Washington, D.C. 20549

                                   FORM 10-K/A


       Amendment No. 1 to Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


          For the fiscal year ended             Commission File Number
              December 31, 1997                         1-7107


                          LOUISIANA-PACIFIC CORPORATION
             (Exact name of registrant as specified in its charter)


                  DELAWARE                             93-0609074
          (State of Incorporation)                  (I.R.S. Employer
                                                  Identification No.)

           111 S.W. Fifth Avenue             Registrant's telephone number
          Portland, Oregon  97204                (including area code)
           (Address of principal                     503-221-0800
            executive offices)


Securities registered pursuant to Section 12(b) of the Act:


                                               Name of each exchange on
          Title of each class                      which registered
          -------------------                      ----------------

Common Stock, $1 par value                     New York Stock Exchange
Preferred Stock Purchase Rights                New York Stock Exchange




Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]


State the aggregate  market value of the voting stock held by  nonaffiliates  of
the registrant: $2,513,964,661 as of March 12, 1998.


Indicate the number of shares outstanding of each of the registrant's classes of
common stock:  109,780,858 shares of Common Stock, $1 par value,  outstanding as
of March 12, 1998.


                       DOCUMENTS INCORPORATED BY REFERENCE


Definitive Proxy Statement for 1998 Annual Meeting: Part III






                                     PART I


ITEM 1.  Business

General
- -------

         Louisiana-Pacific  Corporation, a Delaware corporation since 1973, is a
major forest products firm  headquartered in Portland,  Oregon.  It manufactures
lumber,  pulp,  structural  and other  panel  products,  hardwood  veneers,  and
cellulose  insulation.  It operates  approximately 100 facilities throughout the
United States,  Canada, and Ireland. It has approximately  12,000 employees.  It
distributes its products primarily through distributors and home centers, and to
a minor extent through its own distribution centers.

         The  business of  Louisiana-Pacific  Corporation  and its wholly  owned
subsidiaries  (except when the context otherwise requires,  hereinafter referred
to  collectively  as "the  registrant"  or "L-P") is generally  divided into two
industry  segments:  building  products and pulp.  For 1997,  building  products
accounted  for  approximately  95 percent of the  registrant's  sales  revenues,
compared to approximately 5 percent for pulp.


Building Products
- -----------------

         Panel Products.  The registrant  manufactures  plywood and a variety of
reconstituted panel products,  including oriented strand board ("OSB") and other
panel  products  such as industrial  particleboard,  medium  density  fiberboard
("MDF"),  and hardboard.  Panel products accounted for 44 percent of L-P's sales
in 1997.

         The largest  consumption of panel  products is for  structural  uses in
building  and  remodeling  such  as  subfloors,  walls,  and  roofs.  The  total
structural panel market in North America (plywood, OSB and other waferboards) is
approximately  37 billion  square  feet  annually,  of which  plywood  currently
constitutes  about 20  billion  square  feet.  In  recent  years,  environmental
pressure on timber  harvesting,  especially in the West, has resulted in reduced
supplies and higher costs, causing many plywood mills to close permanently.  The
lost  volume  from  those  closed  mills  has  been  replaced  by  reconstituted
structural panel products.

         The registrant is the largest North American producer of OSB through 16
OSB plants with an aggregate annual capacity of approximately 4.5 billion square
feet,  including its three plants which  manufacture  OSB exterior  siding.  The
registrant  also has an OSB  plant in  Ireland.  The  registrant  operates  five
plywood  plants in the South  with a combined  annual  capacity  of 1.3  billion
square feet.

         The  registrant's  other   reconstituted   panel   products--industrial
particleboard, MDF, and hardboard--produced at a total of seven plants, are used
primarily in the manufacture of furniture and cabinets.

         Lumber.  The registrant is a large  producer of lumber.  The registrant
has 14  Western  (whitewood  and  redwood)  sawmills  with an annual  production
capacity of 1.1 billion board feet ("BBF"),  while its 15 Southern sawmills have
an annual  production  capacity of .5 BBF. Lumber  represented 28 percent of the
registrant's sales revenue in 1997. The registrant's  sawmills produce a variety
of  standard  U.S.  dimension  lumber as well as  specialty  grades  and  sizes,
primarily for the North American home building  market.  A sawmill in Ketchikan,
Alaska, produces lumber for export in the traditional sizes used in the Japanese
building  industry,  but  has the  capability  of  switching  to  standard  U.S.
dimensions.  The  registrant  also operates a fingerjoint  plant which  produces
dimension lumber from low grade and short pieces of lumber.  In

                                      - 2 -



October  1997,  the  registrant  announced  its  intention to sell its remaining
California  redwood  timberlands  and related  lumber and  certain  distribution
businesses.

         Other Building  Products.  The  registrant  produces  various  hardwood
veneers  at a plant in  Wisconsin  with both  rotary  and  sliced  manufacturing
processes.  These veneers are sold to customers who overlay the veneers on other
materials for use in paneling, furniture and cabinets.

         The   registrant  has  four   engineered   I-joist  plants  located  in
California,  Nevada,  North Carolina,  and Oregon.  OSB is cut into sections and
used as the web for the I-joists.  The registrant also produces laminated veneer
lumber  ("LVL")  in Nevada,  North  Carolina  and  Oregon.  LVL is a  high-grade
structural product used where extra strength is required. It is also used as the
flange material in I-joists.  In March 1997, the registrant  acquired the assets
of  Tecton  Laminates  Corp.  ("Tecton"),   which  significantly  increased  the
registrant's LVL and I-joist capacity.

         Nine plants  produce  cellulose  residential  insulation  from recycled
newspaper.  This insulation has a higher R-value than comparable  thicknesses of
conventional fiberglass insulation.  Other facilities operated by the registrant
include  two  wood  chip  mills,  two  coatings  and  chemical   plants,   seven
wood-treating plants, and six building materials distribution centers.

         The registrant  currently  owns seven plants in Ohio which  manufacture
windows and doors and their component  parts. In February 1998, L-P announced it
had reached an agreement in principle to sell these facilities.  L-P expects the
transaction to close during the second quarter of 1998.

         In October 1997,  the registrant  also announced  plans to sell certain
other  facilities  that  it  considers  non-strategic  to its  core  businesses,
including  its Creative  Point,  Inc.,  subsidiary,  its cement fiber roof shake
plant and the fiber gypsum plant in Nova Scotia.  The Nova Scotia plant was sold
prior to year end.

Pulp
- ----

         The  registrant  has two pulp mills located in Samoa,  California,  and
Chetwynd,   British   Columbia,   Canada.   The   Chetwynd   mill   utilizes   a
state-of-the-art mechanical pulping process and a zero effluent discharge system
to produce 100 percent  aspen pulp and has an annual  capacity of  approximately
185 thousand short tons. The Samoa mill produces  bleached and unbleached  kraft
pulp by a chlorine-free  process,  thereby eliminating dioxins. In October 1997,
the registrant announced its intention to sell the Samoa pulp mill. A third mill
in  Ketchikan,   Alaska,  which  produced  a  high-grade  dissolving  pulp,  was
permanently  closed in March  1997.  (See Item 7,  Management's  Discussion  and
Analysis of Financial Condition and Results of Operations.)

Competition
- -----------

         The registrant  competes  internationally  with several thousand forest
products firms, ranging from very large, fully integrated firms to smaller firms
that may  manufacture  only one or a few items.  The  registrant  estimates that
approximately  25 forest  products  firms  comprise its major  competition.  The
registrant also competes less directly with firms that  manufacture  substitutes
for wood  building  products.  A majority of the  products  manufactured  by the
registrant,  including  lumber,  structural  panels,  and  pulp,  are  commodity
products sold primarily on the basis of price in competition with numerous other
forest products companies.

         The registrant has  introduced a number of  value-enhanced  products to
complement its traditional lumber and panel products, such as the OSB

                                      - 3 -


SmartStart(TM)  system of siding  and  exterior  products  and  flooring,  and a
radiant barrier product known as  TechShield(TM).  The  registrant's  Cocoon(TM)
cellulosic  insulation  products  utilize  wood fiber  from waste  paper and are
believed  to  have  better  insulating  and   sound-deadening   properties  than
fiberglass insulation.

Environmental Compliance
- ------------------------

         The registrant is subject to federal, state and local pollution control
laws and  regulations  in all areas in which it has  operating  facilities.  The
registrant maintains an accounting reserve for environmental loss contingencies.
From  time  to  time,  the  registrant  undertakes   construction  projects  for
environmental control facilities or incurs other environmental costs that extend
an asset's useful life,  improve  efficiency,  or improve the  marketability  of
certain properties.

         The  registrant's  policy  is  to  comply  fully  with  all  applicable
environmental laws and regulations.  In recent years, the registrant has devoted
increasing financial and management resources to achieving this goal. As part of
its efforts to ensure environmental compliance,  the registrant conducts regular
internal  environmental  assessments.  From time to time, the registrant becomes
aware of violations of applicable laws or regulations.  In those instances,  the
registrant's  policy is to bring its  operations  promptly into full  compliance
with applicable environmental laws and regulations.  The registrant is not aware
of any  instances in which its current  operations  are not in  compliance  with
applicable  environmental  laws and regulations that would be expected to have a
material adverse effect on the registrant.

         Additional information concerning environmental compliance is set forth
under Item 3, Legal Proceedings and the Notes to Financial Statements in Item 8.

Additional Statistical Information
- ----------------------------------

         Additional  information  regarding  the  business  of  the  registrant,
including segment  information,  production volumes,  and industry product price
trends, is presented in the following tables labeled "Sales and Operating Profit
by Major Product  Group,"  "Summary of Production  Volumes,"  "Industry  Product
Price  Trends," and "Logs by Source."  Additional  financial  information  about
industry  segments is presented in Note 10 of the Notes to Financial  Statements
in Item 8.

         Reference is made to Item 2 for  additional  information  as to sources
and  availability  of raw  materials  and  the  locations  of  the  registrant's
manufacturing facilities.

                                      - 4 -




Louisiana-Pacific Corporation and Subsidiaries

PRODUCT INFORMATION SUMMARY
SEE ADDITIONAL  INFORMATION  REGARDING  INDUSTRY  SEGMENTS IN NOTES TO FINANCIAL
STATEMENTS.
YEAR ENDED DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS)



                                               1997             1996             1995              1994             1993
                                           ------------     ------------     -------------     ------------     ------------


SALES AND PROFIT BY MAJOR PRODUCT GROUP
- ---------------------------------------

                                                                                            
SALES:      Structural panel products     $     864  36%   $   1,006  40%   $   1,127  39%   $   1,208  40%    $    1,005  40%
=====       Lumber                              665  28          614  25          644  23          867  28            816  33
            Industrial panel products           181   8          195   8          215   8          240   8            194   8
            Other building products             563  23          494  20          523  18          505  17            411  16
                                           -------- ---      ------- ---     -------- ---    --------- ---      --------- ---
              Building products               2,273  95        2,309  93        2,509  88        2,820  93          2,426  97
            Pulp                                130   5          177   7          334  12          220   7             85   3
                                           -------- ---     -------- ---     -------- ---    --------- ---      --------- ---
              Total sales                 $   2,403 100%   $   2,486 100%   $   2,843 100%   $   3,040 100%    $    2,511 100%
                                           ======== ===     ======== ===     ======== ===    ========= ===      ========= ===

            Export sales (included
              above)                       $    240  10%   $     268  11%   $     457  16%    $    371  12%    $      252  10%
                                           ======== ===     ======== ===     ======== ===     ======== ===      =========  ==
PROFIT: Building products                  $     20        $     174        $     346         $    636         $      562
            Pulp                                (29)             (91)              44               (5)               (59)
            Settlements, charges and other
              unusual items, net                (32)            (350)            (367)             ---               ---
            General corporate and other
              expense, net                      (80)             (52)            (121)             (72)               (70)
            Interest, net                       (29)              (8)               3                1                 (5)
                                           --------         --------         --------          --------          --------

              Income (loss) before taxes,
                minority interest and
                accounting changes (1)    $    (150)      $     (327)       $     (95)        $    560         $      428
                                          =========        =========         ========         =========        ==========

SUMMARY OF PRODUCTION VOLUMES
- -----------------------------

OSB, million square feet 3/8" basis           4,000            4,008            3,445            3,404              3,100
Softwood plywood, million
  square feet 3/8" basis                      1,221            1,613            1,466            1,604              1,507
Lumber, million board feet                    1,240            1,201            1,359            1,986              1,796
Industrial panel products
  (particleboard, medium density
  fiberboard and hardboard),
  million square feet 3/4" basis                589              580              582              641                597
Engineered I-Joists,
  million lineal feet                            73               55
Laminated veneer lumber,
  thousand cubic feet                         5,800            3,900
Pulp, thousand short tons                       377              439              486              441                224

                                                          - 5 -



                                               1997             1996             1995              1994             1993
                                           ------------     ------------     -------------     ------------     ------------

INDUSTRY PRODUCT PRICE TRENDS (2)
- ---------------------------------

OSB, MSF, 7/16" -- 24/16 span
  rating (North Central price)            $    143         $    184         $    245          $     265        $     236
Southern pine plywood,
  MSF, 1/2" CDX (3 ply)                         26              258              303                302              282
Framing lumber, composite
  prices, MBF                                  417              398              337                405              394
Industrial particleboard,
  3/4" basis, MSF                              262              276              290                295              258

