SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
Filed by a Party other than the Registrant ___
Check the appropriate box:
__ Preliminary Proxy Statement
__ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
X Definitive Proxy Statement
__ Definitive Additional Materials
__ Soliciting Material Pursuant to section 240.14a-11(c) or
section 240.14a-12
WAUSAU-MOSINEE PAPER CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required
__ Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and
0-11.
__ Fee paid previously with preliminary materials.
__ Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid: ___________________________
(2) Form, Schedule or Registration Statement No:______________
(3) Filing Party: ___________________________
(4) Date Filed: ___________________________
[WAUSAU PAPER LOGO AND LETTERHEAD]
March 18, 2005
Dear Shareholder:
You are cordially invited to attend our annual meeting of shareholders to
be held on April 21, 2005, at the Great Hall on ArtsBlock, Wausau, Wisconsin.
The Board has nominated Gary W. Freels and Thomas J. Howatt for
reelection as Class III directors and Michael M. Knetter, Dean of the
University of Wisconsin School of Business, for election to a newly created
Class III directorship. At the annual meeting you will also be asked to
approve a change in our corporate name to "Wausau Paper Corp." The change in
our corporate name is intended to complete the process begun last September
when we began to operate under the name "Wausau Paper" as part of a broader
initiative to create a unified brand recognition across our three business
segments. Our branding initiative has been well received in our markets and
the amendment will provide consistency between our legal and commercial names.
Details on the time and place of the meeting are set forth in the
attached notice and proxy statement as are information on matters to be voted
on by shareholders and other customary and important disclosures.
I look forward to seeing you at the annual meeting. Whether or not you
plan to attend the annual meeting, please sign and return the enclosed proxy so
that your vote will be counted.
Sincerely,
THOMAS J. HOWATT
Thomas J. Howatt
President and CEO
WAUSAU-MOSINEE PAPER CORPORATION
100 PAPER PLACE
MOSINEE, WISCONSIN 54455-9099
_____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
_____________________
The annual meeting of shareholders of Wausau-Mosinee Paper Corporation
will be held at the Great Hall on ArtsBlock, 401 North Fourth Street, Wausau,
Wisconsin, on Thursday, April 21, 2005, at 2:00 p.m., local time. The
following proposals will be considered by shareholders at the annual meeting:
1. The election of three Class III directors;
2. An amendment to the Company's amended and restated articles of
incorporation to change the name of the Company to "Wausau Paper
Corp."; and
3. Any other business that properly comes before the meeting.
The record date for determining the holders of common stock entitled to
notice of and to vote at the annual meeting or any adjournment thereof is the
close of business on February 18, 2005.
March 18, 2005
By order of
the Board of Directors
SCOTT P. DOESCHER
Scott P. Doescher
Secretary
PLEASE PROMPTLY VOTE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE.
PROXY STATEMENT FOR
WAUSAU-MOSINEE PAPER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 21, 2005
TABLE OF CONTENTS
Page No.
Solicitation of Proxies....................................................1
Voting Procedures..........................................................1
Your Vote............................................................1
Shareholders Entitled to Vote........................................1
Quorum, Required Vote, and Related Matters...........................2
Proposal No. 1 - Election of Directors.....................................2
General Information..................................................2
Election of Directors................................................3
Board of Directors...................................................4
Corporate Governance Guidelines and Committees of the Board of
Directors......................................................5
Compensation of Directors............................................6
Determination of Independence of Directors...........................6
Stock Ownership............................................................7
Stock Ownership of Directors, Executive Officers, and 5%
Shareholders...................................................7
Section 16(a) Beneficial Ownership Reporting Compliance..............8
Report of the Audit Committee and Related Matters..........................8
Audit Committee Report...............................................8
Audit Committee Pre-Approval Policies................................9
Independent Auditor and Fees........................................10
Executive Compensation....................................................10
Summary Compensation Table..........................................10
Stock Options and Stock Appreciation Rights.........................11
Retirement Benefits.................................................13
Report of the Compensation Committee................................14
Stock Price Performance Graph.............................................16
Proposal No. 2 - Approval of Name Change to "Wausau Paper Corp."..........17
Proposed Amendment to Change the Company's Name to "Wausau Paper
Corp."........................................................17
Vote Required for Approval of the Amendment.........................17
Other Matters.............................................................18
Costs of Solicitation...............................................18
Proxy Statement Proposals...........................................18
Householding of Annual Meeting Materials............................18
Appendices
Appendix A - Audit Committee Charter
-i-
WAUSAU-MOSINEE PAPER CORPORATION MARCH 18, 2005
100 PAPER PLACE
MOSINEE, WISCONSIN 54455-9099
WWW.WAUSAUPAPER.COM
SOLICITATION OF PROXIES
We are providing these proxy materials in connection with the
solicitation of proxies by the Board of Directors of Wausau-Mosinee Paper
Corporation for use at the 2005 annual meeting of shareholders, including any
adjournment thereof. The annual meeting will be held at 2:00 p.m. on April 21,
2005, at the Great Hall on ArtsBlock, 401 North Fourth Street, Wausau,
Wisconsin.
VOTING PROCEDURES
YOUR VOTE
Your vote is important. Whether or not you plan to attend the annual
meeting, please sign, date, and return the enclosed proxy promptly in order to
be sure that your shares are voted. You may revoke your proxy at any time
before it is voted by giving written notice to the Secretary of the Company at
our principal office in Mosinee, Wisconsin, by filing another duly executed
proxy bearing a later date with the Secretary, or by giving oral notice at the
annual meeting.
All shares represented by your properly completed proxy which have been
submitted to the Company prior to the meeting (and which have not been revoked)
will be voted in accordance with your instructions. IF YOU DO NOT INDICATE HOW
YOUR SHARES SHOULD BE VOTED ON A PROPOSAL, THE SHARES REPRESENTED BY YOUR
PROPERLY COMPLETED PROXY WILL BE VOTED AS THE BOARD RECOMMENDS.
If any matters other than those described in this proxy statement are
properly presented at the annual meeting for consideration, including, among
other things, consideration of a motion to adjourn the meeting to another time
or place, the persons named as proxies in the proxy form furnished to you by
the Board will have discretion to vote on those matters according to their best
judgment to the same extent as you would be entitled to vote. As of the date
of this proxy statement, we do not anticipate that any other matters will be
presented to the annual meeting.
SHAREHOLDERS ENTITLED TO VOTE
General. Shareholders at the close of business on the record date,
February 18, 2005, are entitled to notice of and to vote at the annual meeting.
Each share is entitled to one vote on each proposal properly brought before the
annual meeting. Votes cast by proxy or in person at the annual meeting will be
tabulated by an inspector of elections appointed by the Board. On the record
date, there were 51,695,251 shares of common stock outstanding.
"Street Name" Accounts. If you hold shares in "street name," you will
receive voting instructions from the broker that is the holder of record of
your shares. In some cases, your broker may be able to vote your shares even
if you provide no instructions (such as the election of directors), but on
other matters your broker may vote the shares held for you only if you provide
voting instructions. Shares for which a broker does not have the authority to
vote are recorded as a "broker non-vote" and may count as a vote against
certain proposals. See "Quorum, Required Vote, and Related Matters."
Dividend Reinvestment Plan and Common Stock Purchase Plan Participants.
If you are a participant in the Dividend Reinvestment and Stock Purchase Plan
or Common Stock Purchase Plan, your proxy will also serve to direct the plan
administrator to vote any shares of common stock held for you under either plan
at the close of business on the record date. Shares beneficially owned by
participants in the plans for which no proxy or other
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voting directions are received will not be voted. Your form of proxy will
permit you to vote the shares held in the plan.
401(k) Plan Participants. If you are a participant in our 401(k) plan
you may vote an amount of shares equivalent to the interest in our common stock
credited to your account as of the record date. Your proxy will serve as
voting instructions for the trustee of the 401(k) plan. If you own shares
through the 401(k) plan and do not vote, the plan trustees will vote the plan
shares in the same proportion as shares for which instructions were received
under the plan. Your form of proxy will permit you to vote the shares held in
the plan.
QUORUM, REQUIRED VOTE, AND RELATED MATTERS
Quorum. A quorum is present if a majority of the votes entitled to be
cast on a proposal are represented at the annual meeting in person or by proxy.
