination of Service by reason of
Retirement, or (c) within three months after a Termination of Service for any
reason other than as described in the preceding clauses (a) and (b); provided,
however, that the applicable Stock Option Agreement or the Committee, at any
time after the Grant Date and with the written agreement of the Participant, may
specify a longer or shorter period of time during which the Stock Option may be
exercised after a Termination of Service described in the preceding clauses (a),
(b) and (c). Notwithstanding the foregoing, in no event may a Stock Option be
exercised after expiration of its stated term. Stock Options granted under the
Plan to Eligible Employees shall not be affected by any change of employment so
long as the Participant continues to be an employee of the Group. A Stock Option
Agreement may contain such provisions as the Committee may approve with respect
to the effect of approved leaves of absence for employees. Nothing in this Plan
or in any Stock Option Agreement shall confer on any person any right to
continue in the employ of the Group or interfere in any way with the right of a
member of the Group to terminate any person's employment at any time, with or
without cause, notwithstanding the possibility that the number of shares of
Common Stock purchasable by such person under his Stock Option (or Stock
Options) may thereby be reduced or eliminated.
15. DEATH OF A PARTICIPANT:
In the event of the death of a Participant to whom a Stock Option has been
granted under the Plan, such Stock Option (unless the Stock Option shall have
been previously terminated pursuant to the provisions of paragraphs 8 or 14
hereof) may be exercised (to the extent of the number of shares exercisable by
such Participant at the time of his or her death) by a legatee or legatees of
such Participant under his last will, or by his personal representatives or
distributees, at any time within a period of one year (notwithstanding any
longer period of time that would otherwise be permitted under paragraph 14)
after his death, but not after the expiration of the Stock Option's stated term.
16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION:
Notwithstanding any other provisions of the Plan, in the event of any
change in the outstanding Common Stock by reason of any stock dividend,
split-up, recapitalization, reclassification, combination or exchange of shares,
merger, consolidation or liquidation and the like, the Board may in its sole
discretion provide for a substitution for or adjustment in (i) the number and
class of shares subject to outstanding Stock Options, (ii) the exercise prices
of outstanding Stock Options, (iii) the aggregate number and class of shares
reserved for issuance under the Plan, (iv) the Maximum Annual Amount, (v) the
number of shares to be covered by Stock Options to be granted to Non-Employee
Directors upon election to the Board pursuant to paragraph 9 hereof, and (vi)
the number of shares to be granted to Non-Employee Directors in lieu of annual
retainer fees pursuant to paragraph 10 and the formula pursuant to which the
exercise price of such options is determined. The adjustments made with respect
to Stock Options granted pursuant to paragraphs 9 and 10 hereof shall be
equivalent to the treatment accorded to all other holders of Common Stock. The
Board's determinations with regard to the adjustments or substitutions provided
for by this paragraph 16 shall be conclusive.
17. SUBSTITUTED OPTIONS:
Anything contained herein to the contrary notwithstanding, Incentive Stock
Options and Nonqualified Stock Options may, at the discretion of the Committee,
be granted under the Plan in substitution for options to purchase shares of
capital stock of another corporation which is merged into, consolidated with, or
all or a substantial portion of the property or stock of which is acquired by,
the Company or one of its Subsidiaries. The terms and conditions of the
substitute options so granted may vary from the terms and conditions set forth
in this Plan to such extent as the Committee may deem appropriate (but only to
the extent consistent with the
A-6
<PAGE> 35
requirements of SEC Rules) in order to conform, in whole or part, to the
provisions of the options in substitution for which they are granted. Such Stock
Options shall not be counted toward the limit set forth in paragraph 5 hereof,
except to the extent that it is determined by the Committee that the application
of such limit is required in order to comply with the requirements of the
exception for performance-based compensation under Section 162(m)(4) of the
Code.
18. EFFECT OF CHANGE IN CONTROL:
Notwithstanding any contrary waiting period, installment period or other
limitation or restriction in any Stock Option Agreement or in the Plan, each
outstanding Stock Option granted under the Plan shall become exercisable in full
for the aggregate number of shares covered thereby, in the event (i) the Board
(or, if approval of the Board is not required as a matter of law, the
stockholders of the Company) shall approve (a) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (b) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (c) the adoption of any plan or proposal for
the liquidation or dissolution of the Company, or (ii) any person (as such term
is defined in Section 13(d) of the Exchange Act), corporation or other entity
other than the Company shall make a tender offer or exchange offer to acquire
any Common Stock of the Company (or securities convertible into Common Stock)
for cash, securities or any other consideration, provided, that (a) at least a
portion of such securities sought pursuant to the offer in question is acquired,
and (b) after consummation of such offer, the person, corporation or other
entity in question is the "beneficial owner" (as such term is defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of twenty percent or more
of the outstanding Common Stock (calculated as provided in paragraph (d) of such
Rule 13d-3 in the case of rights to acquire Common Stock).