LOGS BY SOURCE (3)
- ------------------

Fee owned lands                                 19%              16%              13%                11%              12%
Private cutting contracts                       14               14               12                 14               15
Government contracts                             7                6                9                  8               10
Purchased logs                                  60               64               66                 67               63
Total log volume -
  million board feet                         2,398            2,432            2,818              3,138            2,940
- -------------------------- (1) Does not include cumulative effects of accounting changes in 1993. (2) Prices represent yearly averages stated in dollars per thousand board feet (MBF), thousand square feet (MSF) or short ton. Source: Random Lengths. (3) Stated as a percent of total log volume. SEE ADDITIONAL INFORMATION REGARDING INDUSTRY SEGMENTS IN THE NOTES TO FINANCIAL STATEMENTS IN ITEM 8. - 6 - ITEM 2. Properties The following tables list the principal facilities of the registrant and its subsidiaries. Information on production capacities reflects normal operating rates and normal production mixes under current market conditions, taking into account known constraints such as log supply. Unless otherwise noted, capacities are in millions of units. MANUFACTURING FACILITIES ------------------------ SAWMILLS METRIC 1) NORMAL 2) (BOARD FEET, 2 SHIFTS, 5 DAYS; *1 SHIFT, 5 DAYS) CAPACITIES CAPACITIES WESTERN LUMBER (14 plants) Annette, AK 110 70 Belgrade, MT 150 90 Big Lagoon, CA 35 20* Chilco, ID 205 125 Deer Lodge, MT (3 shifts) 155 95 Deer Lodge, MT (fingerjoint) 130 80 Fort Bragg, CA 115 70 Ketchikan, AK 100 60 Moyie Springs, ID (3 shifts) 220 135 Samoa, CA 165 100 Sandpoint, ID (remanufacturing) --- --- Saratoga, WY 80 50 Tacoma, WA 100 60 Ukiah, CA 165 100 SOUTHERN LUMBER (15 plants) Bernice, LA 65 40* Bon Wier, TX 40 25* Cleveland, TX 65 40* Eatonton, GA 60 35* Evergreen, AL 70 45* Hattiesburg, MS 65 40* Henderson, NC 65 40* Jasper, TX 90 55* Kountze, TX 25 15* Lockhart, AL 35 20* Marianna, FL 50 30* New Waverly, TX 25 15* Philadelphia, MS 65 40* Statesboro, GA 50 30* West Bay, FL 60 35* ----- ---- Total Lumber Capacity (29 plants) 2,560 1,560 ===== ===== - 7 - MANUFACTURING FACILITIES PANEL PRODUCTS PLANTS SOFTWOOD PLYWOOD PLANTS METRIC 1) METRIC 2) (3/8-INCH BASIS, SQUARE FEET, 2 SHIFTS, 5 DAYS) CAPACITIES CAPACITIES Bon Wier, TX 230 260 Cleveland, TX 250 280 Logansport, LA 195 220 New Waverly, TX 230 260 Urania, LA 220 250 ----- ----- Total Softwood Plywood Capacity (5 plants) 1,125 1,270 ===== ===== ORIENTED STRAND BOARD PANEL PLANTS (3/8-INCH BASIS, SQUARE FEET, 3 SHIFTS,7 DAYS) Athens, GA 295 335 Carthage, TX (under construction) 355 400 Corrigan, TX 135 150 Dawson Creek, B.C. Canada 335 375 Hanceville, AL 310 350 Hayward, WI (2 plants) 445 500 Houlton, ME 230 260 Jasper, TX 355 400 Montrose, CO 130 145 Roxboro, NC 335 375 Sagola, MI 310 350 Silsbee, TX 310 350 Swan Valley, MB, Canada 400 450 Waterford, Ireland 355 400 ----- ----- Total OSB Capacity (15 plants) 4,300 4,840 ===== ===== ORIENTED STRAND BOARD SIDING PLANTS (3/8-INCH BASIS, SQUARE FEET, 3 SHIFTS, 7 DAYS) Newberry, MI 115 130 Tomahawk, WI 135 150 Two Harbors, MN 125 140 ----- ----- Total OSB Siding Capacity (3 plants) 375 420 ===== ===== MEDIUM DENSITY FIBERBOARD PLANTS (3/4-INCH BASIS, SQUARE FEET, 3 SHIFTS, 7 DAYS) Eufaula, AL 230 130 Oroville, CA 90 50 Urania, LA 90 50 ----- ----- Total MDF Capacity (3 plants) 410 230 ===== ===== PARTICLEBOARD PLANTS (3/4-INCH BASIS, SQUARE FEET, 3 SHIFTS, 7 DAYS) Arcata, CA 220 125 Missoula, MT 275 155 Silsbee, TX 140 80 ----- ----- Total Particleboard Capacity (3 plants) 635 360 ===== ===== HARDBOARD PLANT (1/8-INCH BASIS, SQUARE FEET, 3 SHIFTS, 7 DAYS) Oroville, CA 62 210 ===== ===== - 8 - MANUFACTURING FACILITIES ------------------------ OTHER BUILDING PRODUCTS HARDWOOD VENEER PLANTS NORMAL 2) (SURFACE MEASURE, SQUARE FEET, 2 SHIFTS, 5 DAYS) CAPACITIES Mellen, WI (2 plants) 250 ====== I-JOIST PLANTS (LINEAL FEET; 1 SHIFT, 5 DAYS) Fernley, NV 21 Hines, OR 21 Red Bluff, CA 25 Wilmington, NC 20 ----- Total I-Joist Capacity (4 plants) 87 ===== LAMINATED VENEER LUMBER PLANTS (THOUSAND CUBIC FEET; 2 SHIFTS, 7 DAYS) Fernley, NV 1,600 Hines, OR 2,700 Wilmington, NC 1,600 ----- Total LVL Capacity (3 plants) 5,900 ===== PULP MILLS METRIC 1) NORMAL 2) (THOUSAND SHORT TONS, 3 SHIFTS, 7 DAYS) CAPACITIES CAPACITIES Samoa, CA 195 220 Chetwynd, B.C. Canada 170 185 ----- ----- Total Pulp Capacity (2 plants) 365 405 ===== ===== - 9 - MANUFACTURING FACILITIES OTHER MANUFACTURING FACILITIES (23 PLANTS) Cellulose insulation plants: Phoenix, AZ, Vancouver, B.C.; Sacramento, CA; Atlanta, GA; Fort Wayne, IN; Norfolk, NE; Bucyrus, OH; Portland, OR; Elkwood, VA Cement fiber shake: Red Bluff, CA Chip mills: Cleveland and Moscow, TX Coatings and chemicals: Portland, OR; Orangeburg, SC Consumer electronics storage: Oswego, IL Softwood veneer plant: Rogue River, OR Wood treating plants: Evergreen and Lockhart, AL; Marianna, FL; Statesboro, GA; New Waverly and Silsbee, TX; Ukiah, CA DISTRIBUTION CENTERS (6 LOCATIONS) Calpella, CA Riverside, CA Rocklin, CA Dodge City, KS Salina, KS Conroe, TX TOTAL FACILITIES: 99 Note: The capacities above are based on normal operating rates and normal production mixes. Market conditions, the availability of logs, and the nature of current orders can cause actual production rates to vary considerably from normal rates. TIMBERLAND HOLDINGS HECTARES ACRES California: Whitewoods, Fir, Pine, Redwood 158,900 392,500 Idaho: Fir, Pine 16,700 41,200 Louisiana: Pine, Hardwoods 78,700 194,500 Minnesota: Hardwoods 11,400 28,200 North Carolina: Pine, Hardwoods 900 2,100 Texas: Pine, Hardwoods 283,800 701,100 Virginia: Pine, Hardwoods 2,300 5,700 Wisconsin: Hardwoods 600 1,500 Wyoming: Whitewoods 600 1,600 ------- --------- Total Fee 553,900 1,368,400 ======= ========= 1) Metric capacities in thousand cubic meters. 2) Normal capacities in millions of units unless otherwise noted. Note: See Note 7 of the Notes to Financial Statements in Item 8 for a discussion of an asset sale program involving certain of these timberland holdings and manufacturing facilities. The list does not include window and door manufacturing facilities subject to sale under a letter of intent. In addition to its fee-owned timberlands, the registrant has timber cutting rights in the United States, under long-term contracts (five years and over) on approximately 5,600 acres and under contracts for shorter periods on approximately 240,800 acres, on government and privately owned timberlands in the vicinities of certain of its manufacturing facilities. L-P's Canadian subsidiary is a party to long-term timber license arrangements in Canada. Information regarding the sources of the registrant's log requirements is located under the table labeled "Logs by Source" in Item 1. - 10 - ITEM 3. Legal Proceedings For a discussion of legal and environmental matters involving L-P and the potential effect on L-P, refer to Note 8 of the Notes to Financial Statements under the heading "Contingencies" in Item 8, which is incorporated herein by reference. ITEM 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of the registrant's security holders during the fourth quarter of 1997. Executive Officers of the Registrant - ------------------------------------ The following sets forth the name of each executive officer of the registrant (including certain executives whose duties may cause them to be classified as executive officers under applicable SEC rules), the age of the officer, and all positions and offices held with the registrant as of March 20, 1998: Mark A. Suwyn, age 55, has served as Chairman and Chief Executive Officer of L-P since January 1996. Before joining L-P, Mr. Suwyn was Executive Vice President of International Paper Company from 1992 through 1995. Previously, Mr. Suwyn was Senior Vice President of E.I. du Pont de Nemours & Co. Mr. Suwyn is also a director of the registrant. Michael D. Hanna, age 45, joined L-P in June 1996 as Executive Vice President after serving as President of Associated Chemists, Inc., for more than five years previous. Warren C. Easley, age 56, joined L-P as Vice President, Technology and Quality in May 1996 after serving as Technical Manager--Nylon Division, North America for E.I. du Pont de Nemours & Co. for more than five years previous. Richard W. Frost, age 46, joined L-P in May 1996 as Vice President, Timberlands and Fiber Procurement. Mr. Frost worked for S.D. Warren Company as Director of Timberlands prior to April 1992, as Vice President and Manager, Westbrook Mill, from April 1992 to September 1995, and as Vice President and General Manager, Somerset Operations for S.D. Warren Company from September 1995 to 1996. H. Ward Hubbell, age 37, joined L-P as Director, Corporate Affairs in September 1997. Previously, Mr. Hubbell was employed by International Paper Company beginning in October 1992, first as Communications Director and then as Federal Affairs Manager. Before that, he was vice president of a Washington, D.C., public relations firm. Karen D. Lundquist, age 42, was named Vice President, Manufacturing in January 1997. Before joining L-P, Ms. Lundquist was an executive officer and director of Rapid Change Technologies, Inc. (formerly known as Creative Breakthroughs, Inc.), from the fall of 1993 to January 1997, and served as its chief executive officer from mid-1995 to 1997. From September 1991 to October 1993, Ms. Lundquist was a plant manager with E.I. du Pont de Nemours & Co. J. Keith Matheney, age 49, joined the registrant in March 1970 and has served as Vice President, Sales and Marketing since January 26, 1997. Mr. Matheney was General Manager--Western Division from February 1996 to January 1997 after serving as General Manager--Weather-Seal Division of the registrant from May 1994 to February 1996, and as Director of Sales and Marketing for more than five years previous. - 11 - Elizabeth T. Smith, age 53, became Director, Environmental Affairs of the registrant in March 1993. Ms. Smith has been employed by L-P in various positions relating to environmental management since 1987. Curtis M. Stevens, age 45, was appointed as Vice President, Chief Financial Officer and Treasurer of L-P in September 1997. He previously spent 13 years as the senior financial executive of Planar Systems, Inc., a leading manufacturer and supplier of electroluminescent flat panel displays, where he was named Executive Vice President and General Manager in 1996. Michael J. Tull, age 52, became Vice President, Human Resources of the registrant in May 1996. Mr. Tull was previously employed by Sharp HealthCare, a regional system of hospitals and related facilities in San Diego, California, for more than 10 years, most recently as Corporate Vice President of Employee Quality and Development beginning in 1991. Gary C. Wilkerson, age 51, joined L-P as Vice President and General Counsel in September 1997. Beginning in early 1997, Mr. Wilkerson served as (acting) Senior Vice President, General Counsel and Secretary for the consumer products division of IVAX Pharmaceuticals. For the previous seven years, he was Senior Vice President, General Counsel and Secretary of Maybelline Co., a cosmetics manufacturer. All executive officers serve at the pleasure of the board of directors of L-P. Unless earlier removed by the board of directors, the officers' terms of office run until the next annual meeting of the board of directors. PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters The common stock is listed on the New York Stock Exchange, the Dow-Jones newspaper quotations symbol is "LaPac," and the ticker symbol is "LPX." Information regarding market prices for the registrant's common stock is included in the table in Item 6 headed "High and Low Stock Prices." Holders of the registrant's common stock may automatically reinvest dividends toward purchase of additional shares of the registrant's common stock. At March 12, 1998, L-P had approximately 21,000 stockholders of record. Information regarding cash dividends paid during 1996 and 1997 is included in the table in Item 6 with respect to quarterly data. - 12 - ITEM 6. Selected Financial Data DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE 1996 1997 - ------------------------------------------- ---- ---- ANNUAL DATA Net sales $ 2,486.0 $ 2,402.5 Net income (loss) (200.7) (101.8) Net income (loss) per share-basic and diluted (1.87) (.94) Net cash provided by operating activities 22.8 88.2 Capital expenditures -- plants, logging roads and timber (includes cash portion of acquisitions) 266.0 204.5 Working capital 234.5 277.5 Ratio of current assets to current liabilities 1.68 to 1 1.87 to 1 Total assets 2,622.4 2,578.4 Long-term debt, excluding current portion 458.6 572.3 Long-term debt as a percent of total capitalization 24.3% 30.8% Stockholders' equity 1,427.6 1,286.2 Per ending share of common stock 13.13 11.73 Number of employees 12,500 12,000 Number of stockholders of record 23,900 22,000 1ST QTR 2ND QTR 3RD QTR 4TH QTR YEAR 1997 QUARTERLY DATA Net sales $ 554.6 $ 633.3 $ 619.5 $ 595.1 $ 2,402.5 Gross profit (loss) (1) (35.1) (8.2) (13.8) (31.4) (88.5) Income (loss) before taxes and minority interest 78.3(2) (14.7) (176.3)(2) (37.3) (150.0) Net income (loss) 42.0(2) (10.1) (112.4)(2) (21.3) (101.8) Net income (loss) per share- basic and diluted .39(2) (.10) (1.03)(2) (.20) (.94) Cash dividends per share .14 .14 .14 .14 .56 1996 QUARTERLY DATA Net sales $ 584.1 $ 658.3 $ 676.3 $ 567.3 $2,486.0 Gross profit (loss) (1) (5.0) 35.0 21.9 (20.9) 31.0 Income (loss) before taxes and minority interest (5.0) 34.5 (332.0)(2) (24.3) (326.8) Net income (loss) (3.6) 21.0 (203.4)(2) (14.7) (200.7) Net income (loss) per share- basic and diluted (.03) .19 (1.89)(2) (.14) (1.87) Cash dividends per share .14 .14 .14 .14 .56 HIGH AND LOW STOCK PRICES 1997 High $ 22.00 $ 21.56 $ 25.56 $ 25.88 $ 25.88 Low 19.88 17.00 20.50 17.54 17.00 1996 High $ 26.25 $ 28.13 $ 23.75 $ 23.00 $ 28.13 Low 23.00 22.13 19.63 20.63 19.63 - -------------------------- (1) Gross profit is income before settlements, charges and other unusual items, taxes, minority interest and interest. (2) Includes settlements, charges and other unusual items. See the Notes to Financial Statements in Item 8 for explanation of these amounts. - 13 - FORWARD LOOKING STATEMENTS - -------------------------- Statements herein to the extent they are not based on historical events, constitute forward-looking statements. Forward-looking statements include, without limitation, statements regarding the outlook for future operations, forecasts of future costs and expenditures, evaluation of market conditions, the outcome of legal proceedings, the adequacy of reserves, or plans for product development. Investors are cautioned that forward-looking statements are subject to an inherent risk that actual results may vary materially from those described herein. Factors that may result in such variance, in addition to those set forth under the above captions, include changes in interest rates, commodity prices, and other economic conditions; actions by competitors; changing weather conditions and other natural phenomena; actions by government authorities; uncertainties associated with legal proceedings; technological developments; future decisions by management in response to changing conditions; and misjudgments in the course of preparing forward-looking statements. - 14 - FIVE-YEAR SUMMARY YEAR ENDED DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE) SUMMARY INCOME STATEMENT DATA (2) 1997(4) 1996(4) 1995(4) 1994 1993 - --------------------------------- ------------ ------------ -------------- ------------- --------------- Net sales $ 2,402.5 $ 2,486.0 $ 2,843.2 $ 3,039.5 $ 2,511.3 Gross profit (loss) (1) (88.5) 31.0 268.9 558.6 423.6 Interest, net (29.0) (7.8) 2.9 1.0 5.0 Provision (benefit) for income taxes (43.6) (125.6) (45.8) 209.8 173.2 Income (loss) (3) (101.8) (200.7) (51.7) 346.9 254.4 Income (loss) per share (3) - basic (.94) (1.87) (.48) 3.15 2.32 Income (loss) per share (3) - diluted (.94) (1.87) (.48) 3.13 2.29 Cash dividends per share .56 .56 .545 .485 .43 Average shares of common stock outstanding (thousands)- Basic 108,450 107,410 107,040 110,140 109,670 Diluted 108,450 107,410 107,040 110,800 110,880 SUMMARY BALANCE SHEETS Current assets $ 596.8 $ 612.9 $ 618.5 $ 721.9 $ 614.1 Timber and timberlands, at cost less cost of timber harvested 634.2 648.6 689.6 693.5 673.5 Property, plant and equipment, net 1,191.8 1,278.5 1,452.3 1,273.2 1,145.9 Goodwill and other assets 155.6 82.4 45.0 55.1 32.8 ------------ ----------- ------------- ------------ ------------- Total assets $ 2,578.4 $ 2,622.4 $ 2,805.4 $ 2,743.7 $ 2,466.3 ============ =========== ============= ============= ============= Current liabilities 319.3 $ 378.4 $ 448.5 $ 344.8 $ 317.2 Long-term debt, excluding current portion 572.3 458.6 201.3 209.8 288.6 Deferred income taxes and other 400.6 357.8 499.6 339.7 289.1 Stockholders' equity 1,286.2 1,427.6 1,656.0 1,849.4 1,571.4 ------------ ----------- ------------- ------------- ----------- Total liabilities and stockholders' equity $ 2,578.4 $ 2,622.4 $ 2,805.4 $ 2,743.7 $ 2,466.3 ============ =========== ============= ============= ============= - 15 - KEY FINANCIAL TRENDS 1997(4) 1996(4) 1995 1994 1993 - -------------------- -------------- ----------- -------------- ------------- ------------- Working capital $ 277.5 $ 234.5 $ 170.0 $ 377.1 $ 296.9 ============== =========== ============== ============= ============= Plant and logging road additions (5) $ 154.8 $ 244.0 $ 362.9 $ 286.0 $ 208.4 Timber additions, net 49.7 22.0 49.7 66.0 81.5 -------------- ----------- -------------- ------------- ------------- Total capital additions $ 204.5 $ 266.0 $ 412.6 $ 352.0 $ 289.9 ============== =========== ============== ============= ============= Long-term debt as a percent of total capitalization 31% 24% 11% 10% 16% Income as a percent of average equity (3) -8% -13% -3% 20% 17%
- -------------------------- (1) Gross profit is income before settlements, charges and unusual items, income taxes, minority interest, and interest. (2) All per share amounts and number of shares have been retroactively adjusted for a two-for-one stock split in 1993 and a three-for-two stock split in 1992. (3) Does not include cumulative effects of accounting changes in 1993. (4) Includes settlements, charges and other unusual items, net. See the Notes to Financial Statements in Item 8 for explanation of these amounts. (5) Includes cash paid in acquisitions. - 16 - ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation GENERAL L-P incurred a net loss in 1997 of $101.8 million ($.94 per share), which included a pre-tax net charge of $32.5 million ($20.6 million after taxes, or $.19 per share). L-P's net losses in 1996 and 1995 primarily resulted from charges taken in the third quarter of each year. The charge in 1996 was $350.0 million pre-tax ($215.0 million after tax, or $2.00 per share) and the 1995 charge was $366.6 million pre-tax ($221.8 million after tax, or $2.07 per share). These charges are discussed in further detail in Note Seven to the financial statements. Prior to the settlements, charges and other unusual items, L-P had an after-tax loss of $81.2 million ($.75 per share) in 1997, after-tax income of $14.3 million in 1996 ($.13 per share) and after-tax income of $170.1 million in 1995 ($1.59 per share). Sales in 1997 were $2.40 billion, a 3% decline from 1996 sales of $2.49 billion. Sales in 1996 were 13% lower than 1995 sales of $2.84 billion. L-P operates in two major business segments: building products and pulp. Building products is the most significant segment, accounting for more than 88 percent of net sales in each of the past three years. The results of operations are discussed below for each of these segments separately. Additional information about the factors affecting L-P's segments is presented in the "Selected Financial Data" in Item 6 and the "Product Information Summary" in Item 1. In 1997, the building products segment had a decline in sales and profitability, largely the result of an industry-wide oversupply of structural panel products in North America. In 1997, the pulp segment lost money, but improved from the large losses suffered in 1996. However, the economic crisis in Asia negatively impacted pulp segment results late in the year. Both the building products and pulp segments declined in sales and profitability in 1996 compared to 1995. The weakness in building products was primarily due to the structural panel oversupply, while pulp markets remained very weak throughout 1996 due to high world-wide inventories. The Ketchikan Pulp Company contract issue (discussed further below) also negatively impacted pulp segment results in 1996. BUILDING PRODUCTS INCREASE YEAR ENDED DEC. 31, (DECREASE) --------------------------------------------- 1997 1996 1995 97-96 96-95 - -------------------------------------------------------------------------------- (DOLLAR AMOUNTS IN MILLIONS) Sales: Structural panel products $ 864 $1,006 $1,127 -14% -11% Lumber 665 614 644 +8% -5% Industrial panel products 181 195 215 -7% -9% Other building products 563 494 523 +14% -6% ------ ------ ------ Total building products $2,273 $2,309 $2,509 -2% -8% ====== ====== ====== Profit $ 20 $ 174 $ 346 -89% -50% ====== ====== ====== Sales of structural panel products (plywood and oriented strand board (OSB)) suffered in both 1997 and 1996 from industry wide over-capacity. The over-capacity is the result of new OSB plants built by the industry throughout North America at a rate greater than the growth in demand. Average selling prices in 1997 fell approximately 13% compared to 1996, while 1996 average prices were approximately 20% lower than 1995. During the latter part of 1997, L-P's net sales realization was also negatively impacted by increased shipping costs caused by interrupted rail service. Structural panel sales volumes in 1997 decreased 3% from 1996 levels as a result of the permanent closure of two - 17 - plywood plants and four OSB plants in 1997 and late 1996. Sales volumes in 1996 increased approximately 14% compared to 1995 due to new OSB plants started-up in that year, despite temporary market-related shut-downs at some of L-P's OSB plants. Lumber sales increased in 1997 due to a 6% increase in average sales prices and a slight increase in volume sold. Lumber markets experienced strong demand through the first three quarters of 1997, benefiting from a robust U.S. economy, relatively low interest rates and strong housing starts. Late in the year, weakening currencies in Asia limited shipments from North America to those markets which put supply pressure on domestic markets, causing lumber prices to decline. This trend will likely continue into 1998. Lumber sales were lower in 1996 than 1995 as a result of sales volume, which decreased approximately 12%. L-P permanently closed a number of unprofitable sawmills around the country in 1995 and 1996. Average selling prices rose about 9% in 1996 due to a strong U.S. economy, lower production volumes industry wide and lower volumes of lumber imported from Canada. Industrial panels consist of particleboard, medium density fiberboard (MDF) and hardboard. These sales decreased in 1997 compared to 1996 primarily because of lower sales prices of approximately 6%. The price decline was due primarily to increased industry production relative to demand. Industrial panel sales volumes in 1997 decreased slightly after a slight increase in 1996 compared to 1995. Prices fell approximately 11% in 1996. This price decline was also due to excess industry production. The increase in other building products sales in 1997 was primarily due to the acquisition of Associated Chemists, Inc. (coatings and chemicals) in mid-1996, GreenStone Industries, Inc. (cellulose insulation) in early 1997 and the assets of Tecton Laminates (engineered I-Joists and LVL) in early 1997. Other building products sales decreased in 1996 due to lower wood chip sales. L-P was producing fewer wood chips due to lower sawmill and plywood production, and wood chip prices weakened significantly, particularly on the West Coast. The primary factor in the decrease in building products profits in 1997 was further erosion of OSB sales prices. Also, higher log costs in the southern region of the country caused plywood earnings to be significantly reduced. Industrial panel profits also declined in 1997 as a result of lower sales prices. Lumber profits increased in 1997 due to higher average sales prices, which helped offset the profitability declines in structural and industrial panels. Building products profits decreased in 1996 from 1995 due to the lower prices discussed above for structural panel products and industrial panel products. Raw material costs were generally lower in 1996 than in 1995, but did not fully offset the lower sales prices. L-P's building products are primarily sold as commodities and therefore sales prices fluctuate based on market factors over which L-P has no control. L-P cannot predict whether the prices of its building products will remain at current levels, or will increase or decrease in the future because supply and demand are influenced by many factors, only two of which are the cost and availability of raw materials. L-P is not able to determine to what extent, if any, it will be able to pass any future increases in the price of raw materials on to customers through product price increases. - 18 - PULP INCREASE YEAR ENDED DEC. 31, (DECREASE) ------------------------------------------------------- 1997 1996 1995 97-96 96-95 - -------------------------------------------------------------------------------- (DOLLAR AMOUNTS IN MILLIONS) Pulp sales $130 $177 $334 -27% -47% ==== ==== ==== Profit (loss) $(29) $(91) $ 44 +68% -207% ==== ==== ==== The single largest factor in the decline in pulp sales in 1997 was the closure in March 1997 of the pulp mill owned by L-P's Ketchikan Pulp Company (KPC) subsidiary. Pulp sales volumes decreased approximately 10%, while average prices dropped approximately 19%. However, KPC pulp had a higher sales average than L-P's two remaining pulp mills. Excluding KPC, L-P's remaining pulp business showed an increase of 11% in sales volume and a price decrease of approximately 6%. The Asian economic crisis caused pulp prices to decline late in 1997, which will likely continue into 1998. Pulp sales plummeted in 1996 as sales prices fell an average of 44% while volumes decreased about 5%. Large pulp inventories around the world created very weak pulp markets throughout 1996. L-P took intermittent downtime at the pulp mills during the year, which caused the volume decrease. Pulp segment profits improved significantly in 1997 due in large part to the shut-down of the KPC mill which had been suffering losses due to market conditions and changes in the timber supply contract. At the two remaining mills, L-P successfully cut its operating costs through a concentrated cost reduction effort, both from more efficient operations and a central purchasing program. After making a profit in 1995, the pulp mills returned to losses in 1996 due to the downturn in the markets and problems experienced with the KPC contract. Raw material costs decreased in 1996 after experiencing an increase in 1995. L-P's pulp products are primarily sold as commodities and therefore sales prices fluctuate based on market factors over which L-P has no control. L-P cannot predict whether the prices of its pulp products will remain at current levels, or will increase or decrease in the future because supply and demand are influenced by many factors, only two of which are the cost and availability of raw materials. L-P is not able to determine to what extent, if any, it will be able to pass any future increases in the price of raw materials on to customers through product price increases. The economic crisis in Asia has continued into 1998, which has negatively impacted pulp markets. A significant portion of L-P's pulp is sold to countries in that region. L-P pulp products are sold primarily to export customers and represent the majority of L-P's export sales. Therefore, the decline in pulp sales was the primary reason for L-P's decreased export sales in 1997 and 1996, both in amount and as a percent of total sales. Information regarding L-P's geographic segments and export sales are provided in the notes to financial statements under the caption "Segment Information." GENERAL CORPORATE EXPENSE, NET Net general corporate expense was $80 million in 1997, compared to $52 million in 1996, and an unusually high amount of $121 million in 1995. In 1997 and 1996, the recurring level of general corporate expense has increased largely due to corporate-wide training programs undertaken by current management and the addition of key personnel to drive future growth and improvement initiatives. In 1996, $17 million of credits, resulting from a gain on the sale of assets, were netted into this expense. The most significant factor in the 1995 amount was higher expenses associated with litigation against the company of approximately $48 million, including - 19 - legal fees and increases in contingency reserves (it did not, however, include amounts recorded in the line item "Settlements, Charges and Other Unusual Items, Net" which is discussed in Note Seven to the financial statements). SETTLEMENTS, CHARGES AND OTHER UNUSUAL ITEMS, NET - ------------------------------------------------- For a discussion of settlements, charges and other unusual items, net, refer to Note Seven to the financial statements. INTEREST, NET - ------------- Net interest expense rose significantly in 1997 and 1996 as L-P borrowed funds to cover its settlement obligations and fund capital expenditures. Additionally, interest capitalized has decreased in 1997 and 1996 as construction projects have been completed. Also, interest income was lower in each of the past two years due to lower levels of cash available for investing. LEGAL AND ENVIRONMENTAL MATTERS - ------------------------------- For a discussion of legal and environmental matters involving L-P and the potential effect on the company, refer to Note Eight to the financial statements. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES - --------------------------------------------------- Net cash provided by operations increased to $88 million in 1997 from $23 million in 1996, down from $335 million in 1995. These fluctuations primarily correlate to changes in the company's net loss. In 1997, L-P received a settlement from the U.S. Government of $135 million for claims related to the KPC long-term timber supply contract. In 1997 and 1996, L-P paid out $205 million and $263 million for obligations related to litigation settlements. Net cash used in investing activities decreased to $140 million from $213 million in 1996 and $387 million in 1995. Capital expenditures peaked in 1995 with the addition of several new OSB plants and other projects. In 1997 and 1996, L-P received $64 million and $62 million of cash for assets sold. L-P has also spent significant amounts on environmental projects (such as pollution control equipment), upgrades of existing production facilities, and timber to supply its operations and logging roads. L-P increased its net borrowings by $114 million in 1997 and $196 million in 1996. The borrowings financed the payments of settlement obligations and capital expenditures. L-P purchased only $3 million of treasury shares in 1997 and no treasury shares in 1996 after purchasing $120 million of treasury stock in 1995. L-P has a revolving credit facility of $300 million, which was fully borrowed at year-end. Subsequent to year-end, L-P entered into an additional credit facility with a group of banks for an additional $100 million, which is available to fund cash needs. This additional credit facility must be repaid upon the sale of assets described below. In October 1997, L-P announced that it intends to sell assets that management considers non-strategic to L-P's core businesses. These assets include, among others, the remaining California redwood timberlands, related lumber and certain distribution businesses, the Samoa, California, pulp mill, the Weather-Seal window and door manufacturing business, the Creative Point, Inc., subsidiary, the Red Bluff, California, cement fiber roof shake plant and the fiber gypsum plant in Nova Scotia. As of year-end, L-P was actively marketing all of these assets and had sold the fiber gypsum plant. L-P presently estimates the proceeds from these sales at $800 million to - 20 - $1 billion. However, there can be no assurance that net proceeds within the foregoing range will be realized. The proceeds realized will initially be used to fund operations and reduce or eliminate outstanding borrowings on L-P's revolving credit facility. Management is currently studying alternative uses of the proceeds to maximize the long-term value to L-P and its stockholders. L-P has budgeted capital expenditures, including timber and logging road additions, for 1998 of approximately $150 million. These expenditures are primarily to complete an OSB plant currently under construction, continue environmental improvements to existing plants, upgrade production facilities and provide timber to operations. Contingency reserves, which represent an estimate of future cash needs for various contingencies (principally, payments for siding litigation settlements), total $224 million, of which $40 million is estimated to be payable within one year. As with all accounting estimates, there is inherent uncertainty concerning the reliability and precision of such estimates. As described in the notes to the financial statements under the heading "Contingencies," the amounts ultimately paid in settling all of the outstanding litigation could exceed the current reserves by a material amount. L-P continues to be in a strong financial condition with a relatively low ratio of long-term debt as a percent of total capitalization. Management believes that existing cash and cash equivalents combined with additional borrowing available on lines of credit, expected income tax refunds, the significant cash inflow expected from the asset sale program described above and cash to be generated from operations will be sufficient to meet projected cash needs including the payments related to the siding litigation settlement referred to above. The company also believes that because of its conservative financial structure and policies, it has substantial financial flexibility to generate additional funds should the need arise. YEAR 2000 COMPLIANCE As the year 2000 approaches, an issue impacting most companies has emerged regarding the ability of computer applications and systems to properly interpret the year. This is a pervasive and complex issue. L-P is in the process of identifying significant applications that will require modification to ensure Year 2000 compliance. Internal and external resources are being used to make this assessment, the required modifications and test Year 2000 compliance. L-P plans on completing the assessment of all significant applications and developing a plan for appropriate action by September 30, 1998. In addition, L-P will begin communicating with others with whom it does significant business to determine their Year 2000 compliance readiness and the extent to which L-P is vulnerable to any third party Year 2000 issues. However, there can be no guarantee that the systems of other companies on which L-P's systems rely will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with L-P's systems, would not have a material adverse effect on L-P. The total cost to L-P of these Year 2000 compliance activities has not been and is not anticipated to be material to its financial position or results of operations in any given year. These costs and the date on which L-P plans to complete the Year 2000 assessment process are based on management's best estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third-party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ from those plans. - 21 - ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk No disclosure is required under this item. ITEM 8. Financial Statements and Supplementary Data The consolidated financial statements and accompanying notes to financial statements together with the reports of independent public accountants are located on the following pages. Quarterly data for the registrant's latest two fiscal years is located in the table labeled "Quarterly Data" in Item 6. CONSOLIDATED BALANCE SHEETS DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS) 1997 1996 - ---------------------------------------- --------- --------- ASSETS Current Assets: Cash and cash equivalents $ 31.9 $ 27.8 Accounts receivable, less reserves of $2.0 and $1.4 146.2 136.2 Inventories 258.8 264.3 Prepaid expenses 8.9 12.0 Income tax refunds receivable 78.0 99.5 Deferred income taxes 73.0 73.1 --------- --------- Total current assets 596.8 612.9 Timber and Timberlands, at cost less cost of timber harvested 634.2 648.6 Property, Plant and Equipment, at cost: Land, land improvements and logging roads, net of road amortization 185.6 182.5 Buildings 262.5 269.5 Machinery and equipment 1,876.3 1,953.9 Construction in progress 109.5 80.1 --------- --------- 2,433.9 2,486.0 Less accumulated depreciation (1,242.1) (1,207.5) --------- --------- Net property, plant and equipment 1,191.8 1,278.5 Goodwill, net of amortization 70.7 45.9 Other Assets 84.9 36.5 --------- --------- TOTAL ASSETS $ 2,578.4 $ 2,622.4 ========= ========= See notes to financial statements. - 22 - CONSOLIDATED BALANCE SHEETS DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE) 1997 1996 ---- ---- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 22.9 $ 18.7 Short-term notes payable 22.0 35.4 Accounts payable and accrued liabilities 234.4 224.3 Current portion of contingency reserves 40.0 100.0 --------- --------- Total current liabilities 319.3 378.4 Long-term Debt, excluding current portion 572.3 458.6 Deferred Income Taxes 178.6 163.2 Contingency Reserves, excluding current portion 184.0 159.8 Other Long-term Liabilities and Minority Interest 38.0 34.8 Commitments and Contingencies STOCKHOLDERS' EQUITY: Common stock, $1 par value, 200,000,000 shares authorized, 116,937,022 shares issued 117.0 117.0 --------- --------- Preferred stock, $1 par value, 15,000,000 shares authorized, no shares issued Additional paid-in capital 472.2 472.7 Retained earnings 977.5 1,140.0 Treasury stock, 7,309,360 shares and 8,170,799 shares, at cost (163.4) (183.3) Loans to Employee Stock Ownership Trusts (37.7) (61.6) Other (79.4) (57.2) --------- --------- Total stockholders' equity 1,286.2 1,427.6 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,578.4 $ 2,622.4 ========= ========= See notes to financial statements. - 23 - CONSOLIDATED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE) 1997 1996 1995 ---- ---- ---- NET SALES $ 2,402.5 $ 2,486.0 $ 2,843.2 --------- --------- --------- COSTS AND EXPENSES: Cost of sales 2,138.7 2,123.5 2,250.3 Depreciation and amortization 142.8 150.6 152.0 Cost of timber harvested 41.1 41.2 50.6 Selling and administrative 168.4 139.7 121.4 Settlements, charges and other unusual items, net 32.5 350.0 366.6 Interest expense, net of capitalized interest 30.9 14.2 5.3 Interest income (1.9) (6.4) (8.2) --------- --------- --------- Total costs and expenses 2,552.5 2,812.8 2,938.0 Income (loss) before taxes and minority interest (150.0) (326.8) (94.8) Provision (benefit) for income taxes (43.6) (125.6) (45.8) Minority interest in net income (loss) of consolidated subsidiaries (4.6) (.5) 2.7 --------- --------- --------- NET INCOME (LOSS) $ (101.8) $ (200.7) $ (51.7) ========= ========= ========= NET INCOME (LOSS) PER SHARE - BASIC $ (.94) $ (1.87) $ (.48) ========== ========== ========== AND DILUTED CASH DIVIDENDS PER SHARE OF COMMON STOCK $ .56 $ .56 $ .545 ========== ========== =========== AVERAGE SHARES OF COMMON STOCK (thousands) 108,450 107,410 107,040 ========== ========= =========== See notes to financial statements. - 24 - CONSOLIDATED STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31 (DOLLAR AMOUNTS IN MILLIONS) 1997 1996 1995 - ---------------------------- ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(101.8) $(200.7) $ (51.7) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, amortization and cost of timber harvested 183.9 191.8 202.6 Settlements, charges and other unusual items, net 216.6 350.0 366.6 Cash settlements of contingencies (204.8) (263.4) (13.6) Other adjustments (54.5) 3.8 26.9 Decrease (increase) in receivables (4.0) 31.9 28.7 Decrease (increase) in inventories 12.8 31.1 (103.9) Decrease (increase) in income tax refunds receivable 21.8 (99.5) --- Decrease (increase) in prepaid expenses 4.7 1.4 (7.0) Increase (decrease) in accounts payable and accrued liabilities (1.8) (1.6) 38.2 Increase (decrease) in income taxes payable --- --- (7.5) Increase (decrease) in deferred income taxes 15.3 (22.0) (144.7) ------- ------- ------- Net cash provided by operating activities 88.2 22.8 334.6 CASH FLOWS FROM INVESTING ACTIVITIES Plant, equipment and logging road additions, including cash used in acquisitions (154.8) (244.0) (362.9) Timber and timberland additions (49.7) (22.0) (49.7) Assets sold 63.6 62.4 23.5 Other investing activities, net 1.0 (9.1) 1.8 ------- ------- ------- Net cash used in investing activities (139.9) (212.7) (387.3) CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in short-term notes payable (13.4) (12.9) 47.8 Long-term borrowings 228.4 262.7 30.0 Repayment of long-term debt (101.0) (53.4) (82.0) Cash dividends (60.7) (60.1) (58.2) Purchase of treasury stock (2.9) --- (120.2) Other financing activities, net 5.4 6.0 (5.2) ------- ------- ------- Net cash provided by (used in) financing activities 55.8 142.3 (187.8) ------- ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4.1 (47.6) (240.5) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 27.8 75.4 315.9 ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 31.9 $ 27.8 $ 75.4 ======= ======= ======= See notes to financial statements. - 25 - CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ADD'L DOLLAR AMOUNTS IN MILLIONS COMMON STOCK TREASURY STOCK PAID-IN RETAINED EXCEPT PER SHARE SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ---------------------- ------------------------- ------- -------- BALANCE AS OF DECEMBER 31, 1994 116,937,022 $ 117.0 4,944,804 $ (86.3) $ 478.4 $ 1,510.7 Net income (loss) --- --- --- --- --- (51.7) Cash dividends, $.545 per share --- --- --- --- --- (58.2) Issuance of shares for employee stock plans and for other purposes --- --- (689,744) 13.8 (6.0) --- Purchase of treasury stock --- --- 4,333,397 (120.2) --- --- Employee stock ownership trust contribution --- --- --- --- --- --- Currency translation adjustment and pension liability adjustment, net --- --- --- --- --- --- --- --- --- --- --- --- BALANCE AS OF DECEMBER 31, 1995 116,937,022 $ 117.0 8,588,427 $ (192.7) $ 472.4 $ 1,400.8 Net income (loss) --- --- --- --- --- (200.7) Cash dividends, $.56 per share --- --- --- --- --- (60.1) Issuance of shares for employee stock plans and for other purposes --- --- (417,628) 9.4 .3 --- Employee stock ownership trust contribution --- --- --- --- --- --- Currency translation adjustment, pension liability adjustment and deferred compensation, net --- --- --- --- --- --- --- --- --- --- --- --- BALANCE AS OF DECEMBER 31, 1996 116,937,022 $ 117.0 8,170,799 $ (183.3) $ 472.7 $ 1,140.0 Net income (loss) --- --- --- --- --- (101.8) Cash dividends, $.56 per share --- --- --- --- --- (60.7) Issuance of shares for employee stock plans and for other purposes --- --- (1,016,534) 22.8 (.5) --- Purchase of treasury stock --- --- 155,095 (2.9) --- --- Employee stock ownership trust contribution --- --- --- --- --- --- Currency translation adjustment, pension liability adjustment and deferred compensation, net --- --- --- --- --- --- --- --- --- --- --- --- BALANCE AS OF DECEMBER 31, 1997 116,937,022 $ 117.0 7,309,360 $ (163.4) $ 472.2 $ 977.5 ----------- -------- --------- - -------- -------- ---------
[Table continued on next page of EDGARized text.] OTHER TOTAL LOANS EQUITY STOCK- DOLLAR AMOUNTS IN MILLIONS TO ADJUST- HOLDERS' EXCEPT PER SHARE ESOTs MENTS EQUITY -------- ---------- --------- BALANCE AS OF DECEMBER 31, 1994 $ (114.0) $ (56.4) $ 1,849.4 Net income (loss) --- --- (51.7) Cash dividends, $.545 per share --- --- (58.2) Issuance of shares for employee stock plans and for other purposes --- --- 7.8 Purchase of treasury stock --- --- (120.2) Employee stock ownership trust contribution 28.5 --- 28.5 Currency translation adjustment and pension liability adjustment, net --- .4 .4 -------- ---------- --------- BALANCE AS OF DECEMBER 31, 1995 $ (85.5) $ (56.0) $ 1,656.0 Net income (loss) --- --- (200.7) Cash dividends, $.56 per share --- --- (60.1) Issuance of shares for employee stock plans and for other purposes --- --- 9.7 Employee stock ownership trust contribution 23.9 --- 23.9 Currency translation adjustment, pension liability adjustment and deferred compensation, net --- (1.2) (1.2) -------- ---------- --------- BALANCE AS OF DECEMBER 31, 1996 $ (61.6) $ (57.2) $ 1,427.6 Net income (loss) --- --- (101.8) Cash dividends, $.56 per share --- --- (60.7) Issuance of shares for employee stock plans and for other purposes --- --- 22.3 Purchase of treasury stock --- --- (2.9) Employee stock ownership trust contribution 23.9 --- 23.9 Currency translation adjustment, pension liability adjustment and deferred compensation, net --- (22.2) (22.2) -------- ---------- --------- BALANCE AS OF DECEMBER 31, 1997 $ (37.7) $ (79.4) $ 1,286.2 -------- ---------- --------- See notes to financial statements. - 26 - NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations - -------------------- Louisiana-Pacific Corporation is a U.S.-based company principally engaged in the manufacture of building products, and to a lesser extent, market pulp. Through its foreign subsidiaries, the Company also maintains manufacturing facilities in Canada and Ireland. The principal customers for the Company's building products are retail home centers, builders, manufactured housing producers, distributors and wholesalers in North America, with minor sales to Asia and Europe. The principal customers for its pulp products are brokers in Asia and Europe, with minor sales in North America. A significant portion of L-P's sales are derived from structural panel products and lumber. Structural panel sales were 36% of total 1997 sales and lumber sales were 28% of the total. Use of Estimates in the Preparation of Financial Statements - ----------------------------------------------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. See discussion of specific estimates in footnotes entitled "Income Taxes," "Retirement Plans," "Stock Options and Plans," "Settlements, Charges and Other Unusual Items, Net" and "Contingencies." Principles of Presentation - -------------------------- The consolidated financial statements include the accounts of Louisiana-Pacific Corporation and all of its subsidiaries (L-P), after elimination of intercompany balances and transactions. Earnings Per Share - ------------------ Basic and diluted earnings per share have been computed based on the weighted average number of shares of common stock outstanding during the periods. The effect of potentially dilutive common stock equivalents is not included in the calculation of dilutive earnings per share because it is currently anti-dilutive as a result of L-P's net losses. Shares held by L-P's Employee Stock Ownership Trusts (ESOTs) which were acquired by the ESOTs on or after January 1, 1994 and are not allocated to participants' accounts, are not considered outstanding for purposes of computing earnings per share (763,786 shares at December 31, 1997). Cash and Cash Equivalents - ------------------------- L-P considers all highly liquid securities with an original maturity of three months or less to be cash equivalents. Cash paid during 1997, 1996 and 1995 for interest (net of capitalized interest) was $29.2 million, $13.4 million and $4.6 million. Net cash paid (received) during 1997, 1996 and 1995 for income taxes was $(80.7) million, $(4.1) million and $109.0 million. L-P invests its excess cash with high quality financial institutions and, by policy, limits the amount of credit exposure at any one financial institution. In addition, L-P holds its cash investments until maturity and is therefore not subject to significant market risk. - 27 - NOTES TO FINANCIAL STATEMENTS Inventory Valuation - ------------------- Inventories are valued at the lower of cost or market. Inventory costs include material, labor and operating overhead. The LIFO method is used for most log and lumber inventories with remaining inventories valued at FIFO or average cost. Inventory quantities are determined on the basis of physical inventories, adjusted where necessary for intervening transactions from the date of the physical inventory to the end of the year. The major types of inventories are as follows: DECEMBER 31 (IN MILLIONS) 1997 1996 ------------------------- ---- ---- Logs $ 112.4 $ 106.4 Lumber 37.6 47.4 Panel products 56.6 54.4 Other building products 82.1 70.0 Pulp 15.3 25.4 Other raw materials 25.1 26.3 Supplies 21.3 23.0 LIFO reserve (91.6) (88.6) ------- ------- Total $ 258.8 $ 264.3 ======= ======= Timber - ------ L-P follows an overall policy on fee timber that amortizes timber costs over the total fiber available during the estimated growth cycle. Timber carrying costs, such as reforestation and forest management, are generally expensed as incurred. Cost of timber harvested includes not only the cost of fee timber but also the amortization of the cost of long-term timber deeds. Property, Plant, and Equipment - ------------------------------ L-P uses the units of production method of depreciation for most machinery and equipment which amortizes the cost of equipment over the estimated units that will be produced during its useful life. Provisions for depreciation of buildings and the remaining machinery and equipment have been computed using straight-line rates based on the estimated service lives. The effective straight-line rates for the principal classes of property range from approximately 5 percent to 20 percent. Logging road construction costs are capitalized and included in land and land improvements. These costs are amortized as the timber volume adjacent to the road system is harvested. L-P capitalizes interest on borrowed funds during construction periods. Capitalized interest is charged to machinery and equipment accounts and amortized over the lives of the related assets. Interest capitalized during 1997, 1996 and 1995 was $4.8 million, $7.1 million and $10.9 million. L-P defers start-up costs on major construction projects during the start-up phase. No start-up costs were deferred in 1997. Start-up costs deferred during 1996 and 1995 were $3.8 million and $3.1 million. Asset Impairments - ----------------- Long-lived assets to be held and used by the Company are reviewed for impairment when events and circumstances indicate costs may not be recoverable. Losses are recognized when the book values exceed expected undiscounted future cash flows. If impairment exists, the asset's book value - 28 - NOTES TO FINANCIAL STATEMENTS is written down to its estimated fair value. Assets to be disposed are written down to their estimated fair value, less sales costs. See Note Seven for a discussion of charges in 1997, 1996 and 1995 related to impairment of property, plant and equipment. Derivative Financial Instruments - -------------------------------- L-P has only limited involvement with derivative financial instruments. At December 31, 1997, L-P had no material exposure to derivative financial instruments. Foreign Currency Translation - ---------------------------- Assets and liabilities denominated in foreign currencies are translated to U.S. dollars at the exchange rate on the balance sheet date. Revenues, costs, and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are shown in stockholders' equity. Goodwill - -------- Goodwill has resulted from the purchase of subsidiaries and is being amortized on a straight-line basis over 10 to 25 years. The amortization period and recoverability of this goodwill are periodically reviewed by the Company. Notes Receivable - ---------------- Included in other assets are notes receivable related to a timber and timberland sale that occurred during 1997. The Company received $47.9 million in notes from a third party. The notes are due in principal payments of $20 million in 2008, $20 million in 2009, and $7.9 million in 2012. Interest is to be received in semi-annual installments with rates varying from 5.62% to 7.5%. These notes provide collateral for L-P's senior secured notes. Acquisitions - ------------ Acquisitions are accounted for under the purchase method of accounting, whereby the results of acquired companies are included in L-P's consolidated results from the date of their acquisition. Reclassifications - ----------------- Certain prior year amounts have been reclassified to conform to the current year presentation. 2. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES DECEMBER 31 (IN MILLIONS) 1997 1996 ------------------------- ---- ---- Accounts payable $ 153.0 $ 124.0 Salaries and wages payable 27.4 36.6 Taxes other than income taxes 8.7 12.2 Workers' compensation 13.5 12.0 Other accrued liabilities 31.8 39.5 ------- ------- $ 234.4 $ 224.3 ======= ======= - 29 - NOTES TO FINANCIAL STATEMENTS 3. INCOME TAXES Income (loss) before taxes and minority interest for the years ended December 31, was taxed under the following jurisdictions: YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995 ------------------------------------ ---- ---- ---- Domestic $(87.0) $(255.1) $(123.0) Foreign (63.0) (71.7) 28.2 ------- ------- ------- $(150.0) $(326.8) $ (94.8) ======= ======= ======= Provision (benefit) for income taxes includes the following: YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995 ------------------------------------ ---- ---- ---- Current tax provision (benefit): U.S. federal $(65.0) $(87.4) $ 74.4 State and local (4.3) (10.0) 14.7 Foreign 3.6 12.2 6.1 ------ ------ ------- Total current tax provision (benefit) $(65.7) $(85.2) $ 95.2 ====== ====== ======= Deferred tax provision (benefit): U.S. federal 32.2 $ 2.6 $(129.2) State and local 3.4 .3 (16.4) Foreign (13.5) (43.3) 4.6 ------ ------ ------- Total deferred tax provision (benefit) $ 22.1 $(40.4) $(141.0) ====== ====== ======= The tax effects of significant temporary differences creating deferred tax (assets) and liabilities at December 31 were as follows: DECEMBER 31 (IN MILLIONS) 1997 1996 ------------------------- ---- ---- Property, plant and equipment $ 134.0 $ 95.3 Timber and timberlands 156.9 143.0 Inventories (4.2) (1.2) Accrued liabilities (84.1) (33.7) Contingency reserves (86.7) (100.5) Benefit of foreign capital loss and NOL carryover (27.8) (13.6) Benefit of foreign ITC carryover (62.3) (68.4) Other 41.6 26.0 Valuation allowance 38.2 43.2 -------- -------- Net deferred tax liability 105.6 90.1 Less net current deferred tax assets (73.0) (73.1) -------- -------- Net noncurrent deferred tax liabilities $ 178.6 $ 163.2 ======== ======== The reduction in the valuation allowance reflects the expiration of tax credits and a change in the foreign currency exchange rate between balance sheet dates. L-P's Canadian subsidiary, Louisiana-Pacific Canada Ltd. (LPC), has unrealized foreign investment tax credits (ITC) of approximately C$89 million (Canadian dollars). These credits can be carried forward to offset future tax - 30 - NOTES TO FINANCIAL STATEMENTS of LPC and reduce LPC's basis in the related property, plant and equipment. The credits expire C$18 million in 1999, C$6 million in 2000, C$47 million in 2001, C$4 million in 2003, C$13 million in 2004 and C$1 million in 2005. In addition, LPC has a capital loss carryover of C$29 million available to offset capital gains in future years which does not expire. The following table summarizes the differences between the statutory U.S. federal and effective income tax rates: YEAR ENDED DECEMBER 31 1997 1996 1995 ---------------------- ---- ---- ---- Federal tax rate (35)% (35)% (35)% Tax-exempt investment income --- --- 2 State and local income taxes (4) (4) (4) Exempt foreign sales corporation income --- --- (3) Foreign losses not benefited 6 Other, net 4 1 (4) --- --- --- (29)% (38)% (48)% === === === 4. LONG-TERM DEBT INTEREST RATE DECEMBER 31, (IN MILLIONS) AT 12/31/97 1997 1996 - ------------- ------------- ---- ---- Project Bank Financings -- Chetwynd, B.C. pulp mill, repaid in 1997, ---% $ --- $ 51.0 Nova Scotia fiber gypsum plant, repaid in 1997, --- --- 34.7 Waterford, Ireland, OSB plant, payable 1998-2003, interest rate variable 8.3 32.9 41.4 Project Revenue Bond Financings, payable 1998-2009, interest rates variable 4.4-7.3 26.0 26.1 Employee Stock Ownership Trust (ESOT) Loans -- Hourly ESOT, payable annually through 1999, interest rate variable 8.3 17.0 25.5 Salaried ESOT, payable annually through 1999, interest rate variable 4.9 12.0 18.0 Senior Secured Notes, payable 2008-2112, interest rates fixed 7.1-7.5 47.9 --- Bank Credit Facility -- Revolving credit facility, payable in 2002, interest rate variable 6.3 300.0 275.0 Term loan facility, payable in 2002, interest rate variable 6.3 125.0 --- Other, including capital lease obligations, payable in varying amounts through 2010, interest rates vary 4.0-8.5 34.4 5.6 ------- ------- 595.2 477.3 Less current portion (22.9) (18.7) ------- ------- $ 572.3 $ 458.6 ======= ======= The carrying amounts of L-P's long-term debt approximates fair market value since the debt is primarily variable rate debt. Project bank financings are typically secured by the underlying assets of the related project. The senior secured notes are collateralized by notes receivable related to timber and timberland sales. Many of L-P's loan agreements contain lender's standard covenants and restrictions. L-P was in compliance with all of the covenants and restrictions of these agreements at December 31, 1997. - 31 - NOTES TO FINANCIAL STATEMENTS At December 31, 1997, L-P had a $425 million bank credit facility with a group of banks which is due in 2002. This facility includes a $300 million revolving credit facility and a $125 million term loan facility. Interest on borrowings under the facility is computed on one of numerous variable interest rate formulas at L-P's option. L-P pays a commitment fee on the unused credit line. Borrowings in 1997 are classified as long-term debt as amounts are not expected or required to be repaid during 1998. Additionally, L-P's subsidiary, L-P Canada Ltd. has a $30 million (Canadian) revolving credit facility which is classified as short-term notes payable. Subsequent to year-end, L-P entered into an additional credit facility with a group of banks for an additional $100 million, which must be repaid upon the sale of assets described in Note Seven. The weighted average interest rate for all debt at December 31, 1997 and 1996 was 6.4 percent and 6.2 percent. Required repayment of principal for long-term debt is as follows: YEAR ENDED DECEMBER 31 (IN MILLIONS) 1998 $ 22.9 1999 34.5 2000 6.6 2001 6.4 2002 456.2 2003 and after 68.6 --------- $ 595.2 ========= 5. RETIREMENT PLANS L-P maintains tax-qualified Employee Stock Ownership Trusts (ESOTs), for eligible salaried and hourly employees in the U.S. under which 10 percent of the eligible employees' annual earnings are contributed to the plans. Approximately 9,800 L-P employees participate in the ESOTs. The annual allocation of shares to participant accounts and compensation expense are generally based on the ESOTs' cost of the shares. However, as required, compensation expense for the 1,843,621 shares purchased by the ESOTs in 1994 is based on the market value of the shares at the time of allocation. L-P's ESOTs held a total of approximately 11,868,000 shares at December 31, 1997 of which approximately 9,734,000 were allocated to participants' accounts. ESOT expense is included in the retirement plan expense table below. L-P also maintains other defined contribution pension plans covering various groups of hourly and salaried employees in the U.S. and other countries. Contributions to the plans are generally computed by one of three methods: 1) L-P contribution required based upon a defined formula with no employee contributions allowed; 2) L-P contribution required based upon a defined formula with elective or mandatory employee contributions; and 3) elective employee contributions only with no L-P contribution allowed. L-P also has a number of defined benefit pension plans covering its hourly employees, most of which were frozen in 1994. Contributions to these plans are based on actuarial calculations of amounts to cover current pension and amortization of prior service costs over periods ranging from 10 to 20 years. Contributions to multiemployer defined benefit plans are specified in applicable collective bargaining agreements. - 32 - NOTES TO FINANCIAL STATEMENTS In 1997, L-P adopted the L-P Supplemental Executive Retirement Plan (SERP), a non-qualified defined benefit plan intended to provide supplemental retirement benefits to key executives. Benefits are generally based on compensation in the years prior to retirement. The projected benefit obligation was $1.4 million at December 31, 1997. Expense for this plan is included in the retirement plan expense table below. L-P established a grantor trust to informally provide funding for the benefits payable under the SERP. During 1997, L-P contributed $4.2 million to the trust. The funds were invested in corporate-owned life insurance policies. At December 31, 1997, the trust assets were valued at $3.9 million and included in other assets in L-P's consolidated balance sheet. The status of L-P administered qualified defined benefit pension plans is as follows: 1997 1996 ---- ---- Plan with Plan with Plans with Plans with Assets in Accumulated Assets in Accumulated Excess of Benefits Excess of Benefits Accumulated In Excess Accumulated In Excess Benefits of Assets Benefits of Assets DECEMBER 31 (IN MILLIONS) Accumulated benefit obligation Vested portion $ 11.2 $ 101.1 $ 19.9 $ 89.8 Non-vested portion -- 2.1 .2 2.9 --------- --------- -------- --------- Total 11.2 103.2 20.1 92.7 Effect of future compensation -- -- -- -- --------- --------- -------- --------- Projected benefit obligation 11.2 103.2 20.1 92.7 Plan assets 13.2 89.1 39.6 87.3 --------- --------- -------- --------- Net funded (unfunded) status 2.0 (14.1) 19.5 (5.4) Unrecognized asset at transition (.3) (6.5) (5.1) (8.0) Unrecognized net loss and other 3.9 29.3 .2 20.9 Adjustment to recognize minimum liability -- (22.9) -- (9.7) --------- --------- -------- --------- Net prepaid (accrued) pension expense $ 5.6 $ (14.2) $ 14.6 $ (2.2) ========= ========= ======== =========
