<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 Rule 240.14a-11(c) or
Rule 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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- ----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- ----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------------------------
(5) Total fee paid:
- ----------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- ----------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- ----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- ----------------------------------------------------------------------------
(3) Filing Party:
- ----------------------------------------------------------------------------
(4) Date Filed:
- ----------------------------------------------------------------------------
<PAGE> 2
[TEMPLE-INLAND LOGO]
303 SOUTH TEMPLE DRIVE
DIBOLL, TEXAS 75941
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, MAY 1, 1998
To the Stockholders of Temple-Inland Inc.
NOTICE IS HEREBY GIVEN that the 1998 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 1, 1998, 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 2, 1999; and
3. 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 4, 1998 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
[Warner Signature]
M. RICHARD WARNER
Secretary
Diboll, Texas
March 30, 1998
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 1998 Annual Meeting of Stockholders to be held on Friday, May 1, 1998, 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 30, 1998.
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 proposal 2 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;" and For ratification
of the selection of Ernst & Young LLP as independent auditors for the Company
for the fiscal year ending January 2, 1999.
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
January 3, 1998 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 2, 1999; and
3. 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 4, 1998 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 56,048,867 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 4, 1998.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------- ---------- ----------
<S> <C> <C>
Delaware Management Holdings, Inc. ......................... 3,489,694(1) 6.17%(2)
2005 Market Street
Philadelphia, PA 19103
J. P. Morgan & Co. Incorporated............................. 7,968,781(3) 14%(4)
60 Wall Street
New York, N.Y. 10260
Putnam Investments, Inc. ................................... 4,079,380(5) 7%(6)
One Post Office Square
Boston, Massachusetts 02109
Wellington Management Company, LLP.......................... 3,532,410(7) 6.25%(8)
75 State Street
Boston, Massachusetts 02109
</TABLE>
2
<PAGE> 5
- ---------------
(1) Based on a statement on Schedule 13G dated December 31, 1996 and Amendment
No. 1 thereto dated February 9, 1998 (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
56,559,060 shares of Common Stock outstanding.
(3) Based on a statement on Schedule 13G dated September 30, 1997 and Amendment
No. 1 thereto dated December 31, 1997 (the "J.P. Morgan 13G") filed with
the Securities and Exchange Commission, J.P. Morgan & Co. Incorporated may
be deemed beneficial owner of these shares, all or the majority of which
are owned by investment advisor clients or account holders.
(4) Based upon the calculation in the J.P. Morgan 13G, which assumes 56,919,864
shares of common stock outstanding.
(5) Based on a statement on Schedule 13G dated January 16, 1998 (the "Putnam
13G") filed with the Securities and Exchange Commission, subsidiaries of
Putnam Investments, Inc., which are registered investment advisors, may be
deemed beneficial owner of these shares, which are beneficially owned by
clients of such investment advisors.
(6) Based upon the calculation in the Putnam 13G, which assumes 58,276,857
shares of Common Stock outstanding.
(7) Based on a statement on Schedule 13G dated February 10, 1994 and Amendments
No. 1, 2, 3, and 4 thereto dated January 30, 1995, February 1, 1996,
January 24, 1997, and January 17, 1998, 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.
(8) Based upon the calculation in the Wellington 13G, which assumes 56,518,560
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 4, 1998 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,
and (iii) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
---------------- ----------------------- -----------
<S> <C> <C>
Paul M. Anderson................................... 12,000(3)(4) *
Robert Cizik....................................... 26,540(3)(4) *
Anthony M. Frank................................... 16,500(3)(4) *
Clifford J. Grum................................... 392,589(3)(4)(5)(6) *
William B. Howes................................... 72,073(3)(4)(6) *
Bobby R. Inman..................................... 10,500(3)(4) *
Kenneth M. Jastrow, II............................. 59,323(3)(4)(6) *
Harold C. Maxwell.................................. 93,343(3)(4)(6) *
Herbert A. Sklenar................................. 19,000(3)(4) *
Walter P. Stern.................................... 48,880(3)(4)(5) *
Arthur Temple III.................................. 590,199(3)(4)(5)(7) 1.05 %
Charlotte Temple................................... 386,126(3)(4)(8) *
Larry E. Temple.................................... 11,000(3)(4) *
M. Richard Warner.................................. 61,633(3)(4)(5)(6) *
All directors and executive officers (19 persons)
as a group....................................... 1,937,517(3)(4)(5)(6)(7)(8) 3.46 %
</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
3
<PAGE> 6
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 56,048,867 shares of Common Stock issued and
outstanding on March 4, 1998.
