SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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[ ] Definitive Additional Materials permitted by
[ ] Soliciting Material Pursuant to Rule 14a-6(e)(2))
Section 240.14a-11(c)
or Section 240.14a-12
Louisiana-Pacific Corporation
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(Name of Registrant as Specified In Its Charter)
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[LOGO] LOUISIANA-PACIFIC CORPORATION Proxy Statement and
111 S.W. Fifth Avenue Notice to Stockholders of
Portland, Oregon 97204 ANNUAL MEETING
(503) 221-0800 MAY 10, 1999
March 26, 1999
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend
the Annual Meeting of Stockholders of Louisiana-Pacific Corporation. The meeting
will be held on Monday, May 10, 1999, at 9:30 a.m. at the Embassy Suites, 319
S.W. Pine Street, Portland, Oregon. Your Board of Directors and I look forward
to greeting personally those stockholders able to be present.
At this year's meeting, in addition to the election of two directors,
you will be asked to vote upon approval of an amendment to L-P's non-employee
director stock option plan. Your Board of Directors unanimously recommends a
vote FOR this proposal. Action will also be taken on any other matters that are
properly presented at the meeting, including a stockholder proposal which the
Board of Directors opposes for the reasons stated in the proxy statement.
Regardless of the number of shares you own, it is important that they
be represented and voted at the meeting whether or not you plan to attend.
Accordingly, you are requested to sign, date, and mail the enclosed proxy at
your earliest convenience.
The accompanying proxy statement contains important information about
the annual meeting and your corporation. On behalf of the Board of Directors,
thank you for your continued interest and support.
Sincerely,
[SIGNATURE]
Mark A. Suwyn
Chairman and Chief Executive Officer
ON WRITTEN REQUEST, LOUISIANA-PACIFIC WILL PROVIDE, WITHOUT CHARGE, A COPY OF
THE CORPORATION'S FORM 10-K REPORT FOR 1998 FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (INCLUDING THE FINANCIAL STATEMENTS AND A LIST BRIEFLY
DESCRIBING THE EXHIBITS THERETO) TO ANY RECORD HOLDER OR BENEFICIAL OWNER OF THE
CORPORATION'S COMMON STOCK ON MARCH 12, 1999, THE RECORD DATE FOR THE 1999
ANNUAL MEETING, OR TO ANY PERSON WHO SUBSEQUENTLY BECOMES SUCH A RECORD HOLDER
OR BENEFICIAL OWNER. THE REPORTS WILL BE AVAILABLE FOR MAILING IN APRIL 1999.
REQUESTS SHOULD BE SENT TO: DIRECTOR OF CORPORATE AFFAIRS, LOUISIANA-PACIFIC
CORPORATION, 111 S.W. FIFTH AVENUE, PORTLAND, OREGON 97204.
TABLE OF CONTENTS
PAGE
Voting Procedure...............................................................2
Item 1--Election of Directors..................................................3
Nominees...............................................................3
Continuing Directors...................................................4
Retiring Directors.....................................................5
Board and Committee Meetings...........................................5
Executive Committee....................................................5
Finance and Audit Committee............................................6
Compensation Committee--Interlocks and Insider Participation...........6
Environmental Affairs Committee........................................7
Nominating and Corporate Governance Committee;
Nominations for Director...............................................7
Item 2--Approval of Amendment to 1992 Non-Employee Director Stock Option Plan..8
Background.............................................................8
Terms of Options Under the Plan........................................8
Grant of Options.......................................................9
Other Terms of the Plan...............................................10
Stockholder Approval..................................................10
Item 3--Stockholder Proposal..................................................11
Supporting Statement Submitted by Stockholder.........................11
Recommendation of Board of Directors on Stockholder Proposal..........11
Other Business................................................................13
Holders of Common Stock.......................................................13
Five Percent Beneficial Owner.........................................13
Directors and Executive Officers......................................14
- i -
Executive Compensation........................................................15
Compensation Committee Report.........................................15
Performance Graph.....................................................20
Compensation of Executive Officers....................................21
Retirement Benefits...................................................25
Management Transactions...............................................27
Directors' Compensation...............................................27
Agreements with Executive Officers....................................28
Stockholder Proposals.........................................................31
Section 16(a) Beneficial Ownership Reporting Compliance.......................32
Relationship with Independent Public Accountants..............................32
General.......................................................................33
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[LOGO] LOUISIANA-PACIFIC CORPORATION
111 S.W. FIFTH AVENUE
PORTLAND, OREGON 97204
(503) 221-0800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 10, 1999
The Annual Meeting of Stockholders of Louisiana-Pacific Corporation
("L-P") will be held at the Embassy Suites Hotel, 319 S.W. Pine Street,
Portland, Oregon, on Monday, May 10, 1999, at 9:30 a.m., local time, to consider
and vote upon the following matters:
1. Election of two Class II directors.
2. Approval of an amendment to the 1992 Non-Employee Director Stock Option
Plan.
3. A stockholder's proposal, NOT recommended by management, relating to
shareholder action by written consent.
Only stockholders of record at the close of business on March 12, 1999,
are entitled to notice of and to vote at the meeting.
In accordance with the General Corporation Law of the State of
Delaware, a complete list of the holders of record of L-P Common Stock entitled
to vote at the meeting will be open to examination, during ordinary business
hours at L-P's headquarters located at 111 S.W. Fifth Avenue, Portland, Oregon,
for the 10 days preceding the meeting, by any L-P stockholder for any purpose
germane to the meeting.
Admission to the meeting will be by ticket only. If you are a
stockholder of record and plan to attend, the Admission Ticket attached to the
proxy card will admit you to the meeting. If you are a stockholder whose shares
are held through an intermediary such as a bank or broker and you plan to
attend, you may request an Admission Ticket by sending a written request, along
with proof of ownership, such as a bank or brokerage account statement, to
Stockholder Relations, 111 S.W. Fifth Avenue, Portland, Oregon 97204.
ANTON C. KIRCHHOF, Secretary
Portland, Oregon
March 26, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN ORDER THAT YOUR STOCK MAY BE VOTED
IN ACCORDANCE WITH THE TERMS OF THE PROXY STATEMENT. IF YOU ATTEND THE MEETING,
YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
PROXY STATEMENT
Louisiana-Pacific Corporation, a Delaware corporation ("L-P"), is
soliciting proxies on behalf of its Board of Directors to be voted at the 1999
Annual Meeting of Stockholders (including any adjournment of the meeting). This
proxy statement and the accompanying proxy card are first being sent to
stockholders on approximately March 26, 1999.
VOTING PROCEDURE
A proxy card is enclosed for your use. To vote by proxy, please sign,
date, and return the proxy card promptly. For your convenience, a return
envelope is enclosed, which requires no postage if mailed in the United States.
You may indicate your voting instructions on the proxy card in the
spaces provided. Properly completed proxies will be voted as instructed. If you
return a proxy without indicating voting instructions, your shares will be voted
in accordance with the recommendations of the Board of Directors--FOR items 1
and 2 listed in the Notice of Annual Meeting of Stockholders and AGAINST the
stockholder proposal listed as item 3 in the Notice of Annual Meeting.
If you return a proxy card, you may revoke it (i) by filing either a
written notice of revocation or a properly signed proxy bearing a later date
with the Secretary of L-P at any time before the meeting, or (ii) by voting in
person at the annual meeting.
If you participate in the Automatic Dividend Reinvestment Plan offered
by First Chicago Trust Company of New York, all the shares held for your account
in the plan will be voted in the same manner as shares you vote by proxy. If you
do not vote by proxy, the shares held for your account under the plan will not
be voted.
Only stockholders of record at the close of business on March 12, 1999,
are entitled to receive notice of the annual meeting and to vote at the meeting.
At the record date, there were 107,308,727 shares of common stock, $1 par value
("Common Stock") outstanding. Each share of Common Stock is entitled to one vote
on each matter to be acted upon. A majority of the outstanding shares of Common
Stock represented at the meeting will constitute a quorum. Additional
information concerning holders of outstanding Common Stock may be found under
the heading "Holders of Common Stock" below.
The Board of Directors has adopted a confidential voting policy which
provides that the voting instructions of stockholders are not to be disclosed to
L-P except (i) in the case of communications intended for management, (ii) in
the event of certain contested matters, or (iii) as required by law. Votes will
be
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tabulated by independent tabulators and summaries of the tabulation will be
provided to management.
ITEM 1--ELECTION OF DIRECTORS
Nominees
The two nominees for the Class II director positions to be voted on at
the meeting are presently members of the Board of Directors. The term of office
for the positions to be voted on will expire at the Annual Meeting of
Stockholders in 2002. The nominees are:
PAUL W. HANSEN NOMINEE FOR TERM EXPIRING 2002
Paul W. Hansen, age 47, was elected as a director of L-P in February
1999 to fill the vacancy created by the retirement of Pierre S. du Pont. Mr.
Hansen has been Executive Director of the Izaak Walton League of America (the
"IWLA"), a nationally-recognized conservation organization, since February 1995.
Mr. Hansen began his employment with the IWLA in 1982 as an Acid Rain Project
Coordinator and served in various positions thereafter, becoming Associate
Executive Director in 1994.
DONALD R. KAYSER NOMINEE FOR TERM EXPIRING 2002
Donald R. Kayser, age 68, a private investor, served as interim
Chairman and Chief Executive Officer of L-P from July 1995 to January 1, 1996,
and then served as a consultant to L-P through April 1996. Mr. Kayser retired
from his former position as Executive Vice President and Chief Financial Officer
of Morrison Knudsen Corporation in 1990. He was Senior Vice President and Chief
Financial Officer of AlliedSignal, Inc., until July 1988. Mr. Kayser was an
executive officer of L-P until 1982 and has been a director of L-P since 1972.
YOUR SHARES REPRESENTED BY A PROPERLY COMPLETED AND RETURNED PROXY CARD
WILL BE VOTED FOR THE ELECTION OF THE TWO NOMINEES UNLESS AUTHORITY TO VOTE IS
WITHHELD. If either of the nominees becomes unavailable to serve (which is not
anticipated), your proxy will be voted for a substitute nominee designated by
the Board of Directors.
The two nominees receiving the highest total number of votes will be
elected. Shares not voted for the election of directors, whether because
authority to vote is withheld, because the record holder fails to return a
proxy, because the broker holding the shares does not vote on such issue or
otherwise, will not count in determining the total number of votes for each
nominee.
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Continuing Directors
The current members of the Board of Directors, whose terms of office
will continue beyond the 1999 Annual Meeting of Stockholders, are:
ARCHIE W. DUNHAM CURRENT TERM EXPIRES 2000
Archie W. Dunham, age 60, became a director of L-P in 1996. He is
President and Chief Executive Officer of Conoco Inc. and an Executive Vice
President and a director of its parent, E. I. du Pont de Nemours and Company. He
has served in various senior executive positions with Conoco Inc. and its parent
for more than five years.
