<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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 Section 240.14a-12
</TABLE>
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:
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(4) Date Filed:
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<PAGE> 2
[TEMPLE-INLAND LOGO]
303 SOUTH TEMPLE DRIVE
DIBOLL, TEXAS 75941
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, MAY 5, 2000
To the Stockholders of Temple-Inland Inc.
NOTICE IS HEREBY GIVEN that the 2000 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 South Temple Drive, Diboll,
Texas 75941, on Friday, May 5, 2000, 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 December 30, 2000;
3. To consider, if properly brought before the meeting, a stockholder
proposal opposed by the Board of Directors regarding a spin off of the
Company's financial services businesses; and
4. 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 8, 2000 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
/s/ LESLIE K. O'NEAL
LESLIE K. O'NEAL
Secretary
Diboll, Texas
March 24, 2000
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 2000 Annual Meeting of Stockholders to be held on Friday, May 5, 2000, 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 24, 2000.
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 and 3, 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 December 30, 2000; and Against the stockholder proposal
set forth in this proxy statement.
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 $15,000. 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 1, 2000 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 December 30, 2000;
3. If properly brought before the Annual Meeting, a stockholder
proposal, opposed by the Board of Directors, that is set forth below; and
4. 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 8, 2000 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 52,668,387 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.
2
<PAGE> 5
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 8, 2000.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------------------ ---------- ----------
<S> <C> <C>
J. P. Morgan & Co. Incorporated............................. 4,960,541(1) 8.88%(2)
60 Wall Street
New York, N.Y. 10260
The Prudential Insurance Company of America................. 3,097,602(3) 5.55%(4)
751 Broad Street
Newark, New Jersey 07102-3777
Sanford C. Bernstein & Co., Inc. ........................... 3,899,534(5) 7.00%(6)
767 Fifth Avenue
New York, NY 10153
Wellington Management Company, LLP.......................... 3,060,700(7) 5.48%(8)
75 State Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
(1) Based on a statement on Schedule 13G dated September 30, 1997 and Amendments
No. 1, 2 and 3 thereto dated December 31, 1997, December 31, 1998, and
December 31, 1999, respectively, (the "J.P. Morgan 13G") filed with the
Securities and Exchange Commission ("SEC"), 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.
(2) Based upon the calculation in the J.P. Morgan 13G, which assumes 55,861,948
shares of Common Stock outstanding.
(3) Based on a statement on Schedule 13G dated February 1, 1999 and Amendment
No. 1 thereto dated January 31, 2000 (the "Prudential 13G") filed with the
SEC, The Prudential Insurance Company of America may have direct or indirect
voting and/or investment discretion over these shares which are held for the
benefit of its clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or other
affiliates.
(4) Based upon the calculation in the Prudential 13G, which assumes 55,812,649
shares of Common Stock outstanding.
(5) Based on a statement on Schedule 13G dated February 5, 1999 and Amendment
No. 1 thereto dated February 8, 2000 (the "Sanford Bernstein 13G") filed
with the SEC, these shares are held for the accounts of discretionary
clients.
(6) Based upon the calculation in the Sanford Bernstein 13G, which assumes
55,707,629 shares of Common Stock outstanding.
(7) Based on a statement on Schedule 13G dated February 10, 1994 and Amendments
No. 1, 2, 3, 4, 5 and 6 thereto dated January 30, 1995, February 1, 1996,
January 24, 1997, January 17, 1998, December 31, 1998, and February 9, 2000
respectively, (the "Wellington 13G") filed with the SEC, 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 55,852,190
shares of Common Stock outstanding.
3
<PAGE> 6
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 8, 2000 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) the former Chief Executive Officer, and (iv) 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>
Robert Cizik...................................... 31,540(3)(4) *
Kenneth R. Dubuque................................ 40,560(3)(4) *
Anthony M. Frank.................................. 20,500(3)(4) *
Clifford J. Grum.................................. 374,056(3)(4)(5)(6) *
James T. Hackett.................................. 100(3)(4) *
William B. Howes.................................. 100,282(3)(4)(6) *
Bobby R. Inman.................................... 15,500(3)(4) *
Kenneth M. Jastrow, II............................ 244,407(3)(4)(6) *
James A. Johnson.................................. 14,800(3)(4) *
Harold C. Maxwell................................. 119,013(3)(4)(6) *
W. Allen Reed..................................... 12,000(3)(4) *
Herbert A. Sklenar................................ 23,000(3)(4) *
Walter P. Stern................................... 57,880(3)(4)(5) *
Arthur Temple III................................. 589,199(3)(4)(5)(7) 1.12%
Charlotte Temple.................................. 386,126(3)(4)(8) *
Larry E. Temple................................... 11,000(3)(4) *
M. Richard Warner................................. 82,858(3)(4)(5)(6) *
All directors and executive officers (25 persons)
as a group...................................... 2,416,401(3)(4)(5)(6)(7)(8) 4.59%
</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 52,668,387 shares of Common Stock issued and
outstanding on March 8, 2000.