(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 4,
1998: Mr. Anderson -- 4,500; Mr. Cizik -- 16,000; Mr. Frank -- 11,500; Mr.
Grum -- 29,478; Mr. Howes -- 28,795; Mr. Inman -- 0; Mr. Jastrow -- 15,643;
Mr. Maxwell -- 16,595; Mr. Sklenar -- 8,500; Mr. Stern -- 6,000; Mr. Temple
III -- 10,000; Ms. C. Temple -- 2,500; Mr. L. Temple -- 7,500; Mr.
Warner -- 14,914; and all directors and executive officers (19 persons) as
a group -- 218,163.
(4) Also includes the following number of shares of Common Stock issuable upon
the exercise of options with exercise dates and terms ranging from
approximately five months to fifteen years from March 4, 1998: Mr.
Anderson -- 7,500; Mr. Cizik -- 0; Mr. Frank -- 4,500; Mr. Grum -- 29,750;
Mr. Howes -- 35,405; Mr. Inman -- 0; Mr. Jastrow -- 34,385; Mr.
Maxwell -- 34,385; Mr. Sklenar -- 9,500; Mr. Stern -- 2,000; Mr. Temple
III -- 2,000; Ms. C. Temple -- 7,500; Mr. L. Temple -- 2,500; Mr.
Warner -- 23,090; and all directors and executive officers (19 persons) as
a group -- 287,277. 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 14,473 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. Certain of these shares may be
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 3,742, 377, 1,691, 1,392, and 264 shares of Common Stock held for
Messrs. Grum, Howes, Jastrow, Maxwell, and Warner, respectively, and 15,068
shares of Common Stock held for all directors and executive officers (19
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 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
126,190 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 twelve (12), with three classes of four (4) directors each.
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 as otherwise stated herein, or until their respective
successors have been duly elected and have qualified. Mr. Grum, if elected,
intends to retire from the Company and from the Board at age 65 in accordance
with Company policy. All nominees are presently serving as directors.
NOMINEES FOR DIRECTOR TO BE ELECTED AT 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, 63, 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, 66, 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.
Kenneth M. Jastrow, II........ President and Chief Operating Officer of the Company. Mr.
1998 Jastrow, 50, served as Group Vice President of the Company
from February 1995 until his election as President in 1998,
and has served as Chief Financial Officer of the Company
since November 1991. He also serves as Chairman of the Board
and Chief Executive Officer of the Company's subsidiaries
Temple-Inland Financial Services Inc. and Temple-Inland
Mortgage Corporation, and as President and Chief Executive
Officer of its subsidiary Guaranty Federal Bank, F.S.B. Mr.
Jastrow is also a director of MGIC Investment Corporation.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------- ------------------------------------------
<S> <C>
Herbert A. Sklenar............ Chairman of the Board Emeritus of Vulcan Materials Company,
1993 a producer of construction materials and chemicals. Mr.
Sklenar, 66, served as President of Vulcan Materials Company
from 1983 until his election as Chairman in 1992, he served
as its Chief Executive Officer from 1986 until February 1997
and he served as Chairman from 1992 until his retirement in
1997. In addition to being a director of Vulcan Materials
Company, Mr. Sklenar also is a director of AmSouth
Bancorporation and Protective Life Corporation.
</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.
GRUM, INMAN, JASTROW, AND SKLENAR 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 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 Capital Partners, Inc. Mr. Frank, 66,
1992 served as 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, and Financial
Security Assurance.
William B. Howes........ Executive Vice President of the Company. Mr. Howes, 60,
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.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------- ------------------------------------------
<S> <C>
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, 69, 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 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 at least the past five years, Ms. Temple,
1994 58, has been associated with various civic organizations
while pursuing private interests. Her prior experience was
in the commercial real estate investment area. Ms. Temple is
also a director of Exeter Investment Company.