MARK A. SUWYN CURRENT TERM EXPIRES 2000
Mark A. Suwyn, age 56, became Chairman and Chief Executive Officer of
L-P and was elected to fill a vacancy on its Board of Directors in January 1996.
Mr. Suwyn was Executive Vice President of International Paper Company from 1992
through 1995. Previously, he was Senior Vice President of E. I. du Pont de
Nemours and Company.
JOHN W. BARTER CURRENT TERM EXPIRES 2001
John W. Barter, age 52, a private investor, has been a director of L-P
since May 1998. He served as Executive Vice President of AlliedSignal, Inc., and
President of AlliedSignal Automotive from October 1994 through December 1997.
From 1988 to 1994, Mr. Barter was Senior Vice President and Chief Financial
Officer of AlliedSignal, Inc.
WILLIAM C. BROOKS CURRENT TERM EXPIRES 2001
William C. Brooks, age 65, became a director of L-P in 1996. Mr. Brooks
is Chairman of The Brooks Group International, a holding company involved in
human resources and economic development. Mr. Brooks previously served as Vice
President, Corporate Affairs of General Motors Corporation until his retirement
in 1997. Mr. Brooks was Assistant Secretary of Labor for the Employment
Standards Administration from July 1989 to December 1990. He is also a director
of DTE Energy Company and Detroit Edison Co., Complete Business Solutions, Inc.,
United American Health Care Corporation, and Sigma Associates.
PATRICK F. MCCARTAN CURRENT TERM EXPIRES 2001
Patrick F. McCartan, age 64, became a director of L-P in May 1998. He
is managing partner of the international law firm of Jones, Day, Reavis & Pogue,
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a position that he has held for more than five years. He is a Fellow of the
American College of Trial Lawyers and the International Academy of Trial
Lawyers.
LEE C. SIMPSON CURRENT TERM EXPIRES 2001
Lee C. Simpson, age 64, served as President and Chief Operating Officer
of L-P on an interim basis from July 1995 until March 1996. He also was elected
to fill a vacancy on the Board of Directors in July 1995. He was an executive
officer of L-P from 1972 until his retirement in 1991 and previously served as a
director of L-P from 1972 until 1993.
Retiring Directors
The following individual retired as a director in February 1999:
PIERRE S. DU PONT RETIRED 1999
Pierre S. du Pont, age 64, is a partner in the Wilmington, Delaware,
law firm of Richards, Layton & Finger. Gov. du Pont had been a director of L-P
since 1991.
The following individual has indicated her intention to retire as a
director prior to the 1999 annual meeting:
BONNIE G. HILL RETIRING EFFECTIVE 1999
Bonnie G. Hill, age 57, has been a director of L-P since 1993. Ms. Hill
is President and Chief Executive Officer of the Times Mirror Foundation, Vice
President of Times Mirror Company, and Senior Vice President, Communications and
Public Affairs, of The Los Angeles Times.
Board and Committee Meetings
During 1998, the Board of Directors held four regular quarterly
meetings, one special meeting and two special telephone conference meetings.
Each director attended at least 75% of the total number of the meetings of the
Board and the meetings held by all committees of the Board on which he or she
served during 1998 except Messrs. Barter and McCartan.
Executive Committee
The Board of Directors has an Executive Committee of which Mr. Suwyn is
Chair and Ms. Hill and Mr. Dunham are members. The Executive Committee did not
meet during 1998. The Executive Committee may exercise all the powers and
authority of the Board in the management of L-P's business and
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affairs, except that the Executive Committee may not (i) approve or adopt, or
recommend to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to the stockholders for
approval or (ii) adopt, amend or repeal L-P's bylaws.
Finance and Audit Committee
The Board of Directors has a Finance and Audit Committee (the "Audit
Committee") currently consisting of Mr. Dunham, Chair, Mr. Barter, Mr. Brooks,
and Ms. Hill. During 1998, the Audit Committee held five meetings, two of which
were telephone conference meetings. The Audit Committee makes recommendations to
the Board on matters relating to the financial affairs and policies of L-P,
including capital structure issues, dividend policy, treasury stock purchases,
acquisitions and divestitures, external financing, complex financial
transactions, and investment and debt policies. The Audit Committee also has
responsibility for various auditing and accounting matters, including review of
L-P's audit plan, annual audit, and reports or recommendations of L-P's
independent public accountants, selection of such accountants, and meeting with
both L-P's internal auditors and its independent public accountants to assess
the adequacy of L-P's internal financial controls.
Compensation Committee--Interlocks and Insider Participation
The Board of Directors has a Compensation Committee currently
consisting of the following directors: Mr. Brooks, Chair, Mr. Barter, Mr.
Dunham, Ms. Hill, and Mr. McCartan. Prior to May 1998, William F. Flaherty and
Charles E. Yeager, directors of L-P during the first half of 1998, also served
on the Compensation Committee.
The Compensation Committee held three meetings during 1998, one of
which was a telephone conference meeting. The Compensation Committee's functions
are (i) to administer L-P's 1997 Incentive Stock Award Plan, (ii) to administer
L-P's Annual Cash Incentive Award Plan with respect to the participation therein
of the chief executive officer and other executive officers of L-P whose
compensation may be subject to the limits on deductibility under Section 162(m)
of the Internal Revenue Code of 1986, as amended, and as otherwise provided in
such plan, (iii) to administer each other compensation plan the administration
of which is delegated to the Compensation Committee by the terms of such plan or
by action of the Board of Directors, including, without limitation, the
participation in each of L-P's compensation plans by the chief executive officer
and other executive officers of L-P, and (iv) to exercise all authority of the
Board of Directors with respect to the compensation of the
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chief executive officer and other executive officers of L-P, including, without
limitation, the determination of salaries and bonuses.
During 1998, L-P used, and is continuing to use during 1999, the legal
services of Jones, Day, Reavis & Pogue, of which Mr. McCartan is the managing
partner.
During 1998, L-P provided building materials to Gen. Yeager with a fair
market value of approximately $79,200 in connection with the construction of two
residences in exchange for Gen. Yeager's agreement to appear in advertising
developed by L-P.
Information concerning executive compensation is set forth below under
the caption "Executive Compensation."
Environmental Affairs Committee
The Board of Directors has an Environmental Affairs Committee,
consisting of Mr. Simpson, Chair, Mr. Hansen, Mr. Kayser, and Mr. Suwyn. Prior
to February 1999, Gov. du Pont was Chair of the Environmental Affairs Committee.
The Environmental Affairs Committee, which met twice during 1998, is responsible
for reviewing the effectiveness of L-P's environmental compliance program.
Nominating and Corporate Governance Committee; Nominations for Director
The Board of Directors has a Nominating and Corporate Governance
Committee (the "Nominating Committee") consisting of Mr. Kayser, Chair, Mr.
McCartan, Mr. Simpson, and Mr. Suwyn. The Nominating Committee met three times
during 1998, one of which was a telephone conference meeting. The Nominating
Committee is authorized to establish procedures for selecting and evaluating
potential nominees for director and to recommend to the Board of Directors
criteria for membership on the Board, policies on the size and composition of
the Board, candidates for director, compensation of directors, the composition
of Board committees, and all other matters of corporate governance that may
arise, including director independence, classification of the Board of
Directors, responses to stockholder proposals, and the provisions of L-P's
bylaws. The Nominating Committee will consider stockholders' recommendations
concerning nominees for director. Any such recommendation, including the name
and qualifications of a nominee, may be submitted to L-P to the attention of the
Chair of the Nominating Committee.
L-P's bylaws provide that nominations for election to the Board of
Directors may be made by the Board or by any stockholder of record entitled to
vote
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for the election of directors. Notice of a stockholder's intent to make such a
nomination must be given in writing, by personal delivery or certified mail,
postage prepaid, to the Chairman of the corporation and must include the name
and address of the stockholder and each proposed nominee, a representation that
the stockholder is a record holder of Common Stock and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice, a description of any arrangements or understandings pursuant to
which the nominations are to be made, the consent of each proposed nominee to
serve as a director if elected, and such other information regarding each
nominee as would be required to be included in L-P's proxy statement if the
person had been nominated by the Board of Directors. In the case of the 1999
annual meeting, such notice was required to be delivered no later than March 15,
1999. For future annual meetings, L-P must receive this notice not less than 45
days prior to the first anniversary of the initial mailing date of L-P's proxy
materials for the preceding year's annual meeting. In the case of L-P's annual
meeting in the year 2000, this notice must be received by L-P no later than
February 10, 2000.
ITEM 2 - APPROVAL OF AMENDMENT TO 1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Background
In May 1998, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Louisiana-Pacific Corporation 1992 Non-Employee
Director Stock Option Plan (the "Plan") to increase the number of shares
available for option grants under the Plan by 600,000 shares to a total of
1,200,000 shares of Common Stock. The Plan, which was originally adopted in 1992
and approved by the stockholders of L-P in 1993, provides for the automatic
grant of options to purchase shares of Common Stock to members of the Board of
Directors who are not employees of L-P or any of its subsidiaries. The purpose
of the Plan is to afford the non-employee directors an opportunity to acquire or
increase stock ownership in L-P so that they may have a direct proprietary
interest in its success. Information concerning fees paid to non-employee
directors is set forth under the caption "Directors' Compensation" below.
Terms of Options Under the Plan
Each option under the Plan entitles the holder to purchase 45,000
shares of Common Stock at a price equal to 100% (85% prior to May 3, 1998) of
the fair market value (as defined in the Plan) of a share of Common Stock on the
date of grant. On March 15, 1999, the closing price for a share of Common Stock
was $19.063. Each option becomes exercisable as to 20% of the shares covered by
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the option (i.e., 9,000 shares) on each of the first through fifth anniversaries
of the date of grant. Options will become immediately exercisable in full upon
the death of the optionee or upon the occurrence of a "change in control" (as
defined in the Plan) of L-P. In general, a change in control occurs if any
person or group acquires beneficial ownership of 20% or more of the then
outstanding shares of Common Stock or commences a tender or exchange offer for
30% or more of the then outstanding Common Stock, or if L-P is to be liquidated
or dissolved. To the extent not fully vested, an option will become exercisable
as to an additional 20% of shares upon the director's retirement as of the first
annual meeting of stockholders after the director attains age 70.
Each option expires 10 years after the date of grant, subject to
earlier termination if the optionee ceases to be a member of the Board of
Directors. If the optionee ceases to be a member of the Board of Directors by
reason of death, then the optionee's estate has the right to exercise the option
for a period of 12 months following the date of death. If the optionee retires
as a director as of the first annual meeting of stockholders after attaining age
70, the option remains exercisable (to the extent it had become exercisable on
the date of retirement) for 24 months thereafter. If the optionee ceases to be a
member of the Board of Directors for any other reason, the option remains
exercisable (to the extent then exercisable) for 3 months.