The actuarial assumptions used to determine pension expense and the funded status of the plans for 1997 and 1996 were: a discount rate on benefit obligations of 7.25 percent and 7.75 percent, and an 8.75 percent expected long-term rate of return on plan assets. The assets of the plans at December 31, 1997 and 1996 consist mostly of government obligations, and minor amounts in equity securities and cash and cash equivalents. Retirement plan expense included the following components: - 33 - NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995 ------------------------------------ ---- ---- ---- Benefits earned by employees $ .2 $ .5 $ .4 Interest cost on projected benefit obligation 7.9 8.3 7.9 Return on plan assets (9.0) (10.9) (10.2) Net amortization and deferral (1.0) (1.7) (2.4) ---------- ---------- ---------- Net periodic pension expense (income) (1.9) (3.8) (4 .3) Expense related to ESOTs multiemployer, defined contribution and non-qualified plans 28.8 29.1 30.1 Loss from settlement of pension plan 7.3 --- --- ---------- ---------- ---------- Net retirement plan expense $ 34.2 $ 25.3 $ 25.8 ========== ========== ==========
L-P has several plans which provide minimal postretirement benefits other than pensions. Net expense related to these plans was not significant. L-P does not generally provide post-employment benefits. 6. STOCK OPTIONS AND PLANS The Financial Accounting Standards Board issued SFAS 123, "Accounting for Stock-Based Compensation" which establishes a fair value approach to measuring compensation expense related to employee stock plans for grants on or after January 1, 1995. As allowed by SFAS 123, L-P has elected to adopt only the disclosure provisions of the standard and therefore recorded no compensation expense for certain stock option plans and all stock purchase plans. Had compensation expense for L-P's stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS Statement 123, L-P's net income (loss) and net income (loss) per share would have been reduced to the pro forma amounts indicated below: YEAR ENDED DECEMBER 31 (IN MILLIONS, EXCEPT PER SHARE) 1997 1996 1995 ------------------------------- ---- ---- ---- Net income (loss) As reported $ (101.8) $ (200.7) $ (51.7) Pro forma (108.6) (206.0) (53.6) Net income (loss) per share As reported $ (.94) $ (1.87) $ (.48) Pro forma (1.00) (1.92) (.50)
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model using the actual option terms with the assumptions of a 2.5 percent to 3.2 percent dividend yield, expected volatility of 29 percent in 1997 and 27 percent in 1996 and 1995, and a risk free interest rate of 6.6 percent in 1997 and 6.7 percent in 1996 and 1995. Stock Option Plans - ------------------ L-P grants options to key employees to purchase L-P common stock. Past options were granted at 85 to 100 percent of market price. The current stock award plan requires that options be granted at 100 percent of market price. The options become exercisable over 3 or 5 years beginning one year after the grant date and expire 5 or 10 years after the date of grant. Compensation expense recognized for stock options was $.7 million in 1997, $.7 million in 1996 and $1.0 million in 1995. At December 31, 1997, 4.5 million shares were available under the current stock award plan for future option grants and all other stock-based awards. - 34 - NOTES TO FINANCIAL STATEMENTS Changes in options outstanding and exercisable were as follows: NUMBER OF SHARES YEAR ENDED DECEMBER 31 1997 1996 1995 ---------------------- ---- ---- ---- Options outstanding at January 1 1,647,530 1,370,410 2,611,123 Options granted 789,505 605,000 114,000 Options exercised (154,880) (196,530) (1,046,412) Options canceled (78,300) (131,350) (308,301) ------------- ------------ -------------- Options outstanding at December 31 2,203,855 1,647,530 1,370,410 ============= ============ ============== Options exercisable at December 31 912,144 762,850 668,900 ============= ============ ============== WEIGHTED AVERAGE PRICE PER SHARE YEAR ENDED DECEMBER 31 1997 1996 1995 ---------------------- ---- ---- ---- EXERCISE PRICE Options granted $ 19.97 $ 22.18 $ 21.57 ======== ======== ======== Options exercised $ 13.91 $ 12.13 $ 11.55 ======== ======== ======== Options canceled $ 24.21 $ 21.39 $ 12.73 ======== ======== ======== Options outstanding $ 21.09 $ 21.14 $ 19.40 ======== ======== ======== Options exercisable $ 21.09 $ 19.05 $ 17.05 ======== ======== ======== FAIR VALUE AT DATE OF GRANT Options granted $ 6.05 $ 8.38 $ 8.98 ======== ======== ========
Performance-Contingent Stock Awards - ----------------------------------- L-P has granted performance-contingent stock awards to senior executives as allowed under the current stock award plan. The awards entitle the participant to receive a number of shares of L-P common stock determined by comparing L-P's cumulative total stockholder return to the mean total stockholder return of five other forest products companies for the four-year period beginning in the year of the grant. During 1997, a target of 54,569 performance-contingent awards were granted. Depending on L-P's four-year total stockholder return, the actual number of shares issued at the end of the four-year period could range from zero to 200 percent of this target. Restricted Stock Plans - ---------------------- L-P has also granted awards under the Louisiana-Pacific Corporation Key Employee Restricted Stock Plan. Shares are issued, at no cost to the employee, only after certain annual performance criteria are met. The expense is recorded in the year to which the performance criteria relate. L-P did not meet the performance criteria in 1997, 1996 or 1995 and therefore recognized no compensation expense for restricted stock awards. Changes in the Restricted Stock Awards outstanding were as follows: NUMBER OF SHARES YEAR ENDED DECEMBER 31 1997 1996 1995 -------------------- -------------------------------------------- Restricted awards outstanding at January 1 109,458 251,208 664,500 Restricted awards granted 73,000 --- 145,000 Restricted awards exercised --- --- (42,875) Restricted awards canceled (110,334) (141,750) (515,417) ----------- ------------ ------------ Restricted awards outstanding at December 31 72,124 109,458 251,208 =========== ============ ============ Fair value at date of grant $ 21.13 $ N/A $ 27.00 =========== ============ ============
- 35 - NOTES TO FINANCIAL STATEMENTS L-P has also granted restricted stock in which the shares are issued at the date of grant. The shares are non-transferable until the time period specified lapses. There are no other performance criteria. 150,000 of such shares were granted and issued in 1996. In 1997, 30,000 shares vested and became transferable. The remaining shares vest 30,000 shares in 1998, 30,000 shares in 1999 and 60,000 shares in 2006. Deferred compensation was recorded in the other equity line in the balance sheet in the amount of $3.8 million based on the market value of the stock at the date of issuance. The deferred compensation balance is amortized to expense over the years during which the certificates vest. The amount of expense recorded in 1997 and 1996 related to these restricted shares was $.8 million. Stock Purchase Plans - -------------------- L-P offers employee stock purchase plans to most employees. Under each plan, employees may subscribe to purchase shares of L-P stock over 24 months at 85 percent of the market price. At December 31, 1997, 671,196 shares and 498,185 shares were subscribed at $18.89 and $18.59 per share under the 1997 and 1996 Employee Stock Purchase Plans. During 1997, L-P issued 259,141 shares to employees at an average price of $22.36 under all Employee Stock Purchase Plans, including the completion of the purchase period for the 1995 Plan. 7. SETTLEMENTS, CHARGES AND OTHER UNUSUAL ITEMS, NET The major components of "Settlements, Charges and Other Unusual Items, Net" in the statements of income for the years ended December 31, were as follows: 1997 1996 1995 ---- ---- ---- KPC settlement $ 135.0 $ --- $ --- Charges for litigation, property impairments and other (223.1) (350.0) (374.6) Gains on asset sales 55.6 --- 8.0 ----------- ----------- ------------ $ (32.5) $ (350.0) $ (366.6) =========== =========== ============
1997 - ---- In the first quarter of 1997, L-P's Ketchikan Pulp Company subsidiary recorded a net gain of $121.9 million ($73.7 million after taxes, or $.68 per share) to reflect the initial proceeds of $135 million received under a settlement agreement with the U.S. Government over KPC's claims related to the long-term timber supply contract in Alaska. Adjustments to pulp mill closure- related accruals were netted against this gain. The agreement also provides KPC with sufficient timber volumes to run its two sawmills through the end of 1999. In the third quarter of 1997, L-P recorded a $210.0 million charge ($128.3 million after taxes, or $1.18 per share) to reflect the write-down of certain properties which L-P intends to sell, to adjust reserves for litigation settlements and to accrue for certain other costs. Gains from the sale of 79,000 acres of timber and timberland in California during the third quarter of 1997 in the amount of $55.6 million ($34.0 million after taxes, or $.31 per share) were netted against the charges. - 36 - NOTES TO FINANCIAL STATEMENTS In October 1997, L-P announced that it intends to sell assets that management considers non-strategic to L-P's business. These assets include, among others, the remaining California redwood timberlands, related lumber and certain distribution businesses, the Samoa, California, pulp mill, the Weather-Seal window and door manufacturing business, the Creative Point, Inc., subsidiary, the Red Bluff, California, cement fiber roof shake plant and the fiber gypsum plant in Nova Scotia. As of year-end, L-P was actively marketing all of these assets and had sold the fiber gypsum plant. The total third quarter charge related to property and equipment write-downs, was $35.0 million. The facilities covered by this charge incurred operating losses of approximately $17 million in 1997, all of which was related to the building products related assets. 1996 - ---- In the third quarter of 1996, L-P recorded pre-tax charges of $350.0 million ($215.0 million after tax, or $2.00 per share) to reflect expected costs to be incurred in the shut-down of the pulp mill owned and operated by L-P's Ketchikan Pulp Company (KPC) subsidiary as well as the settlement of all outstanding shareholder securities class action claims, a reserve for other litigation and a reserve for the planned shut-down and other costs related to certain other non-strategic facilities. The charge for the shut-down of the Ketchikan pulp mill included the Company's best estimates of all costs related to the closing of operations including the write-down of property, plant and equipment to estimated salvage value, severance costs, inventory write-downs, environmental and general property clean-up and other costs. In 1996, as part of the implementation of management's strategic plan, L-P evaluated the viability of all its current operations and made plans for the closure or sale of certain other manufacturing facilities including several sawmills, structural panel products plants and other operations. The facilities were written down to their estimated salvage or sales value. The total charge related to property and equipment write-downs, including the KPC facilities, was $191.1 million. The facilities covered by this charge incurred operating losses of approximately $64 million in 1996, of which approximately $40 million related to pulp segment assets and $24 million related to building products related assets. L-P reached an agreement on behalf of all defendants to settle all outstanding shareholder securities class action claims brought in 1995 against the Company and four former and current officers. The settlement required a payment of approximately $65 million, of which approximately $20 million was covered by insurance. L-P also reserved additional amounts related to other outstanding litigation, including plaintiffs who opted out of the siding class action settlements. Detail regarding the industry segments to which this $350.0 million charge relates is presented in Note Ten entitled "Segment Information." Broken down by type of expense, $191.1 million related to property and equipment write-downs, $19.3 million related to inventory write-downs and $139.6 million related to reserves taken for severance and other shut-down charges as well as litigation costs. 1995 - ---- In the third quarter of 1995, L-P recorded a pre-tax charge of $366.6 million ($221.8 million after tax, or $2.07 per share). This charge included $345.0 million for class action settlements related to the Company's siding - 37 - NOTES TO FINANCIAL STATEMENTS product, as well as write-downs on planned disposals by mid-1996 of certain facilities, principally sawmills. The historical results of these operations were not significant. A gain on the sale of a non-strategic asset was netted against this charge. 8. CONTINGENCIES Environmental Proceedings - ------------------------- In March 1995, L-P's subsidiary Ketchikan Pulp Company (KPC) entered into agreements with the federal government to resolve the issues related to water and air compliance problems experienced at KPC's pulp mill during the late 1980s and early 1990s. In addition to civil and criminal penalties that have been paid, KPC also agreed to undertake further expenditures, which are primarily capital in nature, including certain remedial and pollution control related measures, with an estimated cost of up to approximately $20 million. With the closure of the pulp mill, KPC is currently seeking the EPA's and court's guidance regarding the necessity of these expenditures. KPC has also agreed to undertake a study of whether a clean-up of Ward Cove, the body of water adjacent to the pulp mill, is needed. It is anticipated that KPC will be required to spend up to $6 million on the clean-up, including the cost of the study, as part of the overall $20 million of expenditures. KPC negotiated an administrative order with the state and EPA to conduct investigative and clean-up activities at the pulp mill. Total costs for these activities are unknown at this time, but KPC has recorded its initial estimated amount. The United States Forest Service (USFS) has named KPC as a potentially responsible party for costs related to the capping of a landfill near Thorne Bay, Alaska. Total costs may range up to $8 million. EPA and the Department of Justice have indicated their intent to seek penalties for alleged civil violations of the Clean Water Act. The maximum penalty associated with such an action could total up to $625,000. Certain of L-P's plant sites have or are suspected of having substances in the ground or in the groundwater that are considered pollutants. Appropriate corrective action or plans for corrective action are underway. Where the pollutants were caused by previous owners of the property, L-P is vigorously pursuing those parties through legal channels and is vigorously pursuing insurance coverage under all applicable policies. L-P maintains a reserve for estimated environmental loss contingencies. The balance of the reserve was $29.3 million and $49.9 million at December 31, 1997 and 1996. The decrease during 1997 was primarily the result of expenditures related to the closure of operations at the KPC pulp mill. As with all accounting estimates, significant uncertainty exists in the reliability and precision of the estimates because the facts and circumstances surrounding each contingency vary from case to case. L-P continually monitors its estimated exposure for environmental liabilities and adjusts its accrual accordingly. As additional information about the environmental contingencies becomes known, L-P's estimate of its liability for environmental loss contingencies may change significantly, although no estimate of the range of any potential adjustment of the liability can be made at this time. L-P cannot estimate the time frame over which these accrued amounts are likely to be paid out. A portion of L-P's environmental reserve is related to liabilities for clean-up of properties which are currently owned or have been owned in the past by L-P. Certain of these sites are subject to cost-sharing arrangements with other parties who were also involved with the site. L-P does not believe that any of these cost-sharing arrangements will result in additional material liability to L-P due to non-performance by the other - 38 - NOTES TO FINANCIAL STATEMENTS party. L-P has not reduced its liability for any anticipated insurance recoveries. Although L-P's policy is to comply with all applicable environmental laws and regulations, the company has in the past been required to pay fines for non-compliance and sometimes litigation has resulted from contested environmental actions. Also, L-P is involved in other environmental actions and proceedings which could result in fines or penalties. Management believes that any fines, penalties or other losses resulting from the matters discussed above in excess of the reserve for environmental loss contingencies will not have a material adverse effect on the business, financial position, results of operations or liquidity of L-P. See "Colorado Criminal Proceedings" for further discussion of an environmental action against the company. Colorado Criminal Proceedings - ----------------------------- L-P began an internal investigation at L-P's Montrose (Olathe), Colorado, oriented strand board (OSB) plant of various matters, including certain environmental matters, in the summer of 1992 and reported its initial finding of irregularities to governmental authorities in September 1992. Shortly thereafter, a federal grand jury commenced an investigation of L-P concerning alleged environmental violations at that plant, which was subsequently expanded to include the taking of evidence and testimony relating to alleged fraud in connection with the submission of unrepresentative OSB product samples to the APA - The Engineered Wood Association (APA), an industry product certification agency, by L-P's Montrose plant and certain of its other OSB plants. L-P then commenced an independent investigation, which was concluded in 1995, under the direction of former federal judge Charles B. Renfrew concerning irregularities in sampling and quality assurance in its OSB operations. In June 1995, the grand jury returned an indictment in the U.S. District Court in Denver, Colorado, against L-P, a former manager of the Montrose mill, and a former superintendent at the mill. L-P is now facing 23 felony counts related to environmental matters at the Montrose mill, including alleged conspiracy, tampering with opacity monitoring equipment, and making false statements under the Clean Air Act. The indictment also charges L-P with 25 felony counts of fraud relating to alleged use of the APA trademark on OSB structural panel products produced by the Montrose mill as a result of L-P's allegedly improper sampling practices in connection with the APA quality assurance program. In November 1995, the Court bifurcated the environmental and fraud felony counts. A trial date of April 13, 1998, had been set in the environmental case. However, a Notice of Disposition and Joint Motion to Vacate Trial Date was filed with the Court. After pleading guilty to one environmental count, on February 18, 1998, the former superintendent of the mill was sentenced to six months of home detention, five years probation and a fine of $10,000. The former plant manager pled guilty to one environmental count and is scheduled to be sentenced in April 1998. In December 1995, L-P received a notice of suspension from the EPA stating that, because of criminal proceedings pending against L-P in Colorado, agencies of the federal government would be prohibited from purchasing from L-P's Northern Division. L-P is negotiating to have the EPA suspension lifted or modified based on positive environmental programs actively underway. While negotiations are continuing, the EPA has approved a preliminary agreement limiting the prohibition to L-P's Montrose, Colorado, facility for an interim period in recognition of L-P's environmental compliance efforts. Under recently revised regulations of the United States Department of Agriculture, - 39 - NOTES TO FINANCIAL STATEMENTS the EPA suspension will also have the effect of prohibiting L-P's Montrose facility from purchasing timber directly, but not indirectly, from the USFS. L-P maintains a reserve for its estimate of the cost of the Montrose criminal proceedings, although as with any estimate, there is uncertainty concerning the actual costs to be incurred. At the present time, L-P cannot predict whether or to what extent the circumstances described above will result in further civil litigation or investigation by government authorities, or the potential financial impact of any such current or future proceedings, in which case the resolution of the above matters could have a materially adverse impact on L-P. OSB Siding Matters - ------------------ L-P has been named as a defendant in numerous class action and non-class action proceedings, brought on behalf of various persons or purported classes of persons (including nationwide classes in the United States and Canada) who own or have purchased or used OSB siding manufactured by L-P, because of alleged unfair business practices, breach of warranty, misrepresentation, conspiracy to defraud, and other theories related to alleged defects, deterioration, or failure of OSB siding products. The United States District Court for the District of Oregon has given final approval to a settlement between L-P and a nationwide class composed of all persons who own, have owned, or subsequently acquire property on which L- P's OSB siding was installed prior to January 1, 1996, excluding persons who timely opted out of the settlement and persons who are members of the settlement class in the Florida litigation described below. Under the settlement agreement, an eligible claimant whose claim is filed prior to January 1, 2003 (or earlier in certain cases), and is approved by an independent claims administrator will be entitled to receive from the settlement fund established under the agreement a payment equal to the replacement cost (to be determined by a third-party construction cost estimator and currently estimated to be in the range of $2.20 to $6.40 per square foot depending on the type of product and geographic location) of damaged siding, reduced by a specific adjustment (of up to 65 percent) based on the age of the siding. Class members who have previously submitted or resolved claims under any other warranty or claims program of L-P may be entitled to receive the difference between the amount which would be payable under the settlement agreement and the amount previously paid. Independent adjusters will determine the extent of damage to OSB siding at each claimant's property in accordance with a specified protocol. There will be no adjustment to settlement payments for improper maintenance or installation. A claimant who is dissatisfied with the amount to be paid under the settlement may elect to pursue claims against L-P in a binding arbitration seeking compensatory damages without regard to the amount of payment calculated under the settlement protocol. A claimant who elects to pursue an arbitration claim must prove his entitlement to damages under any available legal theory, and L-P may assert any available defense, including defenses that otherwise had been waived under the settlement agreement. If the arbitrator reduces the damage award otherwise payable to the claimant because of a finding of improper installation, the claimant will be entitled to pursue a claim against the contractor/builder to the extent the award was reduced. L-P is required to pay $275 million into the settlement fund in seven annual installments beginning in mid-1996: $100 million, $55 million, $40 million, $30 million, $20 million, $15 million, and $15 million. As of December 31, 1997, L-P had funded the first three installments. If at any time after the fourth year of the settlement period the amount of approved - 40 - NOTES TO FINANCIAL STATEMENTS claims (paid and pending) equals or exceeds $275 million, then the settlement agreement will terminate as to all claims in excess of $275 million unless L-P timely elects to provide additional funding within 12 months equal to the lesser of (i) the excess of unfunded claims over $275 million or (ii) $50 million and, if necessary to satisfy unfunded claims, a second payment within 24 months equal to the lesser of (i) the remaining unfunded amount or (ii) $50 million. If the total payments to the settlement fund are insufficient to satisfy in full all approved claims filed prior to January 1, 2003, then L-P may elect to satisfy the unfunded claims by making additional payments into the settlement fund at the end of each of the next two 12-month periods or until all claims are paid in full, with each additional payment being in an amount equal to the greater of (i) 50 percent of the aggregate sum of all remaining unfunded approved claims or (ii) 100 percent of the aggregate amount of unfunded approved claims, up to a maximum of $50 million. If L-P fails to make any such additional payment, all class members whose claims remain unsatisfied from the settlement fund may pursue any available legal remedies against L-P without regard to the release of claims provided in the settlement agreement. If L-P makes all payments required under the settlement agreement, including all additional payments as specified above, class members will be deemed to have released L-P from all claims for damaged OSB Inner-Seal siding, except for claims arising under their existing 25-year limited warranty after termination of the settlement agreement. The settlement agreement does not cover consequential damages resulting from damage to OSB Inner-Seal siding or damage to utility grade OSB siding (sold without any express warranty), either of which could create additional claims. In the event all claims filed prior to January 1, 2003, that are approved have been paid without exhausting the settlement fund, any amounts remaining in the settlement fund revert to L-P. In addition to payments to the settlement fund, L-P was required to pay fees of class counsel in the amount of $26.25 million, as well as expenses of administering the settlement fund and inspecting properties for damage and certain other costs. As of December 31, 1997, approximately $40 million remained of the $195 million paid into the fund to date, after accruing interest on undisbursed funds and deducting class notification costs, prior claims costs (including payments advanced to homeowners in urgent circumstances) and payment of claims under the settlement. The claims submitted to the claims administrator substantially exceed the $275 million of payments that L-P is required to make under the settlement agreement. As calculated under the terms of the settlement, claims submitted and inspected exceed $325 million. There are insufficient data to project the future volume of claims or the total dollar value of additional claims that may be made against the settlement fund. L-P has not decided whether it will provide the optional funding discussed above in excess of the required $275 million after the fourth year of the settlement. Alternatively, L-P could elect to pursue other options, including allowing the settlement agreement to terminate, thereby entitling claimants with unsatisfied claims to pursue available legal remedies against L-P. A settlement of a Florida class action was approved by the Circuit Court for Lake County, Florida. Under the settlement, L-P has established a claims procedure pursuant to which members of the settlement class may report problems with L-P's OSB Inner-Seal siding and have their properties inspected by an independent adjuster, who will measure the amount of damage and also determine the extent to which improper design, construction, installation, finishing, painting, and maintenance may have contributed to any damage. The maximum payment for damaged siding is $3.40 per square foot for lap siding and $2.82 per square foot for panel siding, subject to reduction of up to 75 percent for damage resulting from improper design, construction, installation, - 41 - NOTES TO FINANCIAL STATEMENTS finishing, painting, or lack of maintenance, and also subject to reduction for age of siding more than three years old. L-P has agreed that the deduction from the payment to a member of the Florida class will be not greater than the deduction computed for a similar claimant under the national settlement agreement described above. Class members will be entitled to make claims for up to five years after October 4, 1995. L-P maintains reserves for the estimated costs of these siding settlements, although, as with any estimate, there is uncertainty concerning the actual costs to be incurred. The discussion herein notes some of the factors, in addition to the inherent uncertainty of predicting the outcome of claims and litigation, that could cause actual costs to vary materially from current estimates. Due to the various uncertainties, L-P cannot predict to what degree actual payments under the settlement agreements will exceed the recorded liability related to these matters, although it is possible that in the near term, total estimated payments will exceed the recorded liabilities. Other OSB Matters - ----------------- Three separate purported class actions on behalf of owners and purchasers of properties in which L-P's OSB panels are used for flooring, sheathing, or underlayment have been consolidated in the United States District Court for the Northern District of California under the caption Agius v. Louisiana-Pacific Corporation. The actions seek damages and equitable relief for alleged fraud, misrepresentation, breach of warranty, negligence, and improper trade practices related to alleged improprieties in testing, APA certification, and marketing of OSB structural panels, and alleged premature deterioration of such panels. A separate state court action entitled Carney v. Louisiana-Pacific Corporation is pending in the Superior Court of the State of California for the City and County of San Francisco, seeking relief under California consumer protection statutes based on similar allegations. On February 27, 1998, the United States District Court for the Northern District of California entered an order approving a settlement that would resolve the above actions. The settlement class is composed of all persons who purchased L-P OSB sheathing or acquired real property or structures in the United States containing L-P OSB sheathing between January 1, 1984, and October 22, 1997. However, persons who purchased L-P sheathing during the class period, but who do not retain ownership of the product, are not included in the class. Under the settlement agreement, an eligible claimant whose claim is filed prior to October 22, 2017, and is reviewed by the claims administrator will be entitled to recover the reasonable cost of repair or replacement of any L-P OSB sheathing determined to have failed to perform its essential function as warranted and not occasioned by misuse, negligent or intentional misconduct of a third party or an event over which L-P had no control. Independent adjusters will determine the extent of damage to the OSB sheathing at each claimant's property. There will be an adjustment to the settlement payments for improper installation and maintenance. If a class member is dissatisfied with the result, he or she may reject the award and request a second inspection, or elect arbitration or initiate a civil suit for compensatory damages (but not for multiple or punitive damages). If a class member rejects the award, elects arbitration and recovers a greater sum than was found to be owing by the independent adjuster, L-P will pay for the administrative cost of the arbitration. An independent, professional ombudsperson will oversee the implementation of the settlement and receive and consider complaints from class members with respect to L-P's performance of the settlement. - 42 - NOTES TO FINANCIAL STATEMENTS Additionally, the settlement agreement provides that L-P will pay a $1.5 million grant to the University of California Forest Products Laboratory, will pay reasonable attorneys' fees of class counsel, and will consent to an injunction prohibiting it from failing to comply with product testing protocols or falsely representing that its products comply with certain testing requirements. As with most class action settlements, a number of opt out notices were received. Those who opted out retain all rights which were available to them prior to the settlement. L-P maintains a reserve for its estimate of the cost of these other OSB matters, including the sheathing settlement, although as with any estimate, there is uncertainty concerning the actual costs to be incurred. Based on a review of its claims records to date, L-P believes that known reports of damage to installed L-P OSB sheathing have been immaterial in number and amount. Executive Employment Matter - --------------------------- On June 19, 1997, the United States District Court for the Southern District of New York entered a judgment in favor of Mark Suwyn and L-P in the action entitled International Paper Company v. Mark A. Suwyn and Louisiana- Pacific Corporation. The complaint had alleged that Mr. Suwyn's employment as chief executive officer of L-P violated the terms of a previous employment agreement with the plaintiff and sought an injunction prohibiting Mr. Suwyn from continuing his employment with L-P for 18 months and other relief. Other - ----- L-P and its subsidiaries are parties to other legal proceedings. Management believes that the outcome of such proceedings will not have a material adverse effect on the business, financial position, results of operations or liquidity of L-P. Contingency Reserves - -------------------- The balance of contingency reserves, exclusive of the environmental reserves discussed above, was $194.7 million and $209.9 million at December 31, 1997 and 1996. As L-P receives additional information regarding actual claim rates and average claim amounts, L-P will monitor its estimated exposure and adjust its accrual accordingly. The amounts ultimately paid for these contingencies could differ materially from the amount currently recorded, although no estimate of the timing or range of any potential adjustment can be made at this time. 9. COMMITMENTS L-P is obligated to purchase timber under certain cutting contracts which extend to 2002. L-P's best estimate of its commitment at current contract rates under these contracts is approximately $20.2 million for approximately 113 million board feet of timber. Payments under all operating leases that were charged to expense during 1997, 1996, and 1995 were $17.5 million, $17.0 million and $10.7 million. Future minimum rental payments under non-cancelable operating leases are not significant. - 43 - NOTES TO FINANCIAL STATEMENTS 10. SEGMENT INFORMATION L-P operates in two major industry segments. The major products included in each segment are detailed further in the "Product Information Summary" in Item 1. Intersegment sales are chips transferred from company-owned building products plants to company-owned pulp mills. All transfers are made at prevailing market prices. Timber and related assets and capital expenditures for such assets have not been allocated to the industry segments as these are a prime source of raw materials for both segments. The cost of logs delivered to the plants and residual fibers are included in the operating results of the segments. Export sales are primarily to customers in Asia and Europe. Information about L-P's geographic segments is as follows: YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995 ------------------------------------ ---- ---- ---- Total sales -- point of origin U.S. $ 2,330 $ 2,389 $ 2,703 Canada and other 128 162 191 Intersegment sales to U.S. (55) (65) (51) --------- --------- --------- Total sales $ 2,403 $ 2,486 $ 2,843 ========= ========= ========= Export sales (included above) $ 240 $ 268 $ 457 ========= ========= ========= Profit (loss) U.S. $ 39 $ 107 $ 353 Canada and other (48) (24) 37 Settlements, charges and other unusual items, net (32) (350) (367) General corporate expense and interest, net (109) (60) (118) --------- --------- --------- Income (loss) before taxes and minority interest $ (150) $ (327) $ (95) ========= ========= ========= Identifiable assets U.S. $ 2,220 $ 2,195 $ 2,305 Canada 285 308 434 All other 73 86 66 --------- --------- --------- Total assets $ 2,578 $ 2,589 $ 2,805 ========= ========= =========
- 44 - NOTES TO FINANCIAL STATEMENTS Information about L-P's industry segments is as follows: YEAR ENDED DECEMBER 31 (IN MILLIONS) 1997 1996 1995 ------------------------------------ ---- ---- ---- Total sales Building products $ 2,280 $ 2,328 $ 2,535 Pulp 130 177 334 Intersegment sales to pulp (7) (19) (26) --------- --------- --------- Total sales $ 2,403 $ 2,486 $ 2,843 ========= ========= ========= Profit (loss) Building products $ 20 $ 174 $ 346 Pulp (29) (91) 44 Settlements, charges and other unusual items, net (1) (32) (350) (367) General corporate expense, net (80) (52) (121) Interest, net (29) (8) 3 --------- --------- --------- Income (loss) before taxes and minority interest $ (150) $ (327) $ (95) ========= ========= ========= Identifiable assets Building products $ 1,420 $ 1,346 $ 1,389 Pulp 294 341 457 Timber, timberlands, logging equipment and roads 671 682 727 General corporate assets 193 220 232 --------- --------- --------- Total assets $ 2,578 $ 2,589 $ 2,805 ========= ========= ========= Depreciation, amortization and cost of timber harvested Building products $ 164 $ 164 $ 158 Pulp 17 25 36 Capital expenditures Building products 145 203 286 Pulp 4 36 47 Timber, timberlands, logging equipment and roads 63 38 69
- -------------------------- (1) In 1997, of the net $32 million charge, a $122 million gain relates to a gain from a settlement received by a subsidiary from the U.S. Government and is not allocable to a segment, a $56 million gain relates to timber and timberland sold and a $210 million charge relates to building products. In 1996, of the total $350 million charge, $171 million related to the pulp segment, $134 million related to the building products segment (including litigation costs related to building products) and $45 million was not allocable to either industry segment. In 1995, the substantial majority of the $367 million charge related to class action settlements concerning the Company's siding product and therefore would be primarily allocated to building products. - 45 - REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS AND MANAGEMENT REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - ---------------------------------------- The Board of Directors and Stockholders of Louisiana-Pacific Corporation: We have audited the accompanying consolidated balance sheet of Louisiana-Pacific Corporation and subsidiaries as of December 31, 1997, and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Louisiana-Pacific Corporation and subsidiaries as of December 31, 1997, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP Portland, Oregon February 6, 1998 - 46 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Stockholders and Board of Directors of Louisiana-Pacific Corporation: We have audited the accompanying consolidated balance sheets of Louisiana-Pacific Corporation (a Delaware corporation) and subsidiaries as of December 31, 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the two years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Louisiana-Pacific Corporation and subsidiaries as of December 31, 1996, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Portland, Oregon January 31, 1997 - 47 - Report of Management - -------------------- The management of Louisiana-Pacific Corporation has prepared the consolidated financial statements and related financial data contained in this Annual Financial Report. The financial statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and by necessity include some amounts determined using management's best judgments and estimates with appropriate consideration to materiality. Management is responsible for the integrity and objectivity of the financial statements and other financial data included in the report. To meet this responsibility management maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that accounting records are reliable. Management supports a program of internal audits and internal accounting control reviews to provide assurance that the system is operating effectively. The Board of Directors pursues its responsibility for reported financial information through its Audit Committee, composed of five outside directors. The Audit Committee meets periodically with management, the internal auditors and the independent public accountants to review the activities of each. MARK A. SUWYN CURTIS M. STEVENS Chairman and Chief Executive Officer Vice President, Treasurer and Chief Financial Officer February 6, 1998 - 48 - ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure -------------------- A change in auditors was reported in the registrant's current report on Form 8-K dated October 26, 1997. PART III ITEM 10. Directors and Executive Officers of the Registrant -------------------------------------------------- Information regarding the directors of the registrant is incorporated herein by reference to the material included under the caption "Item 1--Election of Directors" and "General" in the definitive proxy statement filed by the registrant for its 1998 annual meeting of stockholders (the "1998 Proxy Statement"). Information regarding the executive officers of the registrant is located in Part I of this report under the caption "Executive Officers of the Registrant." Information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by reference to the material included under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the 1998 Proxy Statement. ITEM 11. Executive Compensation ---------------------- Information regarding executive compensation is incorporated herein by reference to the material under the captions "Compensation Committee--Interlocks and Insider Participation," "Compensation of Executive Officers," "Retirement Benefits," "Directors' Compensation," and "Agreements with Executive Officers" in the 1998 Proxy Statement. ITEM 12. Security Ownership of Certain Beneficial Owners and Management ------------------------------------------------------------------ Information regarding security ownership of certain beneficial owners and management is incorporated herein by reference to the material under the caption "Holders of Common Stock" in the 1998 Proxy Statement. ITEM 13. Certain Relationships and Related Transactions ---------------------------------------------- Information regarding management transactions is incorporated herein by reference to the material under the captions "Compensation Committee--Interlocks and Insider Participation" and "Management Transactions" in the 1998 Proxy Statement. - 49 - PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ---------------------------------------------------------------- A. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following financial statements are included in this report: Consolidated Balance Sheets--December 31, 1997, and 1996. Consolidated Statements of Income--years ended December 31, 1997, 1996, and 1995. Consolidated Statements of Cash Flows--years ended December 31, 1997, 1996, and 1995. Consolidated Statements of Stockholders' Equity--years ended December 31, 1997, 1996, and 1995. Notes to Financial Statements. Reports of Independent Public Accountants. No financial statement schedules are required to be filed. B. REPORTS ON FORM 8-K The registrant filed a Form 8-K dated October 26, 1997, reporting a change in auditors. C. EXHIBITS The exhibits filed as part of this report or incorporated by reference herein are listed in the accompanying exhibit index. Each management contract or compensatory plan or arrangement is identified in the index. - 50 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Louisiana-Pacific Corporation, a Delaware corporation (the "registrant"), has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 27, 1998 LOUISIANA-PACIFIC CORPORATION (Registrant) By /s/ CURTIS M. STEVENS Curtis M. Stevens Vice President, Treasurer and Chief Financial Officer ---------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date Signature and Title - ---- ------------------- March 27, 1998 /s/ MARK A. SUWYN Mark A. Suwyn Chief Executive Officer, Chairman of the Board (Principal Executive Officer) March 27, 1998 /s/ CURTIS M. STEVENS Curtis M. Stevens Vice President, Treasurer and Chief Financial Officer (Principal Financial & Accounting Officer) - 51 - Date Signature and Title - ---- ------------------- March 27, 1998 /s/ WILLIAM C. BROOKS William C. Brooks Director March 27, 1998 /s/ ARCHIE W. DUNHAM Archie W. Dunham Director March 27, 1998 /s/ PIERRE S. DU PONT Pierre S. du Pont Director March 27, 1998 /s/ WILLIAM E. FLAHERTY William E. Flaherty Director March 27, 1998 /s/ BONNIE G. HILL Bonnie G. Hill Director March 27, 1998 /s/ DONALD R. KAYSER Donald R. Kayser Director March 27, 1998 /s/ LEE C. SIMPSON Lee C. Simpson Director March 27, 1998 /s/ CHARLES E. YEAGER Charles E. Yeager Director - 52 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Louisiana-Pacific Corporation, a Delaware corporation (the "registrant"), has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 1, 1998 LOUISIANA-PACIFIC CORPORATION (Registrant) /s/ Curtis M. Stevens Curtis M. Stevens Vice President, Chief Financial Officer and Treasurer - 52a - EXHIBIT INDEX On written request, the registrant will furnish to any record holder or beneficial holder of the registrant's common stock any exhibit to this report upon the payment of a fee equal to the registrant's costs of copying such exhibit plus postage. Any such request should be sent to: Ward Hubbell, Director of Corporate Affairs, Louisiana-Pacific Corporation, 111 S.W. Fifth Avenue, Portland, Oregon 97204. Items identified with an asterisk (*) are management contracts or compensatory plans or arrangements. Exhibit Description of Exhibit - ------- ---------------------- 3.A Restated Certificate of Incorporation of the registrant as amended to date. Incorporated by reference to Exhibit 3(a) to the registrant's Form 10-Q report for the quarter ended June 30, 1993. 3.B Bylaws of the registrant as amended July 29, 1997. Incorporated by reference to Exhibit 3 to the registrant's Form 10-Q report for the quarter ended June 30, 1997. 4.A.1 Rights Agreement as Restated as of February 3, 1991, between the registrant and First Chicago Trust Company of New York as Rights Agent, as amended by Amendment No. 1 dated as of July 28, 1995, and Amendment No. 2 dated as of October 30, 1995. Incorporated by reference to Exhibit 4.A.1 to the registrant's Form 10-K report for 1996. Pursuant to Item 601 (b)(4)(iii) of Regulation S-K, the registrant is not filing certain instruments with respect to its long-term debt because the amount authorized under any such instrument does not exceed 10 percent of the total consolidated assets of the registrant at December 31, 1997. The registrant agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request. 4.A.2 Credit Agreement dated as of January 31, 1997, among the registrant, Louisiana-Pacific Canada Ltd., Bank of America National Trust and Savings Association and the other financial institutions party thereto. Incorporated by reference to Exhibit 4.A.2 to the registrant's Form 10-K report for 1996. 10.A 1984 Employee Stock Option Plan as amended. Incorporated by reference to Exhibit 10.A to the registrant's Form 10-K report for 1996.* 10.B 1991 Employee Stock Option Plan. Incorporated by reference to Exhibit 10.B to the registrant's Form 10-K report for 1996.* 10.C 1992 Non-Employee Director Stock Option Plan and Related Form of Option Agreement as amended February 1, 1997.* 10.D Non-Employee Directors' Deferred Compensation Plan effective July 1, 1997.* 10.E(1) The registrant's Key Employee Restricted Stock Plan as amended. Incorporated by reference to Exhibit 10.E(1) to the registrant's Form 10-K report for 1996.* - 53 - Exhibit Description of Exhibit - ------- ---------------------- 10.E(2) Form of Restricted Stock Award Agreement under Exhibit 10.E(1). Incorporated by reference to Exhibit 10.H(2) to the registrant's Form 10-K report for 1992.* 10.F(1) 1997 Incentive Stock Award Plan. Incorporated by reference to Exhibit 10 to the registrant's Form 10-Q report for the quarter ended June 30, 1997.* 10.F(2) Form of Award Agreements for Non-Qualified Stock Options and Performance Shares under the Louisiana-Pacific 1997 Incentive Stock Award Plan. Incorporated by reference to Exhibit 10.F(2) to the registrant's Form 10-K report for 1996.* 10.G Annual Cash Incentive Award Plan effective March 1, 1997. Incorporated by reference to Exhibit 10.F(3) to the registrant's Form 10-K report for 1996.* 10.H The registrant's Supplemental Executive Retirement Plan effective July 1, 1997.* 10.I Employment Agreement between the registrant and Mark A. Suwyn dated January 2, 1996. Incorporated by reference to Exhibit 10.L to the registrant's Form 10-K report for 1995.* 10.J Restricted Stock Award Agreement between the registrant and Mark A. Suwyn dated January 31, 1996.* 10.K 1997 Cash Incentive Award for Mark A. Suwyn adopted March 11, 1997. Incorporated by reference to Exhibit 10.K to the registrant's Form 10-K report for 1996.* 10.L Letter agreement dated April 19, 1996, with Michael D. Hanna, with respect to attached employment agreement dated January 15, 1995, between Mr. Hanna and Associated Chemists, Inc. Incorporated by reference to Exhibit 10.L to the registrant's Form 10-K report for 1996.* 10.M Executive Employment Agreement effective as of January 1, 1997, by and between the registrant and Karen D. Lundquist. Incorporated by reference to Exhibit 10.M to the registrant's Form 10-K report for 1996.* 10.N Letter agreement dated August 14, 1997, relating to the employment of Gary C. Wilkerson with the registrant.* 10.0 Letter agreement dated July 16, 1997, relating to the employment of Curtis M. Stevens with the registrant.* 10.P Executive Deferred Compensation Plan effective May 1, 1997.* 21 List of subsidiaries of the registrant. 23.A Consent of Arthur Andersen LLP. 23.B Consent of Deloitte & Touche LLP. 27 Financial data schedule. - 54 -