For purposes of determining a quorum, shareholders who are present in person or
are represented by proxy, but who abstain from voting, are considered present
and count toward the determination of the quorum. Shares reported as broker
non-votes are also considered to be shares present for purposes of determining
whether a quorum is present.
Election of Directors. Directors are elected by a plurality of the votes
cast. For this purpose, a "plurality" means that the individuals receiving the
largest number of votes are elected as directors, up to the maximum of the
three directors to be chosen at the annual meeting. You may vote in favor of
the nominees specified on the accompanying proxy form or may withhold your vote
as to one or more of such nominees. Shares withheld or not otherwise voted in
the election of directors (because of abstention, broker non-vote, or
otherwise) will have no effect on the election of directors.
Change of Company Name to "Wausau Paper Corp." Proposal No. 2 (see
"Proposal No. 2 - Approval of Name Change to "Wausau Paper Corp.") will be
approved if two-thirds of the shares of stock issued and outstanding on the
record date are voted at the annual meeting vote for approval. Therefore,
shares not represented at the annual meeting, broker non-votes, and abstentions
will have the same effect as a vote cast against the proposal.
All Other Proposals. As of the date of this proxy statement, we do not
anticipate that any other proposals will be brought before the annual meeting.
Generally, proposals other than the election of directors which are brought
before the meeting will be approved if the votes cast for the proposal exceed
the votes cast against the proposal.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
GENERAL INFORMATION
The Nomination Process. Nominations for director are recommended to the
Board by the Corporate Governance Committee. The Committee operates under a
charter which is available under "About Wausau Paper - Corporate Governance" on
the Company's website at www.wausaupaper.com. The Board has determined that
all members of the Committee are independent directors under New York Stock
Exchange, Inc. ("NYSE") listing standards. See "- Corporate Governance
Guidelines and Committees of the Board of Directors - Corporate Governance
Committee," page 5, for more information on the Committee.
Candidates for election to the Board may be identified for initial
consideration by the Committee from a wide variety of potential sources. For
example, the Committee will consider candidates for nomination from among
incumbents whose term will expire at the next annual meeting, persons
identified by other members of the Board, executive officers, shareholders, and
persons identified by a professional search firm should the Committee believe
it appropriate to engage such a firm to assist it. To recommend an individual
for consideration, a shareholder should mail or otherwise deliver a written
recommendation to the Committee not later than the December 1 immediately
preceding the annual meeting for which the individual is to be considered for
inclusion as a nominee of the Board. At a minimum, a shareholder
recommendation should include the
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individual's current and past business or professional affiliations and
experience, age, stock ownership, particular qualifications, and such other
information as the shareholder deems relevant to assist the Committee in
considering the individual's potential service as a member of the Board.
Qualifications. In reviewing potential nominees, the Committee will
consider the age, skills, and experience of current Board members and the
requirement under our Corporate Governance Guidelines that a majority of the
Board members must be independent, as determined in accordance with NYSE
listing standards. At a minimum, nominees must satisfy the qualification
requirements included in our Guidelines (which are also posted on our website),
including the provision that no person may be elected a director if that person
has attained age 70 as of the date of the election. All potential nominees
submitted to or identified by the Committee will be evaluated on a similar
basis for their level of qualifications and experience.
The Committee believes that persons recommended by it to the Board should
possess strong intellectual skills, have had a successful career in business,
higher education, or a profession which demonstrates an ability to manage a
complex organization, have a reputation for personal and professional
integrity, be able to exercise a sound and independent business judgment, and
understand the economic, financial, and operational issues to be addressed by
the Company. Directors whose terms of office will expire at the next annual
meeting are considered by the Committee on the basis of these qualities and
also on the basis of their service to the Company during their term in office.
ELECTION OF DIRECTORS
The number of directors will increase to eight effective with the
election of directors at the annual meeting. As increased, the Board will be
divided into three classes consisting of three Class I and Class III directors,
and two Class II directors, respectively. One class of directors is to be
elected at each annual meeting of shareholders to serve a three-year term. Any
director appointed by the Board to fill a newly created directorship is
required to stand for reelection by the shareholders at the first annual
meeting following his or her appointment by the Board.
Upon recommendation of the Corporate Governance Committee, the Board has
nominated Gary W. Freels and Thomas J. Howatt for reelection, and Michael M.
Knetter for election, as Class III directors for terms of office which will
expire at the annual meeting of shareholders to be held in 2008. Mr. Knetter
was recommended to the Committee by an executive officer of the Company other
than the CEO. No third party was engaged by the Committee to assist it in its
search for nominee candidates. In the event any nominee should become unable
or unwilling to be a nominee for election at the annual meeting, it is the
intention of the proxies to vote for such substitute or substitutes as may be
designated by the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE THREE
NOMINEES FOR CLASS III DIRECTOR. The following table sets forth information
concerning the business background and experience of the Board nominees and all
continuing directors. Unless specified, all current positions listed for a
nominee or director have been held for at least five years. Directors whom the
Board has determined are independent under the criteria of the NYSE listing
standards (or nominees who will meet such criteria) are denoted by an asterisk
(*).
PRINCIPAL OCCUPATION CLASS AND YEAR
AND OTHER IN WHICH TERM DIRECTOR
NAME AND AGE DIRECTORSHIPS WILL EXPIRE SINCE
NOMINEES
Gary W. Freels*, 56 President, Alexander Properties, Inc. (investment Class III 1996
management); formerly President, M&I First 2008
American Bank
Thomas J. Howatt, 55 President and Chief Executive Officer of the Class III 2000
Company since August, 2000; formerly Senior Vice 2008
President, Printing & Writing Group
3
Michael M. Knetter*, 44 Dean, School of Business, University of Wisconsin Class III -
- Madison since July, 2002; formerly, Professor and 2008
Associate Dean, Tuck School of Business, Dartmouth
College; also a trustee of Lehman Brothers First Trust
Income Opportunity Fund and a director of Great
Wolf Resorts, Inc.
CONTINUING DIRECTORS
Walter Alexander*, 70 President of Alexander Lumber Co.; also a Class I 1997
director of Old Second Bancorp. Inc. 2006
San W. Orr, Jr., 63 Chairman of the Board of the Company Class I 1970
and Advisor, Estates of A.P. Woodson 2006
and Family; Chief Executive Officer of the
Company (2000; 1994-1995; 1989-1990); also
a director of Marshall & Ilsley Corporation
David B. Smith, Jr.*, 66 Consultant; formerly Vice President, Class I 1972
Labor Relations, Weyerhaeuser Company 2006
Dennis J. Kuester*, 63 Chairman and CEO, and a director of Marshall Class II 2001
& Ilsley Corporation; also a director of Modine 2007
Manufacturing Company
Andrew N. Baur*, 60 Chairman of the Board of Southwest Bank of Class II 2004
St. Louis, a wholly-owned subsidiary of Marshall 2007
& Ilsley Corporation, since October, 2002; former
Chairman of the Board and CEO of Mississippi Valley
Bancshares, Inc., and its subsidiary, Southwest Bank
of St. Louis; also a director of Marshall & Ilsley
Corporation and Bakers Footwear Group, Inc.
BOARD OF DIRECTORS
Meetings of the Board. The Board met six times in 2004. Each of the
directors attended at least 75% of the total number of the meetings of the
Board and the committees on which they served during the last fiscal year.
Meetings of Non-management Directors. The Board's non-management
directors meet in executive session following each February Board meeting and
establish a schedule of additional meetings. The non-management directors must
meet at least twice each year under the Company's Corporate Governance
Guidelines. At their February, 2005, meeting, the non-management directors
selected Dennis J. Kuester to preside over their meetings. Shareholders and
others may communicate directly with Mr. Kuester or any other non-management
directors by following the procedures set forth in the following paragraph.
Communicating with the Board. Shareholders and others may communicate
with the Board by writing to the Chairman at the Company's corporate office,
100 Paper Place, Mosinee, Wisconsin 54455-9099. Individual directors may also
be contacted in writing at the same address. Mail may be opened and sorted
before forwarding to the director to whom the mail was addressed. If a
communication does not involve an ordinary business matter and if a particular
director is named, the communication will be forwarded to that director. If no
particular director is named, such communication will be forwarded to the
Chairman of the appropriate Board committee. If a complaint or concern
involves accounting, internal accounting controls, or auditing matters, the
correspondence may be addressed to, and will be forwarded to the Chairman of
the Audit Committee. Our website also describes
4
the Audit Committee's concern or complaint procedures. In order to expedite
a response, the non-management directors have instructed management to receive,
research, and respond, if appropriate, on behalf of the Company's
non-management directors or a particular director, to any communication
regarding an ordinary business matter.