Grant of Options
Beginning June 15, 1992, options have been automatically granted to
those individuals who were or became non-employee directors of L-P. Each
non-employee director who has previously received an option under the Plan and
who continues to be a non-employee director is automatically granted an
additional option on the fifth anniversary of the date an option was previously
granted to him or her.
9
The following table summarizes certain benefits under the Plan as proposed
to be amended:
NEW PLAN BENEFITS(1)
1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Group Number of Options
----- -----------------
Non-Employee Director Group (8 persons)....... 135,000
All Others ................................... None
- ----------------------------
(1) Includes only options granted since May 3, 1998. The granting of additional
options is dependent on continued service on the Board of Directors.
Prior to May 3, 1998, the non-employee directors presently on the Board of
Directors had been granted options for a total of 324,000 shares of Common Stock
(excluding cancellations) under the Plan.
Other Terms of the Plan
The maximum number of shares for which options may be granted, the
number of shares covered by each option, and the exercise price per share for
outstanding options, are all subject to appropriate adjustment in the event of
any stock split or other change in capitalization.
The Plan may be amended by the Board of Directors at any time. However,
amendments to the Plan are subject to stockholder approval to the extent
required to comply with the rules and regulations of any securities exchange on
which the Common Stock is listed.
Under current federal income tax law, neither L-P nor the optionees
will recognize any income or deduction at the time an option is granted. Upon
exercise of an option, the optionee will recognize self-employment income in an
amount equal to the difference between the fair market value of the shares
acquired and the option exercise price and L-P will recognize a deduction in the
same amount.
Stockholder Approval
The amendment to the Plan to increase the number of shares as to which
options may be granted by 600,000 shares must be approved by the affirmative
vote of the holders of at least a majority of the shares of Common Stock
present, in person or by proxy, and entitled to vote on such approval at the
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meeting. Shares of Common Stock represented at the meeting that are not voted on
the item (whether by abstention, broker non-vote, or otherwise) have the effect
of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL
OF THE AMENDMENT TO THE PLAN.
ITEM 3 - STOCKHOLDER PROPOSAL
The following proposal, NOT recommended by management, has been
submitted for inclusion in the proxy statement for action at the annual meeting
by the New York City Teachers' Retirement System, Comptroller of the City of New
York, 1 Centre Street, New York, NY 10007-2341, which has indicated that it held
132,100 shares of Common Stock at October 8, 1998:
"BE IT RESOLVED, that the shareholders of Louisiana-Pacific Corporation
request that the Board of Directors amend the certificate of incorporation to
reinstate the rights of the shareholders to take action by written consent."
Supporting Statement Submitted by Stockholder
"The right of the shareholders to take action by written consent
should not be abridged.
"The company's elimination of this right, in our opinion,
effectively removes an important process by which shareholders can act
expeditiously to protect their investment interests. For example,
shareholders should not be prevented from giving timely consideration
to a bidder's proposal to acquire control of the company, or a
dissident shareholder's slate of nominees for election to the Board of
Directors, because shareholders do not have the right to act by written
consent."
Recommendation of Board of Directors on Stockholder Proposal
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE STOCKHOLDER
PROPOSAL IN ITEM 3 FOR THE REASONS DISCUSSED BELOW.
Article Eighth of L-P's Restated Certificate of Incorporation (the
"Certificate") currently provides in relevant part:
"No action required to be taken or which may be taken at any annual or
special meeting of the stockholders of the corporation may be taken
without a meeting, and the power of stockholders to consent in
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writing, without a meeting, to the taking of any action is specifically
denied."
The substance of this provision was included in an amendment to the Certificate
submitted to L-P's stockholders for their approval at the 1983 annual meeting.
The Board of Directors believes that the foregoing provision should be retained,
and that the stockholder proposal appearing above should be rejected, for the
following reasons.
The corporation laws of the state of Delaware, L-P's state of incorporation,
permit stockholders to act without a meeting by written consent of a majority of
stockholders unless the corporation's charter provides otherwise. By contrast,
in most states, action by written consent must be unanimous, that is, by all
stockholders. This requirement prevents the holders of a simple majority of
voting shares from using the consent procedure to take action without even
notifying other stockholders until after the fact.
As Delaware does not impose this requirement of unanimity when acting
without a stockholders' meeting, minority stockholders may be deprived of the
opportunity to express their views on a proposed action before it is taken.
Presently, all stockholders of L-P have the opportunity to participate in
discussion of proposed items submitted for stockholder action and to vote on a
share-for-share basis with all other stockholders. The stockholder proposal is
thus contrary to principles of stockholder democracy. It also could result in
confusion and disruption in the context of a publicly held corporation with more
than 17,000 registered stockholders and in excess of 100,000,000 shares
outstanding if multiple stockholders were able to solicit potentially
conflicting consents on various issues.
If the foregoing stockholder proposal is approved by the requisite vote
at the meeting, the Board of Directors will consider taking the steps required
to amend the Certificate as specified in the resolution. The Board of Directors
does not have the power under Delaware law to amend the Certificate without
further action by the stockholders. Rather, a resolution adopted by the Board
and setting forth the proposed amendment of the Certificate would have to be
submitted to the stockholders for vote at an annual or special meeting. The
amendment would be adopted only if it received the affirmative vote of holders
of 75% of the outstanding shares, as required by Article Eighth of the
Certificate.
In summary, the Board of Directors believes that the stockholder
proposal is not in the best interests of L-P and its stockholders and is
contrary to the previously-expressed views of the stockholders.
12
FOR THE FOREGOING REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THE STOCKHOLDER PROPOSAL IN ITEM 3.
Approval of the stockholder proposal will require the affirmative vote
of a majority of the total votes cast on this item at the meeting. Shares that
are not represented at the meeting, shares that abstain from voting on this
item, and shares not voted on this item by brokers or nominees will not be
counted for purposes of computing a majority.
OTHER BUSINESS
At the time this proxy statement was printed, management knew of no
matters other than the items of business listed in the Notice of Annual Meeting
of Stockholders which might be presented for stockholder action at the meeting.
If any matters other than such listed items properly come before the meeting,
the proxies named in the accompanying form of proxy will vote or refrain from
voting thereon in accordance with their judgment.
HOLDERS OF COMMON STOCK
Five Percent Beneficial Owner
Capital Research and Management Company, a registered investment
adviser to various registered investment companies, located at 333 South Hope
Street, Los Angeles, California 90071, has filed Amendment No. 1 to Schedule 13G
reporting beneficial ownership as of December 31, 1998, of 10,261,000 shares of
Common Stock (9.4% of outstanding shares) as to which it has sole dispositive
power. No other person is known to L-P to own 5% or more of the outstanding
Common Stock.
13
Directors and Executive Officers
The following table summarizes the beneficial ownership of Common Stock
of the directors, nominees for director, current executive officers, and one
former executive officer of L-P:
COMMON STOCK APPROXIMATE
BENEFICIALLY OWNED PERCENT OF
NAME AS OF MARCH 12, 1999(1) CLASS
J. Ray Barbee(2)(3) 12,287 *
John W. Barter(2) 10,000 *
William C. Brooks(2) 18,100 *
Archie W. Dunham(2) 19,000 *
Michael D. Hanna(3) 15,408 *
Paul W. Hansen 0 *
Bonnie G. Hill(2) 54,300 *
Donald R. Kayser(2)(5) 87,797 *
Patrick F. McCartan(2) 9,000 *
J. Keith Matheney(2)(3) 50,015 *
Lee C. Simpson(2) 48,243 *
Curtis M. Stevens (2)(3) 23,060 *
Mark A. Suwyn(2)(3)(4) 361,301 0.3%
Gary C. Wilkerson(2)(3) 16,954 *
All current directors 931,710 0.9%
and executive
officers as a group
(20 persons)(2)(3)(4)(5)
- --------------------
* Percentages under 0.1% are not shown.
(1) Shares are shown as beneficially owned if the person named in the table has
or shares the power to vote or direct the voting of, or the power to dispose
of, or direct the disposition of, such shares. Inclusion of shares in the
table does not necessarily mean that the persons named have any economic
beneficial interest in shares set forth opposite their respective names.
(2) Includes shares reserved for issuance under immediately exercisable options
and options which will become exercisable within 60 days after March 12,
1999, as follows: Mr. Barbee, 11,000 shares; Mr. Barter, 9,000 shares; Mr.
Brooks, 18,000 shares; Mr. Dunham, 18,000 shares; Ms. Hill, 54,000 shares;
Mr. Kayser, 54,000 shares; Mr. McCartan, 9,000 shares; Mr. Matheney, 32,800
shares; Mr. Simpson, 27,000 shares; Mr. Stevens, 20,334 shares; Mr. Suwyn,
235,834 shares; Mr. Wilkerson, 15,667 shares; and all current directors and
executive officers as a group, 700,505 shares.
14
(3) Includes shares held by the L-P Salaried Employee Stock Ownership Trust (the
"ESOT") and beneficially owned by the following officers: Mr. Barbee, 1,287
shares; Mr. Hanna, 1,266 shares; Mr. Matheney, 10,248 shares; Mr. Stevens,
1,287 shares; Mr. Suwyn, 3,711 shares; Mr. Wilkerson, 1,287 shares; and all
current executive officers as a group, 34,793 shares.
(4) Includes 60,000 shares of unvested restricted stock which Mr. Suwyn has the
power to vote.
(5) Includes 1,100 shares donated to The Kayser Family Foundation and as to
which Mr. Kayser shares voting and dispositive power.
EXECUTIVE COMPENSATION
Compensation Committee Report
To the Stockholders of Louisiana-Pacific Corporation:
Overview
The goals of L-P's executive compensation program are to recruit and
retain qualified and talented executives who will provide effective leadership
in meeting the challenges facing the company and to provide those executives
with competitive pay and incentives for performance while aligning their
interests with those of L-P's stockholders. The principal objectives of L-P's
compensation strategy are (i) to reinforce L-P's business organization and
strategic direction, (ii) to be sufficiently competitive to attract and retain
needed management talent, and (iii) to provide compensation that is
performance-based and aligned with stockholder interests yet remains fair,
reasonable, and simple. To accomplish these objectives, the Compensation
Committee approved a program with four principal elements--base salary, annual
cash incentive opportunities, annual stock option grants, and, for selected
senior executives, annual awards of stock contingent on performance. Cash
incentive opportunities are awarded under the L-P Annual Cash Incentive Award
Plan. Annual stock option grants and awards of performance shares are made under
L-P's 1997 Incentive Stock Award Plan.
