SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No.___)
Filed by the Registrant X
Filed by a Party other than the Registrant ___
Check the appropriate box:
Preliminary Proxy Statement
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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 PAPER CORP.
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
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X No fee required
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WAUSAU PAPER
March 17, 2006
Dear Shareholder:
You are cordially invited to attend our annual meeting of shareholders to
be held on April 20, 2006, at the Jefferson Street Inn, 201 Jefferson Street,
Wausau, Wisconsin.
At the annual meeting you will be asked to reelect San W. Orr, Jr. and
David B. Smith, Jr. as Class I directors. Walter Alexander has reached the
mandatory retirement age for directors and will retire at the annual meeting.
Mr. Alexander has served as director since 1997 and also served as a director
of Mosinee Paper from 1987 to 1997. We thank Mr. Alexander for his many years
of service to the Company.
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
100 Paper Place
Mosinee, WI 54455-9099
www.wausaupaper.com
WAUSAU PAPER CORP.
100 PAPER PLACE
MOSINEE, WISCONSIN 54455-9099
_____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
_____________________
The annual meeting of shareholders of Wausau Paper Corp. will be held at
the Jefferson Street Inn, 201 Jefferson Street, Wausau, Wisconsin, on Thursday,
April 20, 2006, at 2:00 p.m., local time. The following proposals will be
considered by shareholders at the annual meeting:
1. The election of two Class I directors; and
2. 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 16, 2006.
March 17, 2006
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 PAPER CORP.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 20, 2006
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
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..........................7
Stock Ownership...........................................................7
Stock Ownership of Directors, Executive Officers, and 5%
Shareholders..................................................7
Section 16(a) Beneficial Ownership Reporting Compliance.............9
Report of the Audit Committee and Related Matters.........................9
Audit Committee Report..............................................9
Audit Committee Pre-Approval Policies..............................11
Independent Auditor and Fees.......................................11
Executive Compensation...................................................12
Summary Compensation Table.........................................12
Stock Options and Stock Appreciation Rights........................13
Retirement Benefits................................................14
Report of the Compensation Committee...............................15
Stock Price Performance Graph............................................17
Other Matters............................................................18
Costs of Solicitation..............................................18
Proxy Statement and Other Shareholder Proposals....................18
Householding of Annual Meeting Materials...........................18
-i-
WAUSAU PAPER CORP. MARCH 17, 2006
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 Paper Corp. for use
at the 2006 annual meeting of shareholders, including any adjournment thereof.
The annual meeting will be held at 2:00 p.m. on April 20, 2006, at the
Jefferson Street Inn, 201 Jefferson 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 has been
submitted to the Company prior to the meeting (and which has 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 16, 2006, 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 51,021,276 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
1
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 two
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.
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.
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 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
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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 Corporate Governance 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, exercise a sound and independent business judgment, and be able to
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 Board has determined that it is appropriate to reduce the number of
directors to seven from eight effective with the annual meeting, divided into
three classes consisting of two Class I and Class II directors and three Class
III directors. 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.
At the annual meeting, shareholders will be asked to elect two Class I
directors for terms of office which will expire at the annual meeting of
shareholders to be held in 2009. Walter Alexander has reached mandatory
retirement age under our Corporate Governance Guidelines and, accordingly, will
not be a candidate for reelection to the Board.
Upon recommendation of the Corporate Governance Committee, the Board has
nominated San W. Orr, Jr. and David B. Smith, Jr. for reelection as Class I
directors. In the event one or both of the nominees 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 NOMINEES
FOR CLASS I 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
San W. Orr, Jr., 64 Chairman of the Board of the Company Class I 1970
and Advisor, Estates of A.P. Woodson 2009
and Family; Chief Executive Officer of the
Company (2000; 1994-1995; 1989-1990); also
a director of Marshall & Ilsley Corporation
David B. Smith, Jr.,* 67 Consultant; formerly Vice President, Class I 1972
Labor Relations, Weyerhaeuser Company 2009
3
CONTINUING DIRECTORS
Andrew N. Baur,* 61 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.
