[LOGO]
BOISE CASCADE OFFICE PRODUCTS
CORPORATION
------------------------
ANNUAL MEETING
OF SHAREHOLDERS
ITASCA, ILLINOIS
APRIL 20, 1999
------------------------
NOTICE AND PROXY
STATEMENT
[BOISE CASCADE LOGO]
NOTICE OF ANNUAL MEETING
Tuesday, April 20, 1999
10 a.m., Central Daylight Time
Boise Cascade Office Products Corporation Headquarters Building
800 West Bryn Mawr Avenue
Itasca, Illinois
March 22, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Boise Cascade Office Products
Corporation annual meeting of shareholders to:
- Elect three directors to serve three-year terms.
- Approve appointment of Arthur Andersen LLP as independent auditors for
1999.
- Approve an amendment to the Key Executive Stock Option Plan to increase
the number of shares of common stock available for issuance.
- Conduct other business properly brought before the meeting.
You also will have the opportunity to hear what has happened in our business
during the past year and to ask questions.
Shareholders who owned stock at the close of business on February 25, 1999,
can vote at the meeting.
Your vote is important. Whether you plan to attend or not, please sign,
date, and return the enclosed proxy card in the envelope provided. If you attend
the meeting and prefer to vote at that time, you may do so.
Thank you for your ongoing support of and continued interest in Boise
Cascade Office Products.
Sincerely yours,
[LOGO]
George J. Harad
Chairman
TABLE OF CONTENTS
Notice of Annual Meeting
Boise Cascade Office Products Corporation.................................................................. 1
Annual Meeting Information................................................................................. 1
Proxy Statement.......................................................................................... 1
Voting................................................................................................... 1
Boise Cascade Office Products Employees Who Are Shareholders............................................. 1
Votes Necessary for Action to be Taken................................................................... 1
Proxy Solicitation....................................................................................... 2
Proposals You May Vote On.................................................................................. 2
1. Election of Directors................................................................................. 2
2. Appointment of Independent Public Accountants......................................................... 2
3. Amendment of Key Executive Stock Option Plan.......................................................... 2
4. Other Matters to be Presented at the Meeting.......................................................... 3
Board of Directors......................................................................................... 3
Structure................................................................................................ 3
Directors Nominated This Year for Terms Expiring in 2002................................................. 3
Directors Whose Terms Expire in 2001..................................................................... 4
Directors Whose Terms Expire in 2000..................................................................... 4
Meetings and Committees of the Board....................................................................... 4
Audit Committee.......................................................................................... 5
Compensation Committee................................................................................... 5
Committee of Independent Directors....................................................................... 5
Director Compensation...................................................................................... 5
Director Stock Option Plan............................................................................... 6
Director Deferred Compensation Program................................................................... 6
Other.................................................................................................... 6
Key Executive Stock Option Plan............................................................................ 6
History and Operation of the KESOP....................................................................... 6
Proposed Plan Amendment.................................................................................. 7
Federal Income Tax Consequences.......................................................................... 7
Additional Information................................................................................... 7
Stock Ownership............................................................................................ 8
Majority Shareholder..................................................................................... 8
Directors and Executive Officers......................................................................... 8
Ownership of More than 5% of Boise Cascade Office Products Stock......................................... 9
Compensation Committee Report.............................................................................. 9
Base Salary.............................................................................................. 10
Annual Variable Incentive Compensation................................................................... 10
Stock Options............................................................................................ 11
Other Compensation Plans................................................................................. 11
Compensation Committee of the Board of Directors......................................................... 11
Performance Graph.......................................................................................... 12
Compensation Tables........................................................................................ 13
Stock Option Tables...................................................................................... 14
i
Other Benefit Plans........................................................................................ 15
Pension Plan............................................................................................. 15
Early Retirement Plan.................................................................................... 16
Executive Officer Agreements............................................................................. 16
Deferred Compensation and Benefits Trust................................................................. 18
Indemnification.......................................................................................... 18
Related Party Transactions................................................................................. 18
Paper Sales Agreement.................................................................................... 18
Administrative Services Agreement........................................................................ 19
Tax Matters Agreement.................................................................................... 19
Shareholder Agreement.................................................................................... 19
Other Information.......................................................................................... 19
Section 16(a) Beneficial Ownership Reporting Compliance.................................................. 19
Boise Cascade Office Products' Annual Report and Form 10-K............................................... 19
Shareholder Proposals for the 2000 Annual Meeting........................................................ 19
Shareholder Nominations for Directors.................................................................... 20
ii
BOISE CASCADE OFFICE PRODUCTS CORPORATION
Boise Cascade Office Products is a worldwide distributor of office and
computer supplies, office furniture, paper, and promotional products. Our
customer base ranges in size from the smallest businesses to multinational
corporations and government agencies. We have operations throughout the United
States, Australia, Belgium, Canada, France, Spain, and the United Kingdom. The
address of our corporate headquarters is 800 West Bryn Mawr Avenue, Itasca,
Illinois 60143-1594. Our telephone number is (630) 773-5000. Boise Cascade
Office Products' website is located at www.bcop.com on the Internet.
ANNUAL MEETING INFORMATION
PROXY STATEMENT
This proxy statement summarizes information we must provide to you under the
rules of the Securities and Exchange Commission (SEC). It is designed to assist
you in voting your shares. We began mailing these proxy materials on or about
March 22, 1999.
VOTING
Shareholders can vote by mail or at the annual meeting by completing a proxy
card. If you submit a properly executed proxy card, the individuals named on the
card, as your proxies, will vote your shares in the manner you indicate. You may
specify whether your shares are voted for all, some, or none of the nominees for
director; for or against the appointment of Arthur Andersen; and for or against
the amendment to the Key Executive Stock Option Plan ("KESOP"). If you sign and
return the card without indicating your instructions, your shares will be voted
FOR:
- the election of the three nominees to serve three-year terms on our board
of directors;
- the appointment of Arthur Andersen LLP as our independent auditors for
1999; and
- the amendment of the KESOP to increase the number of shares of common
stock available for issuance.
You may revoke or change your proxy at any time prior to the vote at the
annual meeting. To do so:
- deliver a new proxy to the independent tabulator, Corporate Election
Services, Inc.;
- give us written notice of your change or revocation; or
- attend the annual meeting and vote in person.
Each share of Boise Cascade Office Products stock is entitled to one vote.
As of February 25, 1999 (the record date for determining shareholders entitled
to vote at the meeting), we had 65,758,524 outstanding shares of common stock.
BOISE CASCADE OFFICE PRODUCTS EMPLOYEES WHO ARE SHAREHOLDERS
If you participate in the company's common stock fund in one of our savings
plans, you may instruct the plan's trustee how to vote the shares allocated to
your account. If you do not provide instructions, the trustee will vote your
shares in the same proportion as shares for which voting instructions have been
provided by other participants.
VOTES NECESSARY FOR ACTION TO BE TAKEN
A quorum is necessary to hold a valid meeting. A quorum will exist if a
majority of the shareholders entitled to cast votes at the meeting are present
in person or by proxy.
1
The three nominees who receive the greatest number of votes at the annual
meeting will be elected as directors. The appointment of Arthur Andersen LLP as
our independent public accountants for 1999 and the amendment of the KESOP
require an affirmative vote of the majority of the votes cast on these matters.
Abstentions and broker nonvotes do not count as votes cast either for or
against the directors, Arthur Andersen, or the KESOP amendment.
PROXY SOLICITATION
We will pay the expenses of soliciting proxies. We retained D. F. King and
Company Inc. to assist us in the distribution and solicitation of proxies. We
will pay D. F. King a fee of $3,500, plus expenses, for these services. Proxies
may also be solicited on our behalf by directors, officers, and other employees
in person or by telephone or electronic transmission. We will not, however,
specially compensate these persons for doing so.