19. MISCELLANEOUS:
a. If any of the terms or provisions of this Plan conflict with the
requirements of SEC Rules (with respect to an Eligible Employee who is subject
to Section 16 of the Exchange Act), Section 422 of the Code (with respect to
Incentive Stock Options), or the requirements of the exception for
performance-based compensation under Section 162(m)(4) of the Code (with respect
to an Eligible Employee who is a "covered employee" within the meaning of
Section 162(m)(3) of the Code) then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of said SEC
Rules and/or Sections 162(m) and 422 of the Code. If this Plan does not contain
any provision required to be included herein under Section 422 of the Code, such
provision shall be deemed to be incorporated herein with the same force and
effect as if such provision had been set out at length herein.
b. A Participant shall have none of the rights of a stockholder with
respect to the shares of Common Stock subject to a Stock Option until such
shares shall be transferred to the Participant upon the exercise of the option.
c. The Committee shall be authorized, in its discretion, to permit the
surrender of outstanding Stock Options in exchange for the grant of new Stock
Options or to require the surrender of outstanding Stock Options as a condition
precedent to the grant of new Stock Options. The number of shares covered by the
new Stock Options, the exercise price, term of the Stock Option and other terms
and conditions of the options shall be determined in accordance with the Plan
and may be different from the provisions of the surrendered Stock Options.
d. By acceptance of an award hereunder of a Stock Option, a Participant
shall be deemed to have agreed that neither the award of such Stock Option, nor
the vesting or exercise thereof, nor any payment with respect thereto, shall be
taken into account as "salary", "pay", "compensation" or "bonus" in determining
the amount of any payment under any pension, retirement or profit-sharing plan
of the Company or any Subsidiary. In addition, each Participant shall be deemed
to have agreed that no such award, nor the exercise or vesting
A-7
<PAGE> 36
thereof, nor any payment with respect thereto shall be taken into account in
determining the amount of any life insurance coverage, short or long-term
disability coverage, or any other pay-based benefits provided by the Company or
any Subsidiary.
e. The masculine pronoun whenever used shall include the feminine pronoun,
and the singular shall include the plural unless the context clearly indicates
the distinction.
20. NON-EXCLUSIVITY OF THE PLAN:
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
21. EFFECTIVENESS OF THE PLAN:
The Plan shall become effective as of May 2, 1997, provided that it is
approved by the affirmative vote of a majority of the votes cast by the holders
of Common Stock present or represented by proxy at a meeting of stockholders of
the Company duly called for that purpose, among others, or any adjournment
thereof.
22. GOVERNMENT AND OTHER REGULATIONS:
The obligation of the Company to sell and deliver shares of Common Stock
pursuant to the exercise of Stock Options granted under the Plan shall be
subject to (i) all applicable laws, rules and regulations, and such approvals by
any governmental agencies as may be required, including, without limitation, the
effectiveness of a registration statement under the Securities Act of 1933, and
(ii) the condition that the shares of Common Stock reserved for issuance upon
the exercise of Stock Options granted under the Plan shall have been duly listed
on the New York Stock Exchange.
23. TERMINATION AND AMENDMENT:
Unless the Plan shall theretofore have been terminated as hereinafter
provided, the Plan shall terminate on, and no Stock Options shall be granted
after, December 31, 2002. The Plan may be terminated, modified or amended by the
stockholders of the Company at any time. In addition, the Board may, at any time
prior to December 31, 2002, terminate the Plan, and may modify or amend the Plan
at any time in such respects as it shall deem advisable; provided, however, that
amendments to the Plan shall be subject to the approval of the Company's
stockholders to the extent required under SEC Rules (with respect to Eligible
Employees who are subject to Section 16 of the Exchange Act), Section 422 of the
Code (with respect to Incentive Stock Options), or the exception for
performance-based compensation under Section 162(m)(4) of the Code (with respect
to "covered employees", within the meaning of Section 162(m)(3) of the Code). No
termination, modification or amendment of the Plan may, without the consent of
the Participant to whom any Stock Option shall theretofore have been granted,
adversely affect the rights of such Participant thereunder.