(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 8,
2000: Mr. Cizik -- 2,000; Mr. Dubuque -- 0; Mr. Frank -- 18,000; Mr.
Grum -- 15,750; Mr. Hackett -- 0; Mr. Howes -- 10,569; Mr. Inman -- 2,000;
Mr. Jastrow -- 17,529; Mr. Johnson -- 0; Mr. Maxwell -- 10,029; Mr.
Reed -- 0; Mr. Sklenar -- 20,000; Mr. Stern -- 12,000; Mr. Temple
III -- 6,000; Ms. C. Temple -- 7,500; Mr. L. Temple -- 10,000; Mr.
Warner -- 6,792; and all directors and executive officers (25 persons) as a
group -- 214,292.
(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 8, 2000: Mr.
Cizik -- 3,000; Mr. Dubuque -- 40,500; Mr. Frank -- 2,000; Mr.
Grum -- 19,250; Mr. Hackett -- 0; Mr. Howes -- 66,411; Mr. Inman -- 3,000;
Mr. Jastrow -- 203,595; Mr. Johnson -- 12,000; Mr. Maxwell -- 65,751; Mr.
Reed -- 12,000; Mr. Sklenar -- 2,000; Mr. Stern -- 5,000; Mr. Temple
III -- 5,000; Ms. C. Temple -- 2,500; Mr. L. Temple -- 0; Mr.
Warner -- 47,848; and all directors and executive officers (25 persons) as a
group -- 695,556. These options are not required to be
4
<PAGE> 7
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 60, 4,105, 11,000, 2,109, 1,550, and 375 shares of Common Stock
held for Messrs. Dubuque, Grum, Howes, Jastrow, Maxwell, and Warner,
respectively, and 42,161 shares of Common Stock held for all directors and
executive officers (25 persons) as a group by trusts under two (2) 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.
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 accordingly set
the number of directors at thirteen (13), with two classes of four (4) directors
each and one class of five (5) 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
5
<PAGE> 8
as directors for three (3) years or as otherwise stated herein, or until their
respective successors have been duly elected and have qualified. All nominees
are presently serving as directors with the exception of Mr. Hackett.
NOMINEES FOR DIRECTOR TO BE ELECTED AT THE 2000 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------- ------------------------------------------
<S> <C>
Robert Cizik................... Mr. Cizik, 68, 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 Koppers
Industries, Inc., Pittsburgh, Pennsylvania and Stanadyne
Automotive, Windsor, Connecticut. He is also a Director of
Air Products and Chemicals, Inc. He previously served as a
director of Harris Corporation from 1988 until November
1999.
James T. Hackett............... Chairman, President and Chief Executive Officer, Ocean
Energy, Inc. Mr. Hackett, age 46, was Chairman and Chief
Executive Officer of Seagull Energy Corporation from 1998
until it merged with Ocean Energy, Inc. in March 1999, when
he assumed the title of Chief Executive Officer and
President. He assumed the Chairman title on January 1, 2000.
Mr. Hackett served as President-Energy Services Group of
Duke Energy Corporation, Houston, Texas from 1997 until 1998
and as Executive Vice President of PanEnergy Corporation
(which merged into Duke Energy) from 1996 until 1997. Mr.
Hackett served as Senior Vice President and President of the
Trident Division of NGC Corporation from 1995 until 1996.
Mr. Hackett is also a director of New Jersey Resources
Corporation.
Arthur Temple III.............. Chairman of the Board and Chief Executive Officer of Exeter
1984 Investment Company. Mr. Temple III, 58, 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 and
Chairman 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.
Larry E. Temple................ Mr. Temple, 64, 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>
6
<PAGE> 9
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.
CIZIK, HACKETT, TEMPLE III, AND 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 or as otherwise stated herein.