PROPOSALS YOU MAY VOTE ON
1. ELECTION OF DIRECTORS
There are three nominees for election this year. Detailed information on
each nominee is provided on page 3. If a nominee is unavailable for election, we
will vote the proxies for another nominee recommended by the board of directors.
As an alternative, the board may reduce the number of directors to be elected at
the meeting.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR"
EACH OF THESE NOMINEES.
2. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Your board of directors, upon the recommendation of its Audit Committee, has
appointed Arthur Andersen LLP to serve as our independent auditors for 1999,
subject to the approval of our shareholders. Arthur Andersen has served us in
this capacity since 1995. Representatives of Arthur Andersen will be present at
the annual meeting to answer questions. They will also have the opportunity to
make a statement if they desire to do so.
Audit services provided by Arthur Andersen during 1998 included an audit of
our consolidated financial statements and a review of our Annual Report and
certain other filings with the SEC and certain other governmental agencies. In
addition, Arthur Andersen provided various nonaudit services to us during the
year.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF ARTHUR ANDERSEN LLP AS OUR INDEPENDENT AUDITORS FOR 1999.
3. AMENDMENT OF KEY EXECUTIVE STOCK OPTION PLAN
We ask you to consider and approve an amendment (adopted by the Compensation
Committee in February 1999) to our Key Executive Stock Option Plan. This
amendment, subject to your approval, increases the number of shares available
under the plan by 3,500,000 shares. Detailed information on the Key Executive
Stock Option Plan and this amendment is provided beginning on page 6.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE AMENDMENT TO THE KEY EXECUTIVE STOCK OPTION PLAN.
2
4. OTHER MATTERS TO BE PRESENTED AT THE MEETING
Our management does not know of any other matters to be voted on at the
meeting. If, however, other matters are presented for a vote at the meeting, the
persons named on the enclosed proxy card will vote your properly executed proxy
according to their judgment on those matters.
At the meeting, management will report on our business, and you will have an
opportunity to ask questions.
BOARD OF DIRECTORS
STRUCTURE
Our board of directors, comprised of eight persons, is divided into three
classes for purposes of election. One class is elected at each annual meeting of
shareholders to serve for a three-year term.
Three directors are nominees for reelection in 1999, each to hold office
until the annual meeting of shareholders in 2002. Our other directors are not up
for election this year and will continue in office for the remainder of their
terms.
DIRECTORS NOMINATED THIS YEAR FOR TERMS EXPIRING IN 2002
[PHOTO] THEODORE CRUMLEY, 53, was elected to the board of
directors in 1995. He is currently senior vice
president and chief financial officer of Boise Cascade
Corporation and has been an executive officer of Boise
Cascade Corporation since 1990. Mr. Crumley is also a
director of Hecla Mining Company.
[PHOTO] A. WILLIAM REYNOLDS, 65, was elected to the board of
directors in 1995. He is the chief executive of Old
Mill Group, a private investment firm. Mr. Reynolds is
the former chairman of the board and chief executive
officer of GenCorp Inc., a diversified manufacturing
and service company. He is also a director of Boise
Cascade Corporation and Eaton Corporation and former
chairman of the Federal Reserve Bank of Cleveland.
[PHOTO] DONALD E. ROLLER, 61, was elected to the board of
directors in 1998. He is a former executive vice
president of USG Corporation, the world's largest
manufacturer of gypsum panels, joint compound, and
related construction products, and the former president
and chief executive officer of United States Gypsum
Company, USG's largest business unit. Mr. Roller is
also a director of Payless Cashways, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
[PHOTO] JOHN B. CARLEY, 65, was elected to the board of
directors in 1995. He is a director, chairman of the
Executive Committee of the board of directors, and
former president and chief operating officer of
Albertson's, Inc., a retail food and drug company. Mr.
Carley is also a director of Idaho Power Company.
[PHOTO] GEORGE J. HARAD, 54, was elected to the board of
directors in 1995 and became chairman of the board that
same year. He is chairman of the board and chief
executive officer of Boise Cascade Corporation and has
been an executive officer of Boise Cascade Corporation
since 1982. Mr. Harad is also a director of Allendale
Insurance Co. and US West, Inc.
[PHOTO] CHRISTOPHER C. MILLIKEN, 53, was elected to the board
of directors in 1998. He is the president and chief
executive officer of the company. Mr. Milliken has
served as an executive officer of Boise Cascade
Corporation since 1995. He is also a director of Cabot
Industrial Trust.
3
DIRECTORS WHOSE TERMS EXPIRE IN 2000
[PHOTO] JAMES G. CONNELLY III, 53, was elected to the board of
directors in 1995. He is the former president and chief
operating officer of USFreightways Corporation, a
diversified transportation and logistics company. Mr.
Connelly is also the former president and chief
operating officer of Caremark International Inc., a
wholly owned subsidiary of MedPartners, Inc., and a
national provider of health care management and
services.
[PHOTO] PETER G. DANIS JR., 67, was elected to the board of
directors in 1995. He is the former president and chief
executive officer of the company. Mr. Danis is also a
director and the nonexecutive chairman of the board of
Payless Cashways, Inc.
MEETINGS AND COMMITTEES OF THE BOARD
During 1998, our board of directors met nine times. In addition to meetings
of the full board, directors also attended meetings of board committees. All of
the directors attended at least 75% of the total meetings of the board and the
committees on which they served.
THE BOARD OF DIRECTORS AND COMMITTEE MEMBERSHIP
- -----------------------------------------------------------------------------------------------------------------
AUDIT COMPENSATION COMMITTEE OF
DIRECTOR COMMITTEE COMMITTEE INDEPENDENT DIRECTORS
- -----------------------------------------------------------------------------------------------------------------
John B. Carley.............................................. X X X*
James G. Connelly III....................................... X* X X
Theodore Crumley............................................
Peter G. Danis Jr........................................... X
George J. Harad.............................................
Christopher C. Milliken.....................................
A. William Reynolds......................................... X*
Donald E. Roller............................................ X X
1998 Meetings............................................... 2 5 0
- -----------------------------------------------------------------------------------------------------------------
*Committee chair
AUDIT COMMITTEE
The Audit Committee meets periodically with management, our internal
auditors, and our independent auditors to assure that appropriate audits of our
affairs are being conducted. Additionally, it reviews the scope of internal and
external audit activities and the results of the annual audit. The committee
also recommends a public accounting firm to serve as independent auditors each
year. Both the independent auditors and the internal auditors communicate
directly with the committee (outside the presence of management) regarding the
results of their examinations, the adequacy of internal accounting controls, and
the integrity of financial reporting.
COMPENSATION COMMITTEE
The Compensation Committee, comprised entirely of outside directors,
establishes all executive officer compensation. In addition, it oversees
administration of stock option and variable compensation programs which apply to
officers and directors. The committee also advises the board on nominees for
executive officer positions in the company.
COMMITTEE OF INDEPENDENT DIRECTORS
The Committee of Independent Directors reviews and approves the terms of all
material agreements and transactions between us and any corporation which holds
more than 10% of the voting shares in the company's capital. The committee also
reviews and evaluates any significant related party transactions between us and
any officer, director, or principal shareholder.
4
DIRECTOR COMPENSATION
Of our current board members, only one, Mr. Milliken, is a salaried employee
of Boise Cascade Office Products. Board members that are not salaried employees
or Boise Cascade Corporation ("BCC") officers receive separate compensation for
board service. That compensation includes:
Annual Retainer: $21,000
Attendance Fees: $1,000 for each board meeting
$1,000 for each committee meeting held on
a day other than the board meeting date
Expenses related to attendance
Stock Options: 5,000 annually
Our directors receive no additional compensation for attending committee
meetings held on the same day as a board meeting.