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<PAGE> 37
APPENDIX "B"
TEMPLE-INLAND INC.
1997 RESTRICTED STOCK PLAN
<PAGE> 38
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. Purpose..................................................... B-1
2. Certain Definitions......................................... B-1
3. Shares Subject to the Plan.................................. B-2
4. Administration and Award of Restricted Stock................ B-2
5. Eligibility and Criteria for Awards......................... B-3
6. Restrictions Applicable to Restricted Stock................. B-3
7. Restricted Stock Agreement.................................. B-4
8. Tax Elections............................................... B-4
9. Nonalienation of Benefits................................... B-4
10. Completion of Vesting Period................................ B-4
11. Withholding................................................. B-4
12. Termination of Employment Prior to Expiration of Vesting
Period...................................................... B-5
13. Right of Company to Terminate Employment.................... B-5
14. Liability of Company........................................ B-5
15. Changes in Stock............................................ B-5
16. Exclusion from Pension, Profit-Sharing and Other Benefit
Computations................................................ B-5
17. Nonexclusivity of the Plan.................................. B-6
18. Effective Date of the Plan.................................. B-6
19. Government and Other Regulations............................ B-6
20. Amendment and Termination of Plan........................... B-6
</TABLE>
B-i
<PAGE> 39
TEMPLE-INLAND INC.
1997 RESTRICTED STOCK PLAN
1. PURPOSE:
The purpose of the Plan is to provide additional incentives to key
employees (including officers) of the Company and its Subsidiaries to continue
in the employ of, and to increase their efforts for, the Company and its
Subsidiaries, and to further the identity of interests of such key employees and
the Company's stockholders through opportunities for increased stock ownership
by such key employees.
2. CERTAIN DEFINITIONS:
For purposes of the Plan, the following terms shall have the meanings set
forth below:
a. Board: means the Board of Directors of the Company.
b. Code: means the Internal Revenue Code of 1986, as amended from time
to time, or any successor thereto.
c. Committee: means the Management Development and Executive
Compensation Committee of the Board, and/or any other committee or
subcommittee the Board may appoint to administer this Plan as provided
herein. A Committee composed solely of two or more members of the Board who
meet (i) the definition of "outside director" under Section 162(m) of the
Code and regulations thereunder, (ii) the definition of "non-employee
director" under Section 16 of the Exchange Act and regulations thereunder,
and (iii) any similar or successor laws hereinafter enacted, shall
administer the Plan with respect to persons who are "covered employees"
(within the meaning of Section 162(m) of the Code) or who are subject to
Section 16 of the Exchange Act at the time of the relevant Committee
action. If at any time no Committee shall be in office, then the functions
of the Committee specified in this Plan shall be exercised by the members
of the Board who are Non-Employee Directors.
d. Common Stock: means shares of the common stock, $1.00 par value, of
the Company.
e. Company: means Temple-Inland Inc., a corporation organized under
the laws of the State of Delaware (or any successor corporation).
f. Disability: means total disability as defined in (i) any long-term
disability plan or retirement plan sponsored by the Company or a Subsidiary
and applicable to the Participant, or (ii) the Federal Social Security Act,
as any of such may be amended from time to time.
g. Eligible Employee: means any salaried employee (including an
officer) of the Group.
h. Employment: means employment by the Company or one of its
Subsidiaries.
i. Exchange Act: means the Securities Exchange Act of 1934, as
amended.
j. Fair Market Value: means the average of the high and low sales
prices of a share of Common Stock on the New York Stock Exchange.
Notwithstanding the foregoing, the Committee may, in its discretion,
prescribe alternative methods of determining Fair Market Value that satisfy
the regulations under Section 422 of the Code.
k. Group: means the Company and its Subsidiaries.
l. Maximum Amount: has the meaning set forth in paragraph 5 hereof.
m. Non-Employee Director: means a member of the Board who is not an
employee of the Group.
n. Participant: means any Eligible Employee who has been awarded
shares of Restricted Stock pursuant to this Plan.
o. Plan: means the Temple-Inland Inc. 1997 Restricted Stock Plan.