Dennis J. Kuester,* 64 Chairman and CEO, and a director of Marshall Class II 2001
& Ilsley Corporation; also a director of Modine 2007
Manufacturing Company
Gary W. Freels,* 57 President, Alexander Properties, Inc. (investment Class III 1996
management) 2008
Thomas J. Howatt, 56 President and Chief Executive Officer of the Class III 2000
Company 2008
Michael M. Knetter,* 45 Dean, School of Business, University of Class III 2005
Wisconsin - Madison since July, 2002; formerly, 2008
Professor and 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.
BOARD OF DIRECTORS
Meetings of the Board. The Board met six times in 2005. Each of the
directors other than Mr. Knetter 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. Mr. Knetter attended 71% of such meetings.
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, 2006, 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 the Audit Committee's
procedures to submit a concern or complaint on a confidential basis. 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.
4
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 2005.
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, Audit,
Compensation, and Corporate Governance 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.
Mr. Freels (Chairman), Mr. Alexander, Mr. Baur, Mr. Knetter, and Mr.
Kuester serve on the Audit Committee. The full Committee met nine times and
there were three meetings between management and the Chairman of the Committee
in 2005. 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. Baur, Mr. Freels, and
Mr. Smith serve as members of the Compensation Committee. The Committee met
twice in 2005.
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 (4) recommend to the Board director nominees
for each committee. Mr. Kuester (Chairman), Mr. Knetter, and Mr. Smith serve
on the Corporate Governance Committee. The Committee met three times in 2005.
5
COMPENSATION OF DIRECTORS
The Board of Directors Compensation Policy adopted December 16, 2005,
provides for the following fees:
Retainer
Annual cash retainer.....................$.24,000
Restricted Stock.........................$.15,000(1)
Stock Options...............................3,000 shares(2)
Board Meeting Fees...........................$ 1,500
$ 1,000 (telephonic meeting)
Committee Meeting Fees.......................$ 1,000
$ 500 (telephonic meeting)
Annual Committee Chair Retainer
Audit and Executive......................$ 5,000
Compensation and Corporate Governance $ 3,000
(1)On the first business day of each fiscal year, each director receives
restricted stock units in an amount determined by dividing $15,000 by
current stock price. Dividend equivalents in the form of additional
restricted stock accrue on each cash dividend date. Units are settled
in the form of company stock upon director's termination of service
from Board unless director elects to defer distribution for a maximum
of two years.
(2)Granted on date of annual meeting at then current market value. Grant
is being phased in as replacement to previous policy and applies to
Class I Directors in 2006, Class II in 2007, and Class III in 2008.
Directors elected by the Board to fill a vacancy receive an initial
grant on date of election.
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 2005, 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. 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.
6
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 2005 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.
The Board has determined that Mr. Alexander, who will retire at the
annual meeting, Mr. Baur, Mr. Freels, Mr. Knetter, Mr. Kuester, and Mr. Smith
satisfy the requirements for independence under the NYSE listing standards.
Mr. Alexander, Mr. Freels, Mr. Knetter, and Mr. Smith have no relationships
with the Company (other than as a director and shareholder, and in Mr. Smith's
case, a participant in our retiree health plan). Mr. Kuester, as chairman and
CEO, and Mr. Baur, as a director, of Marshall & Ilsley Corporation, have
relationships with the Company that are not material under the Board's
categorical standards.
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...................6,450,067 12.6%
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
Trustees of David B. Smith Family Trust 3,173,291(1) 6.2%
1206 E. Sixth Street
Merrill, WI 54452
Dimensional Fund Advisors Inc..............3,479,614 6.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
7
Mac-Per-Wolf Company.......................3,080,150(2) 6.0%
311 S. Wacker Drive, Suite 6000
Chicago, IL 60606
Wells Fargo & Company......................2,700,223 5.3%
420 Montgomery Street
San Francisco, CA 94104
(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 2,131,536 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., 4.4%; Thomas P. Smith, 4.5%;
Margaret S. Mumma, 5.0%; and Sarah S. Miller, 4.9%.