DIRECTORS TO SERVE UNTIL THE 2001 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
ELECTED DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------- ------------------------------------------
<S> <C>
Bobby R. Inman....................... Admiral Inman, 68, 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............... Chairman and Chief Executive Officer of the Company. Mr.
1998 Jastrow, 52, was elected to his current office effective
January 1, 2000. He served as Group Vice President of the
Company from 1995 until 1998, as President and Chief
Operating Officer in 1998 and 1999, and as Chief Financial
Officer of the Company from November 1991 until 1999. Mr.
Jastrow is also a director of MGIC Investment Corporation.
James A. Johnson..................... Chairman and Chief Executive Officer of Johnson Capital
2000 Partners. Mr. Johnson, 56, served as Chairman of the
Executive Committee of the Board of Fannie Mae in 1999 and
as Chairman and Chief Executive Officer of Fannie Mae from
1991 through 1998. He is also a director of Cummins Engine
Company, Inc., Target Corporation, The Goldman Sachs Group,
Inc., Kaufman and Broad Home Corporation and UnitedHealth
Group.
Herbert A. Sklenar................... Chairman of the Board Emeritus of Vulcan Materials Company,
1993 a producer of construction materials and chemicals. Mr.
Sklenar, 68, 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.
</TABLE>
7
<PAGE> 10
DIRECTORS TO SERVE UNTIL THE 2002 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, 68,
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, Financial Security Assurance, and Cotelligent,
Inc.
William B. Howes..................... Executive Vice President of the Company. Mr. Howes, 62,
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.
W. Allen Reed........................ President and Chief Executive Officer of General Motors
2000 Investment Management Corporation. Mr. Reed, 52, was elected
to his current position in 1994 and also serves as Chairman
and CEO of the GM Trust Company and as a Corporate Vice
President of General Motors Corporation. He is also a
director of WEBS Funds, Inc., FLIR Systems, Inc. and General
Motors Acceptance Corporation (GMAC).
Walter P. Stern...................... Vice Chairman of the Board of Capital Group International,
1984 Inc. ("CGII"), a wholly-owned subsidiary of The Capital
Group Companies, Inc. From March 1988 until December 1998,
Mr. Stern, 71, served as Chairman of the Board of CGII. He
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 also serves as Chairman of the Board
of The American Balanced Fund, The Income Fund of America,
Inc., and New Perspective Fund, Inc., all managed by a
subsidiary of The Capital Group Companies, Inc. Mr. Stern is
also Chairman and a director of the Emerging Markets Growth
Fund, Inc. Under the Company's policy, Mr. Stern's
retirement from the Board will take effect at the 2001
Annual Meeting of Stockholders.
Charlotte Temple..................... Investor. During at least the past five years, Ms. Temple,
1994 60, 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>
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.
8
<PAGE> 11
Mr. Temple III is a director, officer and 66 2/3% stockholder of Demco
Manufacturing Company ("Demco"). During 1999, 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 $226,211. It is expected that Demco will
continue to perform services for subsidiaries of the Company in the future.
During 1999, Forest Products purchased all merchantable pine timber on
approximately 117 acres in Angelina County, Texas from Arthur Temple, Jr., Mr.
Temple III's and Ms. C. Temple's father, in the ordinary course of business for
a total consideration of $137,168.
A subsidiary of Forest Products sold a lot in a subdivision to Mr. Temple
III and his wife for $290,000 during 1999 in the ordinary course of business.
By agreement in the ordinary course of business dated March 29, 1999,
Lumbermen's Investment Corporation ("LIC"), a wholly-owned subsidiary of the
Company, agreed to purchase three lots in a subdivision and sell each lot at its
cost plus carry (interest plus taxes) to a builder at the time the builder began
construction of a home on each lot. In August 1999, Mr. Jastrow and his wife
purchased one of these lots from LIC at a cost of $81,795.19, which represented
the same price that the builder would have paid LIC for the lot under the terms
of the agreement.
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.
COMMITTEES OF THE BOARD OF DIRECTORS
There are 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. Messrs. Hackett, Johnson and Reed will be elected to
serve on committees at the May meeting when the Board conducts its annual
evaluation of committee memberships.
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 on Form 10-K 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 1999, 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 1999.
9
<PAGE> 12
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), Stern, and
Temple III. The Chairman of the Board is a nonvoting ex-officio member. The
Finance Committee met three (3) times during 1999.