B-1
<PAGE> 40
p. Performance Goals: means performance goals established by the
Committee which may be based on net income, earnings, sales, return on
assets, equity or investment, regulatory compliance, improvement of
financial ratings, achievement of balance sheet or income statement
objectives, or any other objective goals established by the Committee, and
may be absolute in their terms or measured against or in relationship to
other companies comparably, similarly or otherwise situated. Such
performance standards may be particular to an Eligible Employee or the
department, Subsidiary or other division in which he works, or may be based
on the performance of the Company generally, and may cover such period as
may be specified by the Committee.
q. Retained Distributions: means all distributions made with respect
to shares of Restricted Stock, other than cash distributions and such other
distributions as the Committee may, in its discretion, designate. Retained
Distributions shall be subject to the same restrictions as apply to the
shares of Restricted Stock with respect to which the distribution is made.
r. Restricted Stock: means an award of shares of Common Stock that are
subject to restrictions as provided herein.
s. Restricted Stock Agreement: means the written agreement executed by
the Company and an Eligible Employee in accordance with paragraph 7 hereof
which sets forth the terms of an award of Restricted Stock hereunder.
t. Retirement: means a Participant's retirement from active service at
early or normal retirement age under any pension plan maintained by the
Group whereby the Participant commences receipt of benefits (as opposed to
deferring receipt thereof); provided, however, that in the case of a
Participant who has attained age 55 and is not eligible to participate in
such a pension plan, "Retirement" shall mean the Participant's termination
of Employment with the written consent of the Company or applicable
Subsidiary.
u. SEC Rules: means the rules and regulations promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange Act.
v. Subsidiary: means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
w. Vesting Date: means, with respect to any award of Restricted Stock
hereunder, such date or dates as the Committee shall specify in the
Restricted Stock Agreement evidencing such award of Restricted Stock.
x. Vesting Period: means a period of time beginning on the date of
each award of Restricted Stock and ending on the Vesting Date with respect
to each such award.
3. SHARES SUBJECT TO THE PLAN:
Subject to the provisions of paragraph 15 hereof, the maximum aggregate
number of shares of Restricted Stock that may be awarded under the Plan shall be
300,000. Such shares may be in whole or in part, as the Board shall from time to
time determine, authorized but unissued shares of Common Stock or shares of
Common Stock previously issued and outstanding and reacquired by the Company. If
any shares of Restricted Stock are forfeited or otherwise terminate without
having vested, the shares of Common Stock with respect to which the Restricted
Stock was not vested shall again be available for issuance in connection with
subsequent awards under the Plan.
4. ADMINISTRATION AND AWARD OF RESTRICTED STOCK:
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have plenary authority, in its
discretion, to award Restricted Stock under the Plan and to determine the terms
and conditions (which need not be identical) of such awards, including, without
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<PAGE> 41
limitation, the individuals to whom, and the time or times at which, Restricted
Stock shall be awarded, the number of shares of Restricted Stock covered by each
award, the Vesting Date and conditions to vesting of each award, and the form,
terms and provisions of the Restricted Stock Agreement evidencing each award. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective employees to whom awards of Restricted
Stock are being made, their present and potential contributions to the Company's
success, and such other factors as the Committee in its discretion shall deem
relevant. Subject to the express provisions of the Plan, the Committee shall
have plenary authority to interpret the Plan, to prescribe, amend and rescind
the rules and regulations relating to it and to make all other determinations
deemed necessary or advisable for the administration of the Plan. The
determinations of the Committee on the matters referred to in this paragraph 4
shall be conclusive.
5. ELIGIBILITY AND CRITERIA FOR AWARDS:
Shares of Restricted Stock shall be awarded only to Eligible Employees.
While all Eligible Employees may be considered for an award of Restricted Stock,
it is contemplated that only those employees who, in the determination of the
Committee, perform services of special importance to the Company in the
management, operation and development of the business of the Company or a
Subsidiary will be selected to receive awards of Restricted Stock. Restricted
Stock may be awarded to Eligible Employees whether or not they have received
previous awards under the Plan; provided, however, that the maximum number of
shares with respect to which Restricted Stock may be granted to any Eligible
Employee is 35,000 shares (whether under this Plan or any prior plan of the
Company) (the "Maximum Amount"). The Committee shall have the discretion to
grant less than the maximum number of shares set forth above, and shall not be
required to grant any shares to any Eligible Employee.