                          LOUISIANA-PACIFIC CORPORATION
                  1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

                        (Restated as of February 1, 1997)

         1.  PURPOSE.  The  continued  growth and  success of  Louisiana-Pacific
Corporation (the "Corporation") are dependent upon the efforts of members of the
Corporation's  board of directors (the "Board of  Directors").  Those members of
the  Board of  Directors  who are not  employees  of  Corporation  or any of its
subsidiaries ("Non- Employee  Directors") are not eligible to participate in the
stock option and other stock  incentive  plans  maintained  for employees of the
Corporation.  The purpose of this 1992  Non-Employee  Director Stock Option Plan
(the "Plan") is to provide an incentive to Non- Employee  Directors to remain as
members of the Board of  Directors  and also to afford them the  opportunity  to
acquire, or increase,  stock ownership in the Corporation in order that they may
have a direct  proprietary  interest in its success.  Options  granted under the
Plan  shall be  nonqualified  options  which  are not  intended  to  qualify  as
incentive stock options under Section 422 of the Internal Revenue Code.

         2. STOCK.  The stock subject to options granted under the Plan shall be
shares of the Corporation's authorized but unissued, or reacquired, $1 par value
common stock ("Common  Stock").  The total number of shares of Common Stock with
respect  to which  options  may be  granted  shall not  exceed in the  aggregate
600,000,  provided  that such  aggregate  number of shares  shall be  subject to
adjustment in accordance with the provisions of paragraph 6(g).

         In the  event  that any  outstanding  option  under  the Plan  shall be
canceled or  terminate  or expire  prior to the end of the period  during  which
options may be granted under the Plan,  the shares of Common Stock  allocable to
the  unexercised  portion of such option may be made the  subject of  additional
options granted under the Plan.

         3.  ADMINISTRATION.  The Plan  shall be  administered  by the  Board of
Directors  which shall have full power and authority,  subject to the provisions
of the Plan, to adopt, amend, and rescind rules and regulations for carrying out
the Plan. The  interpretation and decision of the Board of Directors with regard
to any question arising under the Plan shall be final and conclusive.  No member
of the Board of Directors shall be liable for any action taken or  determination
made in good faith with

                                       1


respect to the Plan or to any options granted pursuant to the Plan.

         4. ELIGIBILITY.  The persons eligible to receive options under the Plan
are the Non-Employee Directors of the Corporation.

         5. GRANT OF OPTIONS.

         (a) INITIAL GRANT. Each person who is an Non-Employee  Director on June
15, 1992,  automatically  shall be granted,  as of June 15,  1992,  an option to
purchase  22,500  shares of Common  Stock,  subject to the terms and  conditions
described in paragraph 6.

         (b) NEW NON-EMPLOYEE DIRECTORS.  Each person who becomes a Non-Employee
Director  after June 15, 1992,  automatically  shall be granted,  as of the date
such person becomes a Non-Employee Director, an option to purchase 22,500 shares
of Common Stock  (45,000  shares after May 18,  1993),  subject to the terms and
conditions described in paragraph 6.

         (c) SUBSEQUENT GRANTS. Each Non-Employee  Director who has been granted
an option under  paragraphs 5(a) or 5(b) who remains as a Non-Employee  Director
on the fifth anniversary of the date such option was granted (the "Anniversary")
automatically  shall be granted,  as of such Anniversary,  an option to purchase
45,000 shares of Common Stock,  subject to the terms and condition  described in
paragraph 6.

         6. TERMS AND CONDITIONS OF OPTIONS. Each option granted pursuant to the
Plan shall be subject to the following terms and conditions:

         (a)  PAYMENT.  Upon  exercise  of an option,  in whole or in part,  the
option  price for  shares  to which the  exercise  relates  may be made,  at the
election of the optionee,  either in cash or by  delivering  to the  Corporation
shares of Common Stock  having a Fair Market  Value (as defined  below) equal to
the option price,  or any combination of cash and Common Stock having a combined
value  equal to the  option  price.  Shares of  Common  Stock may not be used in
payment  or partial  payment  unless an option is being  exercised  for at least
2,000  shares.  Payment in shares of Common Stock shall be made by delivering to
the Corporation certificates, duly endorsed for transfer, representing shares of
Common Stock having an aggregate Fair Market Value on the date of exercise equal
to that  portion of the option  price which is to be paid in Common  Stock.  The
Fair Market  Value of a share of Common  Stock on the date of exercise  shall be
deemed to be the closing  price per share of Common  Stock on the New York Stock
Exchange on

                                       2


the date of exercise or, if no sale of Common Stock shall have been made on that
Exchange on that date, on the next  preceding  business day on which there was a
sale of such stock on that Exchange.  Whenever payment of the option price would
require  delivery of a fractional  share,  the optionee  shall  deliver the next
lower whole number of shares of Common Stock and a cash payment shall be made by
the optionee for the balance of the option price.

         (b) OPTION PRICE. The option price for each option shall be the greater
of (i) 85 percent of the Fair Market Value on the date the option is granted, or
(ii) the book  value per share as of the last day of the last  calendar  quarter
ending on or before the date the option is granted (the "Book Value"); provided,
however, that if the Fair Market Value per share is less than the Book Value per
share, the option price shall be the Fair Market Value per share.

         (c) TERM OF OPTION.  Each option  shall  expire ten years from the date
the option is granted,  unless the option is  terminated  earlier in  accordance
with the Plan.

         (d) DATE OF EXERCISE. Unless an option is terminated or the time of its
exercisability  is accelerated in accordance  with the Plan,  each option may be
exercised in whole or in part from time to time to purchase shares as follows:

         Each option shall not be exercisable  until the first  anniversary
    of the date the option was  granted.  On such  first  anniversary,  the
    option shall become  exercisable as to 20 percent of the shares covered
    by the  option,  and on each  of the  second  through  the  fifth  such
    anniversaries,  the option shall become exercisable as to an additional
    20 percent of the shares  covered  by the  option.  However,  no option
    shall be  exercisable  in part with respect to a number of shares fewer
    than 100.

         (e) ACCELERATION OF EXERCISABILITY.  Notwithstanding the limitations on
exercisability  pursuant to paragraph  6(d), an option shall become  immediately
and fully exercisable:

         (i) In  the  event  of the  death  of  the  optionee  Non-Employee
    Director; or

         (ii) Upon the later of (A) the occurrence of a "Change in Control"
    (as defined below) of the  Corporation or (B) six months after the date
    of grant; or

         (iii)  On the  date  an  optionee  Non-Employee  Director  retires
    pursuant to Section 15 of the bylaws of

                                       3


    the Corporation; provided, however, that this paragraph 6(e)(iii) shall only
    apply to an additional 20 percent of the shares covered by such Non-Employee
    Director's option.

For  purposes of the Plan,  a change of control  shall be deemed to occur if (x)
any person or group, together with its affiliates and associates (other than the
Corporation or any of its  subsidiaries  or employee  benefit  plans),  acquires
direct  or  indirect  beneficial  ownership  of 20  percent  or more of the then
outstanding  shares of Common Stock or commences a tender or exchange  offer for
30 percent or more of the then  outstanding  shares of Common Stock,  or (y) the
Corporation is to be liquidated or dissolved.  The terms "group,"  "affiliates,"
"associates" and "beneficial ownership" shall have the meanings ascribed to them
in the rules and regulations promulgated under the Exchange Act.

         (f)  CONTINUATION  AS  A  DIRECTOR.  Notwithstanding  the  option  term
provided in paragraph 6(c), in the event that an optionee  Non-Employee Director
ceases to be a member of the Board of Directors:

         (i) By reason of death, the estate,  personal  representative,  or
    beneficiary  of the  Non-Employee  Director  shall  have  the  right to
    exercise the option at any time within 12 months from the date of death
    and the  option  shall  terminate  as of the last day of such  12-month
    period; or

         (ii) By  reason  of the  retirement  of an  optionee  Non-Employee
    Director  pursuant to Section 15 of the bylaws of the Corporation,  the
    Non-Employee Director's option shall remain exercisable,  to the extent
    it had become exercisable on the date of said retirement,  for a period
    of 24 months following the date of said retirement and the option shall
    terminate as of the last day of such 24-month period; or

         (iii) For any other reason,  the  Non-Employee  Director's  option
    shall remain  exercisable,  to the extent it had become  exercisable on
    the date the  optionee  ceased to be a member of the Board of Directors
    (the  "Termination  Date"),  for a period of three months following the
    Termination  Date and the option shall  terminate as of the last day of
    such three-month period.

         (g)  RECAPITALIZATION.  In the event of any  change  in  capitalization
which affects the Common Stock,  whether by stock dividend,  stock distribution,
stock split, subdivision or

                                       4


combination of shares, merger or consolidation or otherwise,  such proportionate
adjustments,  if any,  as the Board of  Directors  in its good faith  discretion
deems appropriate to reflect such change shall be made with respect to the total
number of shares of Common  Stock in  respect  of which  options  may be granted
under the Plan, the number of shares covered by each outstanding option, and the
exercise price per share under each such option;  however, any fractional shares
resulting from any such adjustment shall be eliminated.

         A dissolution of the Corporation, or a merger or consolidation in which
the  Corporation is not the resulting or surviving  corporation (or in which the
Corporation is the resulting or surviving  corporation  but becomes a subsidiary
of another  corporation),  shall cause every  option  outstanding  hereunder  to
terminate  concurrently  with  consummation of any such  dissolution,  merger or
consolidation,  except that the resulting or surviving  corporation  (or, in the
event the Corporation is the resulting or surviving corporation but has become a
subsidiary of another corporation,  such other corporation) may, in its absolute
and uncontrolled discretion,  tender an option or options to purchase its shares
on terms and conditions,  both as to number of shares and otherwise,  which will
substantially  preserve the rights and  benefits of any option then  outstanding
hereunder.

         In the  event of a change  in the  Corporation's  presently  authorized
Common Stock which is limited to a change of all its presently authorized shares
with par value into the same number of shares with a different par value or into
the same number of shares without par value,  the shares resulting from any such
change shall be deemed to be Common Stock within the meaning of this Plan.

         (h)  TRANSFERABILITY.  No option shall be  assignable  or  transferable
other than by will or the laws of descent and distribution. During an optionee's
lifetime,  only he or his guardian or legal representative may exercise any such
option or right.

         (i) RIGHTS AS A STOCKHOLDER.  An optionee  Non-Employee  Director shall
have no rights as a  stockholder  with  respect to shares  covered by the option
until the date of the  issuance  or transfer of the shares to him and only after
such shares are fully paid.  Except as provided in paragraph 6(g), no adjustment
shall be made for  dividends  or other rights for which the record date is prior
to the date of such issuance or transfer.

         (j) PROVISION FOR TAXES.  It shall be a condition to the  Corporation's
obligation  to issue or  reissue  shares of Common  Stock upon  exercise  of any
option that the optionee pay, or make provision  satisfactory to the Corporation
for payment of, any

                                       5


federal and state income and other taxes which the  Corporation  is obligated to
withhold or collect with respect to the issue or reissue of such shares.

         (k) OPTION  AGREEMENT.  Each  option  shall be  evidenced  by an option
agreement substantially in the form attached to the Plan as Appendix A.

         7. EFFECTIVE DATE AND TERM OF PLAN.  Options shall be granted  pursuant
to the Plan from time to time  beginning  June 15, 1992, the date of adoption of
the Plan by the Board of  Directors.  The Plan shall  continue  in effect  until
options  have been  granted  covering  all  available  shares of Common Stock as
specified  in  paragraph  2 or until  the  Plan is  terminated  by the  Board of
Directors, whichever is earlier, except as provided below.

         The Plan shall be subject to  approval by the  affirmative  vote of the
holders of at least a majority of the securities of the Corporation  present, or
represented  by proxy,  and  entitled  to vote at a meeting  (to be duly held in
accordance  with the applicable laws of the state of Delaware) for which proxies
are solicited substantially in accordance with rules and regulations, if any, as
are then in effect under Section 14(a) of the Exchange Act,  which approval must
occur within  twelve months after said date of adoption of the Plan by the Board
of Directors.  Options granted pursuant to the Plan prior to such approval shall
be subject to such approval.

         8. AMENDMENT OR TERMINATION.  The Board of Directors may alter,  amend,
suspend  or  terminate  the Plan at any  time.  However,  the Plan  shall not be
amended more often than once every six months other than  amendments  to comport
with  changes in income  tax laws or the  requirements  of Rule 16b-3  under the
Exchange Act. Amendments to the Plan shall be subject to stockholder approval to
the extent  required to comply  with any  exemption  to the short  swing  profit
provisions  of  Section  16(b)  of  the  Exchange  Act  pursuant  to  rules  and
regulations  promulgated  thereunder  or with the rules and  regulations  of any
securities  exchange  on  which  the  Common  Stock  is  listed.  Expiration  or
termination of the Plan shall not affect outstanding  options except as provided
in paragraph 7. The Board of Directors may also modify the terms and  conditions
of any outstanding option, subject to the consent of the optionee and consistent
with the provisions of the Plan.

         9.  APPLICATION OF PROCEEDS.  The proceeds  received by the Corporation
from the sale of Common Stock pursuant to options shall be available for general
corporate purposes.

                                       6


         10. NO OBLIGATION TO EXERCISE  OPTION.  The granting of an option shall
impose no  obligation  upon the  optionee to exercise  the same,  in whole or in
part.

         11. RESTRICTIONS ON EXERCISE. Any provision of the Plan to the contrary
notwithstanding,  no option granted pursuant to the Plan shall be exercisable at
any time, in whole or in part, (i)prior to the shares of Common Stock subject to
the option  being  authorized  for  listing on the New York Stock  Exchange,  or
(ii)if issuance and delivery of the shares of Common Stock subject to the option
would be in violation of any applicable laws or regulations.