Attendance at Annual Meetings. The Board has an informal policy under
which all directors are expected to attend the annual meeting of shareholders.
Each of our directors attended the annual meeting held in 2004.
CORPORATE GOVERNANCE GUIDELINES AND COMMITTEES OF THE BOARD OF DIRECTORS
Available Corporate Governance Documents. Our Corporate Governance
Guidelines set forth basic principles and guidelines concerning the
qualifications and responsibilities of directors, Board committees, and other
matters. In addition, we have adopted a code of business conduct and ethics
for all employees and a separate code of ethics which also covers our CEO and
senior financial officers. The Corporate Governance Guidelines, committee
charters, and codes of ethics are posted on our website. See "About Wausau
Paper - Corporate Governance" at www.wausaupaper.com. A copy of these
documents may also be obtained from the Secretary of the Company by writing to
our corporate office.
Our Corporate Governance Guidelines provide that the Company shall have
Audit, Compensation, and Corporate Governance Committees in addition to any
other committees the Board considers appropriate. Each of the members of the
following committees satisfies the criteria for independence under applicable
rules of the Securities and Exchange Commission ("SEC"), NYSE listing
standards, and other applicable regulations.
Audit Committee. The Audit Committee, established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), assists the Board in monitoring (1) the integrity of the
financial statements of the Company, (2) the independent auditor's
qualifications and independence, (3) the performance of the Company's internal
audit function and independent auditors, and (4) compliance by the Company with
legal and regulatory requirements. The Committee has the sole authority to
appoint or replace the Company's independent auditor. Members of the Committee
may not serve on the audit committees of more than two other public companies.
The members of our Audit Committee also satisfy the additional NYSE and SEC
rules for independence applicable to audit committees of listed companies. The
Audit Committee charter was amended in 2004, primarily to reflect the Audit
Committee's role in overseeing the Company's responsibility to maintain an
appropriate and effective system of internal controls. The amended charter is
included with this proxy statement as Appendix A.
Mr. Freels (Chairman), Mr. Alexander, Mr. Baur, and Mr. Kuester serve on
the Audit Committee. The full Committee met nine times and there were six
meetings between management and the Chairman of the Committee in 2004. See
"Report of the Audit Committee and Related Matters," for the report of the
Audit Committee and other information relating to the selection of, and fees
paid to, the independent auditor.
Compensation Committee. The Compensation Committee is appointed by the
Board to (1) discharge the Board's responsibilities relating to compensation of
the Company's directors and officers, and (2) produce an annual report on
executive compensation for inclusion in the Company's proxy statement. The
Committee has overall responsibility for approving and evaluating director and
officer compensation plans, policies, and programs, and approves the granting
of equity-based incentives. The Committee's report on the Company's
compensation policies for executive officers is included in this proxy
statement under the subcaption "Executive Compensation - Report of the
Compensation Committee." Mr. Alexander (Chairman), Mr. Freels, and Mr. Smith
serve as members of the Compensation Committee. The Committee met four times
in 2004.
Corporate Governance Committee. The Corporate Governance Committee is
appointed by the Board to (1) identify individuals qualified to become Board
members, and to recommend to the Board the director nominees for the next
annual meeting of shareholders, (2) recommend to the Board the Corporate
Governance Guidelines applicable to the Company, (3) lead the Board in its
annual review of the Board's performance, and
5
(4) recommend to the Board director nominees for each committee. Mr. Kuester
(Chairman), Mr. Baur, and Mr. Smith serve on the Corporate Governance
Committee. The Committee met three times in 2004.
COMPENSATION OF DIRECTORS
Each director is paid a retainer of $2,000 per month and $1,000 for each
meeting of the Board attended. In addition, the chairmen of the Executive and
Audit Committees each receive an annual retainer of $5,000 and the chairmen of
the Corporate Governance and Compensation Committees each receive an annual
retainer of $3,000. Directors receive a meeting fee of $500 for each meeting
of a Board committee attended. Upon initial election to the Board, a director
receives an option to purchase 15,000 shares of our stock at the current market
price. Upon reelection to a three-year term, a director receives an option to
purchase 10,000 shares of our stock at the current market price. Mr. Smith
participates in our retiree health insurance plan and the other directors who
are officers of the Company receive salaries and benefits related to their
duties. No other director received any compensation or benefits other than the
standard arrangements described above.
The Company maintains a deferred compensation program under which
directors may elect each year to defer some or all of the fees otherwise
payable in cash during the year. Amounts deferred become payable in cash in a
lump sum or in quarterly installments after a director's termination of
service. In the event a director's service terminates in connection with a
change of control of the Company, as defined in the plan, payment of all
deferred amounts will be made in a lump sum. During the period in which
payment is deferred, a director may elect that the deferred fees be credited
with interest at the prime rate in effect as of each calendar quarter, or that
the deferred fees be converted into common stock equivalent units. If common
stock equivalent units are elected, the director's account is also credited
with stock equivalent units representing the shares of our common stock which
could have been purchased with the cash dividends which would have been paid
had the units been actual common stock. Stock equivalent units are converted
to cash based upon the fair market value of our common stock at the time of
distribution. During 2004, Mr. Alexander, Mr. Baur, Mr. Howatt, Mr. Freels,
and Mr. Kuester participated in the plan and deferred all or a portion of the
retainer or meeting fees otherwise payable to them.
Directors who began service prior to January 1, 2003, and have at least
five years of service at termination are eligible to receive a monthly benefit
equal to the monthly retainer and meeting fees in effect at termination of
service. Benefits will be paid for a period of time equal to the retired
director's period of service on the Board, including service on the board of
directors of Mosinee Paper Corporation. Retirement benefits terminate at death
and are accelerated in the event of a change of control of the Company, as
defined in the policy. Directors who began service after December 31, 2002,
are not eligible for retirement benefits.
DETERMINATION OF INDEPENDENCE OF DIRECTORS
Our Corporate Governance Guidelines provide that a majority of the Board
and all members of our Audit, Compensation, and Corporate Governance Committees
will consist of independent directors, as determined in accordance with NYSE
listing standards. During 2004 we engaged in various business transactions
with companies for which some of our directors serve as directors or officers.
Each of these transactions was done in the ordinary course of business and at
prices and on terms prevailing at the time for comparable transactions with
unrelated persons. The Board has adopted categorical standards to assist it in
determining whether any of such transactions create a material relationship
which precludes independence under NYSE listing standards. In general terms,
and absent other factors, the Board's categorical standards provide that a
customer relationship is not material if the Company does not account for more
than 2% of the revenue of the director's business and not more than 2% of the
Company's revenue is derived from the director's business. Similarly, in the
case of a lending relationship, absent other factors, the relationship is not
material if the Company obtained the credit on the same terms as other
borrowers, the credit would have been available from other lenders on
comparable terms, and the interest and fees paid by the Company does not exceed
2% of the lender's total income. The Board's categorical standards are posted
on our website. See "About Wausau Paper - Corporate Governance" at
www.wausaupaper.com.
6
Each of the Company's non-management directors meet the categorical
standards adopted by the Board and none of our non-management directors receive
any compensation from the Company other than in his capacity as a director.
The Board has determined that five of our Board members have no material
relationship with the Company and satisfy the requirements for independence
under the NYSE listing standards (Mr. Baur, Mr. Alexander, Mr. Freels, Mr.
Kuester, and Mr. Smith). Upon the election of Mr. Knetter at the annual
meeting, six of our eight directors, including Mr. Knetter, will satisfy these
independence criteria.
STOCK OWNERSHIP
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS, AND 5% SHAREHOLDERS
The following table sets forth, based on statements filed with the SEC or
information otherwise known to us, the name of each person believed by us to
own more than 5% of our common stock and the number of shares of common stock
held by each person.
COMMON SHARES PERCENT OF
NAME AND ADDRESS BENEFICIALLY OWNED CLASS
Wilmington Trust Company 7,194,185 13.92%
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
Trustees of David B. Smith Family Trust 3,167,789(1) 6.13%
1206 E. Sixth Street
Merrill, WI 54452
Dimensional Fund Advisors Inc 2,779,614 5.38%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
(1)David B. Smith, Jr., Thomas P. Smith, Margaret S. Mumma, and
Sarah S. Miller are the co-trustees of the David B. Smith Family
Trust (the "Trust") which owns 2,368,372 shares of common stock.