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 attends the meetings as a
nonvoting ex-officio member. During 1999, the Compensation Committee met four
(4) times.
Corporate Governance Committee. The Corporate Governance 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,
reviews corporate governance issues, reviews shareholder proposals, 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 Corporate
Governance Committee are Messrs. Inman (Chairman), Frank, Sklenar, and Stern.
The Chairman of the Board is a nonvoting ex-officio member. The Corporate
Governance Committee met three (3) times during 1999.
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), 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 1999.
10
<PAGE> 13
BOARD MEETINGS
During 1999, 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 except for Mr. Frank, who missed the May meetings
due to a serious injury.
DIRECTOR COMPENSATION
Directors who are not employees of the Company will receive in 2000 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. This award vests 10% after one year, 15% after four years, and 25% each
after five, six and seven years. At the expiration of this initial grant, and
each five years thereafter, a director may be granted an additional
non-qualified stock option covering up to 5,000 shares of Common Stock at an
exercise price per share equal to the fair market value of the stock on the date
of the option grant. All options vest 40% after one year, 40% after two years,
and 20% after three years. All options have a term of 10 years. Any non-
employee director may also, pursuant to the terms of the Company's Stock Option
Plan, make an election to receive 2,000 nonqualified stock options in lieu of
his annual retainer fees at a price equal to the fair market value of the stock
on the first trading day in January less the amount of the annual retainer fee.
This option vests 100% after one year and has a term of fifteen years.
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.
11
<PAGE> 14
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 incentive
program based on stock options. The Committee considers all elements of the
compensation package in total, rather than any one element in isolation. In
1999, for example, salaries were increased for the first time since 1997 (except
for officers whose salaries were increased in connection with a promotion),
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 bases its judgments on a review of personal and
business unit performances.
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. However, the Committee reserves the
right to waive this requirement to further the Company's compensation goals from
time to time. All compensation paid in 1999 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." Surveys indicate base salaries for
the Company's named executive officers are currently competitive to the mid
ranges. Base salaries are usually reviewed every two years and were increased in
1999. 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 evaluations of the
CEO and of the Chief Administrative Officer are 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 had earnings of $102.9 million in 1999
compared with $38.9 million in 1998; the Executive Vice President over this
segment received a $250,000 bonus for 1999 compared with a bonus of $100,000 for
1998. The Building Products Group had earnings of $173.7 million in 1999
compared with $112.5 million in 1998, and the Executive Vice President over this
segment received a bonus of $450,000 for 1999 compared with $275,000 for 1998.
The Financial Services Group had earnings of $138.1 million in 1999 compared
with $154.1 million in 1998. The Group Vice President Financial Services
received a bonus of $325,000 for 1999.
12
<PAGE> 15
Mr. Jastrow, II received a bonus of $600,000 for 1999 in his role as President
and Chief Operating Officer. He received a bonus of $450,000 for 1998, in his
capacity both as President and as head of the Financial Services Group for most
of the year. The Chief Administrative Officer received a bonus of $250,000 for
1999 compared with $150,000 for 1998. 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 1999, the key executives listed in the proxy
statement received an annual grant of stock options under a long-term incentive
program and one officer also received a special award of options in connection
with his promotion. 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.
To further align executives' financial interests with those of the Company
and its stockholders, the Committee has adopted minimum stock ownership
guidelines for these executives:
VALUE OF OWNERSHIP OF STOCK AS A MULTIPLE OF ANNUAL SALARY
<TABLE>
<CAPTION>
POSITION MULTIPLE OF SALARY
- -------- ------------------
<S> <C>
Chief Executive Officer.................................. 5x
Executive Vice Presidents 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.
Although annual awards were made from 1984 through 1995 under the Company's
Performance Unit Plan, the specified formulas only generated one (1) cash
payment which occurred in 1991. In all other years, including 1999, 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. Jastrow's performance, the
Committee will consider all of the factors set forth in the above paragraphs.
However, the Committee will focus primarily on the Company's performance,
measured in large part by its net earnings. The former Chief Executive Officer's
performance was measured in that manner. In 1998 the Company had continuing
earnings of $88.9 million (including nonrecurring items) and Mr. Grum received a
bonus of $200,000. In 1999 the Company had continuing earnings of $191.6 million
and Mr. Grum received a bonus of $700,000. 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>
1999............................... $700,000 $700,000 $1,400,000 $99.2 million
1998............................... $726,923 $200,000 $ 926,923 $64.5 million
1997............................... $688,462 0 $ 688,462 $50.8 million
</TABLE>
13
<PAGE> 16
Mr. Grum was not awarded long-term incentives in 1997, 1998, or 1999 due to
his planned retirement at age 65 in accordance with Company policy.