5
DIRECTOR STOCK OPTION PLAN
Through our shareholder-approved Director Stock Option Plan, each director
who is not an employee of either the company or BCC receives an annual stock
option grant on July 31. Directors elected between August 1 and December 31
receive a grant when they are elected. The options are exercisable one year
after the grant date, and they expire the earlier of (a) three years after the
director's retirement, resignation, death, or termination as a director or (b)
ten years after the grant date.
In 1998, each nonemployee director was granted an option to purchase 5,000
shares of our common stock at a price equal to the stock's closing market price
on the grant date.
DIRECTOR DEFERRED COMPENSATION PROGRAM
Our directors' deferred compensation program allows each nonemployee
director to defer all or a portion of his cash compensation.
Under this program, nonemployee directors may defer from a minimum of $5,000
to a maximum of 100% of their cash compensation in a calendar year. Interest is
imputed on deferred compensation at a rate equal to 130% of Moody's Composite
Average of Yields on Corporate Bonds. A minimum death benefit of 1.5 times a
participant's total deferral amount between February 14, 1995, and December 31,
1995, is also provided. The benefits under this program are not funded and are
payable from our general assets. Participants in the program are unsecured
general creditors of the company with respect to these benefits.
As of December 31, 1998, four directors were participating in the deferred
compensation program.
OTHER
During 1995, the company entered into a number of transactions with BCC
which are described under "Related Party Transactions." None of the transactions
constitutes compensation for Messrs. Crumley, Harad, or Reynolds.
KEY EXECUTIVE STOCK OPTION PLAN
HISTORY AND OPERATION OF THE KESOP
Under the KESOP, the Compensation Committee of the board of directors may
grant options to key employees, including executive officers and executive
officers serving as directors of the company, to purchase shares of the
company's common stock. Nonemployee directors are not eligible for grants under
this plan. In 1998, 16 executive officers and 102 other key employees received
option grants under the plan.
Since the plan was adopted in 1995, options have been granted to purchase a
total of 2,405,129 shares of our common stock. Since then, 230,656 shares have
been purchased through the exercise of options, 153,368 options have expired
unexercised, and 2,021,105 shares remain subject to option. Prior to this
proposed amendment, 726,868 shares were available for stock option grants under
the plan. Under the amendment, the number of shares available for stock option
grants will increase by 3,500,000 shares. In February 1999, the Compensation
Committee approved an option grant of 1,028,300 shares to all of the company's
executive officers and certain nonofficer employees. The grants in excess of the
726,868 shares are contingent upon shareholder approval. If shareholders approve
this amendment, a total of 3,198,568 shares will remain available for future
grants under the plan.
Options under the KESOP must be granted at the fair market value of the
company's common stock on the date of grant. As of February 25, 1999, the
closing price of our common stock on the New York Stock Exchange was $12 per
share. The plan does not permit "repricing" of previously granted options. No
incentive stock options have been granted under the plan.
6
Employees exercising an option may pay the exercise price in the form of:
- cash,
- Boise Cascade Office Products stock which has a fair market value equal to
the exercise price,
- the proceeds of a loan authorized by the Compensation Committee, or
- any combination of the above methods (including a "cashless"
broker-assisted process).
The Compensation Committee may amend the KESOP at any time and may make
adjustments to the KESOP and outstanding options, without your approval, to
reflect a stock split, recapitalization, merger, consolidation, or certain other
events. However, shareholders must approve amendments which:
- change the number of shares subject to this plan,
- change employee eligibility requirements,
- change the method of pricing options on the grant date, or
- materially increase the cost of the KESOP to the company or the benefits
to participants.
Options may not be granted under the KESOP after February 20, 2005. However,
the plan will remain in effect until all stock subject to the plan has been
purchased through the exercise of options granted under the plan or until the
options have expired.
PROPOSED PLAN AMENDMENT
The Compensation Committee believes this amendment is essential to maintain
our balanced and competitive total compensation program. We use the KESOP to
relate a portion of our key employees' total compensation directly to
improvement in shareholder value. The KESOP also supports our ability to attract
and retain highly qualified managers in key positions. In order to maintain the
continuity and consistency of the program, as well as to minimize administrative
costs and complexity, the Compensation Committee recommends amending the plan to
authorize additional shares rather than adopting and implementing an entirely
new plan.
This amendment will not be effective unless it is approved by our
shareholders.
FEDERAL INCOME TAX CONSEQUENCES
Under current federal law, an employee granted a stock option under the
KESOP has no income tax consequences at that time. If the employee exercises an
option, then at that time he or she will realize ordinary income equal to the
difference between the value of the common stock and the exercise price. In
general, shares acquired by exercising an option have a basis equal to the
market value of the stock on the date of exercise. When an employee exercises an
option, the company is entitled to a federal income tax deduction in the same
amount as the employee's realized income.
ADDITIONAL INFORMATION
We cannot determine the amount of options under the KESOP which will be
granted during the remainder of 1999 to specific officers, officers as a group,
or nonofficer employees as a group. The plan, however, does not permit grants to
any one individual, during the life of the plan, of options to purchase more
than 20% of the total number of shares authorized for issuance under the plan.
You can find more information regarding options granted and exercised under the
KESOP on page 14 under "Stock Option Tables." These tables show the stock
options granted under the KESOP to our employees and executive officers in 1998.
These amounts would not have been different under the proposed amendment. A copy
of the plan is on file with the Securities and Exchange Commission.
7
STOCK OWNERSHIP
MAJORITY SHAREHOLDER
As of December 31, 1998, BCC, a Delaware corporation headquartered in Boise,
Idaho, beneficially owned an aggregate of 53,398,724 shares, or 81.2%, of our
outstanding common stock. BCC has sole voting and investment power over all of
the shares. Because of their relationship with BCC, Messrs. Crumley, Harad, and
Reynolds may be deemed by the Securities and Exchange Commission to beneficially
own the shares of our common stock owned by BCC. Each of these three people
disclaims any beneficial ownership of those shares.
DIRECTORS AND EXECUTIVE OFFICERS
The directors, nominees for director, and executive officers furnished the
following information to us regarding the shares of our common stock which they
beneficially owned on December 31, 1998.
OWNERSHIP OF BOISE CASCADE OFFICE PRODUCTS CORPORATION STOCK
- ---------------------------------------------------------------------------------------------------
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
- ---------------------------------------------------------------------------------------------------
DIRECTORS(1)
John B. Carley........................................................ 42,000 *
James G. Connelly III................................................. 21,000 *
Theodore Crumley...................................................... 1,000 *
Peter G. Danis Jr..................................................... 229,800 *
George J. Harad....................................................... 2,000 *
Christopher C. Milliken............................................... 200,507(2) *
A. William Reynolds................................................... 38,000 *
Donald E. Roller...................................................... 6,000 *
OTHER NAMED EXECUTIVES
Richard L. Black...................................................... 134,294(2) *
Carol B. Moerdyk...................................................... 150,648(2) *
A. James Balkins III.................................................. 49,158(2) *
Kenneth W. Cupp....................................................... 39,933(2) *
All directors, nominees for director, and executive officers as a
group(1)(2)......................................................... 1,270,585 1.87%
*Less than 1% of class
- ---------------------------------------------------------------------------------------------------
(1) Beneficial ownership for the directors includes all shares held of record or
in street name, plus options granted but unexercised under the Director
Stock Option Plan ("DSOP"), described on page 5 under "Director
Compensation." The number of shares subject to options under the DSOP
included in the beneficial ownership table is as follows: Messrs. Carley,
18,000 shares; Connelly, 18,000 shares; Danis, 5,000 shares; Reynolds,
18,000 shares; Roller, 5,000 shares; and directors as a group, 64,000
shares.
(2) The beneficial ownership for these executive officers includes all shares
held of record or in street name, plus options granted but unexercised under
the Key Executive Stock Option Plan ("KESOP"), described on page 14 under
"Stock Option Tables," and interests in shares of common stock held in the
Boise Cascade Office Products Common Stock Fund by the trustee of the
Savings and Supplemental Retirement Plan ("SSRP"), a defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code. The
following table indicates the nature of each executive's stock ownership.