                                       7

                          LOUISIANA-PACIFIC CORPORATION

                      DIRECTORS' DEFERRED COMPENSATION PLAN

                             Effective July 1, 1997



                                TABLE OF CONTENTS

                                                                         PAGE
                                                                       --------
ARTICLE I--PURPOSE; EFFECTIVE DATE.........................................1

ARTICLE II--DEFINITIONS....................................................1

     2.1  Account..........................................................1
     2.2  Acquiring Person.................................................1
     2.3  Actuarial Equivalent.............................................2
     2.4  Beneficiary......................................................2
     2.5  Board............................................................2
     2.6  Change in Control................................................2
     2.7  Committee........................................................3
     2.8  Compensation.....................................................3
     2.9  Corporation......................................................3
     2.10 Deferral Commitment..............................................3
     2.11 Deferral Period..................................................4
     2.12 Determination Date...............................................4
     2.13 Elective Deferred Compensation...................................4
     2.14 Financial Hardship...............................................4
     2.15 Interest.........................................................4
     2.16 Participant......................................................4
     2.17 Participation Agreement..........................................5
     2.18 Plan Benefit.....................................................5

ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS........................5

     3.1  Eligibility and Participation....................................5
     3.2  Form of Deferral.................................................5
     3.3  Elections for Part Years.........................................5
     3.4  Limitation on Deferral...........................................5
     3.5  Modification of Deferral Commitment..............................5

ARTICLE IV--DEFERRED COMPENSATION ACCOUNT..................................6

     4.1  Accounts.........................................................6
     4.2  Initial Account Balance..........................................6
     4.3  Elective Deferred Compensation...................................6
     4.4  Interest.........................................................6
     4.5  Determination of Accounts........................................6
     4.6  Vesting of Accounts..............................................6
     4.7  Statement of Accounts............................................7

                                                                             (i)



                                TABLE OF CONTENTS


                                                                         PAGE
                                                                       --------
ARTICLE V--PLAN BENEFITS...................................................7

     5.1  Plan Benefit.....................................................7
     5.2  Death Benefit....................................................7
     5.3  In-Service Withdrawals...........................................7
     5.4  Hardship Distributions...........................................7
     5.5  Form of Benefit Payment..........................................8
     5.6  Small Accounts...................................................8
     5.7  Accelerated Distribution.........................................8
     5.8  Payment to Guardian..............................................8

ARTICLE VI--BENEFICIARY DESIGNATION........................................9

     6.1  Beneficiary Designation..........................................9
     6.2  Changing Beneficiary.............................................9
     6.3  Community Property...............................................9
     6.4  No Beneficiary Designation......................................10
     6.5  Effect of Payment...............................................10

ARTICLE VII--ADMINISTRATION...............................................10

     7.1  Committee; Duties...............................................10
     7.2  Agents..........................................................10
     7.3  Binding Effect of Decisions.....................................10
     7.4  Indemnity of Committee..........................................11

ARTICLE VIII--CLAIMS PROCEDURE............................................11

     8.1  Claim...........................................................11
     8.2  Denial of Claim.................................................11
     8.3  Review of Claim.................................................11
     8.4  Final Decision..................................................11

ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN.............................11

     9.1  Amendment.......................................................11
     9.2  Corporation's Right to Terminate................................12

                                                                            (ii)



                                TABLE OF CONTENTS
                                                                         PAGE
                                                                       --------
ARTICLE X--MISCELLANEOUS..................................................12

     10.1  Unfunded Plan..................................................12
     10.2  Unsecured General Creditor.....................................13
     10.3  Trust Fund.....................................................13
     10.4  Nonassignability...............................................13
     10.5  Not a Contract of Future Service on Board......................13
     10.6  Protective Provisions..........................................13
     10.7  Terms..........................................................13
     10.8  Captions.......................................................14
     10.9  Governing Law; Arbitration.....................................14
     10.10 Validity.......................................................14
     10.11 Notice.........................................................14
     10.12 Successors.....................................................14

                                                                           (iii)


                          LOUISIANA-PACIFIC CORPORATION

                      DIRECTORS' DEFERRED COMPENSATION PLAN


                       ARTICLE I--PURPOSE; EFFECTIVE DATE

         The purpose of this Directors'  Deferred  Compensation Plan (the"Plan")
is to provide current tax planning  opportunities as well as supplemental  funds
for  retirement or death for Directors of Louisiana-  Pacific  Corporation  (the
"Corporation").  It is  intended  that  the  Plan  will  aid in  attracting  and
retaining  Directors  of  exceptional  ability  by  providing  them  with  these
benefits. The Plan shall be effective as of July 1, 1997. The terms of this Plan
supersede and replace the terms of the Louisiana-Pacific  Corporation Director's
Deferred  Compensation Plan dated August 1, 1985 ("Prior Plan"),  and, effective
on and after July 1, 1997, the amount of any Director's  deferred  account under
the Prior Plan,  computed as of June 30, 1997,  shall be subject to and governed
by the terms of this Plan.

                             ARTICLE II--DEFINITIONS

         For the  purposes  of this Plan,  the  following  terms  shall have the
meanings indicated unless the context clearly indicates otherwise:

2.1      Account

         "Account" means an Account  maintained by the Corporation in accordance
with  Article IV with respect to any  deferral of  Compensation  pursuant to the
Plan.  A  Participant's  Account  shall be  utilized  solely as a device for the
determination  and  measurement  of the  amounts  to be paid to the  Participant
pursuant to the Plan. A Participant's Account shall not constitute or be treated
as a trust fund of any kind.

2.2      Acquiring Person

         "Acquiring  Person"  means any  person  or  related  person or  related
persons which  constitute a "group" for purposes of Section 13(d) and Rule 13d-5
under the  Securities  Exchange  Act of 1934 as amended  (the  "Exchange  Act");
provided, however, that the term Acquiring Person shall not include:

              (a) Corporation or any of its Subsidiaries;

              (b) Any employee  benefit plan or related trust of  Corporation or
any of its Subsidiaries;

              (c) Any entity holding voting capital stock of Corporation  for or
         pursuant to the terms of any such employee benefit plan; or

              (d) Any person or group  solely  because  such person or group has
         voting power with respect to capital stock of Corporation  arising from
         a revocable  proxy or consent  given in  response to a public  proxy or
         consent solicitation made pursuant to the Exchange Act.

PAGE 1 - DIRECTORS' DEFERRED COMPENSATION PLAN



2.3      Actuarial Equivalent

         "Actuarial  Equivalent"  means  equivalence in value between two (2) or
more forms and/or times of payment based on a determination by an actuary chosen
by the  Corporation,  using  sound  actuarial  assumptions  at the  time of such
determination.

2.4      Beneficiary

         "Beneficiary"  means  the  person,  persons  or entity  entitled  under
Article VI to receive any Plan benefits payable after a Participant's death.

2.5      Board

         "Board" means the Board of Directors of the Corporation.

2.6      Change in Control

         A "Change in Control" shall occur upon:

              (a)  The  acquisition  by  any  Acquiring   Person  of  beneficial
         ownership  (within the meaning of Rule 13d-3 under the Exchange Act) of
         twenty  percent (20%) or more of the combined  voting power of the then
         outstanding Voting Securities;  provided, however, that for purposes of
         this  paragraph (a), the following  acquisitions  will not constitute a
         Change in Control:

                   (i)   Any acquisition directly from Corporation;

                   (ii)  Any acquisition by Corporation;

                   (iii) Any  acquisition  by any  employee  benefit  plan  (or
         related   trust)   sponsored  or  maintained  by   Corporation  or  any
         corporation controlled by Corporation; or

                   (iv)  Any  acquisition  by  any  corporation  pursuant  to  a
         transaction  that  complies  with  clauses  (i),  (ii),  and  (iii)  of
         paragraph (c) of this definition of Change in Control; or

              (b) During any period of twelve (12) consecutive  calendar months,
         individuals  who at the beginning of such period  constitute  the Board
         (the  "Incumbent  Board") cease for any reason to constitute at least a
         majority  of the Board;  provided,  however,  that any  individual  who
         becomes a director during the period whose election,  or nomination for
         election,  by  Corporation's  shareholders  was  approved by vote of at
         least a majority of the directors then constituting the Incumbent Board
         will be  considered  as  though  such  individual  were a member of the
         Incumbent Board, but excluding,  for this purpose,  any such individual
         whose  initial  assumption of office occurs as a result of an actual or
         threatened  election contest with respect to the election or removal of
         directors  or other  actual or  threatened  solicitation  of proxies or
         consents by or on behalf of a Person other than the Board; or

              (c) Consummation of a reorganization,  merger, or consolidation or
         sale or other  disposition of all or substantially all of the assets of
         Corporation (a "Business Combination") in each case, unless,  following
         such Business Combination:

PAGE 2 - DIRECTORS' DEFERRED COMPENSATION PLAN



                   (i) All or substantially  all of the individuals and entities
         who were the  beneficial  owners of the Voting  Securities  outstanding
         immediately  prior  to  such  Business  Combination  beneficially  own,
         directly or indirectly, more than fifty percent (50%) of, respectively,
         the then  outstanding  shares of common stock and the  combined  voting
         power  of the  then  outstanding  voting  securities  entitled  to vote
         generally  in the  election  of  directors,  as the case may be, of the
         corporation  resulting  from  such  Business  Combination   (including,
         without limitation, a corporation which as a result of such transaction
         owns  Corporation or all or substantially  all of Corporation's  assets
         either   directly  or  through  one  (1)  or  more   subsidiaries)   in
         substantially  the same  proportions  as their  ownership,  immediately
         prior to such Business Combination, of the Voting Securities;

                   (ii) No person  (excluding  any  employee  benefit  plan,  or
         related trust, of Corporation or such  corporation  resulting from such
         Business Combination) beneficially owns, directly or indirectly, twenty
         percent (20%) or more of, respectively,  the then outstanding shares of
         common  stock  of  the   corporation   resulting   from  such  Business
         Combination or the combined voting power of the then outstanding voting
         securities of such corporation except to the extent that such ownership
         existed prior to the Business Combination; and

                   (iii) At least a  majority  of the  members  of the  board of
         directors of the corporation  resulting from such Business  Combination
         were members of the Incumbent Board at the time of the execution of the
         initial  agreement,  or of the action of the Board,  providing for such
         Business Combination;

              (d) Approval by the  shareholders  of  Corporation  of any plan or
         proposal for the liquidation or dissolution of Corporation.

2.7      Committee

         "Committee"  means  the  Committee  appointed  by the  Chief  Executive
Officer to administer the Plan pursuant to Article VII.

2.8      Compensation

         "Compensation"  means Board and meeting fees  payable to a  Participant
during the calendar year.  Compensation does not include expense reimbursements,
or any form of noncash compensation or benefits.

2.9      Corporation

         "Corporation"   means   Louisiana-Pacific   Corporation,   a   Delaware
corporation, or any successor to the business thereof.

2.10     Deferral Commitment

         "Deferral Commitment" means a Deferral Commitment made by a Participant
pursuant  to  Article  III and for  which a  Participation  Agreement  has  been
submitted by the Participant to the Committee.

PAGE 3 - DIRECTORS' DEFERRED COMPENSATION PLAN



2.11     Deferral Period

         "Deferral Period" means the period over which a Participant has elected
to defer a portion of his or her Compensation.  The Deferral Period shall be one
(1)  calendar  year.  The  initial  Deferral  Period  shall be from July 1, 1997
through  December 31,  1997.  The  Deferral  Period may be modified  pursuant to
Section 3.3 or Section 3.5.

2.12     Determination Date

         "Determination Date" means the last day of each calendar month.

2.13     Elective Deferred Compensation

         "Elective Deferred  Compensation" means the amount of Compensation that
a Participant elects to defer pursuant to a Deferral Commitment.

2.14     Financial Hardship

         "Financial Hardship" means severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a dependent  (as defined in Section  152(a) of the Internal  Revenue Code) of
the Participant,  loss of the Participant's  property due to casualty,  or other
similar  extraordinary  and unforeseeable  circumstances  arising as a result of
events  beyond  the  control of the  Participant.  The  circumstances  that will
constitute an  unforeseeable  emergency will depend upon the facts of each case,
but in any case,  payment may not be made to the extent that such hardship is or
may be relieved:

              (a)  Through   reimbursement   or  compensation  by  insurance  or
         otherwise;

              (b)  By liquidation of the Participant's assets, to the extent the
         liquidation  of such assets  would not itself  cause  severe  financial
         hardship;

              (c)  By cessation of deferrals under the Plan;

              (d)  By borrowing from commercial sources on reasonable commercial
         terms.

2.15     Interest

         "Interest"  on a  Determination  Date  shall be  equal  to the  monthly
equivalent  of the annual  yield plus two (2)  percentage  points of the Moody's
Average Corporate Bond Yield Index for the preceding calendar month as published
by Moody's Investor Service,  Inc. (or any successor  thereto) or, if such index
is no longer published, a substantially similar index selected by the Board.

2.16     Participant

         "Participant"   means  any  individual  who  is  participating  or  has
participated in the Plan as provided in Article III.

PAGE 4 - DIRECTORS' DEFERRED COMPENSATION PLAN



2.17     Participation Agreement

         "Participation   Agreement"   means  the   agreement   submitted  by  a
Participant to the Committee prior to the beginning of the Deferral Period, with
respect to one or more Deferral Commitments made for such Deferral Period.

2.18     Plan Benefit

         "Plan Benefit" means the benefit payable to a Participant as calculated
in Article V.

               ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS

3.1      Eligibility and Participation

              (a)  ELIGIBILITY.  Eligibility to participate in the Plan shall be
         limited to the Directors of the Corporation.

              (b)  PARTICIPATION. An eligible Director who elects to participate
         in the  Plan  with  respect  to  any  Deferral  Period  must  submit  a
         Participation Agreement to the Committee prior to the Deferral Period.

              (c)  PART-YEAR  PARTICIPATION. In the event that a Director  first
         becomes   eligible  to  participate   during  a  Deferral   Period,   a
         Participation  Agreement  must be submitted  to the  Committee no later
         than  thirty  (30)  days  following  notification  of the  Director  of
         eligibility  to  participate.  Such  Participation  Agreement  shall be
         effective only with regard to Compensation  earned or payable following
         the submission of the Participation Agreement to the Committee.

3.2      Form of Deferral

         DEFERRAL  COMMITMENT.  A Participant  may elect to defer any portion of
his or her compensation for the Deferral Period. The amount to be deferred shall
be stated as a percentage or dollar amount and may not be less than two thousand
four hundred dollars ($2,400) per year.

3.3      Elections for Part Years

         In the event a Director  becomes eligible to participate in the Plan at
any time other than  January 1 of any  calendar  year,  the amount which must be
completed under the appropriate  minimum Deferral  Commitment  stated in Section
3.2 during the  initial  partial  year of  participation  shall be the  pro-rata
portion based upon complete months left in the initial calendar year.

3.4      Limitation of Deferral

         A  Participant  may  defer  up to one  hundred  percent  (100%)  of the
Participant's  Compensation.  However,  the Committee may impose another maximum
deferral  amount or increase the minimum  deferral amount under Section 3.2 from
time to time by giving written notice to all  Participants,  provided,  however,
that no such  changes  may  affect  a  Deferral  Commitment  made  prior  to the
Committee's action.

3.5      Modification of Deferral Commitment

PAGE 5 - DIRECTORS' DEFERRED COMPENSATION PLAN



         A Deferral  Commitment  shall be irrevocable  except that the Committee
may  permit a  Participant  to reduce the  amount to be  deferred,  or waive the
remainder of the Deferral  Commitment,  upon a finding that the  Participant has
suffered a Financial  Hardship.  If a Participant ceases receiving  Compensation
during a Deferral Period due to Disability,  the Deferral Commitment shall cease
at that time.

                    ARTICLE IV--DEFERRED COMPENSATION ACCOUNT

4.1      Accounts

         For  recordkeeping  purposes  only, an Account shall be maintained  for
each Participant.

4.2      Initial Account Balance

         Each  Participant  shall be deemed to have an  initial  balance  in his
Account equal to the balance (if any) in the Prior Plan as of June 30, 1997.

4.3      Elective Deferred Compensation

         A Participant's Elective Deferred Compensation shall be credited to the
Participant's   Account  as  the  corresponding   nondeferred   portion  of  the
Compensation  becomes or would have become payable.  Any withholding of taxes or
other amounts with respect to deferred  Compensation  that is required by state,
federal,  or local  law shall be  withheld  from the  Participant's  nondeferred
Compensation  to the maximum extent possible with any excess being withheld from
the Participant's Account.

4.4      Interest

         The Accounts shall be credited  monthly with the  appropriate  Interest
earned based on the interest rates  specified in Section 2.15.  Interest  earned
shall be calculated as of each  Determination  Date based upon the average daily
balance  of the  Account  since the  preceding  Determination  Date and shall be
credited to the Participant's Accounts at that time.

4.5      Determination of Accounts

         Each Participant's  Account as of each Determination Date shall consist
of the balance of the  Participant's  Accounts as of the  immediately  preceding
Determination  Date,  plus  the  Participant's  Elective  Deferred  Compensation
credited,  and  the  appropriate  Interest  earned,  minus  the  amount  of  any
withdrawals or distributions made since the immediately preceding  Determination
Date.

4.6      Vesting of Accounts

         Each  Participant  shall be one hundred  percent  (100%)  vested at all
times in the amount of  Compensation  elected to be deferred  under the Plan and
Interest thereon.

PAGE 6 - DIRECTORS' DEFERRED COMPENSATION PLAN



4.7      Statement of Accounts

         The  Committee  shall  submit to each  Participant,  within one hundred
twenty (120) days after the close of each  calendar  year and at such other time
as determined  by the  Committee,  a statement  setting forth the balance to the
credit of each Account maintained for a Participant.

                            ARTICLE V--PLAN BENEFITS

5.1      Plan Benefit

         If a Participant  terminates  service on the Board for any reason other
than death, the Corporation  shall pay a Plan benefit equal to the Participant's
Account as determined in accordance with Article IV.

5.2      Death Benefit

         Upon the  death of a  Participant,  the  Corporation  shall  pay to the
Participant's Beneficiary an amount determined as follows:

              (a) POSTTERMINATION.  If the Participant dies after termination of
         service  on the  Board,  the  amount  payable  shall  be  equal  to the
         remaining unpaid balance of the Participant's Account.

              (b) PRETERMINATION.  If the Participant dies prior to termination
         of  service,  the amount  payable  shall be the  Participant's  Account
         balance.

5.3      In-Service Withdrawals

         Participants shall be permitted to elect to withdraw amounts from their
Account subject to the following restrictions:

              (a) ELECTION  TO  WITHDRAW.  An  election  to make an  in-service
         withdrawal must be made at the same time the Participant  enters into a
         Participation  Agreement  for a  Deferral  Commitment.  The date of the
         in-service  withdrawal  cannot be earlier than five (5) years after the
         date the Deferral  Period  begins under the Deferral  Commitment.  Such
         election may be modified no later than the end of the calendar year two
         (2)  calendar  years prior to the  calendar  year the  Participant  was
         scheduled to receive the benefits.

              (b) AMOUNT OF WITHDRAWAL. The amount which a Participant can elect
         to withdraw with respect to any Deferral Commitment shall be limited to
         one hundred  percent  (100%) of the amount of such Deferral  Commitment
         plus interest.

              (c) FORM OF IN-SERVICE  WITHDRAWAL PAYMENT.  The amount elected to
         be withdrawn shall be paid in a lump sum unless the Committee  approves
         an alternative  form of payment at the time elected by the  Participant
         in the Participation Agreement wherein he or she elected the in-service
         withdrawal.

5.4      Hardship Distributions

         Upon a finding that a Participant has suffered a Financial  Hardship or
a Disability, the Committee may, in its sole discretion, make distributions from
the Participant's Account prior to the time specified for

PAGE 7 - DIRECTORS' DEFERRED COMPENSATION PLAN



payment of benefits  under the Plan.  The amount of such  distribution  shall be
limited  to  the  amount   reasonably   necessary  to  meet  the   Participant's
requirements during the Financial Hardship or Disability.

5.5      Form of Benefit Payment

              (a) All  Plan  Benefits  other  than  In-Service  Withdrawals  or
         Hardship  Distributions  shall  be paid  in the  form  selected  by the
         Participant  at the time of the  Deferral  Commitment  from  among  the
         following alternatives:

                   (i)   Lump sum payment

                   (ii)  Substantially equal annual  installments of the Account
         and Interest amortized over a period of five (5) years

                   (iii) Substantially equal annual installments of the Account
         and Interest amortized over a period of ten (10) years

                   (iv)  Substantially equal annual  installments of the Account
         and Interest amortized over a period of fifteen (15) years

                   (v)   Any other method that is the  Actuarial  Equivalent of
         the Participant's appropriate Account balance

              (b) Payment shall  commence as elected by the  Participant,  which
         shall be  either  within  sixty-five  (65)  days of  termination  or in
         January following the Participant's termination.

              (c) The  Participant  may  modify  the form or timing  of  benefit
         payment  as long as such  modification  is made  before  the end of the
         calendar  year two (2) calendar  years prior to when the  Participant's
         benefits were scheduled to commence had the modification not been made.

5.6      Small Accounts

         Notwithstanding Section 5.5(a), if a Participant's Account is less than
twenty thousand  dollars  ($20,000),  the Committee may, in its sole discretion,
pay the Participant in a lump sum.

5.7      Accelerated Distribution

         Notwithstanding  any  other  provision  of the  Plan,  at any  time,  a
Participant shall be entitled to receive, upon written request to the Committee,
a lump-sum  distribution  equal to ninety  percent  (90%) of the vested  Account
balance as of the Determination Date immediately preceding the date on which the
Committee receives the written request. The remaining balance shall be forfeited
by the Participant and the Participant will not be allowed to participate in the
Plan in the future.  The amount  payable  under this section  shall be paid in a
lump sum within  thirty  (30) days  following  the  receipt of the notice by the
Committee from the Participant.

5.8      Payment to Guardian

         If  a  Plan  benefit  is  payable  to a  minor  or  a  person  declared
incompetent or to a person  incapable of handling the  disposition of his or her
property, the Committee may direct payment of such Plan Benefit to

PAGE 8 - DIRECTORS' DEFERRED COMPENSATION PLAN



the  guardian,  legal  representative,  or person having the care and custody of
such  minor,  incompetent,  or  person.  The  Committee  may  require  proof  of
incompetency,  minority,  incapacity or guardianship as it may deem  appropriate
prior to distribution of the Plan Benefit.  Such  distribution  shall completely
discharge the Committee from all liability with respect to such benefit.

                       ARTICLE VI--BENEFICIARY DESIGNATION

6.1      Beneficiary Designation

         Subject to Section 6.3, each  Participant  shall have the right, at any
time, to designate one or more persons or an entity as Beneficiary (both primary
as well as secondary) to whom benefits under the Plan shall be paid in the event
of  Participant's  death prior to  complete  distribution  of the  Participant's
Account.  Each Beneficiary  designation shall be in a written form prescribed by
the Committee and shall be effective  only when filed with the Committee  during
the Participant's lifetime.

6.2      Changing Beneficiary

         Subject to Section 6.3, any Beneficiary designation may be changed by a
Participant  without  the consent of the  previously  named  Beneficiary  by the
filing of a new designation with the Committee.  The filing of a new designation
shall cancel all designations previously filed. If a Participant's  Compensation
is community property,  any Beneficiary  designation shall be valid or effective
only as permitted by applicable law.

6.3      Community Property

         If the Participant resides in a community property state, the following
rules shall apply:

              (a)  Designation by a married  Participant of a Beneficiary  other
         than the Participant's  spouse shall not be effective unless the spouse
         executes  a  written  consent  that  acknowledges  the  effect  of  the
         designation,  or it is  established  the  consent  cannot  be  obtained
         because the spouse cannot be located.

              (b)  A  married  Participant's   Beneficiary  designation  may  be
         changed by a Participant with the consent of the  Participant's  spouse
         as provided  for in Section  6.3(a) by the filing of a new  designation
         with the Committee.

              (c)  If  the  Participant's   marital  status  changes  after  the
         Participant has designated a Beneficiary, the following shall apply:

                   (i)  If the Participant  is  married at the time of death but
         was unmarried when the designation  was made, the designation  shall be
         void unless the spouse has consented to it in the manner  prescribed in
         Section 6.3(a).

                   (ii) If the Participant is unmarried at the time of death but
         was married when the designation was made:

                        a) The designation shall be void if the spouse was named
              as  Beneficiary  unless  Participant  had  submitted  a change  of
              beneficiary listing the former spouse as the beneficiary.

PAGE 9 - DIRECTORS' DEFERRED COMPENSATION PLAN



                        b) The  designation  shall  remain  valid if a nonspouse
              Beneficiary was named.

                   (iii)If the Participant was married when the designation was
         made and is married to a  different  spouse at death,  the  designation
         shall be void unless the new spouse has  consented  to it in the manner
         prescribed above.

6.4      No Beneficiary Designation

         In the  absence  of an  effective  Beneficiary  Designation,  or if all
designated  Beneficiaries  predecease the  Participant or dies prior to complete
distribution of the Participant's  benefits,  then the Participant's  designated
Beneficiary  shall be  deemed to be the  person  in the  first of the  following
classes in which there is a survivor:

              (a) The surviving spouse;

              (b) The Participant's children, except that if any of the children
         predeceases the Participant but leaves issue surviving, then such issue
         shall take by right of  representation  the share the parent would have
         taken if living;

              (c) The Participant's estate.

6.5      Effect of Payment

         The payment to the deemed  Beneficiary  shall completely  discharge the
Corporation's obligations under the Plan.

                           ARTICLE VII--ADMINISTRATION

7.1      Committee; Duties

         The Plan shall be administered by the Committee, which shall consist of
not less than three (3) persons  appointed  by the Chief  Executive  Officer and
which may include the CEO as a member. The Committee shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations for the
administration  of the  Plan  and  decide  or  resolve  any and  all  questions,
including interpretations of the Plan, as may arise in connection with the Plan.
A majority vote of the Committee members shall control any decision.  Members of
the Committee may be Participants under the Plan.

7.2      Agents

         The Committee may, from time to time,  employ other agents and delegate
to them such  administrative  duties  as it sees fit,  and may from time to time
consult with counsel who may be counsel to the Corporation.

7.3      Binding Effect of Decisions

         The  decision or action of the  Committee  with respect to any question
arising out of or in  connection  with the  administration,  interpretation  and
application  of the Plan and the rules  and  regulations  promulgated  hereunder
shall be final,  conclusive  and binding upon all persons having any interest in
the Plan.

PAGE 10 - DIRECTORS' DEFERRED COMPENSATION PLAN



7.4      Indemnity of Committee

         The  Corporation  shall  indemnify and hold harmless the members of the
Committee against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with  respect to the Plan,  except in the case
of gross negligence or willful misconduct.

                         ARTICLE VIII--CLAIMS PROCEDURE

8.1      Claim

         Any person claiming a benefit,  requesting an  interpretation or ruling
under the Plan,  or  requesting  information  under the Plan shall  present  the
request in writing to the  Committee,  which shall respond in writing as soon as
practicable.

8.2      Denial of Claim

         If the claim or request is denied,  the written  notice of denial shall
state:

              (a) The reasons for denial,  with  specific  reference to the Plan
         provisions on which the denial is based.

              (b) A  description  of  any  additional  material  or  information
         required and an explanation of why it is necessary.

              (c) An explanation of the Plan's claim review procedure.

8.3      Review of Claim

         Any person  whose claim or request is denied or who has not  received a
response  within thirty (30) days may request  review by notice given in writing
to the Committee.  The claim or request shall be reviewed by the Committee which
may, but shall not be required to, grant the claimant a hearing.  On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.

8.4      Final Decision

         The decision on review  shall  normally be made within sixty (60) days.
If  an  extension   of  time  is  required  for  a  hearing  or  other   special
circumstances,  the  claimant  shall be notified and the time limit shall be one
hundred  twenty (120) days. The decision shall be in writing and shall state the
reasons and the relevant Plan provisions. All decisions on review shall be final
and bind all parties concerned.

                  ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN

9.1      Amendment

PAGE 11 - DIRECTORS' DEFERRED COMPENSATION PLAN



         The  Corporation  may at any time  amend  the Plan in whole or in part;
provided,  however,  that any such amendment that would materially  increase the
benefits  provided  under the Plan shall be subject to the prior approval of the
Board.  Provided,  further,  that no amendment shall be effective to decrease or
restrict the amount  accrued to the date of Amendment in any Account  maintained
under the Plan.  Changes in the definition of "Interest" shall be subject to the
following restrictions:

              (a) NOTICE.  A change shall not become  effective before the first
         day of the calendar  year which  follows the adoption of the  amendment
         and at least  thirty (30) days written  notice of the  amendment to the
         Participant.

              (b) CHANGE IN CONTROL.  Any change in the  definition  of Interest
         after a Change in Control shall apply only to those amounts credited to
         the  Participant's  Account as a result of  Deferral  Commitments  made
         after the Change in Control.

9.2      Corporation's Right to Terminate

         The Corporation  may at any time partially or completely  terminate the
Plan  if,  in  its  judgment,  the  tax,  accounting  or  other  effects  of the
continuance of the Plan, or potential  payments  thereunder  would not be in the
best interests of the Corporation.

              (a) PARTIAL  TERMINATION.  The Corporation may partially terminate
         the Plan by  instructing  the  Committee  not to accept any  additional
         Deferral Commitments.  In the event of such a Partial Termination,  the
         Plan shall continue to operate and be effective with regard to Deferral
         Commitments  entered into prior to the  effective  date of such Partial
         Termination.

              (b) COMPLETE TERMINATION. The Corporation may completely terminate
         the Plan by  instructing  the  Committee  not to accept any  additional
         Deferral   Commitments,   and  by  terminating  all  ongoing   Deferral
         Commitments. In the event of Complete Termination, the Plan shall cease
         to operate and the Corporation  shall pay out to each Participant their
         Account  as if  the  Participant  had  terminated  service  as  of  the
         effective date of the Complete  Termination.  Payments shall be made in
         equal annual  installments  over the period listed below,  based on the
         Account balance:

         RETIREMENT ACCOUNT BALANCE                        PAYOUT PERIOD
         -----------------------------------------------------------------------
         Less than $10,000                                     1 Year
         $10,000 but less than $50,000                         3 Years
         More than $50,000                                     5 Years
         =======================================================================

                            ARTICLE X--MISCELLANEOUS

10.1     Unfunded Plan

         The Plan is  intended  to be an  unfunded  plan  maintained  solely for
Directors and is not an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and as such is not
intended to be covered by ERISA. In the event of such  termination,  all ongoing
Deferral Commitments shall terminate, no additional Deferral Commitments will be
accepted by the Committee,  and the amount of each Participant's  vested Account
balance shall be distributed to such Participant at such time and in such manner
as the Committee, in its sole discretion, determines.

PAGE 12 - DIRECTORS' DEFERRED COMPENSATION PLAN



10.2     Unsecured General Creditor

         In the  event  of  Corporation's  insolvency,  Participants  and  their
Beneficiaries,  heirs, successors,  and assigns shall have no legal or equitable
rights,  interest or claims in any  property or assets of the  Corporation,  nor
shall they be Beneficiaries  of, or have any rights,  claims or interests in any
life insurance  policies,  annuity contracts or the proceeds  therefrom owned or
which may be acquired  by the  Corporation.  In that  event,  any and all of the
Corporation's assets and policies shall be, and remain, the general,  unpledged,
unrestricted assets of the Corporation.  The Corporation's  obligation under the
Plan shall be that of an unfunded and unsecured  promise of the  Corporation  to
pay money in the future.

10.3     Trust Fund

         The  Corporation  shall be responsible  for the payment of all benefits
provided under the Plan. At its discretion, the Corporation may establish one or
more trusts,  with such  trustees as the Board may  approve,  for the purpose of
providing  for the  payment  of such  benefits.  Such  trust  or  trusts  may be
irrevocable,  but the  assets  thereof  shall be  subject  to the  claims of the
Corporation's  creditors. To the extent any benefits provided under the Plan are
actually  paid  from any such  trust,  the  Corporation  shall  have no  further
obligation  with respect  thereto,  but to the extent not so paid, such benefits
shall remain the obligation of, and shall be paid by, the Corporation.