Other Information. Reference is made to the following charts and tables for
actual compensation grants and awards to key executives, as well as the
Company's performance for the last five (5) years, and to the inside cover and
page 37 of the Company's Annual Report to Shareholders for information
concerning the Company's profitability.
Anthony M. Frank, Chairman
Robert Cizik
Bobby R. Inman
Herbert A. Sklenar
Arthur Temple III
The following table summarizes all compensation earned with respect to the
Company's last fiscal year by the Chief Executive Officer, the former Chief
Executive Officer, and the four other most highly compensated executive officers
who were serving as executive officers at the end of the last completed fiscal
year:
TABLE 1: SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- ---------------------------------
AWARD(S) PAYOUTS
----------------------- -------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($)(1) ($) SARS(#) ($) ($)(2)
--------- ---- -------- -------- ------------ ---------- ---------- ------- ------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth M. Jastrow, II, 1999 $475,000 $600,000 N/A $0 48,000 $0 $3,000
Chairman and Chief 1998 448,077 450,000 N/A 0 51,344 0 3,000
Executive Officer 1997 344,231 450,000 N/A 0 12,480 0 3,000
Kenneth R. Dubuque, Group 1999 $310,000 $325,000 N/A $0 12,500 $0 $9,100
Vice President, Financial 1998 75,314 150,000 $145,088 0 10,000 0 0
Services 1997 N/A N/A N/A N/A N/A N/A N/A
William B. Howes, Director 1999 $449,932 $250,000 N/A $0 15,000 $0 $3,000
and Executive Vice President 1998 425,672 100,000 N/A 0 14,000 0 3,000
1997 422,921 0 N/A 0 12,480 0 3,000
Harold C. Maxwell, Executive 1999 $383,922 $450,000 N/A $0 15,000 $0 $3,000
Vice President 1998 332,308 275,000 N/A 0 14,000 0 3,000
1997 315,385 300,000 N/A 0 12,480 0 3,000
M. Richard Warner, Chief 1999 $301,924 $250,000 N/A $0 12,500 $0 $3,000
Administrative Officer 1998 249,231 150,000 N/A 0 10,000 0 3,000
1997 237,115 110,000 N/A 0 7,140 0 3,000
Clifford J. Grum, former 1999 $700,000 $700,000 N/A $0 0 $0 $3,000
Chairman and Chief 1998 726,923 200,000 N/A 0 0 0 3,000
Executive Officer 1997 688,462 0 N/A 0 0 0 3,000
</TABLE>
- ---------------
(1) The amount shown for Mr. Dubuque is a relocation bonus. For all other
officers, this column is 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
$50,000 or 10% of the annual salary and bonus reported for each officer and
is therefore not reported.
(2) Amounts shown are annual contributions or other allocations to defined
contribution plans.
14
<PAGE> 17
None of the five (5) executive officers named above has an employment
contract with the Company or an agreement providing for severance payments in
the event his employment is terminated.
During 1999, the Company had a stock option plan in place under which
options were granted to employees. Employees also exercised options granted
under a prior plan. Each of the plans was approved by the stockholders and
administered by non-employee members of the Board of Directors. The options were
granted at full market value on the date of the grant, and these exercise prices
have never been reduced. Options have been granted to approximately 440 current
middle and upper level company employees who have direct responsibilities to
improve the profitability of the Company.