Including common stock which is beneficially owned by the
trustees on an individual basis and common stock owned by the
Trust, each of the trustees has sole or shared investment
authority with respect to the following percentages of common
stock: David B. Smith, Jr., 4.70%; Thomas P. Smith, 4.75%;
Margaret S. Mumma, 5.29%; and Sarah S. Miller, 5.14%.
The following table sets forth the number of shares of common stock
beneficially owned as of the record date by each of the directors, each person
nominated to become a director, each of our current executive officers named in
the summary compensation table, and all such nominees, directors, and executive
officers as a group.
COMMON STOCK PERCENT OF
NAME BENEFICIALLY OWNED CLASS
Walter Alexander 41,212(1) *
Andrew N. Baur 25,000(2) *
Gary W. Freels 990,065(3) 1.91%
Thomas J. Howatt 513,633(4) *
Dennis J. Kuester 25,000(5) *
San W. Orr, Jr. 1,603,716(6) 3.09%
David B. Smith, Jr. 2,427,491(7) 4.69%
Michael M. Knetter 0(8) *
Stuart R. Carlson 135,284(9) *
Pete R. Chiericozzi 25,000(10) *
Albert K. Davis 107,335(11) *
Scott P. Doescher 106,335(12) *
All directors and executive officers as a group (14 persons) 6,191,594(13) 11.67%
7
* Less than 1%
(1) Includes 25,000 shares which may be acquired through the exercise of options on or before
60 days from February 18, 2005.
(2) Includes 15,000 shares which may be acquired through the exercise of options on or before
60 days from February 18, 2005.
(3) Includes 975,065 shares of common stock held by two charitable foundations of which Mr.
Freels serves as president and/or a director and 15,000 shares which may be acquired
through the exercise of options on or before 60 days from February 18, 2005.
(4) Includes 498,817 shares which may be acquired through the exercise of options on or before
60 days from February 18, 2005, and 9,098 shares held under 401(k) plan on December 31, 2004.
(5) Includes 25,000 shares which may be acquired through the exercise of options on or before 60
days from February 18, 2005. The Marshall & Ilsley Trust Company is trustee of a Company
retirement plan and holds our common stock as such trustee and in its various other fiduciary
capacities, including the shares held as custodian of the David B. Smith Family Trust
described in note (7). Mr. Kuester is the Chairman and CEO and a director of Marshall &
Ilsley Corporation, the parent corporation of the Trust Company. Mr. Kuester disclaims any
beneficial interest in the shares held of record by the Trust Company.
(6) Includes 1,083,907 shares as to which Mr. Orr exercises shared voting and investment power
(and as to which beneficial ownership is disclaimed) and 216,668 shares which may be
acquired through the exercise of options on or before 60 days from February 18, 2005.
(7) Includes 25,000 shares which may be acquired through the exercise of options on or before
60 days from February 18, 2005. David B. Smith, Jr. is a co-trustee of the David B. Smith
Family Trust which holds 2,368,372 shares of common stock. See note (1) under the preceding
table.
(8) Mr. Knetter is a nominee for election as a Class III director.
(9) Includes 134,800 shares which may be acquired through the exercise of options on or before 60
days from February 18, 2005.
(10) Includes 25,000 shares which may be acquired through the exercise of options on or before 60
days from February 18, 2005.
(11) Includes 106,000 shares which may be acquired through the exercise of options on or before 60
days from February 18, 2005.
(12) Includes 106,000 shares which may be acquired through the exercise of options on or before 60
days from February 18, 2005.
(13) The shares disclosed incorporate footnotes (1) - (12).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and officers and
persons who own more than 10% of the common stock outstanding ("reporting
persons") to file reports of ownership and changes in ownership with the SEC
and the New York Stock Exchange. Reporting persons are also required by SEC
regulations to furnish us with copies of all Section 16(a) forms filed by them
with the SEC. We review copies of the Section 16(a) forms received by us or
rely upon written representations from certain of these reporting persons to
determine compliance with the Section 16(a) regulations for purposes of this
proxy statement. Based on our review of these reports and the representations
of the reporting persons, we believe that all reports required to be filed by
Section 16(a) were filed on a timely basis.
REPORT OF THE AUDIT COMMITTEE AND RELATED MATTERS
AUDIT COMMITTEE REPORT
During the 2004 fiscal year, the Audit Committee met at various times
with senior members of the Company's financial management team and the
Company's independent auditor to review and discuss the Company's financial
statements (including critical accounting policies, significant accounting
issues, and assumptions made in connection with those policies and preparation
of the financial statements), financial management issues, and the Company's
system of internal controls. The Committee also met with the Company's general
legal counsel to review and discuss legal claims and contingencies.
8
The Audit Committee met with the Company's senior financial management
team and the independent auditor to review the Company's audited financial
statements for the 2004 fiscal year prior to their issuance. At that meeting,
the Committee received assurances from senior financial management that all
financial statements had been prepared in accordance with accounting principles
generally accepted in the United States. In addition, the Committee asked the
independent auditor to address and respond to questions concerning the audited
financial statements, the audit process, and other related matters. This
discussion centered on the following questions posed by the Committee to the
independent auditor:
(bullet) Are there any accounting judgments made by management in
preparing the financial statements that would have been made
differently had the auditor prepared and been responsible for the
financial statements?
(bullet) Based on the auditor's experience and its knowledge of the Company, do
the Company's financial statements fairly present to investors, with
clarity and completeness, the Company's financial position and
performance for the reporting period in accordance with generally
accepted accounting principles and Securities and Exchange Commission
("SEC") disclosure requirements?
(bullet) Based on the auditor's experience and its knowledge of the Company,
has the Company implemented all internal controls and internal audit
procedures that are appropriate for the Company?
In connection with its review of the audited financial statements, the
Audit Committee discussed with the independent auditor the independence of the
firm under SEC rules for the purposes of expressing an opinion on the Company's
financial statements, and considered whether the provision of nonaudit services
is compatible with maintaining the auditor's independence. The Committee
received from the independent auditor the written disclosure and the letter
relating to the independence of the firm required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees). The
Committee also discussed with the independent auditor the matters required to
be discussed pursuant to Statement on Auditing Standards No. 61 (Communication
With Audit Committees).
Management has the primary responsibility for the Company's financial
statements and the overall reporting process. It is not the duty of the Audit
Committee to conduct auditing or accounting reviews or procedures. The
Committee acts only in an oversight capacity and it necessarily relies on the
work and assurances provided by management and the independent auditor and it
therefore does not have an independent basis to determine whether management
has maintained appropriate accounting and financial reporting principles or
policies or appropriate internal controls and procedures. Accordingly, the
Committee's reviews of the Company's financial statements and its discussions
with the Company's senior financial management team and the independent auditor
do not guarantee that the Company's financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
or that the audit has been carried out in accordance with auditing standards
generally accepted in the United States.
In reliance on the reviews and discussions described in this report and
on the report of the independent auditor, the Audit Committee recommended to
the Board of Directors that it approve the inclusion of the Company's audited
financial statements in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2004, for filing with the SEC.
AUDIT COMMITTEE
Gary W. Freels (Chairman)
Walter Alexander
Andrew N. Baur
Dennis J. Kuester
9
AUDIT COMMITTEE PRE-APPROVAL POLICIES
The Audit Committee is required to pre-approve audit and non-audit
services performed by the Company's independent auditor. Under its pre-
approval policy, a schedule of specific audit, audit-related, and tax services
and their related fees received pre-approval in 2004 after review by the
Committee of appropriate detailed back-up documentation and receipt of
confirmation from management and the independent auditor that each non-audit
service included in the schedule may be performed by the independent auditor
under applicable SEC and professional standards. Any services not included in
the pre-approved schedule of services and fees must be specifically
pre-approved by the Committee. To ensure prompt handling of unexpected
matters, the Committee has delegated to the chairman, and in his absence, to
Mr. Baur, the authority to grant pre-approvals for services, other than
internal control related services, provided that any such pre-approvals must
be presented to the full Committee at its next meeting.