10.4     Nonassignability

         Neither a  Participant  nor any other  person  shall  have any right to
commute,  sell,  assign,  transfer,  pledge,  anticipate,  mortgage or otherwise
encumber,  transfer,  hypothecate  or convey in  advance of actual  receipt  the
amounts,  if any,  payable  hereunder,  or any part thereof,  which are, and all
rights to which are, expressly declared to be unassignable and  nontransferable.
No part of the amounts  payable shall,  prior to actual  payment,  be subject to
seizure or  sequestration  for the payment of any debts,  judgments,  alimony or
separate  maintenance  owed  by a  Participant  or  any  other  person,  nor  be
transferable  by operation of law in the event of a  Participant's  or any other
person's bankruptcy or insolvency.

10.5     Not a Contract of Future Service on Board

         The terms and  conditions of the Plan shall not be deemed to constitute
a contract of future service between the Corporation  and the  Participant,  and
the  Participant  (or his or her  Beneficiary)  shall have no rights against the
Corporation except as may otherwise be specifically  provided herein.  Moreover,
nothing  in the Plan  shall be  deemed  to give a  Participant  the  right to be
retained in the service of the Corporation.

10.6     Protective Provisions

         A Participant will cooperate with the Corporation by furnishing any and
all information requested by the Corporation, in order to facilitate the payment
of  benefits  hereunder,  and  by  taking  such  physical  examinations  as  the
Corporation  may deem necessary and taking such other action as may be requested
by the Corporation.

10.7     Terms

         Whenever  any words are used  herein in the  masculine,  they  shall be
construed as though they were

PAGE 13 - DIRECTORS' DEFERRED COMPENSATION PLAN


used in the  feminine in all cases where they would so apply;  and  wherever any
words are used herein in the singular or in the plural,  they shall be construed
as though they were used in the plural or the  singular,  as the case may be, in
all cases where they would so apply.

10.8     Captions

         The captions of the articles,  sections and  paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or construction
of any of its provisions.

10.9     Governing Law; Arbitration

         The provisions of the Plan shall be construed and interpreted according
to the laws of the State of Oregon.  Any  dispute or claim that arises out of or
that relates to the Plan or to the interpretation, breach, or enforcement of the
Plan,  must be resolved by mandatory  arbitration  in  accordance  with the then
effective  arbitration rules of Arbitration  Service of Portland,  Inc., and any
judgment upon the award rendered  pursuant to such arbitration may be entered in
any court having jurisdiction thereof

10.10    Validity

         In case any  provision of the Plan shall be held illegal or invalid for
any reason,  said illegality or invalidity  shall not affect the remaining parts
hereof,  but the Plan shall be  construed  and  enforced as if such  illegal and
invalid provision had never been inserted herein.

10.11    Notice

         Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient if in writing and hand delivered,  or sent by
registered or certified mail, to any member of the Committee or the Secretary of
the  Corporation.  Such notice  shall be deemed given as of the date of delivery
or, if  delivery  is made by mail,  as of the date shown on the  postmark on the
receipt for registration or certification.

10.12    Successors

         The  provisions  of the Plan shall bind and inure to the benefit of the
Corporation  and its successors and assigns.  The term successors as used herein
shall include any  corporate or other  business  entity which shall,  whether by
merger, consolidation, purchase or otherwise acquire all or substantially all of
the  business  and  assets  of the  Corporation,  and  successors  of  any  such
corporation or other business entity.


                                      LOUISIANA-PACIFIC CORPORATION

                                 By:    /s/ Mark A. Suwyn
                                        ----------------------------------------
                                        Chairman and Chief Executive Officer



                                 By:    /s/ Anton C. Kirchhof
                                        ----------------------------------------
                                        Secretary


                              Dated:    March 13, 1998
                                        ----------------------------------------

PAGE 14 - DIRECTORS' DEFERRED COMPENSATION PLAN

                          LOUISIANA-PACIFIC CORPORATION

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

                             Effective July 1, 1997



                                TABLE OF CONTENTS                           PAGE

ARTICLE I--PURPOSE; EFFECTIVE DATE.............................................1

ARTICLE II--DEFINITIONS........................................................1

2.1 Acquiring Person ..........................................................1
2.2 Actuarial Equivalent ......................................................1
2.3 Beneficiary ...............................................................1
2.4 Change in Control..........................................................2
2.5 Committee..................................................................3
2.6 Compensation...............................................................3
2.7 Corporation................................................................3
2.8 Deferred Retirement Date...................................................3
2.9 Disability.................................................................3
2.10 Early Retirement Date.....................................................3
2.11 Employer..................................................................3
2.12 Final Average Compensation................................................4
2.13 Final Compensation........................................................4
2.14 Involuntarily Terminated..................................................4
2.15 Normal Retirement Date....................................................4
2.16 Participant...............................................................4
2.17 Participation Agreement...................................................4
2.18 Qualified Retirement Plan.................................................4
2.19 Retirement................................................................4
2.20 Spouse....................................................................4
2.21 Supplemental Retirement Benefit...........................................5
2.22 Target Retirement Percentage..............................................5
2.23 Years of Credited Service.................................................5
2.24 Years of Participation....................................................5

ARTICLE III--PARTICIPATION AND VESTING.........................................5

3.1 Eligibility and Participation..............................................5
3.2 Vesting....................................................................5
3.3 Cessation of Eligibility...................................................5

ARTICLE IV--PRERETIREMENT SURVIVOR BENEFIT.....................................6

4.1 Pretermination Survivor Benefit............................................6

                                                                             (i)


                                TABLE OF CONTENTS

                                                                            PAGE
ARTICLE V--SUPPLEMENTAL RETIREMENT BENEFITS....................................6

5.1 Normal Retirement Benefit..................................................6
5.2 Deferred Retirement Benefit................................................6
5.3 Early Retirement Benefit...................................................6
5.4 Early Termination Retirement Benefit.......................................7
5.5 Change in Control Benefits.................................................7
5.6 Minimum Benefit............................................................7
5.7 Disability Retirement Benefit..............................................7
5.8 Payment of Benefits........................................................8
5.9 Accelerated Distribution...................................................8
5.10 Excise Tax and Lost Benefit Makeup........................................9
5.11 Withholding; Payroll Taxes................................................9
5.12 Payment to Guardian.......................................................9

ARTICLE VI--BENEFICIARY DESIGNATION............................................9

6.1 Beneficiary Designation....................................................9
6.2 Changing Beneficiary.......................................................9
6.3 Community Property........................................................10
6.4 No Beneficiary Designation................................................10

ARTICLE VII--ADMINISTRATION...................................................11

7.1 Committee; Duties.........................................................11
7.2 Agents....................................................................11
7.3 Binding Effect of Decisions...............................................11
7.4 Indemnity of Committee....................................................11
7.5 Binding Effect of Decisions...............................................12
7.6 Indemnity of Committee....................................................12

ARTICLE VIII--CLAIMS PROCEDURE................................................12

8.1 Claim.....................................................................12
8.2 Denial of Claim...........................................................12
8.3 Review of Claim...........................................................12
8.4 Final Decision............................................................12

ARTICLE IX--TERMINATION, SUSPENSION OR AMENDMENT..............................13

9.1 Termination, Suspension or Amendment of Plan..............................13

                                                                            (ii)


                                TABLE OF CONTENTS

                                                                            PAGE
ARTICLE X--MISCELLANEOUS......................................................13

10.1 Unfunded Plan............................................................13
10.2 Unsecured General Creditor...............................................13
10.3 Trust Fund...............................................................13
10.4 Nonassignability.........................................................13
10.5 Not a Contract of Employment.............................................14
10.6 Protective Provisions....................................................14
10.7 Terms....................................................................14
10.8 Captions.................................................................14
10.9 Governing Law; Arbitration...............................................14
10.10 Validity................................................................14
10.ll Notice..................................................................14
10.12 Successors..............................................................15

                                                                           (iii)


                          LOUISIANA-PACIFIC CORPORATION

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

                       ARTICLE I--PURPOSE; EFFECTIVE DATE

         The purpose of this Supplemental Executive Retirement Plan (the "Plan")
is to  provide  supplemental  retirement  and death  benefits  for  certain  key
employees of Louisiana-Pacific  Corporation (the "Corporation").  It is intended
that the Plan will aid in retaining  and  attracting  employees  of  exceptional
ability by providing them with these  benefits.  This Plan shall be effective as
of July 1, 1997.

                             ARTICLE II--DEFINITIONS

         For the  purposes  of this Plan,  the  following  terms  shall have the
meanings indicated, unless the context clearly indicates otherwise:

2.1      Acquiring Person

         "Acquiring  Person"  means any  person  or  related  person or  related
persons which  constitute a "group" for purposes of Section 13(d) and Rule 13d-5
under the  Securities  Exchange Act of 1934,  as amended (the  "Exchange  Act");
provided, however, that the term Acquiring Person shall not include:

              (a) Corporation or any of its Subsidiaries;

              (b) Any employee  benefit plan or related trust of  Corporation or
         any of its Subsidiaries;

              (c) Any entity holding voting capital stock of Corporation  for or
         pursuant to the terms of any such employee benefit plan; or

              (d) Any person or group  solely  because  such person or group has
         voting power with respect to capital stock of Corporation  arising from
         a revocable  proxy or consent  given in  response to a public  proxy or
         consent solicitation made pursuant to the Exchange Act.

2.2      Actuarial Equivalent

         "Actuarial  Equivalent"  means  equivalence in value between two (2) or
more forms and/or times of payment based on a determination by an actuary chosen
by the  Corporation,  using  sound  actuarial  assumptions  at the  time of such
determination.

2.3      Beneficiary

         "Beneficiary"  means  the  person,  persons  or entity  entitled  under
Article VI to receive any Plan benefits payable after a Participant's death.

PAGE 1-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



2.4      Change in Control

         A "Change in Control" shall occur upon:

              (a)  The  acquisition  by  any  Acquiring   Person  of  beneficial
         ownership  (within the meaning of Rule 13d-3 under the Exchange Act) of
         twenty  percent (20%) or more of the combined  voting power of the then
         outstanding   securities  which  vote  generally  in  the  election  of
         directors ("Voting Securities");  provided,  however, that for purposes
         of this paragraph (a), the following acquisitions will not constitute a
         Change in Control:

                   (i) Any acquisition directly from Corporation;

                   (ii) Any acquisition by Corporation;

                   (iii)  Any  acquisition  by any  employee  benefit  plan  (or
              related  trust)  sponsored or  maintained  by  Corporation  or any
              corporation controlled by Corporation; or

                   (iv)  Any  acquisition  by  any  corporation  pursuant  to  a
              transaction  that  complies with clauses (i),  (ii),  and (iii) of
              paragraph (c) of this definition of Change in Control; or

              (b) During any period of twelve (12) consecutive  calendar months,
         individuals  who at the beginning of such period  constitute  the Board
         (the  "Incumbent  Board") cease for any reason to constitute at least a
         majority  of the Board;  provided,  however,  that any  individual  who
         becomes a director during the period whose election,  or nomination for
         election,  by  Corporation's  shareholders was approved by a vote of at
         least a majority of the  directors  then  constituting  the  Incumbent
         Board will be considered as though such individual were a member of the
         Incumbent Board, but excluding,  for this purpose,  any such individual
         whose  initial  assumption of office occurs as a result of an actual or
         threatened  election contest with respect to the election or removal of
         directors  or other  actual or  threatened  solicitation  of proxies or
         consents  by or on behalf of a Person  (as such term is used in Section
         3(d) and 14(d) of the Exchange Act) other than the Board; or

              (c) Consummation of a reorganization,  merger, or consolidation or
         sale or other  disposition of all or substantially all of the assets of
         Corporation (a "Business Combination") in each case, unless,  following
         such Business Combination:

                   (i) All or substantially  all of the individuals and entities
              who  were  the   beneficial   owners  of  the  Voting   Securities
              outstanding   immediately  prior  to  such  Business   Combination
              beneficially own, directly or indirectly,  more than fifty percent
              (50%)  of,  respectively,  the then  outstanding  shares of common
              stock and the combined voting power of the then outstanding voting
              securities   entitled  to  vote   generally  in  the  election  of
              directors,  as the case may be, of the corporation  resulting from
              such  Business  Combination  (including,   without  limitation,  a
              corporation which as a result of such transaction owns Corporation
              or  all  or  substantially  all  of  Corporation's  assets  either
              directly or through one (1) or more subsidiaries) in substantially
              the same proportions as their ownership, immediately prior to such
              Business Combination, of the Voting Securities;

                   (ii) No Person  (excluding  any  employee  benefit  plan,  or
              related trust, of Corporation or such  corporation  resulting from
              such  Business   Combination)   beneficially  owns,   directly  or
              indirectly,  twenty  percent (20%) or more of,  respectively,  the
              then  outstanding  shares  of  common  stock  of  the  corporation
              resulting from such Business Combination or the combined

PAGE 2-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



              voting power of the then  outstanding  voting  securities  of such
              corporation except to the extent that such ownership existed prior
              to the Business Combination; and

                   (iii) At least a  majority  of the  members  of the  board of
              directors  of  the   corporation   resulting  from  such  Business
              Combination were members of the Incumbent Board at the time of the
              execution of the initial agreement, or of the action of the Board,
              providing for such Business Combination; or

              (d) Approval by the  shareholders  of  Corporation  of any plan or
         proposal for the liquidation or dissolution of Corporation.

2.5      Committee

         "Committee"  means  the  Committee  appointed  by the  Chief  Executive
Officer to administer the Plan pursuant to Article VII.

2.6      Compensation

         "Compensation"   means  base  pay  and  annual  incentives  paid  to  a
Participant  during the calendar  year,  before  reduction for amounts  deferred
under the  Louisiana-Pacific  Executive Deferred  Compensation Plan or any other
salary reduction program.  Compensation does not include expense reimbursements,
any form of noncash Compensation or benefits,  group life insurance premiums, or
any other payments or benefits other than normal Compensation.

2.7      Corporation

         "Corporation"   means   Louisiana-Pacific   Corporation,   a   Delaware
corporation, or any successor to the business thereof.

2.8      Deferred Retirement Date

         "Deferred  Retirement Date" means the first day of the month coincident
with or next  following the  Participant's  severance of employment if it occurs
after the Participant's Normal Retirement Date.

2.9      Disability

         "Disability" means a physical or mental condition which, in the opinion
of the Committee, prevents an employee from satisfactorily performing employee's
usual duties for Employer.  The  Committee's  decision as to Disability  will be
based upon medical reports and/or evidence satisfactory to the Committee.  In no
event shall a Disability be deemed to occur or to continue after a Participant's
Normal Retirement Date.

2.10     Early Retirement Date

         "Early  Retirement  Date"  means  the  date on  which  the  Participant
terminates  employment  if it  occurs  on or after  the  first  day of the month
coincidental  with or next  following a  Participant's  attainment of age fifty-
five (55) and  completion of five (5) Years of  Participation,  but prior to his
Normal Retirement Date.

2.11     Employer

PAGE 3-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



         "Employer"  means the  Corporation  and any  affiliated  or  subsidiary
corporation of the Corporation which is incorporated under the laws of any state
of the United States.

2.12     Final Average Compensation

         "Final  Average  Compensation"  means  the  Participant's  Compensation
during the sixty (60)  consecutive  calendar  months out of the last one hundred
twenty (120) months of employment  with the Employer in which the  Participant's
Compensation is the highest divided by sixty (60).

2.13     Final Compensation

         "Final Compensation" means a Participant's base pay for the twelve (12)
months prior to  termination of employment  with the Employer,  plus the average
annual  incentive paid the last three (3) years,  divided by twelve (12). If the
Participant has not been a Participant in the Employer's  annual  incentive plan
for three (3) full years or been an employee for a full twelve (12) months, then
the preceding determination shall be adjusted pro rata.

2.14     Involuntarily Terminated

         "Involuntarily Terminated" means a Participant is discharged or resigns
in response to a change in day-to-day  duties,  or reduction in  Compensation or
benefits,  to a  downward  change  of title,  or to a  relocation  requested  by
Employer.

2.15     Normal Retirement Date

         "Normal  Retirement  Date" means the first day of the month  coincident
with or next following the Participant's attainment of age sixty-two (62).

2.16     Participant

         "Participant"   means  any  individual  who  is  participating  or  has
participated in this Plan as provided in Article III.

2.17     Participation Agreement

         "Participation  Agreement"  means the agreement  filed by a Participant
which acknowledges assent to the terms of the Plan.

2.18     Qualified Retirement Plan

         "Qualified  Retirement  Plan" means the  Louisiana-Pacific  Corporation
Salaried Employees' Stock Ownership Trust and any successor thereof.

2.19     Retirement

         "Retirement" means a Participant's  separation from employment with the
Employer at the Participant's  Early Retirement Date, Normal Retirement Date, or
Deferred Retirement Date.

2.20     Spouse

PAGE 4-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



         "Spouse" means a Participant's  wife or husband who is lawfully married
to the Participant at the time of the Participant's death.

2.21     Supplemental Retirement Benefit

         "Supplemental  Retirement  Benefit" means the benefit  determined under
Article V of this Plan.

2.22     Target Retirement Percentage

         "Target  Retirement  Percentage"  means the percentage of Final Average
Compensation which will be used as a target from which other forms of retirement
benefits  are  subtracted,  as provided in Article V, to arrive at the amount of
the Supplemental  Retirement  Benefit  actually  payable to a Participant.  This
percentage  shall equal  fifty  percent  (50%)  multiplied  by a  fraction,  the
numerator of which is the Participant's Years of Credited Service, not to exceed
fifteen (15), and the  denominator of which is fifteen (15). The adjusted Target
Retirement Percentage shall be rounded to four (4) decimal places.

2.23     Years of Credited Service

         "Years  of  Credited  Service"  means the  number of years of  credited
vesting  service  determined  under the provisions of the  Employer's  Qualified
Retirement Plan.

2.24     Years of Participation

         "Years of Participation"  means the number of twelve (12) month periods
the  Participant has been a Participant in the Plan as set out in Section 3.1(b)
of this Plan. For the initial  Participants,  as set out in Appendix A, Years of
Participation shall be measured from January 1, 1997.

                     ARTICLE III--PARTICIPATION AND VESTING

3.1      Eligibility and Participation

              (a)  ELIGIBILITY.  Eligibility to participate in the Plan shall be
         limited to those employees who are designated by the Committee.

              (b)  PARTICIPATION. An employee's  participation in the Plan shall
         be  effective  upon  notification  of the  employee  of his status as a
         Participant by the Committee.  Participation in the Plan shall continue
         until  such  time as the  Participant  terminates  employment  with the
         Employer,  and as long  thereafter  as the  Participant  is eligible to
         receive benefits under this Plan.

3.2      Vesting

         Each Participant shall be one hundred percent (100%) vested in benefits
under this Plan after  completing five (5) Years of  Participation  in the Plan.
The preceding  notwithstanding,  each  Participant  shall be one hundred percent
(100%) vested in benefits under this Plan upon death,  Disability or a Change in
Control.

3.3      Cessation of Eligibility

PAGE 5-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



         Notwithstanding Section 3.1(b) of this Plan, if a Participant ceases to
be designated by the Committee as eligible to participate in the Plan, by reason
of a  change  in  employment  status  or  otherwise,  participation  herein  and
eligibility to receive benefits  hereunder shall be limited to the Participant's
interest in such benefits as of the date designated by the Committee.

                   ARTICLE IV--PRERETIREMENT SURVIVOR BENEFIT

4.1      Pretermination Survivor Benefit

         If a  Participant  dies while  employed by the  Employer,  the Employer
shall pay a  supplemental  survivor  benefit to the  Participant's  Spouse.  The
amount of this benefit shall be equal to one-half  (1/2) of the monthly  accrued
Supplemental Retirement Benefit payable monthly for the life of the Spouse.


                   ARTICLE V--SUPPLEMENTAL RETIREMENT BENEFITS

5.1      Normal Retirement Benefit

         If a Participant  retires on their Normal Retirement Date, the Employer
shall pay to the Participant a monthly Supplemental  Retirement Benefit equal to
the Target Retirement  Percentage  multiplied by the Participant's Final Average
Compensation, less

              (a) Fifty  percent  (50%)  of the  Participant's  primary  Social
         Security benefit determined at age sixty-two (62), and

              (b) An amount equal to the Participant's Qualified Retirement Plan
         balance  converted to a monthly life annuity.  Such conversion shall be
         at the PBGC immediate annuity rate;

         times the vesting percentage determined under Section 3.2 of this Plan.

5.2      Deferred Retirement Benefit

         If a Participant  retires at a Deferred  Retirement  Date, the Employer
shall  pay to the  Participant  a  Supplemental  Retirement  Benefit  calculated
pursuant to Section 5.1,  except that 5.1(a) and 5.1(b) shall be measured at the
Participant's date of termination.

5.3      Early Retirement Benefit

         If a  Participant  retires at an Early  Retirement  Date,  the Employer
shall pay to the Participant a monthly Supplemental  Retirement Benefit equal to
the Target Retirement  Percentage  multiplied by the Participant's Final Average
Compensation, less

              (a) Fifty  percent  (50%)  of the  Participant's  primary  Social
         Security  benefit  projected to be paid at age sixty-two  (62) based on
         the then current law and assuming no future  increases in Compensation,
         and

              (b) An amount equal to the Participant's Qualified Retirement Plan
         balance  at  termination  converted  to a life  annuity  using the PBGC
         immediate annuity rate;

PAGE 6-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



         times the vesting percentage determined under Section 3.2 of this Plan.

         If a Participant retires with the approval of the Committee,  the above
Early Retirement Benefit shall be reduced by three percent (3%) for each year by
which the benefit  commencement  date  precedes the  Participant's  sixty-second
(62nd)  birthday  (prorated  for  partial  years  on  a  monthly  basis).  If  a
Participant  retires  without  the  approval of the  Committee,  the above Early
Retirement  Benefit shall be reduced by five percent (5%) for each year by which
the benefit  commencement  date precedes the Participant's  sixty-second  (62nd)
birthday  (prorated for partial years on a monthly basis).  For Participants who
retire without approval of the Committee,  this benefit shall be further reduced
by a fraction equal to the Participant's  Actual Years of Service at termination
over Years of Service the Participant  would have had at age sixty-two (62). The
Participant may elect to delay the receipt of Early  Retirement  benefits if the
election  is filed  ninety  (90) days before  termination.  Benefits  may not be
delayed beyond age sixty-five (65).

5.4      Early Termination Retirement Benefit

         If a Participant  terminates employment prior to Early Retirement,  the
Employer shall pay to the Participant a monthly Supplemental  Retirement Benefit
equal to the product of (a) times (b) times (c) where:

              (a) is an  amount  equal  to  the  Target  Retirement  Percentage
         multiplied by the Participant's Final Average Compensation, less

                   (i) Fifty percent (50%) of the  Participant's  primary Social
              Security benefit determined at age sixty-two (62), and

                   (ii) An amount equal to the Qualified Retirement Plan balance
              at age  sixty-two  (62)  converted to life annuity  using the PBGC
              immediate annuity rate;

              (b) is the vesting percentage determined under Section 3.2 of this
         Plan; and

              (c) is a fraction equal to the  Participant's  Years of Service at
         termination over Years of Service the Participant would have had at age
         sixty-two (62).

5.5      Change in Control Benefits

         If a Participant is  Involuntarily  Terminated  within  thirty-six (36)
months of a Change in Control,  such Participant  shall be granted two (2) extra
Years of Service under the Plan, and the greater of Final  Compensation or Final
Average Compensation shall be used in determining the Participant's benefit. For
such  Involuntarily  Terminated  Participants,  benefits shall be payable at the
later of age fifty-five (55) or their date of termination. Such benefit shall be
calculated  pursuant to Section 5.3 and as if the  Participant  Retired with the
approval  of the  Committee.  In Section  5.3(b),  the  measurement  date of the
Qualified Retirement Plan balance shall be the date benefits commence.

5.6      Minimum Benefit

         All Participants  shall receive a minimum benefit under this Plan equal
to any benefit  payable from the  Louisiana-Pacific  Supplemental  Benefit Plan,
payable in the form of a life annuity.

5.7      Disability Retirement Benefit

PAGE 7-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



         If a person  terminates  employment  prior to  Normal  Retirement  as a
result of Disability,  the Employer shall pay to the  Participant a Supplemental
Retirement Benefit commencing at the Participant's  Normal Retirement Date equal
to the amount the Participant  would have received at such time under the Normal
Retirement  provisions of this Article. For purposes of this calculation,  Years
of Credited Service and Years of  Participation  shall continue to accrue during
the period of Disability and the Participant's Final Average  Compensation shall
be based  only on the  amounts  earned  during the sixty  (60)  months  prior to
Disability if this provides the Participant with a greater benefit.

5.8      Payment of Benefits

              (a) FORM OF BENEFIT  PAYMENTS.  The normal form of benefit payment
         shall be a life  annuity.  Any other  form of  benefit  elected  by the
         Participant shall be the Actuarial Equivalent to a life annuity. At the
         time of  enrollment  the  Participant  shall  elect the form of benefit
         payment.  The form of benefit  payments  available  to the  Participant
         shall be:

                   (i)   Life Annuity.

                   (ii)  10-Year Certain and Life.

                   (iii) 50% Joint and Survivor.

                   (iv)  100% Joint and Survivor.

              Participants  may amend their form of benefit election by filing a
         change  form  with the  Committee  at least  ninety  (90)  days  before
         termination of employment.

              (b) COMMENCEMENT OF BENEFIT PAYMENTS. The Supplemental  Retirement
         Benefits  payable  to a  Participant  under  the  Normal  and  Deferred
         Retirement provisions of this Article shall commence within thirty (30)
         days  of  the  Participant's  termination  of  employment.   The  Early
         Retirement  Benefit  payable to a  Participant  shall  commence  within
         thirty (30) days of Participant's termination. However, the Participant
         may elect to delay the  commencement of the benefit if such election is
         made at least ninety (90) days prior to termination (may not be delayed
         beyond  sixty-second  (62nd)  birthday).  The  Supplemental  Retirement
         Benefits  payable  to a  Participant  under  the Early  Termination  or
         Disability provisions of this Article shall commence within thirty (30)
         days of the Participant attaining age sixty-two (62).

5.9      Accelerated Distribution

         Notwithstanding  any  other  provision  of  the  Plan,  at  any  time a
Participant shall be entitled to receive, upon written request to the Committee,
a lump-sum  distribution of the Actuarial Equivalent of the Participant's unpaid
vested  accrued  benefits  under  this Plan on the date on which  the  Committee
receives the written request. The vested accrued benefit for active Participants
shall be calculated  assuming the Participant had terminated  without permission
on the date the distribution is requested.  Each accelerated  distribution shall
be  subject to a penalty  equal to ten  percent  (10%) of the amount  that would
otherwise be distributed, and that amount shall be forfeited by the Participant.
The  amount  payable  under  this  section  shall be paid in a lump  sum  within
sixty-five  (65) days  following the receipt of the notice by the Committee from
the Participant.  In the event a Participant requests and obtains an accelerated
distribution   under  this  section  and  remains   employed  by  the  Employer,
participation will cease and there will be no future benefit accruals under this
Plan for a period of one (1) year.

PAGE 8-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



5.10     Excise Tax and Lost Benefit Makeup

         If as a result of participating in the Plan the Participant is required
to pay  additional  excise tax under  Section 4999 of the Internal  Revenue Code
("IRC"),  or receives a smaller benefit from any other Employer plan as a result
of any IRC Section 280G Golden Parachute limitations, then a makeup amount shall
be payable  from the Plan.  This amount  shall be equal to the amount of Section
4999 excise tax payable and any lost  benefit from other  Employer  Plans due to
IRC Section 280G Golden  Parachute  limitation,  as a result of participation in
the Plan, plus any excise tax and income taxes payable due to this payment.  The
Corporation  and  Participant  shall  cooperate  in good  faith in  making  such
determination and in providing the necessary information for this purpose.

5.11     Withholding; Payroll Taxes

         The Employer  shall  withhold from  payments  made  hereunder any taxes
required to be withheld from a Participant's  wages for the federal or any state
or local  government.  However,  a Beneficiary may elect not to have withholding
for federal income tax purposes pursuant to Section 3405 of the Internal Revenue
Code, or any successor provision.

5.12     Payment to Guardian

         If  a  Plan  benefit  is  payable  to a  minor  or  a  person  declared
incompetent  or to a  person  incapable  of  handling  the  disposition  of  his
property, the Committee may direct payment of such Plan benefit to the guardian,
legal  representative  or person  having  the care and  custody  of such  minor,
incompetent  or  person.  The  Committee  may  require  proof  of  incompetency,
minority,  incapacity  or  guardianship  as it may  deem  appropriate  prior  to
distribution of the Plan benefit.  Such distribution shall completely  discharge
the Committee and the Employer from all liability with respect to such benefit.

                       ARTICLE VI--BENEFICIARY DESIGNATION

6.1      Beneficiary Designation

         Each  Participant  shall have the right,  at any time, to designate any
person or persons as his Beneficiary or  Beneficiaries  (both primary as well as
secondary)  to whom  benefits  under this Plan shall be paid in the event of his
death prior to complete  distribution  to  Participant of the benefits due under
the Plan. Each Beneficiary  designation shall be in a written form prescribed by
the Committee,  and will be effective only when filed with the Committee  during
the Participant's lifetime.

6.2      Changing Beneficiary

         Subject to Section 6.3, any Beneficiary designation may be changed by a
Participant  without  the consent of the  previously  named  Beneficiary  by the
filing of a new designation with the Committee.  The filing of a new designation
shall cancel all designations previously filed. If a Participant's  Compensation
is community property,  any Beneficiary  designation shall be valid or effective
only as permitted by applicable law.

PAGE 9-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



6.3      Community Property

         If the Participant resides in a community property state, the following
rules shall apply:

              (a)  Designation by a married  Participant of a Beneficiary  other
         than the Participant's  Spouse shall not be effective unless the Spouse
         executes  a  written  consent  that  acknowledges  the  effect  of  the
         designation,  or it is  established  the  consent  cannot  be  obtained
         because the Spouse cannot be located.

              (b) A married Participant's Beneficiary designation may be changed
         by a  Participant  with the  consent  of the  Participant's  Spouse  as
         provided for in Section 6.3(a) by the filing of a new designation  with
         the Committee.

              (c)  If  the  Participant's   marital  status  changes  after  the
         Participant has designated a Beneficiary, the following shall apply:

                   (i) If the  Participant  is  married at the time of death but
              was unmarried when the designation was made, the designation shall
              be void  unless  the  Spouse  has  consented  to it in the  manner
              prescribed in Section 6.3(a).

                   (ii) If the Participant is unmarried at the time of death but
              was married when the designation was made:

                        a) The designation shall be void if the Spouse was named
                   as Beneficiary  unless  Participant had submitted a change of
                   beneficiary listing the former Spouse as the beneficiary.

                        b) The  designation  shall  remain valid if a non-Spouse
                   Beneficiary was named.

                   (iii)If the Participant was married when the designation was
              made  and  is  married  to  a  different   Spouse  at  death,  the
              designation  shall be void unless the new Spouse has  consented to
              it in the manner prescribed above.

6.4      No Beneficiary Designation

         In the  absence  of an  effective  Beneficiary  Designation,  or if all
designated  Beneficiaries  predecease the  Participant or dies prior to complete
distribution of the Participant's  benefits,  then the Participant's  designated
Beneficiary  shall be  deemed to be the  person  in the  first of the  following
classes in which there is a survivor:

              (a) the surviving Spouse;

              (b) the Participant's children, except that if any of the children
         predeceases the Participant but leaves issue surviving, then such issue
         shall take by right of  representation  the share the parent would have
         taken if living;

              (c) the Participant's estate.

PAGE 10-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



                           ARTICLE VII--ADMINISTRATION

7.1      Committee; Duties

         The Plan shall be administered by the Committee, which shall consist of
not less than three (3) persons  appointed  by the Chief  Executive  Officer and
which may include the CEO as a member. The Committee shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations for the
administration  of the  Plan  and  decide  or  resolve  any and  all  questions,
including interpretations of the Plan, as may arise in connection with the Plan.
A majority vote of the Committee members shall control any decision.  Members of
the Committee may be Participants under the Plan.