The following table summarizes the stock options granted to the five (5)
named executive officers and one former executive officer in the last fiscal
year:
TABLE 2: OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE(2)
- ------------------------------------------------------------------------------------------------------ ----------
PERCENT OF TOTAL GRANT
NUMBER OF SECURITIES OPTIONS/SARS EXERCISE OR DATE
UNDERLYING OPTIONS/ GRANTED TO EMPLOYEES BASE PRICE PRESENT
NAME SARS GRANTED(#) IN FISCAL YEAR ($/SH) EXPIRATION DATE VALUE ($)
---- -------------------- -------------------- ----------- --------------- ----------
(A) (B) (C) (D) (E) (F)
<S> <C> <C> <C> <C> <C>
Kenneth M. Jastrow, II... 48,000 11.46% $75.28 05/07/09 $1,498,080
Kenneth R. Dubuque....... 12,500 2.98% $59.25 02/05/09 $ 307,125
William B. Howes......... 15,000 3.58% $59.25 02/05/09 $ 368,550
Harold C. Maxwell........ 15,000 3.58% $59.25 02/05/09 $ 368,550
M. Richard Warner........ 12,500 2.98% $59.25 02/05/09 $ 307,125
Clifford J. Grum......... 0 0% N/A N/A $ 0
</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. The options in Mr. Jastrow's award become exercisable as
follows: 15% on 05/07/01, 15% on 05/07/02, 15% on 05/07/03, 15% on 05/07/04,
and 40% on 05/07/05. All other options awarded to the executives become
exercisable in 15% increments on 02/05/01, 02/05/02, 02/05/03, 02/05/04, and
the remaining 40% becomes exercisable on 02/05/05.
(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 29.39%. The annual
risk free rate of return during the expected life of the option (ten years)
was 6.82%. The expected dividend yield or dividend adjusted stock prices was
assumed to be 2.00%. The time of exercise was assumed to be at the
expiration of the options.
15
<PAGE> 18
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 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>
Kenneth M. Jastrow, II.... 14,248 $147,406 4,662 116,462 $ 78,789 $376,659
Kenneth R. Dubuque........ 0 0 0 22,500 0 $196,978
William B. Howes.......... 7,620 $ 68,351 14,622 46,958 $ 261,042 $478,648
Harold C. Maxwell......... 6,668 $ 37,274 13,194 46,118 $ 233,657 $459,982
M. Richard Warner......... 0 0 17,035 33,469 $ 307,921 $330,908
Clifford J. Grum.......... 11,428 $110,394 47,800 0 $1,010,080 0
</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.
(2) SARs are not granted under the Company's 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
31, 1999, less the option exercise price.
16
<PAGE> 19
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 500 S&P PAPER &
MEASUREMENT PERIOD TEMPLE- ------- FOREST
(FISCAL YEAR COVERED) INLAND INC. PRODUCTS
- --------------------- ------------ -----------
<S> <C> <C> <C>
1994 $100.00 $100.00 $100.00
1995 $ 99.60 $137.58 $110.11
1996 $126.09 $169.17 $121.79
1997 $124.53 $225.60 $130.59
1998 $144.60 $290.08 $133.19
1999 $164.13 $351.12 $186.22
</TABLE>
PERFORMANCE GRAPH
ASSUMES $100 INVESTED ON THE LAST TRADING DAY IN FISCAL YEAR 1994
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
17
<PAGE> 20
The named executive officers (except for Mr. Dubuque) 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>
$ 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
650,000.......................... 102,000 153,000 204,000 255,000 306,000 357,000
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
850,000.......................... 134,000 201,000 268,000 335,000 402,000 469,000
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
1,200,000.......................... 190,000 285,000 380,000 475,000 570,000 665,000
1,300,000.......................... 206,000 309,000 412,000 515,000 618,000 721,000
1,400,000.......................... 222,000 333,000 444,000 555,000 666,000 777,000
1,500,000.......................... 238,000 357,000 476,000 595,000 714,000 833,000
1,600,000.......................... 254,000 381,000 508,000 635,000 762,000 889,000
1,700,000.......................... 270,000 405,000 540,000 675,000 810,000 945,000
</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. Jastrow, Howes, Maxwell, and Warner are currently credited with
approximately 21, 9 1/2, 36, and 13 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 33, 11 1/2, 42,
and 30 years of service, respectively. Mr. Grum was credited with 31.25 years of
service on his retirement date. 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.
Mr. Dubuque participates in a defined contribution pension plan. Under this
plan, an amount equal to 3 1/2% of his compensation is contributed to an account
in his name each year. This amount is calculated based upon his salary and
bonus, but excludes all other forms of compensation shown in the foregoing
tables such as stock options. This amount vests after five years of service and
is not subject to any deduction for Social Security or other offset amounts.
18
<PAGE> 21
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no Compensation Committee interlocks among the members of the
board. Mr. Temple III, a member of the Compensation Committee, however,
participated in the following transactions:
Mr. Temple III is a director, officer and 66 2/3% stockholder of Demco.
During 1999, Demco performed machinery repair services for Forest Products in
the ordinary course of business at an aggregate cost to Forest Products of
$226,211. It is expected that Demco will continue to perform services for
subsidiaries of the Company in the future.