(2)Shares held by a subsidiary, Perkins, Wolf, McDonnell and
Company, LLC ("Perkins, Wolf"). Includes 2,974,600 shares
reported by Janus Capital Management, LLC in connection with its
30% indirect ownership stake in Perkins, Wolf.
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 ................................................42,503(1) *
Andrew N. Baur ..................................................26,291(2) *
Gary W. Freels ...............................................1,001,356(3) 2.0%
Thomas J. Howatt ...............................................633,251(4) 1.2%
Michael M. Knetter ..............................................16,291(5) *
Dennis J. Kuester ...............................................26,291(6) *
San W. Orr, Jr. ...............................................1,791,127(7) 3.5%
David B. Smith, Jr. ..........................................2,251,155(8) 4.4%
Stuart R. Carlson ..............................................161,517(9) *
Pete R. Chiericozzi .............................................75,975(10) *
Albert K. Davis ................................................133,382(11) *
Scott P. Doescher ..............................................132,302(12) *
All directors and executive officers as a group (14 persons) 6,480,555(13) 12.3%
* Less than 1%
(1)Includes 25,000 option shares and 1,291 shares attributable to
restricted stock units which may be acquired on or before 60 days from
February 16, 2006.
(2)Includes 15,000 option shares and 1,291 shares attributable to
restricted stock units which may be acquired on or before 60 days from
February 16, 2006.
(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 25,000 option shares and 1,291 shares attributable to restricted
stock units which may be acquired on or before 60 days from February
16, 2006.
(4)Includes 608,817 option shares and 1,291 shares attributable to
restricted stock units which may be acquired on or before 60 days from
February 16, 2006 and 9,098 shares held under 401(k) plan on December
31, 2005.
(5)Includes 15,000 option shares and 1,291 shares attributable to
restricted stock units which may be acquired on or before 60 days from
February 16, 2006.
(6)Includes 25,000 option shares and 1,291 shares attributable to
restricted stock units which may be acquired on or before 60 days from
February 16, 2006. The Marshall & Ilsley Trust Company is trustee of
a Company
8
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
(8). 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.
(7)Includes 1,270,027 shares as to which Mr. Orr exercises shared voting
and investment power (and as to which beneficial ownership is
disclaimed) and 216,668 option shares and 1,291 shares attributable to
restricted stock units which may be acquired on or before 60 days from
February 16, 2006.
(8)Includes 25,000 option shares and 1,291 shares attributable to
restricted stock units which may be acquired on or before 60 days from
February 16, 2006. David B. Smith, Jr. is a co-trustee of the David
B. Smith Family Trust which holds 2,131,536 shares of common stock.
See note (1) under the preceding table.
(9)Includes 159,800 shares which may be acquired through the exercise of
options on or before 60 days from February 16, 2006.
(10)Includes 75,000 shares which may be acquired through the exercise of
options on or before 60 days from February 16, 2006.
(11)Includes 131,000 shares which may be acquired through the exercise of
options on or before 60 days from February 16, 2006.
(12)Includes 131,000 shares which may be acquired through the exercise of
options on or before 60 days from February 16, 2006.
(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 2005 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.
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 2005 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:
(circle)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?
(circle)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
9
and performance for the reporting period in accordance with generally
accepted accounting principles and Securities and Exchange Commission
("SEC") disclosure requirements?
(circle)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, 2005, for filing with the SEC.
AUDIT COMMITTEE
Gary W. Freels (Chairman)
Walter Alexander
Andrew N. Baur
Michael M. Knetter
Dennis J. Kuester
10
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 2005 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 were 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 has 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, 2006. 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 2005 and 2004 fiscal years in the categories specified. All
services performed received pre-approval by the Audit Committee in accordance
with its pre-approval policy.