In general, base salary is intended to be competitive at the median
with other forest and building products companies. In addition, there are annual
opportunities for cash incentive payments based on corporate performance,
business unit performance, and individual performance which, if performance
targets are met, should permit an executive to receive total cash compensation
at above median levels for forest and building products companies. Annual stock
option grants in an amount based on individual performance recognize individual
achievement while aligning management interests with stockholder
15
interests, reinforcing long-term performance, and facilitating stock ownership.
Annual performance-contingent awards of stock are based on four-year total
stockholder return measured against a defined peer group, providing selected
senior executives with significant incentives to maximize stockholder value and
increase their equity participation in L-P.
In addition to the elements of the compensation strategy described
above, L-P has a deferred compensation plan for executives and a supplemental
retirement plan for selected senior executives. The Executive Deferred
Compensation Plan provides for elective pretax deferrals of up to 50 percent of
base salary and up to 100 percent of cash bonuses. The Supplemental Executive
Retirement Plan ("SERP") is designed to provide competitive target retirement
benefits when combined with other company-paid retirement benefits and social
security. L-P's chief executive officer, Mark A. Suwyn, does not participate in
the SERP because he has a separate supplemental retirement benefit under his
employment agreement, which is described in detail under the caption "Retirement
Benefits" below.
Determination of Base Salaries
In early 1998, the Compensation Committee established new base salaries
for executive officers based upon a review of salaries at 20 other forest and
building products companies (including all of the companies included in the
Standard & Poor's Paper & Forest Products Index). This review resulted in a 5
percent increase in base salary for the chief executive officer for 1998. This
positioned Mr. Suwyn's base salary at approximately the median (50th percentile)
for chief executive officers in this industry. Due to individual circumstances,
the salaries for other executive officers for 1998 varied from slightly above to
slightly below the median salary for comparable positions at the other forest
and building products companies reviewed.
Grants of Cash Incentive Awards
In early 1998, the Compensation Committee approved annual cash
incentive award opportunities under L-P's Annual Cash Incentive Award Plan,
subject to achievement of specified performance goals, for Mr. Suwyn and certain
other executive officers. The target amounts of the awards were based on the
salary of each participant and ranged from approximately 40 to 70 percent of
base salary. In accordance with his employment agreement entered into in January
1996, Mr. Suwyn's target amount equaled 70 percent of his base salary.
Depending upon the extent to which performance goals are met, the
actual amount paid as a cash incentive award may range from zero to 150
16
percent of the target amount. The performance goals for each participating
executive for 1998 were based 50 percent on L-P's earnings per share and 50
percent on objective individual and business unit goals unique to each of the
participants, except that no amount of a 1998 award would be paid unless a
minimum earnings per share threshold was reached.
The business criteria on which individual performance goals are based
include goals related to success in developing and implementing particular tasks
assigned to an individual executive. These goals, therefore, naturally vary
depending upon the responsibilities of individual executives and may include,
without limitation, goals related to success in developing and implementing
particular management plans or systems, reorganizing departments, establishing
business relationships, or resolving identified problems. For 1998, the
individual performance goals for Mr. Suwyn included goals related to the
improvement of the financial performance of specified business units or
programs, the disposition of identified non-strategic assets, improvement in
certain commodity price realizations, the acceleration of product and system
innovations, the acquisition of businesses meeting certain sales targets, and
addressing safety, environmental, and succession planning issues.
The business criteria on which business unit performance goals are
based include a combination of financial goals and strategic goals related to
the performance of an identified business unit for which an executive has
responsibility. Strategic goals for a business unit may include one or a
combination of objective factors related to success in implementing strategic
plans or initiatives, introducing products, constructing facilities, or other
identifiable objectives. Financial goals for a business unit may include the
degree to which the business unit achieves one or more measures related to its
revenues, earnings, profitability, efficiency, operating profit, costs of
production, or other measures, whether expressed as absolute amounts or as
ratios or percentages, which may be measured against various standards,
including budget targets, improvement over prior years, and performance relative
to other companies or business units.
In February 1999, the Compensation Committee determined that the level
of attainment of the corporate goal relating to L-P's earnings per share was 73
percent. Based on the determination by the Compensation Committee of the level
of attainment of each of Mr. Suwyn's individual performance goals, his cash
incentive award for 1998 for individual performance was set at 56 percent of the
target level. The Compensation Committee also approved, with Board concurrence,
Mr. Suwyn's determination of levels of achievement of the individual and
business unit performance goals assigned to other participating executives,
resulting in 1998 cash incentive awards for individual performance
17
of executive officers other than Mr. Suwyn ranging from 90 percent to 125
percent of target levels.
Grants of Stock Options
Another significant element in L-P's compensation program is annual
grants of nonstatutory stock options. In January 1998, the Compensation
Committee considered proposed option grants to executive officers with a target
value (using the Black-Scholes valuation model) based on competitive levels
equal to a percentage of the executive's base salary. Target values equaled 70
percent of each executive officer's 1998 base salary, except for Mr. Suwyn,
whose target award equaled 110 percent of his 1998 base salary, and one other
executive officer whose target award equaled 95 percent of his 1998 base salary.
Actual awards were adjusted for individual performance during 1997. The
Compensation Committee approved an option award to Mr. Suwyn of 116,500 shares,
which had a value at the date of grant equal to 115 percent of his 1998 base
salary. In June 1998, an executive officer was granted a second option for
15,000 shares in connection with his promotion and, in October 1998, another
executive officer was granted an additional stock option for 55,000 shares due
to the unanticipated loss of the value of options previously granted by his
former employer. All options granted in 1998 will become exercisable in three
equal annual installments beginning one year from the date of grant and will
terminate 10 years after the date of grant.
Performance-Contingent Stock Awards
In July 1998, the Compensation Committee granted performance-contingent
stock awards to selected senior executives. Each grant entitles the participant
to receive a number of shares of L-P Common Stock determined by comparing L-P's
total annualized stockholder return to the mean annualized total stockholder
return of five other forest and building products companies (all of which are
included in the Standard & Poor's Paper & Forest Products Index) for the
four-year period beginning on January 1 of the year of grant.
Targeted award levels ranging in amount from 40 to 60 percent (based on
the executive's position) of 1998 base salary will be payable in shares to
participating executives if L-P's cumulative total stockholder return is a
specified percentage above the mean total stockholder return of the specified
comparison group. Mr. Suwyn's targeted award level was 60 percent of his 1998
base salary, or 22,326 shares of L-P Common Stock.
Depending upon L-P's four-year total stockholder return for the four
years ending December 31, 2001, in comparison to the group, the actual number of
shares issued could range from zero to 200 percent of the targeted
18
amount. Of the shares earned, 50 percent would be paid at the end of the
four-year period, and 50 percent would remain subject to forfeiture for an
additional two years if the participant leaves L-P's employment within the
two-year restriction period.
Deductibility of Compensation
To the extent consistent with its goal of maintaining a fair and
competitive compensation package, the Compensation Committee attempts to
structure L-P's executive compensation to be deductible for income tax purposes
by complying with applicable tax requirements, including limits on deductibility
of certain types of compensation.
Respectfully submitted,
William C. Brooks, Chair
John W. Barter
Archie W. Dunham
Bonnie G. Hill
Patrick F. McCartan
19
Performance Graph
The following graph is required to be included in this proxy statement
under applicable rules of the Securities and Exchange Commission (the "SEC").
The graph compares the total cumulative return to investors, including dividends
paid (assuming reinvestment of dividends) and appreciation or depreciation in
stock price, from an investment in L-P Common Stock for the period January 1,
1994, through December 31, 1998, to the total cumulative return to investors
from the Standard & Poor's 500 Stock Index and the Standard & Poor's Paper and
Forest Products Index for the same period. Stockholders are cautioned that the
graph shows the returns to investors only as of the dates noted and may not be
representative of the returns for any other past or future period.
COMPARISION OF FIVE-YEAR CUMULATIVE TOTAL RETURN
LOUISIANA-PACIFIC CORPORATION, S&P 500, AND S&P PAPER AND FOREST PRODUCTS
DECEMBER 31, 1993 TO DECEMBER 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Louisiana-Pacific S&P Paper
Corporation S&P 500 & Forest Products
1993 $100 $100 $100
1994 67.01 101.32 104.07
1995 60.94 139.37 114.62
1996 54.39 171.35 126.79
1997 50.26 228.50 135.94
1998 49.86 293.46 138.54
20
Compensation of Executive Officers
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------------------------
Annual Compensation Awards
------------------- ------------------------------
Name
and Restricted Number of Shares All Other
Principal Stock Underlying Compen-
Position Year Salary Bonus(1) Awards Options/SARs sation(2)
-------- ---- ------ ------- ------ ------------ ---------
Mark A. Suwyn 1998 $714,000 $322,500 116,500 $21,740
Chairman and 1997 680,004 150,000 115,500 16,412
Chief 1996 600,000 1,040,000(3) $3,825,000(4) 200,000 251,438
Executive Officer
Michael D. Hanna 1998 256,800 130,000 40,000 643,414
Executive Vice 1997 280,000 220,000 46,000 110,998
President(5) 1996 163,333 145,822 45,000 10,568
Gary C. Wilkerson 1998 277,917 134,000 27,000 16,000
Vice President 1997 81,266 115,000(9) 20,001 --
and
General
Counsel(6)
Curtis M. Stevens 1998 216,668 141,900 80,000 16,769
Vice President, 1997 70,808(8) -- 36,000 --
Treasurer and
Chief Financial
Officer(6)
J. Keith Matheney 1998 208,687 104,000 20,000 17,339
Vice President, 1997 200,000 52,500 23,000 17,339
Core Businesses 1996 150,003 50,000 -- 16,339
J. Ray Barbee 1998 177,174 113,500 33,000 16,374
Vice President,
Sales and
Marketing (7)
- -------------------------
(1)Amounts shown for 1998 represent settlement of annual cash
incentive opportunities awarded under L-P's Annual Cash Incentive
Award Plan based on satisfaction of performance goals established
in early 1998, except (i) Mr. Stevens' bonus includes a first-year
guaranteed bonus in the amount of $84,000 awarded in connection
with his employment by L-P in September 1997 and (ii) Mr. Barbee's
bonus includes a $25,000 signing bonus.
(2)Amounts shown for 1998 include (i) the annual contribution
to the ESOT as follows: Mr. Suwyn, $16,000; Mr. Hanna, $0; Mr.