6. RESTRICTIONS APPLICABLE TO RESTRICTED STOCK:
a. The Committee shall designate a Vesting Date with respect to each award
of Restricted Stock and may, in its discretion, prescribe one or more
Performance Goals that must be achieved in order for shares of Restricted Stock
to become vested and nonforfeitable.
b. Restricted Stock, when issued, will be represented by a stock
certificate (or certificates) registered in the name of the Plan for the benefit
of the Participant. Such certificate (or certificates) shall be held by the
Company, together with such stock powers or other instruments of assignment as
may be necessary to permit transfer to the Company of all or any portion of the
Restricted Stock and any securities constituting Retained Distributions that
shall be forfeited in accordance with the terms of this Plan and the applicable
Restricted Stock Agreements.
c. Shares of Restricted Stock shall constitute issued and outstanding
shares of Common Stock for all corporate purposes. A Participant shall have the
right to vote shares of Restricted Stock, to receive and retain all regular cash
dividends (and such other distributions that are not Retained Distributions)
paid or distributed on such Restricted Stock and to exercise all other rights,
powers and privileges of a holder of Common Stock with respect to such shares;
provided, however, that (i) a Participant shall not be issued a stock
certificate (or certificates) representing shares of Restricted Stock awarded to
such Participant until the Vesting Period shall have expired and any Performance
Goals have been achieved (as certified by the Committee); (ii) the Company shall
retain custody of all Retained Distributions made or declared with respect to
Restricted Stock (and such Retained Distributions shall be subject to the same
restrictions, terms and conditions as are applicable to the Restricted Stock)
until such time, if ever, as the Restricted Stock with respect to which such
Retained Distributions shall have been made, paid or declared shall have become
vested, and such Retained Distributions shall not bear interest or be segregated
in separate accounts; (iii) a Participant may not sell, assign, transfer,
pledge, exchange, encumber or dispose of Restricted Stock or any Retained
Distributions during the Vesting Period; and (iv) a breach of any restrictions,
terms or conditions provided in this Plan or established by the Committee with
respect to any shares of Restricted Stock or Retained Distributions shall cause
a forfeiture of such Restricted Stock and any Retained Distributions with
respect thereto.
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7. RESTRICTED STOCK AGREEMENT:
Each award of Restricted Stock hereunder shall be evidenced by an agreement
in such form and containing such terms and provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve. Such
agreement shall be entered into between the Company and the applicable
Participant at the time of any award of Restricted Stock hereunder.
8. TAX ELECTIONS:
A Participant shall be required to notify the Committee prior to making an
election under Section 83(b) of the Code with respect to an award of Restricted
Stock hereunder.
9. NONALIENATION OF BENEFITS:
Except as required by applicable law, no right or benefit under the Plan
shall be subject to anticipation, alienation, sale, assignment, hypothecation,
pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, transfer, pledge, exchange,
transfer, encumber or charge the same shall be void. No right or benefit
hereunder shall in any manner be liable for or subject to the debts, contracts,
liabilities or torts of the person entitled to such benefit. If any Participant
shall become bankrupt or attempt to anticipate, alienate, sell, assign,
hypothecate, pledge, exchange, transfer, encumber or charge any right or benefit
hereunder, then such right or benefit shall, in the discretion of the Committee,
cease and terminate, and in such event, the Committee in its discretion may hold
or apply the same or any part thereof for the benefit of the Participant or his
beneficiary, spouse, children or other dependents, or any of them, in such
manner and in such proportion as the Committee may deem proper.
10. COMPLETION OF VESTING PERIOD:
On the Vesting Date with respect to an award of Restricted Stock, all or a
portion of the shares of Restricted Stock subject to the award shall become
vested in accordance with the terms of the applicable Restricted Stock
Agreement. Except as otherwise provided in paragraph 12, shares of Restricted
Stock that are awarded to a Participant (and any Retained Distributions with
respect thereto) shall become vested and nonforfeitable only on the Vesting Date
of the award and only if (i) the Participant's Employment by the Group has been
continuous since the date of the award of such Restricted Stock, and (ii) any
Performance Goals imposed with respect to the award of Restricted Stock have
been achieved (as certified by the Committee). A leave of absence that has been
approved by a member of the Group shall not constitute a termination of
Employment, except as otherwise determined by the Committee. Any Retained
Distributions with respect to such Restricted Stock shall become vested on the
Vesting Date to the extent that the Restricted Stock related thereto shall have
become vested. Upon a Participant's termination of Employment, any such
Restricted Stock and Retained Distributions that shall not have become vested
shall be forfeited to the Company, and the Participant shall not thereafter have
any rights (including dividend and voting rights) with respect to such
Restricted Stock and Retained Distributions that shall have been so forfeited.