2005 2004
Audit Fees(1) $ 595,411 $ 578,700
Audit-Related Fees(2) 43,747 168,258
Tax Fees(3) 260,805 288,713
All Other Fees 0 0
$ 899,963 $1,035,671
(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 related to tax compliance (tax returns, refunds, and payment
planning) were $202,925 in 2005 and $215,201 in 2004. Tax
consultation and planning fees were $57,880 in 2005 and $73,512 in
2004; these fees provided, or are expected to provide, benefits to the
Company in excess of the fees paid.
11
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, 2005, and to each of our four most highly
compensated executive officers as of December 31, 2005, whose salary and bonus
exceeded $100,000 for the last fiscal year.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM
COMPENSATION
AWARDS
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL YEAR SALARY(1) BONUS(1) COMPENSATION AWARD(S) OPTIONS/ ALL OTHER
POSITION ($)(2) ($) SARS(#) COMPENSATION
GRANTED LAPSED
Thomas J. Howatt, 2005 $700,000 $195,090 $ 0 $ 84,000(3) 120,000 0 $ 41,950(4)
President and CEO 2004 $651,891 $504,713 $ 0 $166,683 120,000 70,000(5) $ 52,574
2003 $578,702 $126,204 $ 0 $ 51,994 0 0 $ 56,195
Pete R. Chiericozzi, 2005 $259,000 $184,299 $ 0 $ 31,085(3) 50,800 0 $ 7,394(6)
Senior Vice 2004 $250,340 $175,845 $4,999(7) $ 30,291 25,800 25,800(5) $ 16,050(8)
President, Towel 2003 $ 73,878 $ 27,234 $3,784(7) $ 19,989 93,000 18,000(9) 26,348(8)
& Tissue
Stuart R. Carlson 2005 $334,000 $ 98,530 $ 0 $ 40,084(3) 58,400 0 $ 7,077(6)
Executive Vice, 2004 $321,491 $217,121 $ 0 $ 39,059 33,400 33,400(5) $ 6,970
President, 2003 $308,392 $ 77,136 $ 0 $ 25,673 0 0 $ 6,912
Administration
Albert K. Davis, 2005 $295,000 $125,000 $ 0 $ 35,399(3) 54,400 0 $ 5,355(6)
Senior Vice President,2004 $270,945 $210,505 $ 0 $ 34,497 29,400 29,400(5) $ 5,228
Specialty Products 2003 $250,603 $ 82,198 $ 0 $ 21,588 0 0 $ 5,100
Scott P. Doescher, 2005 $270,000 $ 70,659 $ 0 $ 32,396(3) 52,000 0 $ 5,355(6)
Senior Vice 2004 $252,681 $166,449 $ 0 $ 31,580 27,000 27,000(5) $ 5,228
President, Finance, 2003 $240,362 $ 60,125 $ 0 $ 20,147 0 0 $ 5,107
Secretary and Treasurer
(1)Includes compensation deferred by officers under 401(k) plan and Executive
Officers' Deferred Compensation Plan.
(2)The value of perquisites and personal benefits did not exceed $6,421 for any
named officer.
(3)The value indicated in table is based on the closing price of the Company's
stock on the date of award (December 16, 2005, $12.36 per share) with
respect to the following grants of performance units: Mr. Howatt, 6,796;
Mr. Chiericozzi, 2,515; Mr. Carlson, 3,243; Mr. Davis, 2,864; and Mr.
Doescher, 2,621. Vesting of all performance units awarded in 2005 is
subject to the satisfaction of Company performance criteria in 2006, and
service by the grantee through December 31, 2007. 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, 2005, 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, 2005 ($11.85) were: Mr. Howatt, 11,757 shares,
$139,326; Mr. Chiericozzi, 4,350 shares, $51,552; Mr. Carlson, 5,610 shares,
$66,475; Mr. Davis, 4,954 shares, $58,708; and Mr. Doescher, 4,534 shares,
$53,734.