Wilkerson, $16,000; Mr. Stevens, $16,000; Mr. Matheney, $16,000;
and Mr. Barbee, $16,000; (ii) interest accrued under L-P's
Executive Deferred Compensation Plan (to the extent that such
interest exceeds amounts accrued at a rate equal to 120 percent of
the applicable federal long-term rate), compounded monthly, as
follows: Mr. Suwyn, $5,740; Mr. Hanna, $13,614; Mr. Wilkerson, $0;
Mr. Stevens, $769; Mr. Matheney, $0; and Mr. Barbee, $374; (iii)
$1,339 in premiums paid on behalf of Mr. Matheney for life
insurance in excess of group life insurance provided to salaried
employees generally; and (iv) $629,800 as severance benefits to
Mr. Hanna.
21
(3)Mr. Suwyn's 1996 bonus included $440,000 paid upon
satisfaction of performance goals, plus a $600,000 one-time
contractual payment intended as a replacement for an amount likely
to have been paid by his previous employer.
(4)At December 31, 1998, Mr. Suwyn held 90,000 shares of
restricted stock with a dollar value of $1,648,170, subject to
future vesting or forfeiture. The restricted stock award made in
1996 for a total of 150,000 shares vests as to 30,000 shares on
each of January 1, 1997, 1998 and 1999, and the remaining 60,000
shares upon reaching age 62 while employed by L-P, subject to
acceleration of vesting as to all shares upon the occurrence of
certain specified events during Mr. Suwyn's term of employment,
including a change in control of L-P. See "Agreements with
Executive Officers" below. Dividends are payable on restricted
stock at the same time as dividends on unrestricted shares of
Common Stock.
(5)Mr. Hanna's employment as an officer of L-P began in June
1996 and terminated in the 1998 fourth quarter.
(6)Messrs. Stevens and Wilkerson became officers of L-P in
September 1997.
(7)Mr. Barbee became an officer of L-P in June 1998 as a
result of a promotion. The information shown reflects his
compensation for the full year.
(8)Mr. Stevens received personal benefits with a value of
$7,350 in 1997.
(9) Mr. Wilkerson's bonus for 1997 includes a $75,000 signing
bonus.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock
Price Appreciation for
Individual Grants(1) Option Term
------------------------------------------------ ------------------------
Number of Percent of
Shares Total Options
Underlying Granted to Exercise or
Options Employees Base Price Expiration
Name Granted During 1998 Per Share Date 5 Percent 10 Percent
---- ------- ----------- --------- ---- --------- ----------
Mark A. Suwyn 116,500 15.1% $ 18.50 1/25/08 $1,355,425 $3,434,913
Michael D. Hanna 40,000(2) 5.2 18.50 1/25/08 465,382 1,179,369
Gary C. Wilkerson 27,000 3.5 18.50 1/25/08 314,133 796,074
Curtis M. Stevens 25,000 3.2 18.50 1/25/08 290,864 737,106
55,000 7.1 18.31 10/27/08 633,328 1,604,978
J. Keith Matheney 20,000 2.6 18.50 1/25/08 232,691 589,685
J. Ray Barbee 18,000 2.3 18.50 1/25/08 209,422 530,716
15,000 1.9 20.31 6/04/08 191,593 485,534
- --------------------
(1)No stock appreciation rights ("SARs") were granted to the named
executive officers during 1998. All options were granted for the number
of shares indicated at exercise prices equal to the fair market value
of the Common Stock on the date of grant. The options will vest in
three equal annual installments beginning one year following the date
of grant, subject to acceleration of exercisability in the event of a
change in control of L-P. If such acceleration of exercisability
results in an "excess parachute payment" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), the
amount of any excise tax
22
imposed on a participant by Section 4999(a) of the Code directly
attributable to such acceleration will be reimbursed by L-P, together
with any income or excise taxes imposed on such reimbursement.
(2)This option was forfeited upon the officer's termination of
employment in late 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(1)
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 31, 1998 at December 31, 1998
-------------------- --------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Mark A. Suwyn 118,500 313,500 $ 0 $ 0
Michael D. Hanna 45,334 - 17,100 -
Gary C. Wilkerson 6,667 40,334 0 0
Curtis M. Stevens 12,000 104,000 0 0
J. Keith Matheney 18,467 35,333 81,864 0
J. Ray Barbee 5,000 43,000 0 0
- -----------------
(1)The named executive officers did not exercise any options or
SARs during 1998 and did not hold any SARs at December 31, 1998.
23
LONG-TERM INCENTIVE PLANS-AWARDS IN 1998
Estimated Future Payouts
Under Non-Stock
Performance Price-Based Plans(3)
Period ------------------------
Number of Until
Performance Maturation of
Name Shares Payout Threshold (#) Target (#) Maximum (#)
---- ----- ------ ------------- ---------- -----------
Mark A. Suwyn 22,326(1) 1/98-12/01 4,465 22,326 44,652
Michael D. Hanna 7,583(1)(4) 1/98-12/01 1,517 7,583 15,166
Gary C. Wilkerson 5,789(2) 1/97-12/00 1,158 5,789 11,578
5,733(1) 1/98-12/01 1,147 5,733 11,466
Curtis M. Stevens 4,421(2) 1/97-12/00 884 4,421 8,842
4,378(1) 1/98-12/01 876 4,378 8,756
J. Keith Matheney 4,378(1) 1/98-12/01 876 4,378 8,756
J. Ray Barbee 3,961(1) 1/98-12/01 792 3,961 7,922
- ----------------------------
(1)Represents performance-contingent stock awards granted under
L-P's 1997 Incentive Stock Award Plan in July 1998. Each grant entitles
the participant to receive a number of shares of Common Stock
determined by comparing L-P's annualized total stockholder return
("L-P's TSR") to the mean annualized total stockholder return of five
other forest products companies (the "Industry TSR") for the four-year
performance period ending December 31, 2001.
(2)Represents performance-contingent stock awards granted under
L-P's 1997 Incentive Stock Award Plan in January 1998 to two executive
officers hired in September 1997 relating to a four-year performance
period ending December 31, 2000.
(3)The actual number of performance shares to be issued pursuant
to an award, expressed as a percentage of the award, will range from
20% if L-P's TSR is three percentage points below the Industry TSR to
200% if L-P's TSR is 13 percentage points above the Industry TSR, and
will be equal to the target amount if L-P's TSR is 3 percentage points
above the Industry TSR. The number of target performance shares will be
automatically adjusted to reflect a stock dividend or stock split and
the deemed reinvestment of cash dividends declared on the Common Stock
during the performance period. Of the performance shares earned, if
any, 50% is payable at the end of the four-year performance period,
provided that the participant continues to be an employee of L-P, and
50% will remain subject to forfeiture for an additional two years if
the participant leaves L-P's employment within the two-year restriction
period. Special provisions apply in case of the participant's death or
disability, retirement after age 60 with the approval of L-P's chief
executive officer, or a change in control of L-P.
(4)This award was forfeited upon the officer's termination of
employment in late 1998.
24
Retirement Benefits
The L-P Supplemental Executive Retirement Plan (the "SERP") is a
defined benefit plan intended to provide supplemental retirement benefits to key
executives designated by the committee appointed to administer the SERP. The
following table shows the estimated annual benefits payable to participants in
the SERP upon retirement based on the indicated years of credited service and
compensation levels (without reduction for Social Security or ESOT benefits):
PENSION PLAN TABLE
Final Average Years of Credited Service
Compensation -------------------------
------------ 5 10 15
- -- --
$ 150,000...... $ 25,000 $ 50,000 $ 75,000
200,000...... 33,333 66,667 100,000
300,000...... 50,000 100,000 150,000
400,000...... 66,667 133,333 200,000
500,000...... 83,333 166,667 250,000
600,000...... 100,000 200,000 300,000
700,000...... 116,667 233,333 350,000
800,000...... 133,333 266,667 400,000
1,000,000...... 166,667 333,333 500,000
1,200,000...... 200,000 400,000 600,000
1,400,000...... 233,333 466,667 700,000
Participants will become fully vested in their benefits under the SERP
after completing five years of participation in the SERP, beginning January 1,
1997. Vesting will be accelerated in the event of the participant's death or
disability or a change in control of L-P.
The annual benefit payable under the SERP is equal to 50% of final
average compensation multiplied by a fraction the numerator of which is years of
credited service (up to a maximum of 15) and the denominator of which is 15.
Years of credited service are determined under the provisions of the ESOT, L-P's
tax-qualified employee stock ownership plan for salaried employees to which L-P
contributes a minimum of 10% of the total compensation of all participants each
year to be invested in Common Stock. If a participant's employment is
involuntarily terminated within 36 months after a change in control of L-P
occurs, he or she will be credited with two additional years of service. The
years of service credited to the executive officers named in the Summary
Compensation Table above as of December 31, 1998, are as follows:
25
Mr. Suwyn, 6.8 years; Mr. Hanna, not applicable; Mr. Wilkerson, 1.3 years; Mr.
Stevens, 1.3 years; Mr. Matheney, 28.8 years; and Mr. Barbee, 1.0 years.
Final average compensation on an annual basis is defined as a
participant's compensation during the 60 consecutive months out of the last 120
months of employment in which the participant's compensation was highest,
divided by five. Compensation includes base pay and annual cash incentives (for
the executive officers named in the Summary Compensation Table above, salary
plus annual bonus) paid to a participant or deferred under L-P's Executive
Deferred Compensation Plan, but excludes all other benefits. If a participant's
employment is involuntarily terminated within 36 months after a change in
control of L-P, benefits under the SERP will be calculated based on the
participant's base salary during the preceding 12 months plus the average annual
cash incentive paid in the preceding three years, if higher than final average
compensation.
Retirement benefits shown in the table above are expressed in terms of
single life annuities, are subject to reduction in the event of retirement
before age 62 and will be reduced by an amount equal to the sum of (i) 50% of
the participant's primary Social Security benefit determined at age 62 and (ii)
the participant's ESOT balance converted to a life annuity.
Pursuant to Mr. Suwyn's employment agreement with L-P, he is entitled
to a nonqualified supplemental executive retirement benefit in which he is
immediately vested to the extent accrued. The annual retirement benefit payable
to Mr. Suwyn under the agreement (calculated as a single life annuity reduced on
an actuarial basis for retirement prior to age 62) is equal to an amount based
on Mr. Suwyn's compensation (salary plus annual bonus) for the year during the
three consecutive calendar years prior to termination of employment in which he
had the highest compensation (including with his previous employer), with a
maximum annual benefit equal to 50% of such compensation (less a Social Security
offset) and a minimum annual benefit equal to 25% of such compensation. The
annual benefit so calculated will be reduced by an amount equal to benefits
payable to Mr. Suwyn pursuant to the ESOT and the retirement plans maintained by
his prior employer. In the event of a change in control of L-P, Mr. Suwyn will
be entitled to two additional years of service for purposes of the foregoing
benefit. If Mr. Suwyn were to retire on December 31, 1999, the annual
supplemental retirement benefit payable by L-P, without any reductions, pursuant
to the provisions of the agreement is estimated to be $330,606. See "Agreements
with Executive Officers."