In granting approval for a service, the Audit Committee (or the
appropriate designated Committee member) considers the type and scope of
service, the fees, whether the service is permitted to be performed by an
independent auditor, and whether such service is compatible with maintaining
the auditor's independence.
INDEPENDENT AUDITOR AND FEES
The Audit Committee appointed Deloitte & Touche LLP ("Deloitte") as
independent auditor to audit the books, records, and accounts of the Company
for the fiscal year ended December 31, 2004. Representatives of Deloitte will
be present at the annual meeting and will have an opportunity to make a
statement or respond to appropriate questions.
The following table presents aggregate professional fees paid or accrued
during the 2004 and 2003 fiscal years in the categories specified. All
services performed received pre-approval by the Audit Committee.
2004 2003
Audit Fees(1) $ 578,700 $ 242,038
Audit-Related Fees(2) 168,258 117,323
Tax Fees(3) 288,713 573,587
All Other Fees 0 0
$1,035,671 $ 932,948
(1)Audit fees consisted of audit work performed in the preparation of
financial statements, as well as work generally only the independent
auditor can reasonably be expected to provide, such as statutory
audits, review of SEC filings, and the attestation of management's
report on the internal control of financial reporting.
(2)Audit-related fees consisted principally of audits of employee benefit
plans and advisory services relating to compliance with requirements
of Sarbanes-Oxley Act of 2002.
(3)Tax fees for 2004 represent fees of $215,201 related to tax compliance
(tax returns, refunds, and payment planning) and fees of $73,512 for
tax consultation and planning which provided, or are expected to
provide, benefits to the Company in excess of the fees paid. Tax fees
for 2003 represent fees of $232,835 related to tax compliance (tax
returns, refunds, and payment planning) and fees of $340,752 for tax
consultation and planning which provided, or are expected to provide,
benefits to the Company in excess of the fees paid.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth compensation earned by, or awarded or paid by
us to, the CEO as of December 31, 2004, and to each of our four most highly
compensated executive officers as of December 31, 2004, whose salary and bonus
exceeded $100,000 for the last fiscal year.
10
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM
COMPENSATION
AWARDS
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL YEAR SALARY(1) BONUS(1) COMPENSATION AWARD(S) OPTIONS/ COMPENSATION
POSITION ($) ($) SARS(#)
GRANTED LAPSED
Thomas J. Howatt, 2004 $651,891 $504,713 $0 $166,683(2) 120,000 0 $52,574(3)
President and CEO 2003 $578,702 $126,204 $0 $51,994 0 0 $56,195
2002 $503,702 $255,965 $0 $0 54,000 54,000(4) $59,560
Stuart R. Carlson 2004 $321,491 $217,121 $0 $39,059(2) 33,400 0 $ 6,970(5)
Executive Vice President, 2003 $308,392 $ 77,136 $0 $25,673 0 0 $ 6,912
Administration 2002 $293,740 $149,382 $0 $0 36,000 36,000(4) $ 6,717
Albert K. Davis, Senior 2004 $270,945 $210,505 $0 $34,497(2) 29,400 0 $ 5,228(5)
Vice President, 2003 $250,603 $ 82,198 $0 $21,588 0 0 $ 5,100
Specialty Products 2002 $235,740 $ 75,082 $ 4,729(6) $0 36,000 36,000(4) $24,835(7)
Pete R. Chiericozzi, Senior 2004 $250,340 $175,845 $ 4,999(6) $30,291(2) 25,800 0 16,050(5)(7)
Vice President, Towel & Tissue 2003 $ 73,878 $ 27,234 $ 3,784(6) $19,989 93,000 18,000(4) $26,348(7)
Scott P. Doescher, Senior 2004 $252,681 $166,449 $0 $31,580(2) 27,000 0 $ 5,228(5)
Vice President, Finance, 2003 $240,362 $ 60,125 $0 $20,147 0 0 5,107
Secretary and Treasurer 2002 $220,987 $112,349 $0 $0 36,000 36,000(4) $ 4,982
(1)Includes compensation deferred by officers under 401(k) plan and Executive Officers' Deferred Compensation Plan.
(2)The value indicated in table is based on the closing price of the Company's stock attributable to the grants
of performance units or restricted stock as determined on the date of award (December 17, 2004, $16.96 per
share). Mr. Howatt's award includes 5,000 shares of restricted stock which will vest on December 17, 2005.
Dividends paid on the restricted stock are held in escrow and distributed in cash only upon vesting of the
underlying stock. Vesting of all performance units awarded in 2004 is subject to the satisfaction of Company
performance criteria in 2005, and service by the grantee through December 31, 2006. Holders of performance
units are also entitled to dividend equivalents which result in additional performance units being credited to
the named individuals on each cash dividend payment date based upon the cash dividend rate and the price of the
Company's stock on such date. At December 31, 2004, the number of shares attributable to awards held by the
officers named in the table (including shares attributable to hypothetical dividends on performance units) and
the value of such shares based on the closing price of the Company's common stock at December 31, 2004 ($17.86)
were: Mr. Howatt, 13,852 shares, $247,397; Mr. Carlson, 4,290 shares, $76,619; Mr. Davis, 3,705 shares,$66,168;
Mr. Doescher, 3,421 shares, $61,104; and Mr. Chiericozzi, 3,333 shares, $59,527.
(3)Director's fees of $30,000, 401(k) contributions of $5,228, and credits of $17,346 payable under the
Company's flexible benefit plan. Mr. Howatt's fees were deferred under the Deferred Compensation Plan for
Directors described under the caption "Director Compensation."
(4)One-half of the options granted in 2002 were subject to satisfaction of financial performance conditions by
the Company in each of fiscal years 2003 and 2004. Mr. Chiericozzi received a grant for the 2004 fiscal year
following his employment in September, 2003. Because financial performance conditions were not satisfied in
either year, all options have lapsed.
(5)Contributions of $5,228 under 401(k) plan and, with respect to Mr. Carlson, credits payable under the
Company's flexible benefit plan of $1,742.
(6)Reimbursement for taxes under relocation policy.
(7)Includes, as reimbursement of moving expenses under relocation policy with respect to: Mr. Davis, $20,160;
and Mr. Chiericozzi, $10,822 in 2004 and $24,764 in 2003.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Grants. We maintain stock appreciation rights ("SAR") and stock option
plans pursuant to which grants may be made to key employees. The following
grants were made in 2004 to executive officers named in the summary
compensation table.
11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
ALTERNATE
INDIVIDUAL GRANT DATE
GRANTS VALUE
% OF TOTAL MARKET
OPTIONS/SARS PRICE OF
GRANTED TO EXERCISE OR STOCK ON GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE DATE OF EXPIRATION PRESENT
NAME GRANTED (#)* FISCAL YEAR ($/SH) GRANT DATE VALUE $(1)
Mr. Howatt 70,000(2) 12.66% $17.40 $17.40 12/17/2024 $410,200
50,000(3) 9.04% $17.40 $17.40 12/17/2024 $293,000
Mr. Carlson 33,400(2) 6.04% $17.40 $17.40 12/17/2024 $195,724
Mr. Davis 29,400(2) 5.32% $17.40 $17.40 12/17/2024 $172,284
Mr. Chiericozzi 25,800(2) 4.66% $17.40 $17.40 12/17/2024 $151,188
Mr. Doescher 27,000(2) 4.88% $17.40 $17.40 12/17/2024 $158,220
* All grants in 2004 were stock options.
(1) Determined pursuant to Black-Scholes option pricing model. The material
assumptions and adjustments incorporated into the Black-Scholes model in
estimating the value of the options reflected in the above table include
(a) an option term of 20 years; (b) risk-free rate of return (represented
by the interest rate on long-term U.S. Treasury securities with maturity
date corresponding to the term on the grant date); (c) volatility
calculated using daily stock prices for the 36-month period prior to the
grant date; (d) dividends representing the annualized dividend paid with
respect to the underlying common stock; and (e) reductions to reflect the
probability of a shortened term due to termination of employment prior to
the option expiration date. The particular assumptions used for each grant
date are:
RISK-FREE ANNUAL REDUCTION FOR
GRANT RATE OF DIVIDEND SHORTENED
DATE RETURN VOLATILITY DIVIDENDS YIELD TERM
12/17/2004 4.23% 38.20% $0.34 1.95% 24.22%
The actual value, if any, a grantee will realize upon exercise of an option
will depend on the excess of the market value of the common stock over the
exercise price on the date the option is exercised. See "Report of the
Compensation Committee."