7.2      Agents

         The Committee may, from time to time,  employ other agents and delegate
to them such  administrative  duties  as it sees fit,  and may from time to time
consult with counsel who may be counsel to the Employer.

7.3      Binding Effect of Decisions

         The  decision or action of the  Committee  with respect to any question
arising out of or in  connection  with the  administration,  interpretation  and
application  of the Plan and the rules  and  regulations  promulgated  hereunder
shall be final,  conclusive  and binding upon all persons having any interest in
the Plan.

7.4      Indemnity of Committee

         The  Employer  shall  indemnify  and hold  harmless  the members of the
Committee against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with  respect to the Plan,  except in the case
of gross negligence or willful misconduct.

PAGE 11-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



7.5      Binding Effect of Decisions

         The  decision  or action of the  Committee  in respect of any  question
arising out of or in  connection  with the  administration,  interpretation  and
application  of the Plan and the rules  and  regulations  promulgated  hereunder
shall be final and  conclusive  and binding upon all persons having any interest
in the Plan.

7.6      Indemnity of Committee

         The  Employer  shall  indemnify  and hold  harmless  the members of the
Committee and the against any and all claims, loss, damage, expense or liability
arising from any action or failure to act with  respect to this Plan,  except in
the case of gross negligence or willful misconduct.

                          ARTICLE VIII--CLAIMS PROCEDURE

8.1      Claim

         Any person claiming a benefit,  requesting an  interpretation or ruling
under the Plan,  or  requesting  information  under the Plan shall  present  the
request in writing to the Committee which shall respond in writing within thirty
(30) days.

8.2      Denial of Claim

         If the claim or request is denied,  the written  notice of denial shall
state:

              (a) The reason for denial,  with  specific  reference  to the Plan
         provisions on which the denial is based.

              (b) A  description  of  any  additional  material  or  information
         required and an explanation of why it is necessary.

              (c) An explanation of the Plan's claim review procedure.

8.3      Review of Claim

         Any person  whose claim or request is denied or who has not  received a
response  within thirty (30) days may request  review by notice given in writing
to the  Committee.  The claim or request  shall be reviewed by the Committee who
may, but shall not be required to, grant the claimant a hearing.  On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.

8.4      Final Decision

         The decision on review  shall  normally be made within sixty (60) days.
If  an  extension   of  time  is  required  for  a  hearing  or  other   special
circumstances,  the  claimant  shall be notified and the time limit shall be one
hundred  twenty (120) days. The decision shall be in writing and shall state the
reason and the relevant plan provisions.  All decisions on review shall be final
and bind all parties concerned.

PAGE 12-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



                ARTICLE IX--TERMINATION, SUSPENSION OR AMENDMENT

9.1      Termination, Suspension or Amendment of Plan

         The Board may, in its sole  discretion,  terminate or suspend this Plan
at any time or from time to time, in whole or in part. Any amendment may provide
different benefits or amounts of benefits from those herein set forth.  However,
no such termination  suspension or amendment shall adversely affect the benefits
of  Participants  which have accrued prior to such action or the benefits of any
Beneficiary of a Participant who has previously died.

                            ARTICLE X--MISCELLANEOUS

10.1     Unfunded Plan

         The Plan is intended to be an unfunded  plan  maintained  primarily  to
provide  deferred  compensation  benefits for a select group of  "management  or
highly-compensated employees" within the meaning of Sections 201, 301 and 401 of
the Employee  Retirement Income Security Act of 1974, as amended ("ERISA"),  and
therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
Accordingly,  the Plan shall  terminate  and no further  benefits  shall  accrue
hereunder in the event it is determined by a court of competent  jurisdiction or
by an opinion of counsel that the Plan  constitutes an employee  pension benefit
plan within the meaning of Section 3(2) of ERISA which is not so exempt.  In the
event of such termination,  all ongoing Deferral Commitments shall terminate, no
additional  Deferral  Commitments  will be  accepted by the  Committee,  and the
amount of each Participant's vested Account balance shall be distributed to such
Participant  at such  time  and in such  manner  as the  Committee,  in its sole
discretion, determines.

10.2     Unsecured General Creditor

         In  the  event  of  Employer's   insolvency,   Participants  and  their
Beneficiaries,  heirs, successors,  and assigns shall have no legal or equitable
rights,  interest or claims in any property or assets of the Employer, nor shall
they be  Beneficiaries  of, or have any rights,  claims or interests in any life
insurance  policies,  annuity contracts or the proceeds therefrom owned or which
may be acquired by the Employer.  In that event,  any and all of the  Employer's
assets and policies shall be, and remain, the general,  unpledged,  unrestricted
assets of the Employer.  The Employer's  obligation under the Plan shall be that
of an unfunded and unsecured promise of the Employer to pay money in the future.

10.3     Trust Fund

         The  Employer  shall be  responsible  for the  payment of all  benefits
provided  under the Plan. At its  discretion,  the Employer may establish one or
more trusts,  with such  trustees as the Board may  approve,  for the purpose of
providing  for the  payment  of such  benefits.  Such  trust  or  trusts  may be
irrevocable,  but the  assets  thereof  shall be  subject  to the  claims of the
Employer's  creditors.  To the extent any benefits  provided  under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto,  but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Employer.

10.4     Nonassignability

         Neither a  Participant  nor any other  person  shall  have any right to
commute,  sell,  assign,  transfer,  pledge,  anticipate,  mortgage or otherwise
encumber, transfer, hypothecate or convey in advance of actual

PAGE 13-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



receipt the amounts, if any, payable hereunder,  or any part thereof, which are,
and  all  rights  to  which  are,  expressly  declared  to be  unassignable  and
nontransferable.  No part of the amounts payable shall, prior to actual payment,
be subject to seizure or sequestration for the payment of any debts,  judgments,
alimony or separate  maintenance owed by a Participant or any other person,  nor
be transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.

10.5     Not a Contract of Employment

         The terms and  conditions of the Plan shall not be deemed to constitute
a contract of  employment  between the  Employer  and the  Participant,  and the
Participant  (or his or her  Beneficiary)  shall  have  no  rights  against  the
Employer  except as may otherwise be  specifically  provided  herein.  Moreover,
nothing  in the Plan  shall be  deemed  to give a  Participant  the  right to be
retained in the service of the  Employer or to  interfere  with the right of the
Employer to discipline or discharge the Participant at any time.

10.6     Protective Provisions

         A Participant  will  cooperate  with the Employer by furnishing any and
all information requested by the Employer, in order to facilitate the payment of
benefits hereunder, and by taking such physical examinations as the Employer may
deem necessary and taking such other action as may be requested by the Employer.

10.7     Terms

         Whenever  any words are used  herein in the  masculine,  they  shall be
construed as though they were used in the feminine in all cases where they would
so apply;  and  wherever  any words are used  herein in the  singular  or in the
plural,  they shall be  construed  as though they were used in the plural or the
singular, as the case may be, in all cases where they would so apply.

10.8     Captions

         The captions of the articles,  sections and  paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or construction
of any of its provisions.

10.9     Governing Law; Arbitration

         The provisions of the Plan shall be construed and interpreted according
to the laws of the State of Oregon.  Any  dispute or claim that arises out of or
that relates to the Plan or to the interpretation, breach, or enforcement of the
Plan,  must be resolved by mandatory  arbitration  in  accordance  with the then
effective  arbitration rules of Arbitration  Service of Portland,  Inc., and any
judgment upon the award rendered  pursuant to such arbitration may be entered in
any court having jurisdiction thereof.

10.10    Validity

         In case any  provision of the Plan shall be held illegal or invalid for
any reason,  said illegality or invalidity  shall not affect the remaining parts
hereof,  but the Plan shall be  construed  and  enforced as if such  illegal and
invalid provision had never been inserted herein.

10.11    Notice

PAGE 14-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



         Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient if in writing and hand delivered,  or sent by
registered or certified mail, to any member of the Committee or the Secretary of
the  Employer.  Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.

10.12    Successors

         The  provisions  of the Plan shall bind and inure to the benefit of the
Employer and its  successors  and assigns.  The term  successors  as used herein
shall include any  corporate or other  business  entity which shall,  whether by
merger, consolidation, purchase or otherwise acquire all or substantially all of
the business and assets of the Employer,  and successors of any such corporation
or other business entity.


                                            LOUISIANA-PACIFIC CORPORATION


                                       By:  /s/ William L. Hebert
                                            Vice President, Treasurer
                                                and Controller



                                       By:  /s/ Anton C. Kirchhof
                                            Secretary



                                    Dated:  July 15, 1997

PAGE 15-SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

                        RESTRICTED STOCK AWARD AGREEMENT


         This RESTRICTED  STOCK AWARD AGREEMENT  ("Award  Agreement") is entered
into effective as of January 31, 1996, between Louisiana-Pacific  Corporation, a
Delaware  corporation  ("Company"),  and  Mark  A.  Suwyn,  Chairman  and  Chief
Executive Officer of the Company ("Executive").

         WHEREAS,  the Company and the Executive have entered into an Employment
Agreement  dated as of January 2, 1996  ("Employment  Agreement"),  pursuant  to
which the Executive became Chairman and Chief Executive  Officer of the Company;
and

         WHEREAS, the Employment Agreement provides,  among other matters,  that
the Executive  will receive from the Company,  within 30 days of the date of the
Employment  Agreement,  a grant of 150,000  restricted shares of common stock of
the Company; and

         WHEREAS, the parties have entered into this Award Agreement in order to
evidence the grant and award of  restricted  shares  pursuant to the  Employment
Agreement;

         NOW, THEREFORE, the parties agree as follows:

         Section 1. Definitions.

         "Certificate" means a stock certificate representing Restricted Shares.

         "Common  Stock" means shares of common stock,  $1.00 par value,  of the
Company.

         "Restricted  Shares"  means  the  shares  of  Common  Stock  issued  to
Executive  pursuant to this Award  Agreement and,  unless the context  otherwise
requires,  includes any shares of Common  Stock or other equity  security of the
Company (or any successor  issuer) issued in respect of the Restricted Shares as
a stock dividend, stock split, or similar distribution, or issued in exchange or
substitution  therefore  by  reason  of  any  reorganization,  recapitalization,
merger, or other similar transaction.

         "Securities Act" means the Securities Act of 1933, as amended.

         "Vest,"  "Vested,"  or any similar  word,  means,  with  respect to the
Restricted Shares represented by any Certificate,  the expiration or termination
of the period during which the  Restricted  Shares may be forfeited  pursuant to
Section  3(d)  hereof and during  which  transfer  of the  Restricted  Shares is
restricted pursuant to Section 4(b) hereof.

         Other capitalized terms used in this Award Agreement without definition
shall have the meanings ascribed thereto in the Employment Agreement.

                                      - 1 -



         Section 2. Award of Restricted Shares.

         The Company has,  effective the date of this Award  Agreement,  granted
and  awarded to the  Executive,  subject to possible  forfeiture  as provided in
Section 3(d) hereof,  150,000  Restricted  Shares initially  represented by four
Certificates as follows:


    Certificate             Number of Shares         Scheduled Date of Vesting

         1                       30,000              January 1, 1997
         2                       30,000              January 1, 1998
         3                       30,000              January 1, 1999
         4                       60,000              August 12, 2004


The  Certificate  numbers  referred to above are used for  convenient  reference
only, it being understood that each Certificate  shall bear a number assigned by
the Company's transfer agent.

         Section 3. Vesting and Forfeiture.

         (a) Unless sooner Vested or forfeited,  the Restricted Shares evidenced
by each Certificate (including, without limitation, any Restricted Shares issued
in respect of the shares originally  represented thereby) will become Vested and
non-forfeitable  on the respective  dates set forth in Section 2;  provided,  in
each case, that the Executive is employed by the Company on such date.

         (b) Unless sooner Vested or forfeited,  the Restricted Shares evidenced
by  Certificates  1, 2, and 3 (including,  without  limitation,  any  Restricted
Shares  issued in respect of the shares  originally  represented  thereby)  will
become immediately Vested and non-forfeitable  upon the occurrence of any one of
the  following:  a Change in  Control,  a "change of  control" as defined in the
Option Plan, the  termination of the Term of Employment by the Company  pursuant
to Section 2 of the Employment  Agreement,  the Executive's death or Disability,
termination  of employment by the Executive for Good Reason,  or  termination of
employment  by the  Company  without  Cause;  provided,  in each case,  that the
Executive is employed by the Company on the date of such event.

         (c) Unless sooner Vested or forfeited,  the Restricted Shares evidenced
by Certificate 4 (including, without limitation, any Restricted Shares issued in
respect of the shares  originally  represented  thereby)  will become Vested and
non-forfeitable  upon  the  occurrence  of any of the  following:  a  Change  in
Control, a "change of control" as defined in the Option Plan, the termination of
the Term of  Employment by the Company  pursuant to Section 2 of the  Employment
Agreement,  termination  of  employment  by the  Executive  for Good Reason,  or
termination of employment by the Company without Cause;  provided, in each case,
that the Executive is employed by the Company on the date of such event.

         (d) Upon the  termination of Executive's  employment  with the Company,
the rights of the Executive with respect to any Restricted  Shares which are not
Vested pursuant to

                                      - 2 -


paragraph  (a),  (b),  or (c) above on or prior to the date of such  termination
shall be forfeited and shall revert to the ownership of the Company.

         Section 4. Rights as Stockholder; Restrictions on Transfer.

         (a)   Except  as  expressly  provided  in  this  Award  Agreement,  the
Executive  shall be entitled to all rights as a stockholder  with respect to the
Restricted  Shares,  including  the right to vote the  Restricted  Shares and to
receive any dividends  and other  distributions  with respect to the  Restricted
Shares;  provided,  however,  that  certain  dividends  and  distributions,   as
specified in Section 1 hereof,  shall themselves  constitute  Restricted Shares,
subject to possible forfeiture as provided herein.

         (b)  None  of the  Restricted  Shares,  the  Certificates  representing
Restricted  Shares,  or the  Executive's  rights with respect thereto under this
Award  Agreement  may be sold,  assigned,  pledged,  or  otherwise  transferred,
disposed of, or encumbered, voluntarily or involuntarily, until they have become
Vested. Any purported sale, assignment, pledge, or other transfer,  disposition,
or encumbrance of Restricted  Shares in violation of this Award  Agreement shall
be null and void.

         (c)  Each  Certificate  for  Restricted  Shares shall be issued in the
name of the  Executive  and shall be held by the  Company  until the  Restricted
Shares  represented  thereby have become Vested or until such Restricted  Shares
are forfeited, as provided in this Award Agreement.  The Executive shall execute
and deliver to the Company a stock transfer power with respect to the Restricted
Shares. All Certificates for Restricted Shares that have not become Vested shall
bear a legend in substantially the following form:

         "The  shares   evidenced  by  this   Certificate  were  issued  as
    Restricted  Shares pursuant to a Restricted Stock Award Agreement dated
    as of January 31,  1996,  and are subject to  possible  forfeiture  and
    restrictions on transfer,  disposition, or encumbrance until [scheduled
    date of vesting] pursuant to the terms of said agreement."

When any  Restricted  Shares become  Vested,  they shall no longer be subject to
possible  forfeiture  pursuant to Section  3(d),  the transfer  thereof shall no
longer be  restricted by the  provisions of Section 4(b),  and the Company shall
promptly cause a new Certificate or Certificates  representing such shares to be
issued in the name of the  Executive,  without the foregoing  legend,  and shall
deliver such Certificate or Certificates to the Executive.

         Section 5. Income Taxes.

         The Company shall have the right to withhold  from any amounts  payable
to the Executive,  as compensation or otherwise,  or to require the Executive to
make  other  provision  satisfactory  to the  Company  for  payment of an amount
sufficient to satisfy all federal, state, and local withholding tax requirements
with respect to the award or the Vesting of the Restricted  Shares.  The Company
shall not be obligated to deliver any Certificates to the Executive until

                                      - 3 -


any such  withholding  or payment  requirement  shall have been  satisfied.  The
Executive  agrees to  promptly  notify  the  Company if the  Executive  makes an
election under Section 83(b) of the Internal Revenue Code with respect to any of
the Restricted Shares.

         Section 6. Securities Law Restrictions.

         (a) The Executive  acknowledges  that the Restricted  Shares have not
been registered under the Securities Act or any applicable state securities law,
and that the Restricted  Shares may not be sold or otherwise  transferred in the
absence of an effective  registration  statement  under the Securities Act or an
available  exemption  from  such  registration,  and  upon  compliance  with the
requirements  of any  applicable  state  securities  law. The Executive  further
acknowledges  that  transfer  of shares  owned by  affiliates  of the Company is
restricted  under  the  Securities  Act.  The  Executive   represents  that  the
Restricted Shares are being acquired for his own account without any view to the
distribution thereof.

         (b) All Certificates for the Restricted Shares shall bear the following
legend:

         "The securities  represented hereby have not been registered under
    the  Securities  Act of 1933,  and  they  may not be sold or  otherwise
    transferred in the absence of an effective registration statement under
    the  Securities  Act  of  1933  or an  available  exemption  from  such
    registration."

         (c) At any time  after  the  Vesting  of  Restricted  Shares,  upon the
written request of the Executive or, if he is deceased,  his estate, the Company
shall  prepare  and file a  registration  statement  under  the  Securities  Act
covering an  offering  and sale of such  number of Vested  Restricted  Shares as
shall have been  requested  by the  Executive  or his estate,  and shall use its
reasonable  efforts to cause such  registration  statement to become  effective;
provided,  however,  that the Company  shall not be required to prepare and file
more than four registration statements pursuant to this Award Agreement.

         (d) Notwithstanding the provisions of paragraph (c), the Company shall
not be obligated to file a  registration  statement  with respect to the sale of
Restricted  Shares (i) if the Company  shall deliver to the Executive (or to his
estate if he is  deceased) an opinion of counsel to the effect that the proposed
sale of the  Restricted  Shares for which  registration  was requested  does not
require registration under the Securities Act, or that such sale may be effected
immediately pursuant to the exemption from registration  afforded by Rule 144 or
any similar  exemption,  or (ii) if the Company shall  undertake to purchase and
purchases the Restricted Shares for which  registration is requested,  on a date
specified  by the  Company  (not  later  than  30  days  after  the  date of the
Executive's or his estate's request), at a price per share equal to the reported
closing price for a share of Common Stock (or any successor security) on the New
York Stock  Exchange  (or if not traded on the New York Stock  Exchange,  on the
principal  market on which  Common  Stock (or any  successor  security)  is then
traded)  for the last day  immediately  preceding  the date of purchase on which
Common Stock (or any successor security) is traded.

                                      - 4 -


         (e)   Whenever Restricted Shares are to be registered hereunder:

         (i)   The parties  shall  cooperate in supplying  one another with
         all  information  and documents as may be reasonably  necessary in
         connection  with such  registration  and shall execute and deliver
         such   representations,    indemnity   agreements,    underwriting
         agreements, and other undertakings as are reasonable and customary
         in connection with similar transactions.

         (ii)  The Company shall prepare and file a registration  statement
         and such exhibits,  amendments,  and supplements thereto as may be
         necessary to cause such registration statement to become effective
         as promptly as reasonably  practicable and to remain effective for
         a  reasonable  period  of time not  exceeding  30 days;  provided,
         however, that the Company may, in its discretion, delay the filing
         or effectiveness of a registration statement for a reasonable time
         not exceeding 180 days if, in the good faith judgment of its board
         of directors,  the filing or  effectiveness  of such  registration
         statement  would be  unreasonably  detrimental to the interests of
         the Company.

         (iii) The  Company  shall  prepare  such  prospectuses  and  other
         documents as may be reasonably  required in  connection  with such
         registration  and shall register or qualify the Restricted  Shares
         covered by such registration statement under such blue sky laws as
         may be  reasonably  necessary,  and do such  other  acts as may be
         reasonably necessary or advisable in order to enable the Executive
         to consummate the sale of the Restricted Shares.

         (iv) The Company  shall pay all  expenses in  connection  with the
    registration, other than underwriters' discounts, brokers' commissions,
    or similar fees.

         Section 7. Miscellaneous.

         (a)  Subject to the restrictions  on transfer of the Restricted  Shares
set forth  herein,  this Award  Agreement  shall be binding upon and benefit the
parties hereto and their respective successors and assigns.

         (b)  Any  notices under this Award  Agreement  shall be in writing  and
shall be effective if given as provided in the Employment Agreement.

         (c)  This Award Agreement  will be governed by the laws of the state of
Delaware  without regard to its conflict of laws rules. (d) This Award Agreement
(together  with the  Employment  Agreement  to the  extent  referred  to herein)
constitutes the entire  understanding of the parties with respect to the subject
matter hereof,  and supersedes all prior  agreements  between the parties hereto
with

                                      - 5 -


respect to its subject  matter.  This Award  Agreement may be executed in one or
more  counterparts,  each of which will be deemed to be an original,  but all of
which together will constitute one and the same instrument.

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this Award
Agreement as of the date first set forth above.


                                            LOUISIANA-PACIFIC CORPORATION



                                            By       /s/ Lee C. Simpson
                                            Title    President


                                            EXECUTIVE



                                            /s/ Mark A. Suwyn
                                            Mark A. Suwyn



                                                     - 6 -

L-P

Louisiana-Pacific Corporation

111 S.W. Fifth Avenue
Portland, Oregon  97204
503/221-0800
FAX:  503/796-0204

August 14, 1997


Mr. Gary Wilkerson
9021 Forest Meadow
Memphis TN 38125

Dear Gary:

I am pleased to offer you the position of Vice President and General  Counsel at
Louisiana-Pacific.  This offer is  extended  on the  assurance  that you are not
entered  into any  employment  contracts  which may prevent you from  working at
Louisiana-Pacific  and that you are  eligible  to work in the  United  States as
regulated by Federal Immigration Laws.

In this position you will work in the Portland Oregon office and report directly
to me. Your start date will be September  15, 1997.  This  position will include
the following compensation package:

     A.  An annual base salary of $275,000 paid semi-monthly.

     B.  A first year bonus  target equal to 50% of your annual base salary with
         total earnings based on mutually established  performance criteria. The
         1997  bonus  will be  prorated  for  the  balance  of the  time in this
         position.

     C.  A stock option award of 20,000  shares that will vest over three years,
         (6,667 each on 9/1/98, 9/1/99 and 6,666 on 9/1/2000) with a life of ten
         years. These stock options are subject to board approval.

     D.  A signing  bonus of  $75,000  to be paid  within 30 days of your  start
         date.

     E.  A  severance  package  that in the event of a change of control  during
         your  first  year of  employment,  you will be  eligible  to receive 24
         months salary plus bonus.

     F.  Four weeks of vacation annually.



Mr. Gary Wilkerson
August 14, 1997
Page 2

As a salaried employee of Louisiana-Pacific, you will be eligible to participate
in all  salaried  employee  benefit  programs:  Health Care  Coverage,  Life and
Accidental  Death &  Dismemberment  Insurance,  Long Term  Disability  coverage,
Personal Accident Insurance,  Employee Stock Ownership Trust, and Employee Stock
Purchase Plans. A summary providing a brief description of these is enclosed.

To assist your move to the  Portland  area you may  participate  in the Employee
Relocation  Program.  This will include two house hunting trips for you and your
family,  packing and  transportation  of all  household  goods,  and up to three
months temporary living  allowance.  In addition during the three months you are
in  temporary  living  Louisiana-Pacific  will pay your travel  expenses for two
visits each month to visit your home in Memphis.

If you decide to accept this  position and have  questions  regarding any of the
L-P  benefits,  Please call  Dennis  Christen  in the  Portland  office at (503)
221-0800.

I hope you will find this offer acceptable as we look forward to having you as a
key member of the Louisiana-Pacific Senior Management Team.

Sincerely,


/s/ Mark Suwyn                                     Accepted:  /s/ Gary Wilkerson
Chairman and CEO,
Louisiana-Pacific

cc:  Mike Tull
     Bryan Miller
     Dennis Christen
L-P

Louisiana-Pacific Corporation

111 S.W. Fifth Avenue
Portland, Oregon  97204
503/221-0800
503/796-0204 FAX

July 16, 1997

Mr. Curt Stevens
13930 SW Tennessee Lane
Beaverton, Oregon  97008

Dear Curt,

I am very pleased to offer you the  position of Chief  Financial  Officer.  This
offer is extended on the assurance  that you are not entered into any employment
contracts which may prevent you from working at  Louisiana-Pacific  and that you
are eligible to work in the United  States as  regulated by Federal  Immigration
Laws.  You will begin work in the  Portland  office on August 1, 1997 and report
directly to me.

In this position, your responsibilities will include the following.

- -    Directs the  activities  of 16 staff in the Regional  Controller,  Business
     Financial  Analyst,  Corporate  Accounting  and  Finance  staff  functions,
     including six regional Controllers, Director of Taxes, Credit Manager, Risk
     Manager,  four  Financial  Analysts and  Corporate  Accounting  and Finance
     personnel.
- -    Directs  organization-wide formal budget process to include four levels: 1)
     five-year  strategic plan, 2) annual budgeting,  3) quarterly budgeting and
     4) monthly budgeting activities.
- -    Together with other top management,  determines,  mission, direction, goals
     and  objectives of assigned areas and ensures  implementation  of strategic
     and operating plans.  Directs the development of short and long range plans
     and budgets.  Develops  metrics and goal setting  process for the financial
     function.
- -    Establishes capital needs for the corporation and ensures ongoing financial
     support for  Louisiana-Pacific  by determining  appropriate sources such as
     liquidity,  long term  planning  for  capital,  and  banking  relationships
     (commercial and investment banks).
- -    Sets financial policies,  reporting  mechanisms from the field and standard
     controls for internal and external financial activity.  Responsible for all
     disclosures, shareholder disclosures and government filings.
- -    Reviews and analyzes  opportunities  for  acquisitions  and dispositions of
     properties.



Mr. Curt Stevens
July 16, 1997
Page 2
- -------------------------------------------------------


- -    Communicates the company's business objectives to the investment community,
     and works  closely  with the  retail  and  wholesale  investors  and rating
     agencies.
- -    Determines  overall  corporate stance on risk tolerance  policies,  what to
     insure inside or outside.
- -    Works closely with outside insurance brokers.
- -    Also works closely and proactively with board members,  and responsible for
     all financial reporting presentations at board meetings.

This position will include the following compensation package:

     A. An annual base salary of $210,000.
     B. A first year bonus in the 40% to 50% range,  with a guaranteed amount of
        $84,000.
     C. A four-year  relative total shareholder  return plan. The program grants
        annual  contingent awards of stock that have the potential to pay out at
        the end of a four-year performance cycle.
     D. A stock option  award of 36,000  shares that will vest over three years,
        (12,000 each on 8/1/98, 8/1/99 and 8/1/2000 with a life of five years.
     E. A Supplemental Executive Retirement Plan (SERP). The SERP is designed to
        provide a  competitive  level  target  retirement  benefit to the senior
        management group.
     F. A severance package that in the event of a change of control during your
        first two years of employment,  you will have the option of electing two
        years  salary  plus bonus.  If you choose to remain  with the  successor
        company, two months after the change of control,  this severance package
        option is revoked.
     G. A vacation allowance of four weeks per year.


- --------------------------------------------------------------------------------
Mr. Curt Stevens
July 16, 1997
Page 3

As an Officer of  Louisiana-Pacific,  you will be eligible to participate in all
salaried  employee benefit programs:  Health Care Coverage,  Life and Accidental
Death  &  Dismemberment  Insurance,  Long  Term  Disability  coverage,  Personal
Accident Insurance,  Employee Stock Ownership Trust, and Employee Stock Purchase
Plans.   Please  refer  to  the  accompanying  L-P  Benefits  Summary  for  more
information about the company benefit programs.


If you decide to accept this  position and have  questions  regarding any of the
L-P benefits,  please call Dennis  Christen in the Human  Resources  Department,
Portland office at 221-0800.

I hope you will find this offer  acceptable  as we look forward to having you as
the Chief Financial Officer at Louisiana-Pacific.

Sincerely,

/s/ Mark A. Suwyn                                             /s/ Curt Stevens
Mark A. Suwyn                                      Accepted:  ------------------
Chairman and CEO                                                 Curt Stevens

Enclosures

cc:  Mike Tull-Portland
                          LOUISIANA-PACIFIC CORPORATION

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                              Effective May 1, 1997




                                TABLE OF CONTENTS

                                                                            PAGE


ARTICLE I--PURPOSE; EFFECTIVE DATE.............................................1

ARTICLE II--DEFINITIONS........................................................1

2.1 Account....................................................................1
2.2 Acquiring Person...........................................................1
2.3 Actuarial Equivalent.......................................................1
2.4 Beneficiary................................................................2
2.5 Board......................................................................2
2.6 Change in Control..........................................................2
2.7 Committee..................................................................3
2.8 Compensation...............................................................3
2.9 Corporation................................................................3
2.10 Deferral Commitment.......................................................3
2.11 Deferral Period...........................................................4
2.12 Determination Date........................................................4
2.13 Disability................................................................4
2.14 Early Retirement Date.....................................................4
2.15 Elective Deferred Compensation............................................4
2.16 Employee..................................................................4
2.17 Employer..................................................................4
2.18 Employer Plans............................................................4
2.19 Employment................................................................4
2.20 Financial Hardship........................................................5
2.21 Interest..................................................................5
2.22 Normal Retirement Date....................................................5
2.23 Participant...............................................................5
2.24 Participation Agreement...................................................5
2.25 Plan Benefit..............................................................6
2.26 Qualified Plan............................................................6
2.27 Retirement................................................................6
2.28 Years of Service..........................................................6

ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS............................6

3.1 Eligibility and Participation..............................................6
3.2 Form of Deferral; Minimum Deferral.........................................6
3.3 Elections for Part Years...................................................7
3.4 Limitation on Deferral.....................................................7
3.5 Modification of Deferral Commitment........................................7
3.6 Cessation of Eligibility...................................................7

                                                                             (i)



                                TABLE OF CONTENTS

                                                                            PAGE

ARTICLE IV--DEFERRED COMPENSATION ACCOUNT......................................7
4.1 Accounts...................................................................7
4.2 Elective Deferred Compensation.............................................7
4.3 Qualified Plan Makeup Credit...............................................7
4.4 Interest...................................................................8
4.5 Determination of Accounts..................................................8
4.6 Vesting of Accounts........................................................8
4.7 Statement of Accounts......................................................8

ARTICLE V--PLAN BENEFITS.......................................................8

5.1 Retirement Benefit.........................................................8
5.2 Termination Benefit........................................................8
5.3 Death Benefit..............................................................9
5.4 In-Service Withdrawals.....................................................9
5.5 Hardship Distributions.....................................................9
5.6 Form of Benefit Payment....................................................9
5.7 Small Accounts............................................................10
5.8 Accelerated Distribution..................................................10
5.9 Excise Tax and Lost Benefit Makeup........................................10
5.10 Withholding; Payroll Taxes...............................................10
5.11 Payment to Guardian......................................................11

ARTICLE VI--BENEFICIARY DESIGNATION...........................................11

6.1 Beneficiary Designation...................................................11
6.2 Changing Beneficiary......................................................11
6.3 Community Property........................................................11
6.4 No Beneficiary Designation................................................12
6.5 Effect of Payment.........................................................12

ARTICLE VII--ADMINISTRATION...................................................12

7.1 Committee; Duties.........................................................12
7.2 Agents....................................................................13
7.3 Binding Effect of Decisions...............................................13
7.4 Indemnity of Committee....................................................13

ARTICLE VIII--CLAIMS PROCEDURE................................................13

8.1 Claim.....................................................................13

                                                                            (ii)



                                TABLE OF CONTENTS

                                                                            PAGE
8.2 Denial of Claim...........................................................13
8.3 Review of Claim...........................................................13
8.4 Final Decision............................................................13

ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN.................................14

9.1 Amendment.................................................................14
9.2 Employer's Right to Terminate.............................................14

ARTICLE X--MISCELLANEOUS......................................................15

10.1 Unfunded Plan............................................................15
10.2 Unsecured General Creditor...............................................15
10.3 Trust Fund...............................................................15
10.4 Nonassignability.........................................................15
10.5 Not a Contract of Employment.............................................15
10.6 Protective Provisions....................................................16
10.7 Terms....................................................................16
10.8 Captions.................................................................16
10.9 Governing Law; Arbitration...............................................16
10.10 Validity................................................................16
10.11 Notice..................................................................16
10.12 Successors..............................................................16

                                                                           (iii)



                          LOUISIANA-PACIFIC CORPORATION

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                       ARTICLE I--PURPOSE; EFFECTIVE DATE

         The purpose of this Executive  Deferred  Compensation Plan (the "Plan")
is to provide current tax planning  opportunities as well as supplemental  funds
for retirement or death for selected employees of Louisiana-Pacific  Corporation
(the  "Corporation").  It is intended that the Plan will aid in  attracting  and
retaining  employees  of  exceptional  ability  by  providing  them  with  these
benefits. The Plan shall be effective as of May 1, 1997.