(4)Director's fees of $30,000, 401(k) contributions of $5,355, and credits of
$6,595 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."
(5)The options granted in 2004 were subject to satisfaction of financial
performance conditions by the Company in fiscal year 2005. Because
financial performance conditions were not satisfied, options indicated have
lapsed.
(6)Contributions of $5,355 under 401(k) plan and, with respect to Mr.
Chiericozzi and Mr. Carlson, credits payable under the Company's flexible
benefit plan of $2,039 and $1,722, respectively.
(7)Reimbursement for taxes under relocation policy.
(8)Includes, as reimbursement of moving expenses under relocation policy,
$10,822 in 2004 and $24,764 in 2003.
(9)Options granted in 2003 were subject to satisfaction of financial
performance conditions in 2004.
12
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Grants. We maintain stock appreciation rights ("SAR") and stock option
plans pursuant to which grants may be made to key employees. The following
grants were made in 2005 to executive officers named in the summary
compensation table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL ALTERNATIVE
GRANTS GRANT DATE
NUMBER OF % OF TOTAL VALUE
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE $ (2)
Mr. Howatt 70,000(3) 11.21% $12.36 12/16/2025 $288,400
50,000 8.01% $12.36 12/16/2025 $206,000
Mr. 25,800(3) 4.13% $12.36 12/16/2025 $106,296
Chiericozzi 25,000 4.00% $12.36 12/16/2025 $103,000
Mr. Carlson 33,400(3) 5.35% $12.36 12/16/2025 $137,608
25,000 4.00% $12.36 12/16/2025 $103,000
Mr. Davis 29,400(3) 4.71% $12.36 12/16/2025 $121,128
25,000 4.00% $12.36 12/16/2025 $103,000
Mr. Doescher 27,000(3) 4.32% $12.36 12/16/2025 $111,240
25,000 4.00% $12.36 12/16/2025 $103,000
(1)Grants under 2000 Stock Incentive Plan made at fair market value as defined
in the plan.
(2)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
12/16/2005 4.45% 28.8% $0.34 2.5% 5.11%
The actual value, if any, a grantee will realize upon exercise of an option
will depend on the excess of the market value of the common stock over the
exercise price on the date the option is exercised. See "Report of the
Compensation Committee."
(3)Vesting is subject to satisfaction of financial performance conditions by
the Company in fiscal 2006.
13
Exercise and Year-End Value. The following table sets forth information
regarding the exercise of stock options or SARs in 2005 by each of the
executive officers named in the summary compensation table and the December 31,
2005, value of unexercised, in-the-money stock options or SARs held by each
such person.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES VALUE OPTIONS/SARS AT FY-END(#) THE-MONEY OPTIONS/SARS
ACQUIRED ON REALIZED AT FY-END ($)
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Mr. Howatt 0 0 608,817* 70,000* $1,058,040*(1) $0
22,183(dagger) 0 $ 261,797(dagger) $0
Mr. Chiericozzi 0 0 75,000* 50,800* $ 0* $0
Mr. Carlson 0 0 159,800* 33,400* $ 197,180* $0
46,200(dagger) 0 $ 293,810(dagger) $0
Mr. Davis 0 0 131,000* 29,400* $ 188,483*(1) $0
Mr. Doescher 0 0 131,000* 27,000* $ 6,840* $0
* 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.
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.
14
Based on average covered compensation as of December 31, 2005, 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 13; 56 $76,000 $335,000 $411,000 $822,000
Mr. Chiericozzi 2; 62 $ 3,000 $102,000 $105,000 $424,000
Mr. Carlson 14; 59 $34,000 $181,000 $215,000 $430,000
Mr. Davis 5; 58 $73,000 $107,000 $180,000 $359,000
Mr. Doescher 4; 46 $57,000 $104,000 $161,000 $322,000
(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, adjusted annually, 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.