COMMON UNEXERCISED SSRP
SHARES OPTION (COMMON
OWNED SHARES STOCK)
------ ----------- -------
Christopher C. Milliken........................... 8,400 178,400 13,707
Richard L. Black.................................. 1,494 132,800 0
Carol B. Moerdyk.................................. 5,000 141,400 4,248
A. James Balkins III.............................. 200 39,000 9,958
Kenneth W. Cupp................................... 1,660 36,550 1,723
All executive officers as a group................. 24,534 867,050 39,201
8
On December 31, 1998, the following directors, nominees for director, and
executive officers beneficially owned the following number of shares of BCC's
common and preferred stock.
OWNERSHIP OF BOISE CASCADE CORPORATION STOCK
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL
COMMON UNEXERCISED SSRP SHARES ESOP
SHARES OPTION (COMMON COMMON (PREFERRED
NAME OF BENEFICIAL OWNER OWNED SHARES STOCK) STOCK(1) STOCK)(2)
- -----------------------------------------------------------------------------------------------------------------------------
DIRECTORS
Theodore Crumley...................................................... 1,180 140,200 19,228 160,608 563
Peter G. Danis Jr..................................................... 5,840 34,300 0 40,140 0
George J. Harad....................................................... 3,050 593,200 7,979 604,229 793
Christopher C. Milliken............................................... 0 1,300 0 1,300 906
A. William Reynolds................................................... 10,000 14,538 0 24,538 0
OTHER NAMED EXECUTIVES
Carol B. Moerdyk...................................................... 0 44,575 43 44,618 265
A. James Balkins III.................................................. 65 36,500 0 36,565 449
All directors, nominees for director, and executive officers as a
group............................................................... 22,478 997,123 29,415 1,049,016 10,372
- -----------------------------------------------------------------------------------------------------------------------------
(1) The individual beneficial ownership represents less than 1% of the
outstanding shares. All of our executive officers, directors, or nominees
for director (as a group) beneficially own 1.73% of BCC's common stock.
(2) Our executive officers (individually or as a group) do not own more than 1%
of BCC's Series D preferred stock (ESOP).
OWNERSHIP OF MORE THAN 5% OF BOISE CASCADE OFFICE PRODUCTS STOCK
As of December 31, 1998, the table below describes each person or entity
that we know to be the beneficial owner of more than 5% of any class of our
voting securities.
- -----------------------------------------------------------------------------------------------------------------------------
DISPOSITIVE AUTHORITY
VOTING AUTHORITY TOTAL AMOUNT
------------------------- ------------------------- OF BENEFICIAL PERCENT OF
NAME AND ADDRESS SOLE SHARED SOLE SHARED OWNERSHIP CLASS
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCK, $.01 PAR VALUE
- -----------------------------------------------------------------------------------------------------------------------------
Boise Cascade Corporation 53,398,724 0 53,398,724 0 53,398,724 81.2%
1111 W. Jefferson Street
P.O. Box 50
Boise, ID 83728
- -----------------------------------------------------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the board of directors approves the individual
salaries and compensation programs for executive officers. The following report
explains the basis for the committee's compensation decisions during 1998.
The company's salary policy provides for compensation at competitive levels
for all employees. Our executive compensation program is designed to:
- attract, motivate, reward, and retain the broad-based management talent
critical to achieving the company's business goals;
- link a portion of each executive officer's compensation to the performance
of both the company and the individual executive officer; and
- encourage ownership of company common stock by executive officers.
To ensure that compensation levels remain competitive, the company reviews
various reports and other information on the executive compensation practices of
five other companies within the office products distribution industry. These
companies are selected primarily because comparable
9
levels of responsibility can be identified for executives within those
companies. The industry comparables index shown in the performance graph
following this report is comprised of the five companies we monitor.
The company also collects information on the compensation practices of 104
other distribution and retail companies. Together, these office products
distribution, general distribution, and retail companies are referred to as
"peer group" companies in this report. In addition to the peer group companies'
compensation information, the company and committee use information regarding
executive compensation programs provided by human resource consulting firms,
including in 1998, Hewitt Associates, Management Compensation Group, and Stern
Stewart & Co.
The company's executive compensation program has four principal components:
- base salary;
- annual variable incentive compensation;
- stock options; and
- other compensation plans.
During 1998, the cash-based annual variable (at-risk) incentive component linked
executive compensation directly to the company's financial performance, and the
stock option component tied executive compensation to growth in its stock value.
The company's compensation plans reflect the committee's intent that the
compensation paid to executive officers will qualify for federal income tax
deduction by the company. Executive compensation decisions, however, necessarily
involve some subjective judgment. The committee reserves the authority to make
compensation payments that may not be deductible under federal tax law.
BASE SALARY
A salary guideline is established for each salaried position in the company,
including each executive officer position. The midpoint of each salary guideline
approximates the average salary, adjusted for company size (in sales), of
equivalent positions at the peer group companies. Annual base salary is designed
to compensate executives for their level of responsibility, sustained individual
performance, and performance of the business or staff unit which the executive
heads. Business or staff unit performance is measured by economic value added,
return on total capital, achievement of sales or operating targets,
effectiveness of cost-containment measures, implementation of Total Quality
process improvements, and other factors relevant to the specific position. In
weighing these factors, the committee must make inherently subjective judgments.
Each year, the committee reviews the criteria discussed above and
establishes the chief executive officer's base salary. In 1998, the committee
set Mr. Milliken's base salary at $390,000 per year. This salary rate was
approximately 24% below the midpoint of the designated salary guideline
($512,400) for the company's chief executive officer. Mr. Milliken's salary
reflects his 21 years of combined experience with the company and BCC, his
responsibilities as chief executive officer, and his role in the company's
strategic growth, cost-effectiveness programs, and Total Quality evolution.
ANNUAL VARIABLE INCENTIVE COMPENSATION
The committee establishes objective performance criteria for the variable
incentive compensation program and oversees the program's administration. This
program applies to a majority of the company's salaried and hourly employees.
The criteria for the program specify percentages of the participants'
compensation to be paid as additional cash compensation based on improvements in
the company's "economic value added." Economic value added is determined by
calculating the company's operating profit and then subtracting a pretax charge
for the capital used to generate that profit.
10
The committee establishes target payouts for each participating position.
The target payout for the chief executive officer, over time, should average
approximately 60% of the chief executive officer's base salary, assuming the
company performs satisfactorily. The actual payout under the plan varies from
year to year depending on the company's financial performance for the year.
Target payout amounts for executive officers also vary, depending on their
levels of responsibility and on competitive compensation practices.
Under the 1998 program, Mr. Milliken received a payment equal to 51.98% of
his base salary, as reported in the Summary Compensation Table. The Summary
Compensation Table reflects amounts paid under this variable incentive program.
STOCK OPTIONS
The purpose of the stock option plan is to further align management's
interests with the company's long-term performance and, therefore, the long-term
interests of the shareholders. The committee administers this plan and grants
stock options to executive officers and other key managers. The exercise price
of all grants represents the fair market value of the common stock when granted.
The committee determines the number of stock options to grant by:
- analyzing peer group companies' competitive compensation;
- considering consultants' recommendations; and
- taking each individual's salary guideline and responsibility into account.
The committee may also consider the number and exercise price of options granted
to an individual in the past. Corporate or business unit measures are not used
to determine the size of individual option grants.
The stock option plan limits the number of shares issued to any individual
over the life of the plan to 20% of the total number of shares authorized by
shareholders for issuance under the plan. This provision reflects the
committee's view that the plan is intended to provide long-term incentive
compensation to a relatively broad spectrum of the company's management.