</TABLE>
DIRECTORS TO SERVE UNTIL THE 2000 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------- ------------------------------------------
<S> <C>
Paul M. Anderson......... President and Chief Operating Officer of Duke Energy
1994 Corporation, a provider of global energy services. Mr.
Anderson, 52, has served as President and Chief Operating
Officer of Duke Energy Corporation since 1997. He served as
Chairman (since 1997), President (since 1993) and Chief
Executive Officer (since 1995) of PanEnergy Corp until its
merger with Duke Power Company in 1997 and as Group Vice
President of PanEnergy from 1991 through 1993. From February
1990 until 1991, he served as Vice President, Finance and
Chief Financial Officer of Inland Steel Industries, Inc. He
serves on the boards of Duke Energy Corporation, TEPPCO
Partners, L.P., Kerr-McGee Corporation, and Baker Hughes
Incorporated.
Robert Cizik............. Mr. Cizik, 66, 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 and Non-Executive Chairman of Stanadyne
Automotive, Windsor, Connecticut. He is also a Director of
Air Products and Chemicals, Inc. and Harris Corporation.
Arthur Temple III........ Chairman of the Board and Chief Executive Officer of Exeter
1984 Investment Company. Mr. Temple III, 56, 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>
7
<PAGE> 10
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------- ------------------------------------------
<S> <C>
Larry E. Temple.......... Mr. Temple, 62, 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>
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 1997, 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 $121,147. It is expected that Demco will
continue to perform services for subsidiaries of the Company in the future.
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 that Mr.
Jastrow's report of a July 31, 1996 stock option exercise, which was filed on a
timely basis, inadvertently omitted a tax withholding of forty-five shares.
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 1997, 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
8
<PAGE> 11
Committee, and the Chairman of each standing committee of the Board. The
Executive Committee did not meet in 1997.
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 1997.
Management Development and Executive Compensation Committee. The Management
Development and Executive Compensation Committee ("Compensation Committee") is
responsible for ensuring that a 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 1997, the Compensation Committee met three (3) 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. The members of the Nominating
Committee are Messrs. Inman (Chairman), Frank, Sklenar, and Stern. The Chairman
of the Board is a nonvoting ex-officio member. The Nominating Committee met two
(2) times during 1997.
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 1997.
9
<PAGE> 12
BOARD MEETINGS
During 1997, 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 1998 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 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 1997, for
example, salaries were increased for the first time since 1995 (other than one
officer who received an increase in 1996 in connection with his promotion and
assumption of increased responsibilities), while incentive bonuses were used to
reward performance and
10
<PAGE> 13
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 1997
should qualify for a deduction under Section 162(m).
Since its inception in 1984, Temple-Inland's compensation philosophy has
been to ensure that stockholder returns are a top priority in evaluating the
effectiveness of the compensation program. The following paragraphs outline the
Compensation Committee's objectives.
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 increased
in 1997. 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. The Paper Group's Executive Vice President received no bonus
in 1997 compared with a $200,000 bonus in 1996. The Financial Services Group had
earnings of $132.1 Million in 1997 compared with $107 Million in 1996 (exclusive
of a one-time $44 Million assessment levied in connection with the
recapitalization of the Savings Association Insurance Fund) and the President
received a bonus of $450,000 in 1997 compared with $425,000 in 1996. The
Building Products Group had earnings of $131.1 Million in 1997 compared with
$102 Million in 1996, and the Group Vice President of this segment received a
bonus of $300,000 in 1997 compared with $250,000 in 1996. The Vice President,
General Counsel, and Secretary received a bonus of $110,000 in 1997 compared
with $135,000 in 1996. 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 1997, 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,
11
<PAGE> 14
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.
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
President, Executive Vice President and 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 1997, 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 further grants were made.
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. In 1996, Mr. Grum received a bonus of
$300,000. Mr. Grum did not receive a bonus in 1997. 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>
1997......................... $688,462 0 $ 688,462 $ 50.8 Million
1996......................... 600,000 $300,000 $ 900,000 $132.8 Million
1995......................... 588,808 $500,000 $1,088,808 $281.0 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 in 1995 and 1996. He
received 12,800 options 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 ($46.88 in 1995 and $42.81 in 1996), as well as adjustments
made by the Committee in consideration of previous grants. In 1995, Mr. Grum
received a tandem performance unit award equal to one-half ( 1/2) the number of
options. No performance units were awarded in 1996 due to the discontinuance of
the plan. In 1997, Mr. Grum was not awarded long term incentives due to his
planned retirement at age 65 in accordance with Company policy.
12
<PAGE> 15
Other Information. Reference is made to the following charts and tables for
actual compensation grants and awards to key executives, as well as the
Company's performance for the last five (5) years, and to pages 1 and 25 of the
Company's Annual Report to Shareholders for information concerning the Company's
profitability.