26
Management Transactions
In 1996, L-P acquired Associated Chemists, Inc. ("ACI"). Michael Hanna,
president and a shareholder of ACI, who was Executive Vice President of L-P from
June 1996 until late 1998, received $5,700,000 for his ACI shares; $2,915,000 of
such amount was payable on a deferred basis. Mr. Hanna received approximately
$204,600 in interest on the deferred balance during 1998.
Terry Simpson, the son of one of L-P's directors, Lee C. Simpson, is an
employee of L-P and received a salary of $68,310 during 1998.
During 1998, L-P used the legal services of Richards, Layton & Finger,
of which Pierre S. du Pont is a partner.
The consulting firm of Rapid Change Technologies, Inc. ("RCT"),
provided consulting services to L-P and furnished training and decision-making
skills to L-P employees during 1998. Fees paid to RCT during 1998 totaled
approximately $909,000, including reimbursement of expenses. Karen Malkewitz was
an officer of RCT until her election as L-P's Vice President, Manufacturing in
January 1997; she did not receive any compensation from RCT thereafter. Ms.
Malkewitz sold her 40% ownership interest in RCT to RCT in March 1998 and
resigned from her position as an officer of L-P in late 1998.
See "Item 1 - Election of Directors; Compensation Committee -
Interlocks and Insider Participation" for a description of two additional
transactions. See also "Agreements with Executive Officers."
Directors' Compensation
Each director of L-P who is not an employee of L-P receives for all
services as a director fees at the rate of $20,000 per year, plus $1,750 for
each board meeting attended, $1,000 for each committee meeting attended ($1,250
for committee chairpersons) and, for participation in each telephone conference
meeting, $750 for a board meeting and $500 for a committee meeting ($750 for
committee chairpersons).
L-P maintains an unfunded deferred compensation plan for directors
which permits outside directors to elect to defer payment of any portion of
their director fees and meeting fees, provided that the minimum deferral amount
is $2,400 per year. Such deferred compensation, including amounts deferred under
the prior plan, earns interest at a rate equal to two percentage points above
Moody's Average Corporate Bond Yield Index, adjusted monthly. Payment of
deferred amounts will generally be made, at the director's option, in a lump sum
or in substantially equal annual installments over a 5-year,
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10-year or 15-year period beginning either within 65 days or during the month of
January after he or she ceases to be a director.
L-P's 1992 Non-Employee Director Stock Option Plan (the "Director
Plan") provides for the automatic grant every five years of options to purchase
shares of Common Stock to members of the Board of Directors who are not
employees of L-P or any of its subsidiaries. Each option granted under the
Director Plan entitles the holder to purchase 45,000 shares of Common Stock at a
price equal to 100% (85% prior to May 3, 1998) of the fair market value (as
defined) of a share of Common Stock on the date of grant. Each option becomes
exercisable as to 20% of the shares covered by the option (i.e., 9,000 shares)
on each of the first through fifth anniversaries of the date of grant. Options
become immediately exercisable in full upon the death of the holder or upon the
occurrence of a change in control of L-P. To the extent not fully vested, an
option will become exercisable as to an additional 20% of shares upon the
director's retirement as of the first annual meeting of stockholders after the
director attains age 70. Each option expires 10 years after the date of grant,
subject to earlier termination if the holder ceases to be a member of the Board
of Directors. See "Item 2 - Approval of Amendment to 1992 Non-Employee Director
Stock Option Plan."
Agreements with Executive Officers
L-P entered into an employment agreement with Mark A. Suwyn with
respect to his employment as L-P's Chairman and Chief Executive Officer in
January 1996. The term of the agreement will expire on December 31, 1999,
subject to automatic extension annually thereafter unless 90 days' prior notice
of intention to terminate is given by either party.
The agreement provides that Mr. Suwyn is entitled to a minimum base
salary of $600,000, subject to annual review for increase by the Board of
Directors beginning in 1997, and an annual bonus, subject to satisfying
reasonable annual performance goals established by the Compensation Committee.
The agreement also provides for a nonqualified supplemental retirement benefit
as described above under "Retirement Benefits." In addition, Mr. Suwyn is
entitled under the agreement to participate in all L-P employee benefit
arrangements at a level commensurate with his position.
In the event Mr. Suwyn's employment is terminated by Mr. Suwyn for Good
Reason (as defined) or by L-P for any reason other than disability or Cause (as
defined), or if the agreement is not renewed pursuant to notice by L-P, Mr.
Suwyn will be entitled to receive an amount equal to his base salary, as then in
effect, for the remainder of the term of the agreement or 24 months, whichever
is longer, plus a pro rata cash incentive payment for the year of
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termination and certain continued medical benefits. He will also be entitled to
all other amounts and benefits in which he is then or thereby becomes vested.
If a Change in Control occurs and Mr. Suwyn's employment terminates
(including voluntarily by Mr. Suwyn) during the 13-month period following the
Change in Control other than for Cause or by death or disability, Mr. Suwyn will
be entitled to receive, in addition to all amounts and benefits in which he is
vested, an amount equal to his base salary, as then in effect, for the remainder
of the term of the agreement or 24 months, whichever is longer, together with
(i) a pro rata share of the targeted annual cash incentive award for the year in
which such termination occurs; (ii) a bonus equal to two times the targeted
annual cash incentive award, if any, for such year payable in 24 equal monthly
installments; and (iii) employee welfare benefits substantially similar to those
which he was receiving immediately prior to such termination.
For purposes of the agreement, a "Change in Control" of L-P includes
certain extraordinary corporate transactions pursuant to which less than a
majority of the combined voting power in L-P remains in the hands of the holders
immediately prior to such transactions, a person or group (other than certain
persons related to L-P) becomes the beneficial owner of 25% or more of the
combined voting power in L-P, or, with certain exceptions, the existing
directors of L-P cease to constitute a majority of the Board of Directors.
"Cause" includes continuing to fail to devote substantially all one's business
time to L-P's business and affairs, engaging in certain activities competitive
with L-P, or the commission of specified wrongful acts. "Good Reason" includes
failure to maintain Mr. Suwyn as Chairman and Chief Executive Officer, a
reduction in base salary or the termination or reduction of any employee
benefits, certain extraordinary corporate transactions, certain relocations of
Mr. Suwyn's place of work, or any material breach of the agreement by L-P.
If any payment under the agreement is determined to be subject to the
federal excise tax imposed on benefits that constitute excess parachute payments
under the Code, Mr. Suwyn will be entitled to reimbursement for such taxes on an
after-tax basis.
In connection with his termination of employment with L-P in late 1998,
Michael D. Hanna and L-P entered into a separation agreement pursuant to which,
in exchange for releasing any employment-related claims against L-P, Mr. Hanna
received benefits as follows: (i) salary, accrued vacation and benefits through
his last regular workday; (ii) separation pay in a lump sum in the amount of
$85,000; (iii) the sum of $511,200 in two equal installments paid on November
13, 1998 and January 2, 1999, in accordance with the notice requirements of his
employment letter agreement dated April 19, 1996; and
29
(iv) financial planning services through December 31, 1998. L-P also agreed to
reimburse Mr. Hanna for certain legal expenses.
Since January 1998, L-P has entered into Change of Control Employment
Agreements (the "Employment Agreements") with eight of its current executive
officers, including each of the current executive officers named in the Summary
Compensation Table above. The Employment Agreements provide for severance
compensation in the event of termination of employment following a change of
control of L-P. Each Employment Agreement has a term of three years subject to
automatic extension annually for one additional year unless notice of nonrenewal
is given by November 26 of the current year. Also, if a change of control of L-P
occurs during the term of the Employment Agreements, the term will be extended
automatically for three additional calendar years beyond the date on which the
change of control occurs.
The Employment Agreements further provide that if, within three years
following the occurrence of a change of control, an executive's employment with
L-P is terminated by L-P other than for cause or by the executive for good
reason, the executive will be entitled to receive (i) his or her full base
salary through the date of termination (which must be at least equal to the
highest rate in effect during the 12 months prior to the date the change of
control occurred) plus a pro rata amount of the executive's target bonus for the
fiscal year in which the change of control occurred (the "Target Bonus"), (ii)
an amount equal to three times the sum of (x) his or her annual base salary at
such rate plus (y) his or her Target Bonus, and (iii) the difference, calculated
on an actuarial present value basis, between the retirement benefits that would
have accrued if the executive's employment continued for an additional three
years and the actual vested benefit, if any, at the date of termination. Special
payment provisions apply in the event of the executive's death or disability
following a change of control.
The Employment Agreements also provide for reimbursement of legal fees
and expenses and for outplacement services and for the continuation of health,
disability and life insurance benefits for three years following termination of
employment voluntarily for good reason or involuntarily other than for cause or
disability. Each Employment Agreement also provides for reimbursement for any
excise tax imposed on benefits that constitute excess parachute payments plus
any related federal, state and local income taxes, subject to a "cut back"
provision providing for a reduction in the payments under the Employment
Agreement if the amount that would be treated as excess parachute payments is
not greater than 110% of the maximum amount that could be paid to the executive
without imposition of any excise tax.
30
Lengthy definitions of cause, change of control and good reason are
included in the Employment Agreements. Brief summaries of the definitions are
set forth below.
"Cause" means (i) the willful and continued failure of the executive to
perform substantially his or her duties after delivery of a written demand for
substantial performance or (ii) the willful engaging by the executive in illegal
conduct or gross misconduct that is materially and demonstrably injurious to
L-P, in each case pursuant to a resolution adopted by the affirmative vote of at
least three-fourths of the entire membership of the Board of Directors.
"Change of control" means (i) the acquisition by a person or group of
beneficial ownership of 20% of L-P's outstanding Common Stock or voting
securities, with certain exceptions, (ii) a change in the composition of the
Board of Directors such that the incumbent directors cease to constitute at
least a majority of the Board (including, for purposes of computing a majority,
those persons nominated for election by a majority of the then incumbent
directors who had been similarly nominated), (iii) consummation of certain
reorganizations, mergers, consolidations or sale of substantially all the assets
of L-P, or (iv) approval by L-P's stockholders of a complete liquidation or
dissolution of L-P.
"Good reason" with respect to the termination by an employee of his or
her employment with L-P means (i)subject to certain exceptions, the assignment
of duties inconsistent with the executive's position, (ii) any failure by L-P to
comply with the compensation provisions of the Employment Agreement, (iii)
transfer of the executive to a location more than 25 miles from the present
location, or (iv) any purported termination by L-P of the executive's employment
otherwise than as expressly permitted by the Employment Agreement. A termination
of employment by the executive during the 30-day period immediately following
the first anniversary of the change of control is deemed to be for good reason
for purposes of the Employment Agreements.