In 1998, Mr. Milliken received a grant of an option to purchase 90,000
shares of the company's common stock. In determining the number of shares to
include in Mr. Milliken's grant, the committee considered:
- information about stock option grants to chairpersons and chief executive
officers of the peer group companies;
- the company's financial performance;
- the number of shares granted to other chief executive officers and the
value of those options;
- the size of grants offered to the company's other executive officers; and
- the number and exercise price of shares previously granted to Mr.
Milliken.
OTHER COMPENSATION PLANS
The company's executive officers are entitled to receive additional
compensation in the form of payments, allocations, or accruals under various
other compensation and benefit plans. The plans are described more fully in the
footnotes to the Summary Compensation Table and on page 15 under "Other Benefit
Plans." Each of these plans is an integral part of the company's compensation
program.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
A. William Reynolds, Chairman
John B. Carley
James G. Connelly III
11
PERFORMANCE GRAPH
The following graph compares the four-year cumulative total return beginning
April 7, 1995 (the date that our common stock began trading on the New York
Stock Exchange), through December 31, 1998, for the company, the Standard &
Poor's 500 index, and a selected group of office products companies. The
selected companies include Corporate Express, Office Depot, OfficeMax, Staples,
and U.S. Office Products Company. The graph plots the growth in value of an
initial $100 investment over the indicated time period, assuming the
reinvestment of dividends, if any.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
BOISE CASCADE OFFICE PRODUCTS CORPORATION INDUSTRY COMPARABLES INDEX* S&P 500 INDEX
4/7/95 $100.00 $100.00 $100.00
1995 $171.00 $114.00 $124.00
1996 $166.00 $115.00 $152.00
1997 $120.00 $132.00 $203.00
1998 $108.00 $181.00 $261.00
BASE PERIOD
COMPANY/INDEX NAME 4/7/95 RETURN 1995 RETURN 1996 RETURN 1997 RETURN 1998
- -----------------------------------------------------------------------------------------------------------------------------
Boise Cascade Office Products Corp.......................... $ 100 $ 171 $ 166 $ 120 $ 108
Industry Comparables Index*................................. 100 114 115 132 181
S&P 500 Index............................................... 100 124 152 203 261
- -----------------------------------------------------------------------------------------------------------------------------
*Industry Comparables Index includes Corporate Express, Office Depot, OfficeMax,
Staples, and U.S. Office Products Company.
12
COMPENSATION TABLES
The following tables present compensation information for our chief
executive officer and the four next most highly compensated executive officers
during 1998.
This table sets forth compensation earned during each of the last three
years.
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- AWARDS
-------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY($) BONUS($) COMPENSATION($) OPTIONS/SARS(#) COMPENSATION($)
NAME AND PRINCIPAL POSITION YEAR (2) (3) (4) (5) (6)
- ------------------------------------------------------------------------------------------------------------------------------
Christopher C. Milliken, 1998 $ 371,250 $ 202,722 $ 0 90,000 $ 26,050
President and 1997 233,757 87,840 0 28,000 22,042
Chief Executive Officer(1) 1996 207,522 199,331 0 32,000 17,811
Richard L. Black, 1998 252,507 99,818 0 39,000 16,751
Senior Vice President, 1997 223,002 78,134 0 28,000 16,356
Direct Marketing and Europe 1996 209,853 171,399 0 32,000 14,866
Carol B. Moerdyk, 1998 252,507 99,818 0 39,000 27,363
Senior Vice President, 1997 223,002 83,448 0 28,000 27,217
North American and 1996 202,257 192,823 0 32,000 24,123
Australian Contract Operations(1)
A. James Balkins III, 1998 202,061 81,543 54,068 39,000 25,412
Senior Vice President, 1997 175,104 72,331 0 0 23,946
Chief Financial Officer, 1996 165,402 17,335 0 0 27,481
and Treasurer(1)
Kenneth W. Cupp, 1998 175,959 73,097 0 12,500 8,429
Senior Vice President 1997 152,517 39,661 0 8,100 8,275
and Region Manager 1996 144,501 72,677 0 7,400 7,391
- ------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Milliken is also a senior vice president and Mr. Balkins and Ms. Moerdyk
are also vice presidents of BCC.
(2) Includes amounts deferred under the SSRP, Key Executive Deferred
Compensation Plan, and 1995 Executive Officer Deferred Compensation Plan.
Mr. Balkins joined the company on February 10, 1998. His compensation
figures include amounts earned by him during the period from 1996 through
February 9, 1998, when he was employed by BCC.
(3) Payments, if any, under the company's variable incentive compensation
program. See "Annual Variable Incentive Compensation" on page 10. See
footnote (2) for a discussion of Mr. Balkins' compensation.
(4) For 1998, the aggregate cost to the company of providing perquisites
received by Mr. Balkins is reported and includes $50,567 for a moving
expense reimbursement. If any federal income taxes were incurred by the
executive and paid by the company relating to various executive officer
benefits, the amounts would be shown in this column. The cost incurred by
the company during these years for various perquisites provided to each of
the named executive officers, except for Mr. Balkins in 1998, is not
included in this column because the amount did not exceed the lesser of
$50,000 or 10% of the executive's compensation during each year.
(5) Grants under the company's Key Executive Stock Option Plan. During 1996 and
1997, Mr. Balkins was not granted options to purchase shares of Boise
Cascade Office Products' common stock. He was, however, granted options by
the Executive Compensation Committee of the Boise Cascade Corporation board
of directors to purchase 10,000 (1996) and 8,800 (1997) shares of BCC's
common stock under its Key Executive Stock Option Plan.
13
(6) Amounts disclosed in this column include the following:
- -------------------------------------------------------------------------------------------------------------------
COMPANY ACCRUALS OF COMPANY-
MATCHING ABOVE-MARKET ALLOCATIONS TO PAID
CONTRIBUTIONS INTEREST ON BOISE CASCADE PORTION
TO THE DEFERRED CORPORATION OF EXECUTIVE
DEFERRED COMPENSATION EMPLOYEE OFFICER LIFE
COMPENSATION OR PLANS STOCK OWNERSHIP INSURANCE
NAME YEAR SSRP PLANS($)(*) BALANCES($) PLAN($) PROGRAMS($)
- -------------------------------------------------------------------------------------------------------------------
Christopher C. Milliken......... 1998 $ 13,773 $ 8,072 $ 0 $ 4,205
1997 12,993 6,356 0 2,693
1996 10,968 4,549 0 2,294
Richard L. Black................ 1998 9,919 5,701 0 1,131
1997 11,832 3,537 0 987
1996 11,007 3,032 0 827
Carol B. Moerdyk................ 1998 10,079 11,031 0 6,253
1997 12,475 7,156 0 7,586
1996 10,811 5,356 0 7,956
A. James Balkins III............ 1998 9,366 9,282 0 6,764
1997 8,082 6,119 1,674 8,071
1996 12,558 5,018 1,496 8,409
Kenneth W. Cupp................. 1998 6,001 1,794 0 634
1997 6,756 953 0 566
1996 6,613 449 0 329
- -------------------------------------------------------------------------------------------------------------------
(*) The company's 1995 Executive Officer Deferred Compensation Plan is an
unfunded plan. Executive officers may irrevocably elect to defer receipt
of a portion (6% to 20%) of their base salary until termination of
employment or beyond. Amounts so deferred are generally credited with
imputed interest at a rate equal to 130% of Moody's Composite Average of
Yields on Corporate Bonds. The SSRP is a profit-sharing plan qualified
under Section 401(a) of the Internal Revenue Code which contains a cash
or deferred arrangement meeting the requirements of Section 401(k) of the
Code.
STOCK OPTION TABLES
This table details the 1998 option grants under our Key Executive Stock
Option Plan ("KESOP") to the five executives named in the Summary Compensation
Table, as well as to all executive officers as a group and nonofficer employees
as a group.