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 35 companies which, in addition to the Company,
comprise the Hemscott 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 compensation paid to its
executive officers 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 in setting base compensation. 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
15
companies (as discussed above), individual job performance, and, where
appropriate, the economic conditions in which the Company is operating.
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. Individual job
performance in the 2004 fiscal year was the most important factor considered by
the Compensation Committee in determining appropriate increases in base salary
paid in 2005. In setting base salaries for 2006, the Committee determined that
business conditions facing the Company should take precedence over factors
customarily used in setting base salaries and, upon recommendation from the
CEO, did not increase base salaries for 2006.
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 Company and
individual goals are achieved.
Company performance goals include targeted earnings per shares, returns
on capital employed, segment operating profits, and other financial measures.
Individual performance objectives vary according to the officer's
responsibilities. Criteria used in the assessment of Mr. Howatt's eligibility
for incentive compensation in 2005 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 included, 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 operating cost containment.
For 2005 and 2006, as in recent years, incentive compensation, if earned,
consists of cash and equity components. Cash awards are determined by
application of the criteria described above, while equity based awards are
conditioned on the achievement of targeted returns on capital employed.
Approximately 75% of the potential value of annual incentive compensation is
payable in cash and the remaining 25% represents an equity award in the form of
stock options or restricted stock units. The value of these potential equity
awards is based on the Black-Scholes model for stock options and the fair
market date of grant value for restricted stock units. Restricted stock units
awarded with respect to the 2005 fiscal year vested as a result of a change by
the Committee in the measurement of the Company's financial performance. The
number of units vested was not material.
Other Equity Awards. The Committee has not established formal criteria
with respect to the size of equity grants that are not part of an incentive
plan, but it 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 2005. 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)
Andrew N. Baur
Gary W. Freels
David B. Smith, Jr.
16
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, 2000, and ending December 31, 2005, with the Hemscott
(formerly CoreData) 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, 2000, 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.]
2000 2001 2002 2003 2004 2005
Wausau Paper Corp. 100.00 122.90 117.52 146.03 197.49 134.58
Hemscott Paper & Paper Products 100.00 98.20 89.72 112.92 125.66 114.54
Russell 2000 Index 100.00 101.02 79.22 115.16 135.31 139.81
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 AND OTHER SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the annual meeting
to be held in 2007 must deliver the written proposal to the Secretary of the
Company at our office in Mosinee, Wisconsin:
(circle)not later than November 17, 2006, if the proposal is
submitted for inclusion in our proxy materials for the 2007
meeting pursuant to Rule 14a-8 under the Exchange Act; or
(circle)on or after January 20, 2007, and on or before February
19, 2007, 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 2007 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 2007 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
SECRETARY
PLEASE SIGN, DATE, AND RETURN YOUR PROXY PROMPTLY.
18
PROXY
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING
TO BE HELD APRIL 20, 2006
WAUSAU PAPER CORP.
The undersigned hereby appoint(s) San W. Orr, Jr. and Thomas J. Howatt, and
each of them, proxies of the undersigned, with full power of substitution, to
vote all shares of common stock of Wausau Paper Corp. that the undersigned is
entitled to vote at the annual meeting of shareholders to be held on April 20,
2006 and at any adjournment thereof (the "Annual Meeting"). The proxies have
the authority to vote such stock as directed herein with respect to the
proposal 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 PAPER CORP.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, IT WILL
BE VOTED FOR EACH OF THE NOMINEES LISTED BELOW.
1. ELECTION OF CLASS III DIRECTORS: 2. In their discretion, the proxies are
authorized to vote upon such other
business as may properly come before
the Annual Meeting.
(TO WITHHOLD AUTHORITY TO VOTE WITHHOLD
FOR ANY INDIVIDUAL NOMINEE, FOR AUTHORITY
STRIKE A LINE THROUGH
THAT NOMINEE'S NAME IN THE
LIST BELOW)
SAN W. ORR, JR.
DAVID B. SMITH, JR.
COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature ________________ Signature__________________ Date______________2006
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