During 1999, Forest Products purchased all merchantable pine timber on
approximately 117 acres in Angelina County, Texas from Arthur Temple, Jr., Mr.
Temple III's and Ms. C. Temple's father, in the ordinary course of business for
a total consideration of $137,168.
A subsidiary of Forest Products sold a lot in a subdivision to Mr. Temple
III and his wife for $290,000 during 1999 in the ordinary course of business.
PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 30, 2000
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 December 30,
2000 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
DECEMBER 30, 2000.
STOCKHOLDER PROPOSAL REGARDING THE SPIN OFF OF
FINANCIAL SERVICES BUSINESS
The Company has been informed that Nell Minow, a Principal of LENS
Investment Management, LLC (the "Proponent"), intends to present a proposal at
the Annual Meeting. The proposal and supporting statement, for which the Board
of Directors and the Company accept no responsibility, are set forth below. The
Board of Directors opposes this proposal for the reasons set forth below in the
Board of Directors Statement in Opposition.
Nell Minow, whose address is Suite 400, 45 Exchange Street, Portland, Maine
04101, and who is a beneficial owner of 120 shares of Common Stock, submitted
the following resolution:
"RESOLVED: That the shareholders of Temple-Inland Inc. recommend that
the board of directors take action necessary to spin off to shareholders
the banking and financial services division as a separate company."
19
<PAGE> 22
The Proponent has furnished the following statement setting forth the
reasons advanced by her in support of her proposal:
"This board and management have failed to demonstrate that the
conglomeration of paper and forest products with banking and financial
services can provide optimal value to the shareholders. There are no
synergies of any kind and no reason to keep them together.
"Separating the two businesses into independent companies will
liberate their intrinsic values by (1) providing greater accountability by
management, (2) ensuring greater accounting transparency, (3) facilitating
analysis and valuation by the investment community, and (4) allowing
shareholders to diversify.
"Quite simply, Temple-Inland's current conglomerated structure is not
working. Temple-Inland's performance has been disappointing, significantly
trailing the S&P 500, S&P Paper and Forest Index, and S&P Savings and Loan
Index over the last five years. If $100 were invested in Temple-Inland five
years ago (November 19, 1994), it would be worth $149 today (November 19,
1999); whereas $100 would be worth $175 if invested in the S&P Paper and
Forest Index, $284 if invested in the S&P Savings and Loan Index, and $338
if invested in the S&P 500 Index.
"Keeping these two completely unrelated businesses together results in
shares that trade at a significant discount to the sum of the real values
of the financial and paper businesses. Stand-alone financial service
companies have experienced excellent profit growth and multiple expansion
in recent years, but the value of Temple-Inland's financial business
remains suppressed by the paper business. Our belief is that the potential
values of the component businesses significantly exceed the current share
price.
"There are no financial or industrial synergies between the paper
business and the financial services business. Strong results in the
company's financial services division have shielded the paper and forest
products division from market discipline for its own lackluster
performance. The paper and forest products industry has experienced
increased global competition in recent years, resulting in over-capacity
and a squeezing of margins and cash flows. While other industry players
have responded to these conditions with substantial restructurings,
Temple-Inland has failed to respond aggressively. Despite the recent
announcement to sell the Evadale bleached paperboard facility, the company
continues to manage its assets lethargically. Indeed, Temple-Inland
invested heavily into their core paper businesses over the past years and
failed to even meet their cost of capital. We also note that timber values
have risen substantially during the last decade, and that these values are
currently lost in the price of the stock.
"If other shareholders believe, as we do, that the value of the
underlying assets of Temple-Inland is not reflected in the stock price,
then the board and the management have not met their obligation to prove
that they can add value with the current conglomerated structure. The
company needs to be fundamentally restructured. We recommend that the board
start with a spin-off of its financial services business."
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING AGAINST THIS
PROPOSAL.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
TO THE STOCKHOLDER PROPOSAL
The Board of Directors is cognizant of its fiduciary responsibilities to
its stockholders and strives to discharge these responsibilities in a manner
that the Board believes is in the best interests of the Company and its
stockholders. The members of the Board of Directors, the majority of whom are
independent, non-employee directors, draw upon broad business backgrounds and
experience in making strategic decisions pertaining to the Company's operations
and the value each operation adds to stockholder value. In its continuing review
of issues such as those associated with the proposal, the Board of Directors is
convinced that stockholder value will be best served by continuing to operate
and, where appropriate, grow the Financial Services Group as a wholly-owned unit
of the Company.