OPTION/SAR GRANTS IN 1998
- ------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF GRANT DATE
SECURITIES PERCENT OF VALUE
UNDERLYING TOTAL OPTIONS/ EXERCISE ----------------
OPTIONS/SARS SARS GRANTED TO OR BASE GRANT DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE(2)
NAME (#) FISCAL YEAR ($/SH)(1) DATE ($)
- ------------------------------------------------------------------------------------------------------------------------------
Christopher C. Milliken........................... 90,000 11.51% $18.500 2/11/08 $ 606,600
Richard L. Black.................................. 33,000 4.22 18.500 2/11/08 222,420
6,000 0.77 14.375 8/5/08 43,560
Carol B. Moerdyk.................................. 33,000 4.22 18.500 2/11/08 222,420
6,000 0.77 14.375 8/5/08 43,560
A. James Balkins III.............................. 33,000 4.22 18.500 2/11/08 222,420
6,000 0.77 14.375 8/5/08 43,560
Kenneth W. Cupp................................... 9,600 1.23 18.500 2/11/08 64,704
2,900 0.37 14.375 8/5/08 21,054
Executive officers as a group..................... 345,700 44.20 17.861 2/11/08- 2,357,674
8/5/08
Nonofficer employees as a group................... 436,500 55.80 18.500 2/11/08 2,959,470
- ------------------------------------------------------------------------------------------------------------------------------
(1) Under the KESOP, the exercise price must be the fair market value at the
date of grant. Options granted under this plan during 1998 were fully vested
when granted. However, except under limited circumstances, the options are
exercisable only as follows: one-third of each option is exercisable after
one year from the grant date, two-thirds of each option is exercisable after
two years from the grant date, and the entire option is exercisable after
three years from the grant date. Under the plan, no options may be granted
after February 20, 2005. The exercise price of options granted to executive
14
officers as a group and nonofficer employees as a group is the weighted
average of options granted during 1998. The expiration dates are 10 years
after the grant date of each option grant.
(2) "Grant Date Value" has been calculated using the Black-Scholes model of
option valuation, with assumptions of: (a) risk-free interest rate of 5.5%,
(b) expected stock price volatility of 35%, (c) expected option term of 4.2
years, and (d) no dividends. Based on this model, the calculated values of
the options on February 10 and August 4, 1998 (grant dates), are $6.74 and
$7.26 per share granted. This value does not necessarily represent the
amount an option holder may ultimately realize upon exercise of an option.
The following table sets forth the shares acquired and gross value (without
adjustment for personal income taxes and fees, if any) realized by the top five
executives when they exercised their stock options during 1998 and also states
the year-end gross value of unexercised stock options held by these executives.
AGGREGATE OPTION/SAR EXERCISES FOR 1998 AND 1998 OPTION/SAR VALUES
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT 12/31/98(#) AT 12/31/98($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME UPON EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE(2)
- -----------------------------------------------------------------------------------------------------------------------
Christopher C. Milliken........................... 0 $ 0 59,066/119,334 $ 28,400/0
Richard L. Black.................................. 0 0 64,466/ 68,334 33,800/0
Carol B. Moerdyk.................................. 0 0 73,066/ 68,334 42,400/0
A. James Balkins III.............................. 0 0 0/ 39,000 0/0
Kenneth W. Cupp................................... 0 0 16,183/ 20,367 8,550/0
- -----------------------------------------------------------------------------------------------------------------------
(1) The "value realized" represents the difference between the option's exercise
price and the value of the company's common stock at the time of exercise.
(2) This column indicates the aggregate amount, if any, by which the common
stock share price on December 31, 1998, $13.50, exceeded the options'
exercise price.
OTHER BENEFIT PLANS
PENSION PLAN
We are a participating employer in the Boise Cascade Corporation Pension
Plan for Salaried Employees. The estimated annual benefits payable upon
retirement at age 65 under this plan for specified levels of average
remuneration and years-of-service classifications are set out in the following
table.
PENSION PLAN TABLE
- -------------------------------------------------------------------------------------------
YEARS OF SERVICE
---------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
- -------------------------------------------------------------------------------------------
$ 175,000 $ 10,938 $ 21,875 $ 32,813 $ 43,750 $ 54,688 $ 65,625 $ 76,563
200,000 12,500 25,000 37,500 50,000 62,500 75,000 87,500
250,000 15,625 31,250 46,875 62,500 78,125 93,750 109,375
300,000 18,750 37,500 56,250 75,000 93,750 112,500 131,250
400,000 25,000 50,000 75,000 100,000 125,000 150,000 175,000
500,000 31,250 62,500 93,750 125,000 156,250 187,500 218,750
600,000 37,500 75,000 112,500 150,000 187,500 225,000 262,500
700,000 43,750 87,500 131,250 175,000 218,750 262,500 306,250
800,000 50,000 100,000 150,000 200,000 250,000 300,000 350,000
- -------------------------------------------------------------------------------------------
The pension plan entitles each vested employee, including executive
officers, to receive a pension benefit at normal retirement equal to 1 1/4% of
the highest average of any five consecutive years of compensation (as defined in
the plan) out of the last ten years of employment, multiplied by the employee's
years of service.
15
Under the plan, "compensation" is the employee's base salary plus any
amounts earned under the company's variable incentive compensation program (only
"Salary" and "Bonus" from the Summary Compensation Table). As of December 31,
1998, the highest average of annual compensation during any five consecutive
years for 1989 through 1998 and the years of service for the named executives
are as follows:
- ----------------------------------------------------------------------------------------------------------------------
NAME COMPENSATION YEARS OF SERVICE
- ----------------------------------------------------------------------------------------------------------------------
Christopher C. Milliken........................................................ $ 330,175 21
Richard L. Black............................................................... 321,281 5
Carol B. Moerdyk............................................................... 309,955 18
A. James Balkins III........................................................... 228,771 20
Kenneth W. Cupp................................................................ 192,270 30
- ----------------------------------------------------------------------------------------------------------------------
As shown in the Pension Plan Table above, benefits are computed on a
straight-life annuity basis and are not offset by social security or other
retirement-type benefits. An employee is 100% vested in his or her pension
benefit after five years of service, except for certain breaks in service. If an
employee is entitled to a greater benefit under the plan's formula than the
Internal Revenue Code allows for tax-qualified plans, the excess benefits will
be paid from the company's general assets under the unfunded Supplemental
Pension Plan. The benefit under the qualified pension plan is reduced by
compensation deferred under any nonqualified deferred compensation plan. The
Supplemental Pension Plan will also provide payments to the extent that
participation in these deferred compensation plans has the effect of reducing an
individual's pension benefit under the qualified plan.
In the event of a change in control (as defined in the plan) of BCC, the
plan restricts the ability of the plan sponsor or its successor to recoup
surplus plan assets, if any exist. In general, after a change in control, the
participants and beneficiaries will receive the plan's surplus assets, if any,
on a pro rata basis if the plan is terminated, merged or consolidated with
another plan, or the assets are transferred to another plan.
After a change in control, a majority (in both number and interest) of plan
participants and beneficiaries must consent to amend this provision.
EARLY RETIREMENT PLAN
The Early Retirement Plan applies to:
- executive officers 55 years old or older who are also executive officers
of BCC,
- who have ten or more years of service, and
- who retire before age 65.
Eligible officers receive an early retirement benefit prior to age 65 equal to
the benefit calculated under the Pension Plan for Salaried Employees without
reduction due to the officer's early retirement. Messrs. Milliken and Balkins
and Ms. Moerdyk participate in this plan.
EXECUTIVE OFFICER AGREEMENTS
We have entered into agreements with Messrs. Milliken and Balkins and Ms.
Moerdyk who are also executive officers (but not employees) of BCC. These
agreements formalize our severance benefits if any of those persons' employment
is terminated after a change in control (as defined in the agreements) of BCC.