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the Annual Meeting
of Stockholders of L-P in the year 2000, and who wishes to have the proposal
included in L-P's proxy materials for that meeting, must deliver the proposal to
the Corporate Secretary of L-P no later than November 27, 1999. Any such
proposal must meet the informational and other requirements set forth in the
rules and regulations of the SEC in order to be eligible for inclusion in the
proxy materials for that meeting.
L-P's bylaws also provide that no business may be brought before an
annual meeting except as specified in the notice of the meeting or as otherwise
31
brought before the meeting by or at the direction of the Board of Directors or
by a stockholder of record who has delivered written notice thereof to the
Chairman by the deadline specified in the bylaws. In the case of L-P's annual
meeting in the year 2000, this notice must be received by L-P no later than
February 10, 2000. Such notice must include the information required by the
SEC's rules for stockholder proposals presented for inclusion in L-P's proxy
materials. The meeting chairman may, if the facts warrant, determine that any
such business was not properly brought before the meeting and so declare to the
meeting, in which case such business shall not be transacted.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 ("Section 16")
requires that reports of beneficial ownership of Common Stock and changes in
such ownership be filed with the SEC and the New York Stock Exchange by L-P's
officers, directors, and certain other "reporting persons." Based solely upon a
review of copies of Section 16 reports filed by L-P's reporting persons and
written representations by such persons, to L-P's knowledge, all Section 16
reporting requirements applicable to such persons were complied with for the
period specified in the SEC's rules governing proxy statement disclosures, with
the exception of initial reports of beneficial ownership on Form 3 filed by each
of J. Ray Barbee and F. Jeff Duncan within 10 days after he was appointed an
executive officer of L-P, which each inadvertently omitted information as to an
option grant received in January 1998.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Deloitte & Touche LLP, independent
public accountants, to examine the financial statements of L-P for 1999. L-P
expects representatives of Deloitte & Touche LLP to be present at the annual
meeting and to be available to respond to appropriate questions from
stockholders. The accountants will have the opportunity to make a statement at
the annual meeting if they desire to do so.
L-P engaged Deloitte & Touche LLP as its principal independent
accountants to audit L-P's financial statements effective October 26, 1997, upon
the recommendation and approval of the Audit Committee. Arthur Andersen LLP, the
independent accounting firm previously engaged as principal accountants to audit
L-P's financial statements, was concurrently dismissed effective October 26,
1997.
None of the reports of Arthur Andersen LLP for 1995 or 1996 contained
any adverse opinion or disclaimer of opinion or was qualified or modified as to
uncertainty, audit scope, or accounting principles. Also during 1995, 1996 and
32
the portion of 1997 preceding the dismissal of Arthur Andersen LLP, there were
no disagreements between L-P and Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to the satisfaction of Arthur Andersen LLP,
would have caused Arthur Andersen LLP to make reference to the subject matter of
the disagreement or disagreements in its reports.
During 1995, 1996 and the portion of 1997 preceding the engagement of
Deloitte & Touche LLP, L-P did not, nor did anyone on L-P's behalf, consult
Deloitte & Touche LLP regarding either (i) the application of accounting
principles to a specified completed or proposed transaction or the type of audit
opinion that might be rendered on L-P's financial statements as to which a
written report or oral advice was provided to L-P that was an important factor
considered by L-P in reaching a decision as to such accounting, auditing or
financial reporting issue, or (ii) any matter that was the subject of a
disagreement between L-P and Arthur Andersen LLP or an event of the type
described in the preceding paragraph.
GENERAL
The cost of soliciting proxies will be borne by L-P. In addition to the
solicitation of proxies by the use of the mails, some of the officers and
regular employees of L-P, without extra compensation, may solicit proxies
personally or by other means such as telephone, telecopier, telegraph, or cable.
L-P will request brokers, dealers, banks, voting trustees, and their
nominees who hold Common Stock of record to forward soliciting material to the
beneficial owners of such stock and will reimburse such record holders for their
reasonable expenses in forwarding material. L-P has retained D.F. King & Co.,
Inc., to assist in such solicitation for an estimated fee of $9,500 plus
reimbursement for certain expenses.
33
LOUISIANA-PACIFIC CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING MAY 10, 1999
The undersigned hereby constitutes and appoints John W. Barter, William C.
Brooks, Patrick F. McCartan, and Lee C. Simpson, and each of them, his true and
lawful agents and proxies, each with full power of substitution, to represent
and vote the common stock of Louisiana-Pacific Corporation ("L-P"), which the
undersigned may be entitled to vote at the Annual Meeting of L-P stockholders to
be held May 10, 1999, or at any adjournment thereof.
Nominees for Election as Directors:
Paul W. Hansen, Donald R. Kayser
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ON
THE REVERSE SIDE. YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. BY SIGNING ON THE REVERSE, YOU
ACKNOWLEDGE RECEIPT OF THE 1999 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND
ACCOMPANYING PROXY STATEMENT AND REVOKE ALL PROXIES HERETOFORE GIVEN BY YOU TO
VOTE AT SAID MEETING OR ANY ADJOURNMENT THEREOF.
--------------------------------------
SEE REVERSE SIDE
--------------------------------------
- --------------------------------------------------------------------------------
* DETATCH AND RETURN PROXY CARD; RETAIN ADMISSION TICKET *
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR the election of directors,
FOR proposal 2 and AGAINST proposal 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSAL 2.
FOR WITHHELD
1. Election of Directors (see reverse) / / / /
FOR all nominees except as marked to the contrary below:
- ------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of amendment of 1992
Non-Employee Director Stock Option Plan. / / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
FOR AGAINST ABSTAIN
3. Stockholder proposal, NOT recommended
by management, relating to shareholder
action by written consent. / / / / / /
If any other matters properly come before the meeting, this proxy will be voted
by the proxies named herein in accordance with their best judgment.
SIGNATURE(S) DATE
------------------------------- ---------------------------
NOTE: Please sign exactly as your name appears hereon. If signing for estates,
trusts, or corporations, title or capacity should be stated. If shares
are held jointly, each holder should sign.
- -------------------------------------------------------------------------------
* DETATCH AND RETURN PROXY CARD; RETAIN ADMISSION TICKET *
[Logo]
LOUISIANA-PACIFIC CORPORATION
111 S.W. Fifth Avenue
Portland, Oregon 97204
(503) 221-0800
Annual Meeting of Stockholders
May 10, 1999
ADMISSION TICKET
The Annual Meeting of Stockholders of Louisiana-Pacific Corporation will be held
at 9:30 a.m. on May 10, 1999, at the Embassy Suites Hotel, 319 S.W. Pine Street,
Portland, Oregon 97204. Public transportation to the hotel is available from the
airport, and there is ample public parking in the vicinity of the hotel.
Your voted proxy card should be detached and returned as soon as possible in the
enclosed postpaid envelope. If you plan to attend the Annual Meeting, please
retain this Admission Ticket and, on May 10, 1999, present it to the
Louisiana-Pacific representative for admission to the meeting.
--Anton C. Kirchhof
Secretary
LOUISIANA-PACIFIC CORPORATION
1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Restated as of May 3, 1998)
1. PURPOSE. The continued growth and success of Louisiana-Pacific
Corporation (the "Corporation") are dependent upon the efforts of members of the
Corporation's board of directors (the "Board of Directors"). Those members of
the Board of Directors who are not employees of Corporation or any of its
subsidiaries ("Non- Employee Directors") are not eligible to participate in the
stock option and other stock incentive plans maintained for employees of the
Corporation. The purpose of this 1992 Non-Employee Director Stock Option Plan
(the "Plan") is to provide an incentive to Non- Employee Directors to remain as
members of the Board of Directors and also to afford them the opportunity to
acquire, or increase, stock ownership in the Corporation in order that they may
have a direct proprietary interest in its success. Options granted under the
Plan shall be nonqualified options which are not intended to qualify as
incentive stock options under Section 422 of the Internal Revenue Code.
2. STOCK. The stock subject to options granted under the Plan shall be
shares of the Corporation's authorized but unissued, or reacquired, $1 par value
common stock ("Common Stock"). The total number of shares of Common Stock with
respect to which options may be granted shall not exceed in the aggregate
1,200,000, provided that such aggregate number of shares shall be subject to
adjustment in accordance with the provisions of paragraph 6(g). In the event
that any outstanding option under the Plan shall be canceled or terminate or
expire prior to the end of the period during which options may be granted under
the Plan, the shares of Common Stock allocable to the unexercised portion of
such option may be made the subject of additional options granted under the
Plan.
3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors which shall have full power and authority, subject to the provisions
of the Plan, to adopt, amend, and rescind rules and regulations for carrying out
the Plan. The interpretation and decision of the Board of Directors with regard
to any question arising under the Plan shall be final and conclusive. No member
of the Board of Directors shall be liable for any action taken or determination
made in good faith with
1
respect to the Plan or to any options granted pursuant to the Plan.
4. ELIGIBILITY. The persons eligible to receive options under the Plan
are the Non-Employee Directors of the Corporation.
5. GRANT OF OPTIONS.
(a) INITIAL GRANT. Each person who is an Non-Employee Director on June
15, 1992, automatically shall be granted, as of June 15, 1992, an option to
purchase 22,500 shares of Common Stock, subject to the terms and conditions
described in paragraph 6.
(b) NEW NON-EMPLOYEE DIRECTORS. Each person who becomes a Non-Employee
Director after June 15, 1992, automatically shall be granted, as of the date
such person becomes a Non-Employee Director, an option to purchase 22,500 shares
of Common Stock (45,000 shares after May 18, 1993), subject to the terms and
conditions described in paragraph 6.
(c) SUBSEQUENT GRANTS. Each Non-Employee Director who has been granted
an option under paragraphs 5(a) or 5(b) who remains as a Non-Employee Director
on the fifth anniversary of the date such option was granted (the "Anniversary")
automatically shall be granted, as of such Anniversary, an option to purchase
45,000 shares of Common Stock, subject to the terms and condition described in
paragraph 6.
6. TERMS AND CONDITIONS OF OPTIONS. Each option granted pursuant to the
Plan shall be subject to the following terms and conditions:
(a) PAYMENT. Upon exercise of an option, in whole or in part, the
option price for shares to which the exercise relates may be made, at the
election of the optionee, either in cash or by delivering to the Corporation
shares of Common Stock having a Fair Market Value (as defined below) equal to
the option price, or any combination of cash and Common Stock having a combined
value equal to the option price. Shares of Common Stock may not be used in
payment or partial payment unless an option is being exercised for at least
2,000 shares. Payment in shares of Common Stock shall be made by delivering to
the Corporation certificates, duly endorsed for transfer, representing shares of
Common Stock having an aggregate Fair Market Value on the date of exercise equal
to that portion of the option price which is to be paid in Common Stock. The
Fair Market Value of a share of Common Stock on the date of exercise shall be
deemed to be the closing price per share of Common Stock on the New York Stock
Exchange on
2
the date of exercise or, if no sale of Common Stock shall have been made on that
Exchange on that date, on the next preceding business day on which there was a
sale of such stock on that Exchange. Whenever payment of the option price would
require delivery of a fractional share, the optionee shall deliver the next
lower whole number of shares of Common Stock and a cash payment shall be made by
the optionee for the balance of the option price.