11. WITHHOLDING:
The Company's obligation to deliver shares of Common Stock upon the vesting
of Restricted Stock awarded hereunder shall be subject to the satisfaction of
applicable federal, state and local tax withholding requirements. Unless
otherwise prohibited by the Committee, and in accordance with rules prescribed
by the Committee, a Participant may satisfy any such withholding tax obligation
by either of the following means or by a combination of such means: (a)
tendering a cash payment; or (b) authorizing the Company to withhold shares of
Common Stock from the shares otherwise issuable to the Participant as the result
of the vesting of shares of Restricted Stock. For purposes of this paragraph 11,
shares of Common Stock that are withheld to satisfy applicable withholding taxes
shall be valued at their Fair Market Value on the date the withholding tax
obligation arises.
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<PAGE> 43
12. TERMINATION OF EMPLOYMENT PRIOR TO EXPIRATION OF VESTING PERIOD:
a. If a Participant's Employment terminates for any reason (whether
voluntarily or involuntarily or with or without cause) prior to the Vesting Date
of an award of Restricted Stock, such Restricted Stock (and any Retained
Distributions with respect thereto) shall be forfeited, except as otherwise
provided in subparagraph (b) of this paragraph or as otherwise provided in the
applicable Restricted Stock Agreement.
b. Notwithstanding any provisions herein to the contrary, if a
Participant's Employment terminates by reason of Retirement, death, or
Disability prior to the Vesting Date of any award of Restricted Stock to such
Participant, a pro rata portion of such Restricted Stock (and any Retained
Distributions thereon) shall immediately vest. The pro rata portion that shall
immediately vest shall be equal to the product determined by multiplying (i) the
number of shares of Restricted Stock originally subject to each such award by
(ii) a fraction, the numerator of which shall be the number of full years (each
such year beginning on the anniversary date of each award) that shall have
elapsed from the date of the award through the first day of the month during
which the Retirement, death or Disability occurred, and the denominator of which
shall be the number of full years (each such year beginning on the anniversary
date of such award) from the date of the award through the Vesting Date
specified in the applicable Restricted Stock Agreement. If the number of shares
of Restricted Stock that would vest in accordance with the foregoing provisions
of this subparagraph (b) would otherwise result in the issuance of a fractional
share, the number of shares that shall vest shall be rounded to the next higher
whole number. Solely for the purposes of this paragraph, each portion of an
award having a separate Vesting Date shall be considered a separate award.
13. RIGHT OF COMPANY TO TERMINATE EMPLOYMENT:
Nothing contained in the Plan or in any Restricted Stock Agreement shall
confer on any Participant any right to continue in the employ of the Company or
any of its Subsidiaries or interfere in any way with the right of the Company or
a Subsidiary to terminate the Employment of a Participant at any time, with or
without cause, notwithstanding the possibility that shares of Restricted Stock
(and Retained Distributions thereon) awarded to the Participant may be
forfeited.
14. LIABILITY OF COMPANY:
Nothing in the Plan or any Restricted Stock Agreement shall be construed to
give any employee of the Group any right to receive an award of Restricted Stock
or as evidence of any agreement or understanding, express or implied, that the
Company will employ any Participant in any particular position or at any
particular rate of remuneration, or for any particular period of time.
15. CHANGES IN STOCK:
In the event of any change in the outstanding Common Stock of the Company
by reason of any stock dividend, split-up, recapitalization, reclassification,
combination or exchange of shares, merger, consolidation or liquidation or the
like, the Board may in its sole discretion provide for a substitution for or
adjustment in the number and class of shares available for award under the Plan
and in the Maximum Amount. The Board's determination with regard to any such
substitution or adjustment shall be conclusive. The Board may, in its sole
discretion, make such amendments to the terms of Restricted Stock Agreements as
it deems necessary or appropriate to reflect any adjustments or substitutions
made pursuant to this paragraph 15.
16. EXCLUSION FROM PENSION, PROFIT-SHARING AND OTHER BENEFIT COMPUTATIONS:
By acceptance of an award under the Plan, a Participant shall be deemed to
have agreed that the award and vesting of such Restricted Stock constitutes
special incentive compensation that shall not be taken into account as "salary",
"pay", "compensation" or "bonus" in determining the amount of any payment under
any pension, retirement or profit-sharing plan of the Company or any Subsidiary.