The agreements provide certain severance benefits and protect other benefits
that the named officers have already earned or reasonably expect to receive
under our employee benefit plans. The officer will receive the benefits provided
under the agreement if, after a change in control of BCC, we terminate the
officer's employment other than for cause or disability (as defined in the
agreement) or if the officer terminates employment after we take certain actions
specified in the agreement which adversely affect the officer. Under the
agreement, the officer must remain employed with us for six months following the
first potential change in control of BCC.
16
These agreements help ensure that we will have the benefit of these
officers' services without distraction in the face of a potential change in
control of our majority shareholder. The board of directors believes that the
agreements are in the best interests of our shareholders and the company. BCC
has entered into similar agreements with all its executive officers.
The benefits under the agreements include:
- the officer's salary through the termination date;
- severance pay equal to three times the officer's annual base salary and
target incentive pay, less any severance pay that the officer receives
under the Severance Pay Policy for Executive Officers, which is currently
the amount of the officer's annual base salary;
- vacation pay according to our Vacation Policy;
- any earned but unpaid bonus under the Key Executive Performance Plan (or
any substitute plan) for the year preceding termination;
- an award under the Key Executive Performance Plan (or any substitute plan)
equal to the greater of:
(a) the officer's target award prorated through the month in which the
officer is terminated, or
(b) the actual award through the end of the month prior to termination
based upon the award criteria for the applicable plan, prorated
through the month in which the officer is terminated;
- accelerated exercisability of the officer's stock options;
- benefits under the Supplemental Early Retirement Plan; and
- certain additional retirement and other employee benefits.
The agreements provide four additional benefits. First, we will maintain for up
to one year all employee benefit plans and programs in which the officer was
entitled to participate immediately prior to termination or we will substitute
similar arrangements. Second, we will maintain our participation in the
Split-Dollar Life Insurance Plan until the officer's insurance policy under that
plan is fully paid. Third, we will pay legal fees and expenses which the officer
incurs to enforce his or her rights or benefits under the agreement. Fourth, we
will increase the officer's total payments under the agreement to cover any
excise taxes imposed by the Internal Revenue Service as a result of such
payments.
The estimated amount of payments and other benefits (not including legal
fees, if any) each named executive officer would receive under the agreement
based on 1998 compensation figures (in excess of the benefits to which the
officer is entitled without the agreement) is:
- - Christopher C. Milliken...................................... $3,915,944
- - Carol B. Moerdyk............................................. 2,376,710
- - A. James Balkins III......................................... 1,867,956
(Payments which would be made subsequent to the termination date have been
discounted as of December 31, 1998, at a rate of 5.35%, according to the
requirements of Section 280G of the Internal Revenue Code.) Actual payments made
under the agreements at any future date would vary, depending in part upon what
the executive has accrued under the variable compensation plans and benefit
plans.
Each agreement is effective until December 31, 2001. The agreements are
automatically extended each January 1 for a new three-year period, unless we
notify the officers by September 30 of the preceding year that we do not wish to
extend the agreements.
17
DEFERRED COMPENSATION AND BENEFITS TRUST
The company has established a deferred compensation and benefits trust. This
trust is intended to ensure that participants and beneficiaries under several of
our nonqualified and unfunded deferred compensation plans and the executive
officer agreements will receive the benefits they have earned in the event of a
change in control of BCC (as defined in the plans and the agreements). The trust
will not increase the benefits to which any individual participant is entitled
under the covered plans and agreements. If a potential change in control occurs,
the trust will be revocably funded. If an actual change in control occurs, the
trust will be irrevocably funded and will pay benefits to participants in
accordance with the plans and agreements. The trustee will receive fees and
expenses either from us or from the trust assets. If the company become bankrupt
or insolvent, the trust assets will be accessible to the claims of the company's
creditors.
INDEMNIFICATION
To the extent that Delaware law permits, we will indemnify our directors and
officers against liabilities they incur in connection with actual or threatened
proceedings to which they are or may become parties and which arise from their
status as directors and officers. We insure, within stated limits, the directors
and officers against these liabilities. The aggregate premium on the insurance
policies for 1998 was $64,272.
RELATED PARTY TRANSACTIONS
As of December 31, 1998, BCC owned 81.2% of the outstanding shares of our
common stock. We supply office products to BCC and purchase certain paper and
paper products from them. During the year ended December 31, 1998, our sales to
BCC were $1,077,440, and our purchases from them were $281,914,363. We
anticipate that our sales and purchases with BCC during 1999 will exceed those
in 1998.
We have entered into a number of agreements with BCC regarding our ongoing
relationship. Because our various relationships with BCC are so complex, each
agreement or the transactions within it, considered separately, may contain
terms less favorable to us than we might have obtained from an unaffiliated
third party. Nevertheless, the company and BCC intend that these interrelated
agreements and transactions, taken as a whole, should fairly accommodate our
respective interests while continuing certain mutually beneficial joint
arrangements.
We may enter into additional or modified arrangements and transactions with
BCC. While we expect any future arrangements and transactions to be negotiated,
conflicts of interest may occur. Although we have not adopted any formal
procedures to prevent conflicts of interest, we intend to seek our independent
directors' approval for any agreement which our management or any independent
director believes to be materially important to us and to involve a significant
conflict of interest with BCC.
Certain arrangements and transactions between us and BCC or its affiliates
are summarized below.
PAPER SALES AGREEMENT
The majority of our purchases from BCC are under a Paper Sales Agreement
whereby BCC sells us office papers. We calculate the prices for these papers
with a formula meant to approximate prevailing market prices. The agreement has
an initial term of 20 years, commencing April 1, 1995. It will automatically
renew for five-year periods, subject to termination rights under specific
circumstances.
18
ADMINISTRATIVE SERVICES AGREEMENT
We also have an agreement under which BCC provides various administrative
services to us. These services include, among others, financial reporting, cash
management, human resources services, legal and corporate secretarial functions,
internal audit, benefits administration, transfer agent functions, and
insurance. These services are provided for varying periods, from one to five
years, and may be renewed or terminated from time to time. BCC charges us rates
for these services which reasonably approximate the cost to BCC of providing
these services to us. During 1998, we paid BCC $2,578,102 under this agreement.
TAX MATTERS AGREEMENT
We have entered into an agreement with BCC which allocates state and federal
tax liabilities and obligations between us. Since April 1, 1995, we have been
responsible for all tax liability which we incur. BCC must provide tax
administration for us, and we must reimburse them for the administration costs.
SHAREHOLDER AGREEMENT
Finally, we have an agreement with BCC which establishes certain rights for
BCC to purchase shares of voting stock or securities convertible into voting
stock which we may wish to sell from time to time. In addition, this agreement
gives BCC certain demand and participation registration rights for the shares of
our stock which it holds.
OTHER INFORMATION
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and any person who owns more than 10% of a registered
class of our equity securities, to file reports of holdings and transactions in
Boise Cascade Office Products shares with the SEC and the New York Stock
Exchange. Based on our records and other information, we believe that in 1998
our directors and executive officers met all applicable SEC filing requirements.
BOISE CASCADE OFFICE PRODUCTS' ANNUAL REPORT AND FORM 10-K
We are mailing you our 1998 Annual Report with this proxy statement. We will
file our Form 10-K with the SEC in March. Copies of the 1998 Annual Report to
Shareholders and Annual Report on Form 10-K can be obtained at no charge from
our Investor Relations Department, 800 West Bryn Mawr Avenue, Itasca, Illinois
60143-1594, 630/773-5042. Our financial statements are also on file with the SEC
and with the New York Stock Exchange. You can obtain copies of these statements
through the Securities and Exchange Commission's web site at www.sec.gov.
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
If you wish to submit a proposal to be included in our 2000 proxy statement
we must receive it no later than November 22, 1999.
All other proposals to be presented at the meeting must be delivered to our
corporate secretary, in writing, no later than February 19, 2000 (but not before
December 21, 1999). According to our Restated Certificate of Incorporation, your
notice must include:
- a brief description of the business you wish to bring before the meeting
and the reasons for conducting the business at the meeting,
- your name and address,
19
- the class and number of shares of our stock which you beneficially own,
and
- any material interest you have in the business to be brought before the
meeting.