(b) OPTION PRICE. On and after May 3, 1998, the option price per share
for each option granted under the Plan shall be 100 percent of the Fair Market
Value per share on the date the option was granted.
(c) TERM OF OPTION. Each option shall expire ten years from the date
the option is granted, unless the option is terminated earlier in accordance
with the Plan.
(d) DATE OF EXERCISE. Unless an option is terminated or the time of its
exercisability is accelerated in accordance with the Plan, each option may be
exercised in whole or in part from time to time to purchase shares as follows:
Each option shall not be exercisable until the first anniversary
of the date the option was granted. On such first anniversary, the
option shall become exercisable as to 20 percent of the shares covered
by the option, and on each of the second through the fifth such
anniversaries, the option shall become exercisable as to an additional
20 percent of the shares covered by the option. However, no option
shall be exercisable in part with respect to a number of shares fewer
than 100.
(e) ACCELERATION OF EXERCISABILITY. Notwithstanding the limitations on
exercisability pursuant to paragraph 6(d), an option shall become immediately
and fully exercisable:
(i) In the event of the death of the optionee Non-Employee
Director; or
(ii) Upon the later of (A) the occurrence of a "Change in Control"
(as defined below) of the Corporation or (B) six months after the date
of grant; or
(iii) On the date an optionee Non-Employee Director retires
pursuant to Section 15 of the bylaws of
3
the Corporation; provided, however, that this paragraph 6(e)(iii) shall only
apply to an additional 20 percent of the shares covered by such Non-Employee
Director's option.
For purposes of the Plan, a change of control shall be deemed to occur if (x)
any person or group, together with its affiliates and associates (other than the
Corporation or any of its subsidiaries or employee benefit plans), acquires
direct or indirect beneficial ownership of 20 percent or more of the then
outstanding shares of Common Stock or commences a tender or exchange offer for
30 percent or more of the then outstanding shares of Common Stock, or (y) the
Corporation is to be liquidated or dissolved. The terms "group," "affiliates,"
"associates" and "beneficial ownership" shall have the meanings ascribed to them
in the rules and regulations promulgated under the Exchange Act.
(f) CONTINUATION AS A DIRECTOR. Notwithstanding the option term
provided in paragraph 6(c), in the event that an optionee Non-Employee Director
ceases to be a member of the Board of Directors:
(i) By reason of death, the estate, personal representative, or
beneficiary of the Non-Employee Director shall have the right to
exercise the option at any time within 12 months from the date of death
and the option shall terminate as of the last day of such 12-month
period; or
(ii) By reason of the retirement of an optionee Non-Employee
Director pursuant to Section 15 of the bylaws of the Corporation, the
Non-Employee Director's option shall remain exercisable, to the extent
it had become exercisable on the date of said retirement, for a period
of 24 months following the date of said retirement and the option shall
terminate as of the last day of such 24-month period; or
(iii) For any other reason, the Non-Employee Director's option
shall remain exercisable, to the extent it had become exercisable on
the date the optionee ceased to be a member of the Board of Directors
(the "Termination Date"), for a period of three months following the
Termination Date and the option shall terminate as of the last day of
such three-month period.
(g) RECAPITALIZATION. In the event of any change in capitalization
which affects the Common Stock, whether by stock dividend, stock distribution,
stock split, subdivision or
4
combination of shares, merger or consolidation or otherwise, such proportionate
adjustments, if any, as the Board of Directors in its good faith discretion
deems appropriate to reflect such change shall be made with respect to the total
number of shares of Common Stock in respect of which options may be granted
under the Plan, the number of shares covered by each outstanding option, and the
exercise price per share under each such option; however, any fractional shares
resulting from any such adjustment shall be eliminated.
A dissolution of the Corporation, or a merger or consolidation in which
the Corporation is not the resulting or surviving corporation (or in which the
Corporation is the resulting or surviving corporation but becomes a subsidiary
of another corporation), shall cause every option outstanding hereunder to
terminate concurrently with consummation of any such dissolution, merger or
consolidation, except that the resulting or surviving corporation (or, in the
event the Corporation is the resulting or surviving corporation but has become a
subsidiary of another corporation, such other corporation) may, in its absolute
and uncontrolled discretion, tender an option or options to purchase its shares
on terms and conditions, both as to number of shares and otherwise, which will
substantially preserve the rights and benefits of any option then outstanding
hereunder.
In the event of a change in the Corporation's presently authorized
Common Stock which is limited to a change of all its presently authorized shares
with par value into the same number of shares with a different par value or into
the same number of shares without par value, the shares resulting from any such
change shall be deemed to be Common Stock within the meaning of this Plan.
(h) TRANSFERABILITY. No option shall be assignable or transferable
other than by will or the laws of descent and distribution. During an optionee's
lifetime, only he or his guardian or legal representative may exercise any such
option or right.
(i) RIGHTS AS A STOCKHOLDER. An optionee Non-Employee Director shall
have no rights as a stockholder with respect to shares covered by the option
until the date of the issuance or transfer of the shares to him and only after
such shares are fully paid. Except as provided in paragraph 6(g), no adjustment
shall be made for dividends or other rights for which the record date is prior
to the date of such issuance or transfer.
(j) PROVISION FOR TAXES. It shall be a condition to the Corporation's
obligation to issue or reissue shares of Common Stock upon exercise of any
option that the optionee pay, or make provision satisfactory to the Corporation
for payment of, any
5
federal and state income and other taxes which the Corporation is obligated to
withhold or collect with respect to the issue or reissue of such shares.
(k) OPTION AGREEMENT. Each option shall be evidenced by an option
agreement substantially in the form attached to the Plan as Appendix A.
7. EFFECTIVE DATE AND TERM OF PLAN. Options shall be granted pursuant
to the Plan from time to time beginning June 15, 1992, the date of adoption of
the Plan by the Board of Directors. The Plan shall continue in effect until
options have been granted covering all available shares of Common Stock as
specified in paragraph 2 or until the Plan is terminated by the Board of
Directors, whichever is earlier, except as provided below.
The Plan shall be subject to approval by the affirmative vote of the
holders of at least a majority of the securities of the Corporation present, or
represented by proxy, and entitled to vote at a meeting (to be duly held in
accordance with the applicable laws of the state of Delaware) for which proxies
are solicited substantially in accordance with rules and regulations, if any, as
are then in effect under Section 14(a) of the Exchange Act, which approval must
occur within twelve months after said date of adoption of the Plan by the Board
of Directors. Options granted pursuant to the Plan prior to such approval shall
be subject to such approval.
8. AMENDMENT OR TERMINATION. The Board of Directors may alter, amend,
suspend or terminate the Plan at any time. However, the Plan shall not be
amended more often than once every six months other than amendments to comport
with changes in income tax laws or the requirements of Rule 16b-3 under the
Exchange Act. Amendments to the Plan shall be subject to stockholder approval to
the extent required to comply with any exemption to the short swing profit
provisions of Section 16(b) of the Exchange Act pursuant to rules and
regulations promulgated thereunder or with the rules and regulations of any
securities exchange on which the Common Stock is listed. Expiration or
termination of the Plan shall not affect outstanding options except as provided
in paragraph 7. The Board of Directors may also modify the terms and conditions
of any outstanding option, subject to the consent of the optionee and consistent
with the provisions of the Plan.
9. APPLICATION OF PROCEEDS. The proceeds received by the Corporation
from the sale of Common Stock pursuant to options shall be available for general
corporate purposes.
6
10. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
impose no obligation upon the optionee to exercise the same, in whole or in
part.
11. RESTRICTIONS ON EXERCISE. Any provision of the Plan to the contrary
notwithstanding, no option granted pursuant to the Plan shall be exercisable at
any time, in whole or in part, (i)prior to the shares of Common Stock subject to
the option being authorized for listing on the New York Stock Exchange, or
(ii)if issuance and delivery of the shares of Common Stock subject to the option
would be in violation of any applicable laws or regulations.
7
LOUISIANA-PACIFIC CORPORATION
1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
OPTION AGREEMENT
Date of Option Grant: --------------, 199-
Louisiana-Pacific Corporation
a Delaware corporation
111 S.W. Fifth Avenue
Portland, OR 97204 ("Corporation")
- ------------------------
- ------------------------
- ------------------------
- ------------------------ ("Optionee")
Corporation maintains the Louisiana-Pacific Corporation 1992
Non-Employee Director Stock Option Plan (the "Plan"). A copy of the Plan is
attached hereto as Exhibit A and is incorporated by reference in this Agreement.
Capitalized terms not otherwise defined in this Agreement have the meanings
given them in the Plan.
The Plan is administered by the Board for the benefit of Non-Employee
Directors of Corporation.
The parties agree as follows:
1. GRANT OF OPTION.
---------------
Subject to the terms and conditions of this Agreement and the Plan,
Corporation grants, as of the date of option grant set forth above, to the
Optionee a stock option (the "Option") to purchase 45,000 shares of
Corporation's Common Stock at $------- per share.
2. TERMS OF OPTION.
---------------
The option shall be subject to all the terms and conditions set forth
in the Plan.
3. CONDITIONS PRECEDENT.
--------------------
The Option is subject to stockholder approval pursuant to paragraph 7
of the Plan. Corporation will use its best efforts to obtain approval of the
Plan and the Option by any state or federal agency or authority that Corporation
determines has jurisdiction. If Corporation determines that any required
approval cannot be obtained, the Option shall terminate on notice to the
Optionee to that effect.
-1-
4. SUCCESSORSHIP.
-------------
Subject to restrictions on transferability set forth in the Plan, this
Agreement shall be binding upon and benefit the parties, their successors and
assigns.
5. NOTICES.
-------
Any notices under the Option shall be in writing and shall be effective
when actually delivered personally or through Corporation interoffice mail
service, or, if mailed, when deposited as registered or certified mail directed
to the address of Corporation's records or to such other address as a party may
certify by notice to the other party. Notices to Corporation shall be sent to
the Treasurer of Corporation at Corporation's address set forth above, or at
such other address as Corporation, by written notice to Optionee, may designate
from time to time.
CORPORATION: LOUISIANA-PACIFIC CORPORATION
--------------------------------
Vice President, Treasurer
and Chief Financial Officer
--------------------------------
Secretary
OPTIONEE:
--------------------------------