In addition, each Participant shall be deemed to have agreed that the award and
vesting of such Restricted Stock shall not be taken into account in determining
the amount of any life insurance coverage, short or long-term disability
coverage, or any other pay-based benefits provided by the Company or any
Subsidiary.
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<PAGE> 44
17. NONEXCLUSIVITY OF THE PLAN:
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including without limitation, the
awarding of stock and cash awards otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
18. EFFECTIVE DATE OF THE PLAN:
The Plan shall become effective as of May 2, 1997, provided that it is
approved by the affirmative vote of a majority of the votes cast by the holders
of Common Stock present or represented by proxy at a meeting of stockholders of
the Company duly called for that purpose, among others, or any adjournment
thereof.
19. GOVERNMENT AND OTHER REGULATIONS:
Notwithstanding any other provisions of the Plan, the obligations of the
Company under the Plan and with respect to Restricted Stock awarded hereunder
shall be subject to all applicable laws, rules and regulations, and such
approvals by any governmental agencies as may be required. The Company reserves
the right to restrict, in whole or in part, the delivery of Common Stock
pursuant to any award of Restricted Stock until such time as:
a. any legal requirements or regulations shall have been satisfied
relating to the issuance of such Restricted Stock or to their registration,
qualification or exemption from registration or qualification under the
Securities Act of 1933 or any applicable state securities laws; and
b. satisfactory assurances shall have been received that such
Restricted Stock when issued will be duly listed on the New York Stock
Exchange.
20. AMENDMENT AND TERMINATION OF PLAN:
The Board may at any time terminate the Plan, or make such amendments to
the Plan as it shall deem advisable; provided, however, that amendments to this
Plan shall be subject to the approval of the Company's stockholders to the
extent required under SEC Rules (with respect to Eligible Employees who are
subject to Section 16 of the Exchange Act) or the exception for
performance-based compensation under Section 162(m)(4) of the Code (with respect
to "covered employees", within the meaning of Section 162(m)(3) of the Code). No
termination or amendment of the Plan shall adversely affect the rights of any
Participant (without his consent) under any award previously made. Unless sooner
terminated by the Board, no Restricted Stock shall be awarded under the Plan
after December 31, 2002.
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<PAGE> 45
PROXY
TEMPLE-INLAND INC.
303 SOUTH TEMPLE DRIVE
DIBOLL, TEXAS 75941
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
ANNUAL MEETING ON MAY 2, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting
of Stockholders and proxy statement each dated March 17, 1997 and does hereby
appoint Clifford J. Grum, David H. Dolben, and M. Richard Warner, and each of
them as Proxies, each with the power to appoint his substitute and hereby
authorizes each of them to represent and vote, as designated below, all the
shares of Common Stock, par value $1.00 per share, of Temple-Inland Inc. held of
record by the undersigned on March 7, 1997 at the annual meeting of
stockholders to be held on Friday, May 2, 1997, and any adjournment(s) thereof:
-----------
SEE REVERSE
SIDE
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE OF THIS CARD. DO NOT FOLD. PLEASE
VOTE.
<PAGE> 46
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
- --------------------------------------------------------------------------------
1. Proposal to elect as Directors of Temple-Inland Inc. the
WITHHOLD following persons to hold office until the expiration of
FOR AUTHORITY their terms or until their successors have been duly
[ ] [ ] elected and have qualified. Nominees for Director: Paul M.
Anderson, Robert Cizik, Arthur Temple III, and Larry E.
Temple
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR INDIVIDUAL NOMINEES WRITE THE
NAMES OF SUCH NOMINEES IN THE SPACE PROVIDED BELOW.)
- --------------------------------
FOR AGAINST ABSTAIN
2. Proposal to ratify the selection of Ernst & Young [ ] [ ] [ ]
LLP as independent auditors of Temple-Inland Inc.
for the fiscal year ending January 3, 1998.
3. Proposal to ratify the adoption of the Temple-Inland [ ] [ ] [ ]
Inc. 1997 Stock Option Plan.
4. Proposal to ratify the adoption of the Temple-Inland [ ] [ ] [ ]
Inc. 1997 Restricted Stock Plan.
5. In their discretion the proxies are authorized to
vote upon such other business as may properly come
before the meeting.
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- -------------------------------------------------
- -------------------------------------------------
SIGNATURE(S) DATE