(2) Vesting is subject to satisfaction of financial performance conditions by
the Company in fiscal 2005.
(3) Vesting is subject to continued service through December 17, 2005.
Exercise and Year-End Value. The following table sets forth information
regarding the exercise of stock options or SARs in 2004 by each of the
executive officers named in the summary compensation table and the December 31,
2004, value of unexercised, in-the-money stock options or SARs held by each
such person.
12
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES VALUE OPTIONS/SARS AT FY-END(#) THE-MONEY OPTIONS/SARS
ACQUIRED ON REALIZED AT FY-END ($)
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Mr. Howatt 0 0 498,817* 120,000* $3,658,718*(1) $ 67,200
0 0 22,183(dagger) 0 $ 435,481(dagger) $ 0
Mr. Carlson 0 0 134,800* 33,400* $ 105,068* $ 18,704
0 0 46,200(dagger) 0 $ 644,712(dagger) $ 0
Mr. Chiericozzi 0 0 25,000* 75,800* $ 124,500* $263,448
Mr. Davis 0 0 106,000* 29,400* $ 809,813*(1) $ 16,464
Mr. Doescher 0 0 106,000* 27,000* $ 518,700* $ 15,120
* Options.
(dagger)SARs exercisable only for cash. In cases of SAR valuations, includes,
in cases where the grant so provides, the value of hypothetical shares
credited to grantee under provision in SAR grant which assumes cash
dividends are paid on underlying shares and invested in hypothetical common
stock.
(1) Value of options with respect to 32,444 shares for Mr. Howatt and 13,819
shares for Mr. Davis includes the value of hypothetical shares credited
under the 1991 Dividend Equivalent Plan which assumes cash dividends are
paid on underlying shares and invested in hypothetical common stock.
RETIREMENT BENEFITS
Our retirement plan covers all salaried employees and bases a
participant's pension on the value of a hypothetical account balance in the
plan. A participant will receive an annual credit to his account equal to
4.25% of covered compensation up to the Social Security taxable wage base and
8.5% of the covered compensation in excess of the taxable wage base, plus an
interest credit on all prior accruals equal to the 30-year U.S. Treasury rate.
For 2004, a discretionary additional credit of 5% was also approved by the
Board. The benefit payable under the plan is determined by converting the
hypothetical account balance credits into annuity form.
Executive officers also participate in a nonqualified supplemental
retirement plan under which benefits are determined by compensation without
regard to limitations contained in the cash balance plan. The supplemental
plan will provide an executive officer with a retirement benefit equal to 50%
of his average salary and bonus upon retirement at age 62 after 10 years of
service as an executive officer. The supplemental plan provides for an offset
of benefits payable under the cash balance plan. Accrued benefits under the
supplemental plan will be paid in a lump sum in the event of a change of
control of the Company, as defined in the supplemental plan.
13
Based on average covered compensation as of December 31, 2004, the
following estimated single life annuity benefits would be payable from the cash
balance and supplemental retirement plans upon retirement at normal retirement
age under the cash balance plan (age 65) to the following executive officers:
YEARS OF ADDITIONAL TOTAL AVERAGE
SERVICE QUALIFIED SUPPLEMENTAL RETIREMENT COVERED
EXECUTIVE OFFICER AND AGE(1) PLAN BENEFIT PLAN BENEFIT BENEFIT REMUNERATION
Mr. Howatt 12; 55 $73,000 $289,000 $362,000 $724,000
Mr. Carlson 13; 58 $33,000 $174,000 $207,000 $414,000
Mr. Davis 4; 57 $69,000 $ 87,000 $156,000 $311,000
Mr. Chiericozzi 1; 61 $ 1,000 $100,000 $101,000 $407,000
Mr. Doescher 3; 45 $48,000 $ 92,000 $140,000 $279,000
(1) Years of service as an executive officer under the supplemental plan.
Vesting under the supplemental plan with respect to the listed officers
requires attainment of age 55 and 10 years of service as an executive
officer. All officers except Mr. Chiericozzi are vested in their accrued
benefit under the cash balance plan.
Our Executive Deferred Compensation Plan permits an executive officer of
the Company to elect to defer up to 50% of his base salary and 100% of his
incentive compensation. The amounts deferred are credited with interest at the
prime rate from the date of deferral. A Participant's accrued balance is
distributed on a date elected by the participant subject to certain limitations
provided for in the plan. Distribution will be made pursuant to an installment
method of up to 120 months, or in a lump sum, as elected by the Participant.
The plan is unfunded.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee establishes and reviews base salaries of
executive officers and is responsible for the establishment and implementation
of executive bonus and incentive programs, general compensation policies, and
grants under stock incentive plans. This report describes the policies of the
Compensation Committee as in effect for the 2004 fiscal year.
General. The Committee's compensation policy is designed to align the
interests of executives and shareholders by making a significant portion of
each executive officer's compensation package directly related to the annual
performance of the Company and the performance of the Company's common stock.
The total compensation paid to executive officers and the retirement and other
fringe benefits provided by the Company are designed to offer a level of
compensation which is competitive with other companies in the paper industry.
Some, but not all, of the companies used for purposes of compensation
comparisons are included in the 36 companies which, in addition to the Company,
comprise the CoreData index of paper companies' stock performance under the
caption "Stock Price Performance Graph." The Committee makes compensation
comparisons only with those companies whose operations are similar to the
Company or which have operating units which are similar to the Company. Given
the disparity in size between companies which operate in the paper industry and
the difficulty in determining the precise duties of executive officers of other
companies, it is difficult to draw exact comparisons with the compensation
policies of other companies. The determination of executive compensation is,
therefore, subjective.
The Compensation Committee is aware that, except for certain plans
approved by shareholders, Section 162(m) of the Internal Revenue Code of 1986,
as amended, limits deductions to $1 million for compensation paid to the CEO
and each of the four most highly paid executive officers named in the summary
compensation table who are officers on the last day of the year. The Committee
reviews this limit and its application to the Company's compensation policies
as part of its compensation policy.
Base Compensation. The Compensation Committee does not rely on specific
salary and benefit comparisons, but does periodically consider and review
surveys of paper industry compensation and may retain
14
independent consultants in order to gauge the relationship of its executive
officers' base salaries and benefit levels to the levels of comparable paper
companies. Annual increases in the base salary of each of the Company's
executive officers are determined in accordance with the Committee's policy of
maintaining competitive salary levels with other paper industry companies
(as discussed above) and individual job performance.
Individual job performance in the prior fiscal year is the most important
factor considered by the Compensation Committee in annual reviews and in
determining appropriate increases in base salary. The CEO annually assesses
the job performance of executive officers who report to him. The CEO's base
salary is determined by the Committee on the same basis as that of the
Company's other executive officers, except that the Committee annually
establishes performance criteria for the CEO and reviews his performance.
Individual performance criteria generally include an evaluation of the
performance of the individual officer's fundamental duties and responsibilities
and the extent to which specific individual performance goals used to measure
incentive compensation have been achieved.
Incentive Compensation Based on Financial Performance of the Company and
Individual Performance. The Company's compensation policies are intended to
subject a significant portion of executive officer compensation to risks
relating to the Company's achievement of annual financial objectives.
Incentive compensation is predicated on the degree to which the Company
achieves specified goals, including, among others, targeted returns on capital
employed and achievement of individual performance objectives related to the
achievement of targeted rates of return on approved capital projects, increases
in mill operating efficiencies, and reductions in targeted components of
working capital.
Criteria used in the assessment of Mr. Howatt's eligibility for incentive
compensation in 2004 based upon individual objectives included the achievement
of targeted revenues from new products, targeted rates of return on approved
capital projects, and increases in mill operating efficiencies. The individual
performance objectives for executive officers other than the CEO vary by
individual job responsibilities. They may include, for example, achievement of
targeted levels of certain components of working capital, achievement of
targeted rates of return on approved capital projects, increases in
productivity and volume of product shipped, revenues derived from new products,
and in operating cost containment.
Stock Based Compensation. Executive officers participate in equity-based
plans at various levels. The Compensation Committee has not established formal
criteria by which the size of plan grants are determined, but the Committee
considers the amount and terms of any new grant and published data concerning
equity ownership and grants for executives within the paper industry. The
value of these grants are principally related to the long-term performance of
the common stock and, therefore, provide an identity of interests between
executive officers and the shareholders.