Anthony M. Frank, Chairman
Robert Cizik
Bobby R. Inman
Herbert A. Sklenar
Arthur Temple III
The following table summarizes all compensation earned with respect to the
Company's last fiscal year by the Chief Executive Officer and the four other
most highly compensated executive officers who were serving as executive
officers at the end of the last completed fiscal year:
TABLE 1: SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- ---------------------------------
AWARD(S) PAYOUTS
----------------------- -------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION($) AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
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
Chief 1997 $688,462 $ 0 N/A $0 0 $0 $3,000
Executive Officer 1996 600,000 300,000 N/A 0 35,000 0 3,000
1995 588,808 500,000 N/A 0 12,800 0 3,000
Kenneth M. Jastrow, II,
Director, 1997 $344,231 $450,000 N/A $0 12,480 $0 $3,000
President and Chief Operating
Officer 1996 300,000 425,000 N/A 0 9,300 0 3,000
1995 288,462 400,000 N/A 0 8,532 0 3,000
William B. Howes, Director and 1997 $422,921 $ 0 N/A $0 12,480 $0 $3,000
Executive Vice President 1996 379,589 200,000 N/A 0 10,500 0 3,000
1995 361,722 400,000 N/A 0 9,600 0 3,000
Harold C. Maxwell, Group Vice 1997 $315,385 $300,000 N/A $0 12,480 $0 $3,000
President 1996 280,000 250,000 N/A 0 9,300 0 3,000
1995 274,577 225,000 N/A 0 8,532 0 3,000
M. Richard Warner, Vice
President, 1997 $237,115 $110,000 N/A $0 7,140 $0 $3,000
General Counsel and Secretary 1996 215,000 135,000 N/A 0 7,000 0 3,000
1995 213,269 175,000 N/A 0 13,864 0 3,000
</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 $50,000 or 10% of the
annual salary and bonus reported for each officer and is therefore not
reported.
(2) Amounts shown are annual contributions or other allocations to defined
contribution plans.
None of the five (5) executive officers named above has an employment
contract with the Company or an agreement providing for severance payments in
the event his employment is terminated.
During 1997, the Company had a stock option plan in place under which
options were granted to employees. Employees also exercised options granted
under a prior plan. Each of the plans was approved by the stockholders and
administered by non-employee members of the Board of Directors. The options were
granted at full market value on the date of the grant, and these exercise prices
have never been reduced. Options have been granted to approximately 450 current
middle and upper level company employees who have direct responsibilities to
improve the profitability of the Company.
13
<PAGE> 16
The following table summarizes the stock options granted to the five (5)
named executive officers in the last fiscal year:
TABLE 2: OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE (2)
- -------------------------------------------------------------------------------------------------------- ---------
PERCENT OF TOTAL GRANT
NUMBER OF SECURITIES OPTIONS/SARS EXERCISE OR DATE
UNDERLYING OPTIONS/ GRANTED TO EMPLOYEES BASE PRICE PRESENT
NAME SARS GRANTED (#) IN FISCAL YEAR ($/SH) EXPIRATION DATE VALUE ($)
---- -------------------- -------------------- ------------- --------------- ---------
(a) (b) (c) (d) (e) (f)
<S> <C> <C> <C> <C> <C>
Clifford J. Grum......... 0 0% $56.06 02/07/2007 $ 0
Kenneth M. Jastrow, II... 12,480 6.4% $56.06 02/07/2007 $252,221
William B. Howes......... 12,480 6.4% $56.06 02/07/2007 $252,221
Harold C. Maxwell........ 12,480 6.4% $56.06 02/07/2007 $252,221
M. Richard Warner........ 7,140 3.7% $56.06 02/07/2007 $144,299
</TABLE>
- ---------------
(1) Options to purchase Temple-Inland Inc. common stock. The exercise price is
the average of the high and low sales price of a share of Company Common
Stock on the New York Stock Exchange on the date of grant. Exercise prices
have never been repriced. Withholding taxes may be paid with exercised
shares. No general or freestanding stock appreciation rights ("SARs") were
granted. All grants to the named executive officers under the Stock Option
Plan include a provision for acceleration of vesting in certain change of
control situations. Options become exercisable in 15% increments on
02/07/99, 02/07/00, 02/07/2001, 02/07/2002, and the remaining 40% becomes
exercisable on 02/07/2003.