20
<PAGE> 23
The strategy behind the Company's entry into financial services, to provide
a line of business in which earnings would offset the cyclicality of earnings
from paper and forest products, remains valid. The diversified earning power of
each of the operations has served as a source of financial strength for the
Company, increased return on investment, and therefore provided greater
contributions to stockholder value.
As a matter of course, the Board regularly reviews all the operations of
the Company, including Management reports evaluating the contribution of each
business unit to the Company's performance. In addition, the Board of Directors
has always been, and continues to be, active in exploring strategic alternatives
to enhance stockholder value. Recent examples of the Board's activity include
the sale of the bleached paperboard business, the Mplus50 plan to increase
profitability of the corrugated packaging operations, the stock re-purchase
program, the growth in the Building Products Group and the growth in the
Financial Services Group. Strategic or tactical adjustments will continue to be
made when they enhance stockholder value.
The Company's strategy is to operate a related array of businesses, with a
goal to maximize returns to its stockholders. If a business cannot reasonably
achieve market leadership or targeted returns in a value creating way, it will
be evaluated for sale, merger, or other actions that will produce results. These
considerations were a major factor in the Company's decision in 1999 to sell its
bleached paperboard business. Clearly, the Company has demonstrated a
willingness to acquire or divest businesses and to implement other forms of
corporate reorganization where value can be created for stockholders. However,
at this time the Company's Board and Management believe that value will continue
to be created by retaining the Financial Services Group as a wholly-owned unit
of the Company.
In conclusion, the Board of Directors does not believe that a vote for the
proposal would be in the best interest of the Company and its stockholders and
therefore recommends voting against the proposal.
Approval of the stockholder proposal requires the affirmative vote of a
majority of the votes attributable to all shares of Common Stock represented at
the meeting, in person or by proxy, and entitled to vote. In determining whether
the proposal has received the requisite number of affirmative votes, abstentions
will be counted and will have the same effect as a vote against the proposal;
broker non-votes will be disregarded and will have no effect on the outcome of
the vote.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL, AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS PRESENTED UNLESS
YOU SPECIFY OTHERWISE.
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.
21
<PAGE> 24
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 2001 Annual Meeting, stockholder proposals must
be received by the Company by November 24, 2000 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). Shareholder proposals
submitted outside the processes of Rule 14a-8 will be considered untimely if
they are submitted before January 25, 2001 or after February 19, 2001. 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 -- Corporate
Governance 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
/S/ LESLIE K. O'NEAL
LESLIE K. O'NEAL
Secretary
Diboll, Texas
March 24, 2000
22
<PAGE> 25
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 5, 2000
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 24, 2000 and does hereby
appoint Kenneth M. Jastrow, II, 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 8, 2000 at the annual meeting of stockholders
to be held on Friday, May 5, 2000, and any adjournment(s) thereof:
CONTINUED AND TO BE SIGNED ON REVERSE SIDE OF THIS CARD. DO NOT FOLD. PLEASE
VOTE.
-----------
SEE REVERSE
SIDE
-----------
- -----------------------------------------------------------------------------
- FOLD AND DETACH HERE -
[X] PLEASE MARK YOUR ----
VOTES AS IN THIS 5340
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 AND AGAINST PROPOSAL 3.
- --------------------------------------------------------------------------
THE DIRECTORS OF TEMPLE-INLAND INC. RECOMMEND A VOTE FOR PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------
1. Proposal to elect as Directors of Temple-Inland Inc. the following
persons to hold office until the expiration of their terms or until
their successors have been duly elected and have qualified. Nominees for
Director: Robert Cizik, James T. Hackett, Arthur Temple III, and
Larry E. Temple.
FOR WITHHOLD AUTHORITY
[ ] [ ]
(Instructions: To withhold authority to vote for individual nominees write the
names of such nominees in the space provided below.)
- -------------------------------------------------------
2. Proposal to ratify the selection of Ernst & Young LLP as independent
auditors of Temple-Inland Inc. for the fiscal year ending December 30,
2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
- --------------------------------------------------------------
<PAGE> 26
3. Stockholder proposal regarding a spin off of the Company's financial
services businesses.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. 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
- ----------------------------------------------------------------------------
- FOLD AND DETACH HERE -