Compensation Committee Interlocks and Insider Participation. The
directors making this report are the only directors who served on the
Compensation Committee in 2004. Each member of the Committee is an independent
director under NYSE listing standards and none is a former officer of the
Company.
COMPENSATION COMMITTEE
Walter Alexander (Chairman)
Gary W. Freels
David B. Smith, Jr.
15
STOCK PRICE PERFORMANCE GRAPH
The following graph and table compare the yearly percentage change in the
cumulative total shareholder return on our common stock for the period
beginning December 31, 1999, and ending December 31, 2004, with the CoreData's
Russell 2000 and Paper and Paper Products Indices for the same periods. The
graph and table assume that the value of the investment in our common stock and
each index on December 31, 1999, was $100 and that all dividends were
reinvested. All information is based on stock prices on the last trading day
of the fiscal year.
[Stock Price Performance Graph deleted pursuant to Rule 304(d) of Regulation
S-T. Data reported in the graph is also reported in the following tabular
Form in the proxy statement delivered to shareholders.]
December 31,
1999 2000 2001 2002 2003 2004
Wausau-Mosinee Paper 100.00 89.68 110.21 105.39 130.96 177.11
CD Paper & Paper Products 100.00 90.81 89.17 81.48 102.54 114.11
Russell 2000 Index 100.00 95.68 96.66 75.80 110.19 129.47
16
PROPOSAL NO. 2 - APPROVAL OF NAME CHANGE TO "WAUSAU PAPER CORP."
PROPOSED AMENDMENT TO CHANGE THE COMPANY'S NAME TO "WAUSAU PAPER CORP."
The Board has proposed an amendment to Article 1 of our restated articles
of incorporation to change the name of the Company to "Wausau Paper Corp." from
the present "Wausau-Mosinee Paper Corporation." As amended, Article 1 would
read as follows:
Article 1
The name of the corporation shall be Wausau Paper Corp. (the "Corporation").
In September 2004, we announced that the Company would begin to operate
under the name "Wausau Paper" as part of a broader initiative to create a
unified brand recognition across our three business segments. As part of the
branding initiative, all of our products were aligned under the Wausau Paper
name and are now sold under the Wausau Paper label. This change has allowed us
to create a consistent brand in each of our markets while implementing
corporate-wide marketing and cross-selling efforts.
At the time we announced the change in our commercial name, we indicated
that we would seek to change the legal name of the Company at the annual
meeting. Accordingly, the Board has proposed and recommended that the
shareholders vote "FOR" the amendment of our restated articles of incorporation
to change the legal name of the Company to "Wausau Paper Corp."
If the amendment to our restated articles of incorporation is approved at
the annual meeting, we intend to make it effective by promptly filing the
amendment with the Wisconsin Department of Financial Institutions. Our
trading symbol on the New York Stock Exchange was changed to "WPP" in September
and no further change in that symbol will be required as a result of the change
in our legal name.
VOTE REQUIRED FOR APPROVAL OF THE AMENDMENT
Approval of the amended plan requires the affirmative vote of two-thirds
of our shares which are issued and outstanding on the record date, February 18,
2005. Shares not voted at the annual meeting, including broker non-votes and
abstentions, will have the effect of a vote against the proposed amendment.
All shareholders are requested to specify their vote on the enclosed form
of proxy. If no specification is made, the proxy will be voted for approval of
the plan.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE AMENDMENT TO OUR
RESTATED ARTICLES OF INCORPORATION TO CHANGE OUR NAME TO "WAUSAU PAPER CORP."
17
OTHER MATTERS
COSTS OF SOLICITATION
In addition to solicitation by mail, our officers, directors and regular
employees may solicit proxies in person or by telephone, facsimile, electronic
mail, or other forms of communication. Expenses in connection with the
solicitation of proxies, including the reasonable expenses of brokers,
fiduciaries, and other nominees in forwarding proxy material to beneficial
owners of our common stock, will be borne by us.
PROXY STATEMENT PROPOSALS
Any shareholder who intends to present a proposal at the annual meeting
to be held in 2006 must deliver the written proposal to the Secretary of the
Company at our office in Mosinee, Wisconsin:
(bullet)not later than November 18, 2005, if the proposal is
submitted for inclusion in our proxy materials for the 2006
meeting pursuant to Rule 14a-8 under the Exchange Act; or
(bullet)on or after January 21, 2006, and on or before February
20, 2006, if the proposal is submitted pursuant to our
bylaws, in which case we are not required to include the
proposal in our proxy materials.
Shareholders may present a proposal at the 2006 annual meeting for
consideration only if proper notice of the proposal has been given in
accordance with one of these requirements. Nominations for director made from
the floor at the annual meeting of shareholders to be held in 2006 require
advance notice in accordance with the bylaws.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
In accordance with notices sent to shareholders who share the same
address, we are sending only one annual report and proxy statement to that
address unless we receive contrary instructions from any shareholder at that
address. This practice, which is called "householding," is designed to reduce
our printing and postage costs and the volume of duplicate information you
receive. We expect that most banks, brokers and other nominee record holders
will also "household" proxy statements and annual reports for shareholders
whose accounts are held in street name. Each shareholder will continue to
receive a separate proxy card. We will promptly deliver a separate copy of our
proxy statement or annual report to any shareholder upon written or oral
request to the Secretary, Wausau Paper, 100 Paper Place, Mosinee, WI 54455-
9099, telephone: (715) 693-4470.
Shareholders holding stock in their own name who wish to either request
or discontinue householding may contact the Secretary of the Company at the
address or telephone number listed in the preceding paragraph. Shareholders
whose shares are held in street name and who wish to request or discontinue
householding, should contact their bank, broker, or other nominee record
holder.
By order of the Board of Directors
SCOTT P. DOESCHER
SCOTT P. DOESCHER
SECRETARY
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.
18
APPENDIX A
WAUSAU-MOSINEE PAPER CORPORATION
AUDIT COMMITTEE CHARTER
AS AMENDED DECEMBER 17, 2004
1. PURPOSE
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2)
the independent auditor's qualifications and independence, (3) the performance
of the Company's internal audit function and independent auditors, and (4) the
compliance by the Company with legal and regulatory requirements. The
Committee shall prepare the report required by the rules of the Securities and
Exchange Commission (the "Commission") to be included in the Company's annual
proxy statement.
2. COMMITTEE MEMBERSHIP
(a) Number and Qualifications. The Audit Committee shall consist of no
fewer than three members. The members of the Committee shall meet the
independence and experience requirements of the New York Stock Exchange,
Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules and regulations of the Commission. Committee members shall not
simultaneously serve on the audit committees of more than two other public
companies.
(b) Selection and Appointment. The members of the Audit Committee
shall be appointed and may be replaced by the Board on the recommendation of
the Corporate Governance Committee.
3. MEETINGS
The Audit Committee shall meet as often as it determines appropriate, but
not less frequently than quarterly. The Committee shall meet periodically with
management, the internal auditors and the independent auditor in separate
executive sessions. The Committee may request any officer or employee of the
Company or the Company's outside counsel or independent auditor to attend a
meeting of the Committee or to meet with any members of, or consultants to, the
Committee.
4. COMMITTEE AUTHORITY AND RESPONSIBILITIES
(a) Appointment of Independent Auditor. The Audit Committee shall have
the sole authority to appoint or replace the independent auditor. The
Committee shall be directly responsible for the compensation and oversight of
the work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The
independent auditor shall report directly to the Committee.
(b) Approval of Services.
(1) The Audit Committee shall pre-approve all auditing services,
internal control related services, and permitted non-audit services
(including the fees and terms thereof) to be performed for the Company by
its independent auditor, subject to the de minimus exceptions for non-
audit services described in Section 10A(i)(1)(B) of the Exchange Act
which are approved by the Committee prior to the completion of the audit.
(2) The Audit Committee may form and delegate authority to
subcommittees consisting of one or more members when appropriate. The
authority to grant pre-approvals of audit and permitted non-audit
services may be delegated to the chair of the Committee, or, in his
absence, one other member,
A-1
provided that decisions of such subcommittee to grant preapprovals shall
be presented to the full Committee at its next scheduled meeting.