The chairperson of the meeting may disregard any business not properly
brought before the meeting according to our Restated Certificate of
Incorporation.
SHAREHOLDER NOMINATIONS FOR DIRECTORS
If you wish to suggest a nominee for the board to consider for future
elections, write to Matthew R. Broad, corporate secretary, 1111 West Jefferson
Street, P.O. Box 50, Boise, Idaho 83728-0001. You should describe in detail your
proposed nominee's qualifications and other relevant biographical information
and indicate whether the proposed nominee is willing to accept nomination.
The board of directors considers director nominees from shareholders for
election at the annual shareholders meeting if a written nomination is received
by our corporate secretary not less than 60 days or more than 120 days in
advance of the meeting. According to our Restated Certificate of Incorporation,
your notice of nomination must include:
- your name and address;
- each nominee's name, age, and address;
- each nominee's principal occupation or employment;
- the number of shares of our stock which the nominee beneficially owns;
- the number of shares of our stock which you beneficially own;
- any other information that must be disclosed about nominees in proxy
solicitations under Regulation 14A of the Securities Exchange Act of 1934;
and
- each nominee's executed consent to serve as our director if elected.
The chairperson of the meeting may disregard any nomination not made in
accordance with the above procedures.
WE REQUEST THAT YOU PROMPTLY SIGN, DATE AND RETURN THE ENCLOSED PROXY SO
THAT IT WILL BE AVAILABLE FOR USE AT THE MEETING.
Matthew R. Broad
Corporate Secretary
March 22, 1999
[RECYCLED LOGO]
This Notice and Proxy Statement is printed on recycled-content
ASPEN-TM- Lightweight Opaque paper produced by
Boise Cascade's papermakers at its St. Helens, Oregon, mill.
This paper is made with no less than 10% postconsumer fiber.
20
[MAP]
[LOGO] BOISE CASCADE OFFICE PRODUCTS CORPORATION 800 W. Bryn Mawr Avenue
ANNUAL MEETING OF SHAREHOLDERS, APRIL 20, 1999 Itasca, IL 60143-1594
PROXY
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The shareholder signing this card appoints George J. Harad, Christopher C.
Milliken, and John W. Holleran as proxies, each with the power to appoint a
substitute. They are directed to vote all the shareholder's Boise Cascade
Office Products Corporation stock held on February 25, 1999, at the company's
annual meeting to be held on April 20, 1999, and at any adjournment of that
meeting. They are also given discretionary authority to vote on any other
matters that may properly be presented at this meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED BELOW AND FOR
PROPOSALS 2 AND 3.
1. Election of Directors: THEODORE CRUMLEY A. WILLIAM REYNOLDS DONALD E. ROLLER
/ / FOR all nominees / / WITHHOLD AUTHORITY WITHHOLD AUTHORITY for the following nominee(s) only:
(except as may be for all nominees
indicated) _____________________________________________________
_____________________________________________________
2. Appointment of Arthur Andersen LLP as independent accountants for 1999. / / FOR / / AGAINST / / ABSTAIN
3. Approval of amendment to Key Executive Stock Option Plan. / / FOR / / AGAINST / / ABSTAIN
THIS PROXY WILL BE VOTED ACCORDING TO YOUR INSTRUCTIONS. IF YOU SIGN AND RETURN
THE CARD BUT DO NOT VOTE ON THESE MATTERS, THEN PROPOSALS 1, 2, AND 3 WILL
RECEIVE FOR VOTES.
This card provides voting authority for all beneficial holdings of Boise Cascade
Office Products Corporation shares.
Please sign exactly as the name appears below and date this card. When shares
are held by joint tenants, both should sign. When signing as an attorney,
executor, administrator, trustee, or guardian, give full title as such. When
signing as a corporation, sign in full corporate name by an authorized officer.
When signing as a partnership, sign in partnership name by an authorized person.
______________________________________ __________________
Signature of Shareholder Date
______________________________________ __________________
Signature of Shareholder Date
Forward this card to D. F. King (solicitor) or to
Corporate Election Services (independent tabulator),
P.O. Box 1150, Pittsburgh, PA 15230
[LOGO]
BOISE CASCADE
OFFICE PRODUCTS CORPORATION
Dear Shareholder:
The Boise Cascade Office Products Corporation annual meeting of shareholders
will be held in the company's corporate headquarters building in Itasca,
Illinois, at 10 a.m., Central daylight time, April 20, 1999.
Shareholders of record on February 25, 1999, are entitled to vote by proxy,
before or at the meeting. The proxy card attached to the bottom of this page is
for your use in designating proxies and providing voting instructions.
The attached card serves both as a proxy designation (for shareholders of
record, including those holding shares in the BCOP Employee Stock Purchase Plan)
and as voting instructions (for Boise Cascade employee savings plan
participants). As "named fiduciaries," participants in the BCOP stock funds of
the employee savings plans are entitled to provide voting instructions to the
Trustee, using this card, for shares in the BCOP stock fund of the savings plan
in which they participate.
Individual proxy/voting instruction cards will be received and tabulated by
Corporate Election Services, Inc., in Pittsburgh, Pennsylvania, an independent
tabulator.
Please indicate your voting preferences on the card, SIGN and DATE the card, and
return it to the independent tabulator in the envelope provided. EMPLOYEE
SAVINGS PLAN PARTICIPANTS' VOTING INSTRUCTIONS ARE CONFIDENTIAL.
Thank you.
(fold and tear along perforation)
- --------------------------------------------------------------------------------
PROXY AND VOTING INSTRUCTION CARD BOISE CASCADE OFFICE PRODUCTS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 1999
The Board of Directors recommends a vote FOR all nominees listed below and
FOR proposals 2 and 3.
1. Election of Directors: THEODORE CRUMLEY A. WILLIAM REYNOLDS DONALD E. ROLLER
/ / FOR all nominees / / WITHHOLD AUTHORITY WITHHOLD AUTHORITY for the following nominee(s) only:
(except as may be for all nominees
indicated) _____________________________________________________
_____________________________________________________
2. Appointment of Arthur Andersen LLP as independent accountants for 1999. / / FOR / / AGAINST / / ABSTAIN
3. Approval of amendment to Key Executive Stock Option Plan. / / FOR / / AGAINST / / ABSTAIN
____________________________ ___________
Signature of Shareholder Date
____________________________ ___________
Signature of Shareholder Date
Shareholder(s) must sign as name(s) appear in
account registration printed to the left.
Forward this card to Corporate Election Services,
P.O. Box 1150, Pittsburgh, PA 15230
(Instructions on Reverse Side)
Printed on Boise Cascade Corporation's SUMMIT-Registered Trademark-
TAG-X, 100# White, which is made in St. Helens, Oregon.
PROXY AND VOTING INSTRUCTION CARD BOISE CASCADE OFFICE PRODUCTS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 1999
THIS PROXY AND THESE INSTRUCTIONS ARE SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.
The shareholder signing this card appoints George J. Harad, Christopher C.
Milliken, and John W. Holleran as proxies, each with the power to appoint a
substitute. They are directed to vote (as indicated on the reverse side of this
card) all the shareholder's Boise Cascade Office Products Corporation stock held
on February 25, 1999, at the company's annual meeting to be held on April 20,
1999, and at any adjournment of that meeting. They are also given discretionary
authority to vote on any other matters that may properly be presented at this
meeting. If the shareholder is a current or former company employee, this card
also provides voting instructions to the Trustee for BCOP shares held in any
Boise Cascade Corporation employee savings plans.
This proxy will be voted according to your instructions. If you sign and return
the card but do not vote on these matters, then proposals 1, 2, and 3 will
receive FOR votes.
(To be SIGNED on other side)