(2) The Grant Date Present Value was determined using the Black-Scholes option
pricing model. The expected volatility was measured by the Standard
Deviation of a statistical distribution using daily closing stock prices
for the last ten years for an assumed expected volatility of 27.26%. The
annual risk free rate of return during the expected life of the option (ten
years) was 5.56%. The expected dividend yield or dividend adjusted stock
prices was assumed to be 2.11%. The time of exercise was assumed to be at
the expiration of the options.
The following table summarizes the stock option exercises and value of
options held at year-end of the five (5) named executive officers:
TABLE 3: AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT FISCAL OPTIONS/SARS
ACQUIRED YEAR-END(#)(2) AT FISCAL YEAR-END($)(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.......... 0 $11,220 28,940 38,200 $ 70,169 $358,280
Kenneth M. Jastrow, II.... 0 $ 6,904 18,051 23,913 $ 48,020 $102,447
William B. Howes.......... 7,912 $82,839 24,820 25,380 $233,709 $115,620
Harold C. Maxwell......... 0 $10,352 19,991 23,913 $ 49,995 $102,447
M. Richard Warner......... 0 0 10,398 17,606 $ 58,749 $ 87,623
</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, less the
option exercise price. Includes a one-time payment in lieu of exercise for
options that expired on February 7, 1997 equal to the value that would have
been realized if the options had been exercised on the expiration date.
14
<PAGE> 17
(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, Jastrow, Howes, Maxwell, and Warner at fiscal year-end was 7,912,
5,936, 0, 6,924, and 0, respectively. All of these tandem limited SARs have
since expired. Since there have been no change of control situations, none
of these SARs were ever 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 January
2, 1998.
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- FOREST
(FISCAL YEAR COVERED) INLAND INC. S&P 500 PRODUCTS
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 99.92 110.08 110.21
1994 91.34 111.53 144.84
1995 90.97 153.45 126.44
1996 115.17 188.68 139.87
1997 113.74 251.63 149.97
</TABLE>
ASSUMES $100 INVESTED ON THE LAST TRADING DAY IN FISCAL YEAR 1992
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
15
<PAGE> 18
The five (5) named executive officers 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, Jastrow, Howes, Maxwell, and Warner are currently
credited with approximately 29, 19, 7 1/2, 34, and 11 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, 33, 11 1/2, 42, and 30 years of service, respectively. 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 1997, 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 $121,147. It is expected that Demco will
continue to perform services for subsidiaries of the Company in the future.
16
<PAGE> 19
PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR
ENDING JANUARY 2, 1999
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 2, 1999
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 2, 1999.
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.
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 1999 Annual Meeting, stockholder proposals must
be received by the Company by November 30, 1998 and must otherwise comply with
the requirements of Rule 14a-8.
17
<PAGE> 20
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
[Warner Signature]
M. RICHARD WARNER
Secretary
Diboll, Texas
March 30, 1998
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<PAGE> 21
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 1, 1998
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 30, 1998 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 4, 1998 at the annual meeting of
stockholders to be held on Friday, May 1, 1998, and any adjournment(s) thereof:
CONTINUED AND TO BE SIGNED ON REVERSE SIDE OF THIS CARD. DO NOT FOLD. PLEASE
VOTE.
[SEE REVERSE SIDE]
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o FOLD AND DETACH HERE o
<PAGE> 22
[X] PLEASE MARK YOUR 5340
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 AND 2.
<TABLE>
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<S> <C> <C> <C>
WITHHOLD FOR AGAINST ABSTAIN
FOR AUTHORITY 1. Proposal to elect as Directors of 2. Proposal to ratify the selection of [ ] [ ] [ ]
[ ] [ ] Temple-Inland Inc. the following persons to Ernst & Young LLP as independent
hold office until the expiration of their terms auditors of Temple-Inland Inc. for
or until their successors have been duly the fiscal year ending January 2,
elected and have qualified. Nominees for 1999.
Director: Clifford J. Grum, Bobby R. Inman,
Kenneth M. Jastrow, II, and Herbert A. Sklenar.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR INDIVIDUAL NOMINEES
WRITE THE NAMES OF SUCH NOMINEES IN THE SPACE PROVIDED BELOW.)
3. In their discretion the proxies are authorized to vote upon
- ------------------------------------------- such other business as may properly come before the
meeting.
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Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor, ad-
ministrator, trustee or guardian, please give full title
as such.
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SIGNATURE(S) DATE
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o FOLD AND DETACH HERE o
</TABLE>