(c) Retention of Advisors. The Audit Committee shall have the
authority, to the extent it deems necessary or appropriate, to retain
independent legal, accounting or other advisors. The Company shall provide for
appropriate funding, as determined by the Committee, for payment of
compensation to the independent auditor for the purpose of rendering or issuing
an audit report and to any advisors employed by the Committee.
(d) Reports to the Board. The Audit Committee shall make regular
reports to the Board. The Committee shall review and reassess the adequacy of
this Charter annually and recommend any proposed changes to the Board for
approval. The Committee shall annually review the Committee's own performance.
5. COMMITTEE PROCEDURES
In exercising its authority and fulfilling its responsibilities under
this Charter, the Audit Committee, shall take the following actions to the
extent it deems necessary or appropriate.
(a) Financial Statement and Disclosure Matters.
(1) Review and discuss with management and the independent
auditor the annual audited financial statements, including disclosures
made under "Management's Discussion and Analysis of Financial Conditions
and Results of Operations," and recommend to the Board whether the
audited financial statements should be included in the Company's Form 10-
K.
(2) Review and discuss with management and the independent
auditor the Company's quarterly financial statements prior to the filing
of its Form 10-Q, including the results of the independent auditor's
review of the quarterly financial statements and disclosures made under
"Management's Discussion and Analysis of Financial Conditions and Results
of Operations."
(3) Discuss with management and the independent auditor
significant financial reporting issues and judgments regarding accounting
principles and financial statement presentations made in connection with
the preparation of the Company's financial statements, including any
significant changes in the Company's selection or application of
accounting principles.
(4) Review and discuss with management and the independent
auditor any major issues as to the adequacy of the Company's internal
controls, any special steps adopted in light of material control
deficiencies, and the adequacy of disclosures about changes in internal
control over financial reporting.
(5) Review and discuss with management (including the senior
internal audit executive) and the independent auditor the Company's
internal controls report and the independent auditor's attestation of the
report prior to the filing of the Company's Form 10-K.
(6) Review and discuss quarterly reports from the independent
auditors on:
(A) All critical accounting policies and practices to be
used.
(B) All alternative treatments of financial information
within generally accepted accounting principles that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred
by the independent auditor.
(C) Other material written communications between the
independent auditor and management, such as any management letter
or schedule of unadjusted differences.
A-2
(7) Discuss with management the Company's earnings press
releases, including the use of "pro forma" or "adjusted" non-GAAP
information, as well as financial information and earnings guidance
provided to analysts and rating agencies. Such discussion may be done
generally (consisting of discussing the types of information to be
disclosed and the types of presentations to be made). The committee is
not required to discuss in advance each release or each instance in which
earnings guidance may be provided.
(8) Discuss with management and the independent auditor the
effect of regulatory and accounting initiatives as well as off-balance
sheet structures on the Company's financial statements.
(9) Discuss with management the Company's major financial risk
exposures and the steps management has taken to monitor and control such
exposures, including the Company's risk assessment and risk management
policies.
(10) Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit, including any difficulties encountered in the
course of the audit work, any restrictions on the scope of activities or
access to requested information, and any significant disagreements with
management.
(11) Review disclosures made to the Audit Committee by the
Company's CEO and CFO during their certification process for the Form 10-
K and Form 10-Q about any significant deficiencies in the design or
operation of internal controls or material weaknesses therein and any
fraud involving management or other employees who have a significant role
in the Company's internal controls.
(b) Oversight of the Company's Relationship with the Independent
Auditor.
(1) Review and evaluate the lead partner of the independent
auditor team.
(2) Obtain and review a report from the independent auditor at
least annually regarding (a) the independent auditor's internal quality-
control procedures, (b) any material issues raised by the most recent
internal quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional authorities
within the preceding five years respecting one or more independent audits
carried out by the firm, (c) any steps taken to deal with any such
issues, and (d) all relationships between the independent auditor and the
Company. Evaluate the qualifications, performance and independence of
the independent auditor, including considering whether the auditor's
quality controls are adequate and the provision of permitted non-audit
services is compatible with maintaining the auditor's independence, and
taking into account the opinions of management and internal auditors.
The Audit Committee shall present its conclusions with respect to the
independent auditor to the Board.
(3) Ensure the rotation of the audit partners as required by
law. Consider whether, in order to assure continuing auditor
independence, it is appropriate to adopt a policy of rotating the
independent auditing firm on a regular basis.
(4) Recommend to the Board policies for the Company's hiring of
employees or former employees of the independent auditor who participated
in any capacity in the audit of the Company.
(5) Discuss with the independent auditor material issues on
which the national office of the independent auditor was consulted by the
Company's audit team and matters of audit quality and consistency.
(6) Meet with the independent auditor prior to the audit to
discuss the planning and staffing of the audit.
A-3
(c) Oversight of the Company's Internal Audit Function.
(1) Review the appointment and replacement of the senior
internal auditing executive.
(2) Review the significant reports to management prepared by the
internal auditing department and management's responses.
(3) Discuss with the independent auditor and management the
internal audit department responsibilities, budget and staffing and any
recommended changes in the planned scope of the internal audit.
(d) Compliance Oversight Responsibilities.
(1) Obtain from the independent auditor assurance that Section
10A(b) of the Exchange Act has not been implicated.
(2) Obtain reports from management, the Company's senior
internal auditing executive and the independent auditor that the Company
and its subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements. Review reports and disclosures of insider
and affiliated party transactions and the report of the Corporate
Governance Committee concerning the Corporate Compliance Program. Advise
the Board with respect to the Company's policies and procedures regarding
compliance with laws and regulations applicable to the Company's
reporting and disclosure obligations under the Exchange Act and other
matters within the scope of the Committee's authority and responsibility.
(3) Establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
(4) Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any published
reports which raise material issues regarding the Company's financial
statements or accounting policies.
(5) Discuss with the Company's general counsel legal matters
that may have a material impact on the financial statements or the
Company's compliance policies and internal controls.
6. LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
A-4
PROXY
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING
TO BE HELD APRIL 21, 2005
WAUSAU-MOSINEE PAPER CORPORATION
The undersigned hereby appoint(s) San W. Orr, Jr., Thomas J. Howatt, and Dennis
J. Kuester, and each of them, proxies of the undersigned, with full power of
substitution, to vote all shares of common stock of Wausau-Mosinee Paper
Corporation that the undersigned is entitled to vote at the annual meeting of
shareholders to be held on April 21, 2005 and at any adjournment thereof (the
"Annual Meeting"). The proxies have the authority to vote such stock as
directed on the reverse side hereof with respect to the proposals set forth in
the Proxy Statement with the same effect as though the undersigned were present
in person and voting such shares. For participants in the Dividend
Reinvestment and Stock Purchase Plan, Common Stock Purchase Plan, and the
Corporation's 401(k) plan, the proxy also serves as voting instructions to the
plan administrator or trustee, as applicable, of such plans to vote the shares
of common stock beneficially owned by the participants in each plan. The
undersigned hereby revokes all proxies heretofore given to vote at the Annual
Meeting and any adjournment thereof.
PLEASE INDICATE HOW YOUR STOCK IS TO BE VOTED. IF NO SPECIFIC VOTING
INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
RECOMMENDED BY THE BOARD OF DIRECTORS.
(Continued and to be marked, dated, and signed on reverse side.)
PROXY - WAUSAU-MOSINEE PAPER CORPORATION
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, IT WILL
BE VOTED FOR EACH OF THE NOMINEES LISTED BELOW AND APPROVAL OF PROPOSAL 2.
1.ELECTION OF CLASS III 2. Amendment to restated FOR AGAINST ABSTAIN
DIRECTORS: articles of incorporation
to change name to
"Wausau Paper Corp."
(TO WITHHOLD AUTHORITY TO VOTE WITHHOLD 3. In their discretion, the
FOR ANY INDIVIDUAL NOMINEE, FOR AUTHORITY proxies are authorized to vote
STRIKE A LINE THRUOGH THAT upon such other business as may
NOMINEE'S NAME IN THE LIST BELOW) properly come before the
Annual Meeting.
GARY W. FREELS
THOMAS J. HOWATT
MICHAEL M. KNETTER
COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature____________________ Signature____________________Date__________2005
Note: When shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title. If a corporation, partnership, LLC, or other entity, please sign in
full name of entity by authorized individual and give title