                             ARTICLE II--DEFINITIONS

         For the  purposes  of this Plan,  the  following  terms  shall have the
meanings indicated unless the context clearly indicates otherwise:

2.1      ACCOUNT

         "Account" means the Retirement  Account or the Moody's  Account,  where
appropriate,  as maintained  by the Employer in accordance  with Article IV with
respect to any deferral of  Compensation  pursuant to this Plan. A Participant's
Retirement  Account or Moody's  Account shall be utilized solely as a device for
the  determination  and measurement of the amounts to be paid to the Participant
pursuant to the Plan. A Participant's Account shall not constitute or be treated
as a trust fund of any kind.

2.2      ACQUIRING PERSON

         "Acquiring  Person"  means any  person  or  related  person or  related
persons which  constitute a "group" for purposes of Section 13(d) and Rule 13d-5
under the Securities  Exchange Act of 1934 (the "Exchange Act"), as such Section
and Rule are in effect as of the Grant Date;  provided,  however,  that the term
Acquiring Person shall not include:

              (a) Corporation or any of its Subsidiaries;

              (b) Any employee  benefit plan or related trust of  Corporation or
         any of its Subsidiaries;

              (c) Any entity holding voting capital stock of Corporation  for or
         pursuant to the terms of any such employee benefit plan; or

              (d) Any person or group  solely  because  such person or group has
         voting power with respect to capital stock of Corporation  arising from
         a revocable  proxy or consent  given in  response to a public  proxy or
         consent solicitation made pursuant to the Exchange Act.

2.3      ACTUARIAL EQUIVALENT

PAGE 1 - EXECUTIVE DEFERRED COMPENSATION PLAN



         "Actuarial  Equivalent"  means  equivalence in value between two (2) or
more forms and/or times of payment based on a determination by an actuary chosen
by the  Corporation,  using  sound  actuarial  assumptions  at the  time of such
determination.

2.4      BENEFICIARY

         "Beneficiary"  means  the  person,  persons  or entity  entitled  under
Article VI to receive any Plan benefits payable after a Participant's death.

2.5      BOARD

         "Board" means the Board of Directors of the Corporation.

2.6      CHANGE IN CONTROL

         A "Change in Control" shall occur upon:

              (a)  The  acquisition  by  any  Acquiring   Person  of  beneficial
         ownership  (within the meaning of Rule 13d-3 under the Exchange Act) of
         twenty  percent (20%) or more of the combined  voting power of the then
         outstanding Voting Securities;  provided, however, that for purposes of
         this  paragraph (a), the following  acquisitions  will not constitute a
         Change in Control:

                   (i)    Any acquisition directly from Corporation;

                   (ii)   Any acquisition by Corporation;

                   (iii)  Any acquisition  by any  employee  benefit  plan  (or
              related  trust)  sponsored or  maintained  by  Corporation  or any
              corporation controlled by Corporation; or

                   (iv)   Any acquisition  by  any  corporation  pursuant  to  a
              transaction  that  complies with clauses (i),  (ii),  and (iii) of
              paragraph (c) of this definition of Change in Control; or

              (b) During any period of twelve (12) consecutive  calendar months,
         individuals  who at the beginning of such period  constitute  the Board
         (the  "Incumbent  Board") cease for any reason to constitute at least a
         majority  of the Board;  provided,  however,  that any  individual  who
         becomes a director during the period whose election,  or nomination for
         election,  by  Corporation's  shareholders was approved by a vote of at
         least a majority of the directors then constituting the Incumbent Board
         will be  considered  as  though  such  individual  were a member of the
         Incumbent Board, but excluding,  for this purpose,  any such individual
         whose  initial  assumption of office occurs as a result of an actual or
         threatened  election contest with respect to the election or removal of
         directors  or other  actual or  threatened  solicitation  of proxies or
         consents by or on behalf of a Person other than the Board; or

              (c) Consummation of a reorganization,  merger, or consolidation or
         sale or other  disposition of all or substantially all of the assets of
         Corporation (a "Business Combination") in each case, unless,  following
         such Business Combination:

PAGE 2 - EXECUTIVE DEFERRED COMPENSATION PLAN



                   (i)   All  or  substantially   all  of  the  individuals  and
              entities who were the beneficial  owners of the Voting  Securities
              outstanding   immediately  prior  to  such  Business   Combination
              beneficially own, directly or indirectly,  more than fifty percent
              (50%)  of,  respectively,  the then  outstanding  shares of common
              stock and the combined voting power of the then outstanding voting
              securities   entitled  to  vote   generally  in  the  election  of
              directors,  as the case may be, of the corporation  resulting from
              such  Business  Combination  (including,   without  limitation,  a
              corporation which as a result of such transaction owns Corporation
              or  all  or  substantially  all  of  Corporation's  assets  either
              directly or through one (1) or more subsidiaries) in substantially
              the same proportions as their ownership, immediately prior to such
              Business Combination, of the Voting Securities;

                   (ii)  No Person  (excluding any  employee  benefit  plan,  or
              related trust, of Corporation or such  corporation  resulting from
              such  Business   Combination)   beneficially  owns,   directly  or
              indirectly,  twenty  percent (20%) or more of,  respectively,  the
              then  outstanding  shares  of  common  stock  of  the  corporation
              resulting from such Business  Combination  or the combined  voting
              power  of  the  then   outstanding   voting   securities  of  such
              corporation except to the extent that such ownership existed prior
              to the Business Combination; and

                   (iii) At  least a  majority of the  members  of the  board of
              directors  of  the   corporation   resulting  from  such  Business
              Combination were members of the Incumbent Board at the time of the
              execution of the initial agreement, or of the action of the Board,
              providing for such Business Combination; or

              (d) Approval by the  shareholders  of  Corporation  of any plan or
         proposal for the liquidation or dissolution of Corporation.

2.7      COMMITTEE

         "Committee"  means  the  Committee  appointed  by the  Chief  Executive
Officer to administer the Plan pursuant to Article VII.

2.8      COMPENSATION

         "Compensation" means total cash compensation, including bonuses paid by
the Employer,  and before  reduction for amounts  deferred under the Plan or any
tax qualified plan  sponsored by the Employer which permits  deferral of current
compensation.  Compensation does not include expense  reimbursements,  overtime,
any form of noncash compensation or benefits.

2.9      CORPORATION

         "Corporation"   means   Louisiana-Pacific   Corporation,   a   Delaware
corporation, or any successor to the business thereof.

2.10     DEFERRAL COMMITMENT

         "Deferral  Commitment"  means a Salary  Deferral  Commitment or a Bonus
Deferral Commitment made by a Participant  pursuant to Article III and for which
a  Participation  Agreement  has  been  submitted  by  the  Participant  to  the
Committee.

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2.11     DEFERRAL PERIOD

         "Deferral Period" means the period over which a Participant has elected
to defer a portion of his or her Compensation.  The Deferral Period shall be one
(1)  calendar  year  for a  Salary  Deferral  Commitment,  or a  Bonus  Deferral
Commitment.  The  Deferral  Period may be  modified  pursuant  to Section 3.3 or
Section 3.5.

2.12     DETERMINATION DATE

         "Determination Date" means the last day of each calendar month.

2.13     DISABILITY

         "Disability" means a physical or mental condition which, in the opinion
of the Committee, prevents an Employee from satisfactorily performing Employee's
usual duties for Employer.  The  Committee's  decision as to Disability  will be
based upon medical reports and/or other evidence satisfactory to the Committee.

2.14     EARLY RETIREMENT DATE

         "Early Retirement Date" means the date prior to a Participant's  Normal
Retirement  Date  on  which  the  Participant  actually  terminates   Employment
following the attainment of age fifty-five (55) and completion of five (5) Years
of Service.

2.15     ELECTIVE DEFERRED COMPENSATION

         "Elective Deferred  Compensation" means the amount of Compensation that
a Participant elects to defer pursuant to a Deferral Commitment.

2.16     EMPLOYEE

         "Employee" shall mean a person,  other than an independent  contractor,
who is receiving  remuneration for services rendered to, or labor performed for,
the  Employer  (or who  would  be  receiving  such  remuneration  except  for an
authorized  leave of  absence)  with  respect to such  person's  duties as a key
employee of the Employer as determined by the Committee under Article III.

2.17     EMPLOYER

         "Employer"  means the  Corporation  and any  affiliated  or  subsidiary
corporation of the Corporation which is incorporated under the laws of any state
of the United States.

2.18     EMPLOYER PLANS

         "Employer  Plans" shall mean any employee benefit plan or contract from
which benefits may be payable to the Participant.

2.19     EMPLOYMENT

         "Employment" means a Participant's ongoing service with the Employer.

PAGE 4 - EXECUTIVE DEFERRED COMPENSATION PLAN



2.20     FINANCIAL HARDSHIP

         "Financial Hardship" means severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a dependent  (as defined in Section  152(a) of the Internal  Revenue Code) of
the Participant,  loss of the Participant's  property due to casualty,  or other
similar  extraordinary  and unforeseeable  circumstances  arising as a result of
events  beyond  the  control of the  Participant.  The  circumstances  that will
constitute an  unforeseeable  emergency will depend upon the facts of each case,
but in any case,  payment may not be made to the extent that such hardship is or
may be relieved:

              (a) Through   reimbursement   or  compensation  by  insurance  or
         otherwise;

              (b) By liquidation of the Participant's  assets, to the extent the
         liquidation  of such assets  would not itself  cause  severe  financial
         hardship; or

              (c) By cessation of deferrals under the Plan.

              (d) By borrowing from commercial sources on reasonable  commercial
         terms.

2.21     INTEREST

         "Interest" on a Determination  Date means interest computed at the rate
provided below:

              (a) MOODY'S  ACCOUNT  INTEREST.  The interest  yield credited to a
         Moody's Account shall be equal to the monthly  equivalent of the annual
         yield  of the  Moody's  Average  Corporate  Bond  Yield  Index  for the
         preceding calendar month as published by Moody's Investor Service, Inc.
         (or any successor thereto) or, if such index is no longer published,  a
         substantially similar index selected by the Board.

              (b) RETIREMENT ACCOUNT INTEREST.  The interest yield credited to a
         Retirement  Account  shall be equal to the  monthly  equivalent  of the
         effective  annual yield on the Moody's  Account plus two (2) percentage
         points.

2.22     NORMAL RETIREMENT DATE

         "Normal  Retirement  Date" means the first day of the month  coinciding
with or next following the date on which the Participant  attains age sixty-five
(65).

2.23     PARTICIPANT

         "Participant"   means  any  individual  who  is  participating  or  has
participated in the Plan as provided in Article III.

2.24     PARTICIPATION AGREEMENT

         "Participation   Agreement"   means  the   agreement   submitted  by  a
Participant to the Committee prior to the beginning of the Deferral Period, with
respect to one or more Deferral Commitments made for such Deferral Period.

PAGE 5 - EXECUTIVE DEFERRED COMPENSATION PLAN



2.25     PLAN BENEFIT

         "Plan Benefit" means the benefit payable to a Participant as calculated
in Article V.

2.26     QUALIFIED PLAN

         "Qualified  Plan"  means  the  Louisiana-Pacific  Corporation  Salaried
Employees' Stock Ownership Trust and any successor thereof.

2.27     RETIREMENT

         "Retirement" means severance of Employment at the Participant's  Normal
Retirement Date or Early Retirement Date as applicable.

2.28     YEARS OF SERVICE

         "Years of Service"  shall have the meaning  provided  for such term for
vesting  purposes  under the  Qualified  Plan,  whether  or not the  Participant
participates in that Plan.

               ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS

3.1      ELIGIBILITY AND PARTICIPATION

              (a) ELIGIBILITY.  Employees  eligible to  participate in the Plan
         shall  be  those  key  management  employees  of the  Employer  who are
         designated,  from  time  to  time,  by the  Committee  as  eligible  to
         participate in the Plan.

              (b) PARTICIPATION.  An eligible Employee who elects to participate
         in the  Plan  with  respect  to  any  Deferral  Period  must  submit  a
         Participation Agreement to the Committee prior to the Deferral Period.

              (c) PART-YEAR  PARTICIPATION.  In the event that an Employee first
         becomes   eligible  to  participate   during  a  Deferral   Period,   a
         Participation  Agreement  must be submitted  to the  Committee no later
         than  thirty  (30)  days  following  notification  of the  Employee  of
         eligibility  to  participate.  Such  Participation  Agreement  shall be
         effective only with regard to Compensation  earned or payable following
         the submission of the Participation Agreement to the Committee.

3.2      FORM OF DEFERRAL; MINIMUM DEFERRAL

         A  Participant  may  elect in the  Participation  Agreement  any of the
following Deferral Commitments:

              (a) SALARY DEFERRAL  COMMITMENT.  A Participant may elect to defer
         any  portion of his or her base  salary for the  Deferral  Period.  The
         amount to be deferred shall be stated as a percentage of base salary or
         dollar  amount  and may not be less  than  two  thousand  four  hundred
         dollars ($2,400).

              (b) BONUS DEFERRAL  COMMITMENT.  A Participant  may elect to defer
         all or a portion of the bonus amounts to be paid by the Employer in the
         Deferral Period. The amount to be

PAGE 6 - EXECUTIVE DEFERRED COMPENSATION PLAN



         deferred  shall be stated as an even  percentage of such bonus and must
         not be less than two thousand four hundred dollars ($2,400), unless the
         Participant also elects to make a Salary Deferral Commitment,  in which
         case there shall be no minimum Bonus Deferral Commitment.

3.3      ELECTIONS FOR PART YEARS

         In the event an Employee becomes eligible to participate in the Plan at
any time other than  January 1 of any  calendar  year,  the amount which must be
completed under the appropriate  minimum Deferral  Commitment  stated in Section
3.2 during the  initial  partial  year of  participation  shall be the  pro-rata
portion based upon complete months left in the initial calendar year.

3.4      LIMITATION ON DEFERRAL

         A  Participant  may  defer  up to one  hundred  percent  (100%)  of the
Participant's  Compensation.  However,  the Committee may impose another maximum
deferral  amount or increase the minimum  deferral amount under Section 3.2 from
time to time by giving written notice to all  Participants,  provided,  however,
that no such  changes  may  affect  a  Deferral  Commitment  made  prior  to the
Committee's action.

3.5      MODIFICATION OF DEFERRAL COMMITMENT

         A Deferral  Commitment  shall be irrevocable  except that the Committee
may  permit a  Participant  to reduce the  amount to be  deferred,  or waive the
remainder of the Deferral  Commitment,  upon a finding that the  Participant has
suffered a Financial  Hardship.  If a Participant ceases receiving  Compensation
during a Deferral Period due to Disability,  the Deferral Commitment shall cease
at that time.

3.6      CESSATION OF ELIGIBILITY

         In the event a Participant  ceases to be designated by the Committee as
eligible to participate  in the Plan by reason of a change in employment  status
or otherwise,  no further amounts of his or her  Compensation  shall be deferred
under a Deferral Commitment after the date of such cessation of eligibility.

                    ARTICLE IV--DEFERRED COMPENSATION ACCOUNT

4.1      ACCOUNTS

         For  recordkeeping  purposes only, two (2) Accounts shall be maintained
for each Participant,  a Retirement  Account and a Moody's Account,  only one of
which shall be payable to the  Participant  under  Section  5.1,  Section 5.2 or
Section 5.3.

4.2      ELECTIVE DEFERRED COMPENSATION

         A Participant's Elective Deferred Compensation shall be credited to the
Participant's   Account  as  the  corresponding   nondeferred   portion  of  the
Compensation  becomes or would have become payable.  Any withholding of taxes or
other amounts with respect to deferred  Compensation  that is required by state,
federal,  or local  law shall be  withheld  from the  Participant's  nondeferred
Compensation  to the maximum extent possible with any excess being withheld from
the Participant's Account.

4.3      QUALIFIED PLAN MAKEUP CREDIT

PAGE 7 - EXECUTIVE DEFERRED COMPENSATION PLAN



         The Employer shall credit to each Participant's Account on the last day
of each year a  Qualified  Plan  Makeup  Credit  ("Makeup"),  which shall be the
difference between:

              (a) The amount which would have been  contributed to the Qualified
         Plan if no deferrals had been made under this Plan; and

              (b) The amounts  actually  contributed  to the Qualified  Plan for
         such Participant.

4.4      INTEREST

         The Accounts shall be credited  monthly with the  appropriate  Interest
earned based on the interest rates  specified in Section 2.21.  Interest  earned
shall be calculated as of each  Determination  Date based upon the average daily
balance  of the  Account  since the  preceding  Determination  Date and shall be
credited to the Participant's Accounts at that time.

4.5      DETERMINATION OF ACCOUNTS

         Each  Participant's  Retirement  Account and Moody's Account as of each
Determination Date shall consist of the balance of the Participant's Accounts as
of the immediately preceding Determination Date, plus the Participant's Elective
Deferred Compensation credited, any Makeup credited and the appropriate Interest
earned,  minus the amount of any  withdrawals  or  distributions  made since the
immediately preceding Determination Date.

4.6      VESTING OF ACCOUNTS

         Each  Participant  shall be one hundred  percent  (100%)  vested at all
times in the amount of  Compensation  elected to be deferred under this Plan and
Interest thereon. Any Makeup credited to the Participant's Account shall vest at
the same rate as the underlying Qualified Plan, except upon a Change in Control,
Disability, or death, in which case the Participant shall be one hundred percent
(100%)  vested in the  Makeup.  However,  the  Participant  shall be entitled to
receive  either the  Retirement  Account or the Moody's  Account,  as determined
under Article V, but not both.

4.7      STATEMENT OF ACCOUNTS

         The  Committee  shall  submit to each  Participant,  within one hundred
twenty (120) days after the close of each  calendar  year and at such other time
as determined  by the  Committee,  a statement  setting forth the balance to the
credit of each Account maintained for a Participant.

                            ARTICLE V--PLAN BENEFITS

5.1      RETIREMENT BENEFIT

         The  Employer  shall  pay a Plan  Benefit  equal  to the  Participant's
Retirement  Account to a  Participant  who  terminates  Employment  by reason of
Retirement, Disability or within twenty-four (24) months of a Change in Control.

5.2      TERMINATION BENEFIT

PAGE 8 - EXECUTIVE DEFERRED COMPENSATION PLAN



         Except as may otherwise be provided in Section 5.3, the Employer  shall
pay a Plan  Benefit  equal to the  Participant's  vested  Moody's  Account  to a
Participant  who terminates  Employment for any reason other than those provided
for in Section 5.1.

5.3      DEATH BENEFIT

         Upon  the  death  of a  Participant,  the  Employer  shall  pay  to the
Participant's Beneficiary an amount determined as follows:

              (a) POSTTERMINATION.  If the Participant dies after termination of
         Employment,  the amount payable shall be equal to the remaining  unpaid
         balance of the Participant's appropriate Account.

              (b) PRETERMINATION.  If the Participant dies prior to termination
         of Employment, the amount payable shall be the Participant's Retirement
         Account balance.

5.4      IN-SERVICE WITHDRAWALS

         Participants shall be permitted to elect to withdraw amounts from their
Account subject to the following restrictions:

              (a) ELECTION  TO  WITHDRAW.  An  election  to make an  in-service
         withdrawal must be made at the same time the Participant  enters into a
         Participation  Agreement  for a  Deferral  Commitment.  The date of the
         in-service  withdrawal cannot be earlier than five years after the date
         the Deferral Period begins under the Deferral Commitment. Such election
         may be  modified  no later  than the end of the  calendar  year two (2)
         calendar years prior to the calendar year the Participant was scheduled
         to receive the benefits.

              (b) AMOUNT OF WITHDRAWAL. The amount which a Participant can elect
         to withdraw with respect to any Deferral Commitment shall be limited to
         one hundred  percent  (100%) of the amount of such Deferral  Commitment
         plus interest.

              (c) FORM OF IN-SERVICE  WITHDRAWAL PAYMENT.  The amount elected to
         be withdrawn shall be paid in a lump sum unless the Committee  approves
         an alternative  form of payment at the time elected by the  Participant
         in the  Participation  Agreement  wherein  he or she  elected  the  in-
         service withdrawal.

5.5      HARDSHIP DISTRIBUTIONS

         Upon a finding that a Participant has suffered a Financial  Hardship or
a Disability, the Committee may, in its sole discretion, make distributions from
the  Participant's  Account prior to the time  specified for payment of benefits
under the Plan. The amount of such  distribution  shall be limited to the amount
reasonably necessary to meet the Participant's requirements during the Financial
Hardship or Disability.

5.6      FORM OF BENEFIT PAYMENT

              (a) All  Plan  Benefits  other  than  In-Service  Withdrawals  or
         Hardship  Distributions  shall  be paid  in the  form  selected  by the
         Participant  at the time of the  Deferral  Commitment  from  among  the
         following alternatives:

PAGE 9 - EXECUTIVE DEFERRED COMPENSATION PLAN



                   (i)   Lump sum payment

                   (ii)  Substantially  equal annual installments of the Account
              and Interest amortized over a period of five (5) years

                   (iii) Substantially equal annual installments of the Account
              and Interest amortized over a period often (10) years

                   (iv)  Substantially equal annual  installments of the Account
              and Interest amortized over a period of fifteen (15) years

                   (v)   Any other method that is the  Actuarial  Equivalent  of
              the Participant's appropriate Account balance

              (b) Payment shall  commence as elected by the  Participant,  which
         shall be  either  within  sixty-five  (65)  days of  termination  or in
         January following the Participant's termination.

              (c) The  Participant  may  modify  the form or timing  of  benefit
         payment  as long as such  modification  is made  before  the end of the
         calendar  year two (2) calendar  years prior to when the  Participant's
         benefits were scheduled to commence had the modification not been made.

5.7      SMALL ACCOUNTS

         Notwithstanding Section 5.6(a), if a Participant's Account is less than
twenty thousand  dollars  ($20,000),  the Committee may, in its sole discretion,
pay the Participant in a lump sum.

5.8      ACCELERATED DISTRIBUTION

         Notwithstanding  any  other  provision  of the  Plan,  at any  time,  a
Participant shall be entitled to receive, upon written request to the Committee,
a lump-sum  distribution  equal to ninety  percent  (90%) of the vested  Account
balance as of the Determination Date immediately preceding the date on which the
Committee receives the written request. The remaining balance shall be forfeited
by the  Participant  and the  Participant  will not be allowed to participate in
this Plan in the future.  The amount payable under this section shall be paid in
a lump sum within  thirty (30) days  following  the receipt of the notice by the
Committee from the Participant.

5.9      EXCISE TAX AND LOST BENEFIT MAKEUP

         If as a  result  of  participating  in this  Plan  the  Participant  is
required to pay additional excise tax under Section 4999 of the Internal Revenue
Code ("IRC"),  or receives a smaller  benefit from any other  Employer Plan as a
result of any IRC  Section  280G  Golden  Parachute  limitations,  then a makeup
amount shall be payable from this Plan. This amount shall be equal to the amount
of Section  4999  excise tax payable and any lost  benefit  from other  Employer
Plans  due to IRC  Section  280G  Golden  Parachute  limitation,  as a result of
participation  in this Plan,  plus any excise tax or income taxes payable due to
this  payment.  The Company and  Participant  shall  cooperate  in good faith in
making such  determination  and in providing the necessary  information for this
purpose.

5.10     WITHHOLDING; PAYROLL TAXES

PAGE 10 - EXECUTIVE DEFERRED COMPENSATION PLAN



         The Employer  shall  withhold from  payments  made  hereunder any taxes
required to be withheld from such payments  under  federal,  state or local law.
However,  a Beneficiary may elect not to have withholding for federal income tax
pursuant  to Section  3405(a)(2)  of Internal  Revenue  Code,  or any  successor
provision thereto.

5.11     PAYMENT TO GUARDIAN

         If  a  Plan  benefit  is  payable  to a  minor  or  a  person  declared
incompetent or to a person  incapable of handling the  disposition of his or her
property, the Committee may direct payment of such Plan Benefit to the guardian,
legal  representative,  or person  having the care and  custody  of such  minor,
incompetent,  or  person.  The  Committee  may  require  proof of  incompetency,
minority,  incapacity  or  guardianship  as it may  deem  appropriate  prior  to
distribution of the Plan Benefit.  Such distribution shall completely  discharge
the Committee from all liability with respect to such benefit.

                       ARTICLE VI--BENEFICIARY DESIGNATION

6.1      BENEFICIARY DESIGNATION

         Subject to Section 6.3, each  Participant  shall have the right, at any
time, to designate one or more persons or an entity as Beneficiary (both primary
as well as  secondary)  to whom  benefits  under  this Plan shall be paid in the
event of Participant's death prior to complete distribution of the Participant's
Account.  Each Beneficiary  designation shall be in a written form prescribed by
the Committee and shall be effective  only when filed with the Committee  during
the Participant's lifetime.

6.2      CHANGING BENEFICIARY

         Subject to Section 6.3, any Beneficiary designation may be changed by a
Participant  without  the consent of the  previously  named  Beneficiary  by the
filing of a new designation with the Committee.  The filing of a new designation
shall cancel all designations previously filed. If a Participant's  Compensation
is community property,  any Beneficiary  designation shall be valid or effective
only as permitted by applicable law.

6.3      COMMUNITY PROPERTY

         If the Participant resides in a community property state, the following
rules shall apply:

              (a) Designation by a married  Participant of a Beneficiary  other
         than the Participant's  spouse shall not be effective unless the spouse
         executes  a  written  consent  that  acknowledges  the  effect  of  the
         designation,  or it is  established  the  consent  cannot  be  obtained
         because the spouse cannot be located.

              (b) A married Participant's Beneficiary designation may be changed
         by a  Participant  with the  consent  of the  Participant's  spouse  as
         provided for in Section 6.3(a) by the filing of a new designation  with
         the Committee.

              (c) If  the  Participant's   marital  status  changes  after  the
         Participant has designated a Beneficiary, the following shall apply:

PAGE 11 - EXECUTIVE DEFERRED COMPENSATION PLAN



                   (i)   If the  Participant is married at the time of death but
              was unmarried when the designation was made, the designation shall
              be void  unless  the  spouse  has  consented  to it in the  manner
              prescribed in Section 6.3(a).

                   (ii)  If the  Participant  is  unmarried at the time of death
              but was married when the designation was made:

                        a) The designation shall be void if the spouse was named
                   as Beneficiary  unless  Participant had submitted a change of
                   beneficiary listing the former spouse as the beneficiary

                        b) The  designation  shall  remain  valid if a nonspouse
                   Beneficiary was named.

                   (iii) If the Participant was married when the designation was
              made  and  is  married  to  a  different   spouse  at  death,  the
              designation  shall be void unless the new. spouse has consented to
              it in the manner prescribed above.

6.4      NO BENEFICIARY DESIGNATION

         In the  absence  of an  effective  Beneficiary  Designation,  or if all
designated  Beneficiaries  predecease the  Participant or dies prior to complete
distribution of the Participant's  benefits,  then the Participant's  designated
Beneficiary  shall be  deemed to be the  person  in the  first of the  following
classes in which there is a survivor:

              (a) the surviving spouse;

              (b) the Participant's children, except that if any of the children
         predeceases the Participant but leaves issue surviving, then such issue
         shall take by right of  representation  the share the parent would have
         taken if living;

              (c) the Participant's estate.

6.5      EFFECT OF PAYMENT

         The  payment  to the  deemed  Beneficiary  shall  completely  discharge
Employer's obligations under the Plan.

                           ARTICLE VII--ADMINISTRATION

7.1      COMMITTEE; DUTIES

         The Plan shall be administered by the Committee, which shall consist of
not less than three (3) persons  appointed  by the Chief  Executive  Officer and
which may include the CEO as a member. The Committee shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations for the
administration  of this  Plan  and  decide  or  resolve  any and all  questions,
including  interpretations  of this Plan,  as may arise in  connection  with the
Plan. A majority  vote of the  Committee  members  shall  control any  decision.
Members of the Committee may be Participants under this Plan.

PAGE 12 - EXECUTIVE DEFERRED COMPENSATION PLAN



7.2      AGENTS

         The Committee may, from time to time,  employ other agents and delegate
to them such  administrative  duties  as it sees fit,  and may from time to time
consult with counsel who may be counsel to the Employer.

7.3      BINDING EFFECT OF DECISIONS

         The  decision or action of the  Committee  with respect to any question
arising out of or in  connection  with the  administration,  interpretation  and
application  of the Plan and the rules  and  regulations  promulgated  hereunder
shall be final,  conclusive  and binding upon all persons having any interest in
the Plan.

7.4      INDEMNITY OF COMMITTEE

         The  Employer  shall  indemnify  and hold  harmless  the members of the
Committee against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to this Plan,  except in the case
of gross negligence or willful misconduct.

                         ARTICLE VIII--CLAIMS PROCEDURE

8.1      CLAIM

         Any person claiming a benefit,  requesting an  interpretation or ruling
under the Plan,  or  requesting  information  under the Plan shall  present  the
request in writing to the  Committee,  which shall respond in writing as soon as
practicable.

8.2      DENIAL OF CLAIM

         If the claim or request is denied,  the written  notice of denial shall
state:

              (a) The reasons for denial,  with  specific  reference to the Plan
         provisions on which the denial is based.

              (b) A  description  of  any  additional  material  or  information
         required and an explanation of why it is necessary.

              (c) An explanation of the Plan's claim review procedure.

8.3      REVIEW OF CLAIM

         Any person  whose claim or request is denied or who has not  received a
response  within thirty (30) days may request  review by notice given in writing
to the Committee.  The claim or request shall be reviewed by the Committee which
may, but shall not be required to, grant the claimant a hearing.  On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.

8.4      FINAL DECISION

PAGE 13 - EXECUTIVE DEFERRED COMPENSATION PLAN



         The decision on review  shall  normally be made within sixty (60) days.
If  an  extension   of  time  is  required  for  a  hearing  or  other   special
circumstances,  the  claimant  shall be notified and the time limit shall be one
hundred  twenty (120) days. The decision shall be in writing and shall state the
reasons and the relevant Plan provisions. All decisions on review shall be final
and bind all parties concerned.

                  ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN

9.1      AMENDMENT

         The  Corporation  may at any time  amend  the Plan in whole or in part;
provided,  however,  that any such amendment that would materially  increase the
benefits  provided  under the Plan shall be subject to the prior approval of the
Board.  Provided,  further,  that no amendment shall be effective to decrease or
restrict the amount  accrued to the date of Amendment in any Account  maintained
under the Plan.  Changes in the definition of "Interest" shall be subject to the
following restrictions:

              (a) NOTICE.  A change shall not become  effective before the first
         day of the calendar  year which  follows the adoption of the  amendment
         and at least  thirty (30) days written  notice of the  amendment to the
         Participant.

              (b) CHANGE IN CONTROL.  Any change in the  definition  of Interest
         after a Change in Control shall apply only to those amounts credited to
         the  Participant's  Account as a result of  Deferral  Commitments  made
         after the Change in Control.

9.2      EMPLOYER'S RIGHT TO TERMINATE

         The Corporation  may at any time partially or completely  terminate the
Plan  if,  in  its  judgment,  the  tax,  accounting  or  other  effects  of the
continuance of the Plan, or potential  payments  thereunder  would not be in the
best interests of the Employer.

              (a) PARTIAL  TERMINATION.  The Corporation may partially terminate
         the Plan by  instructing  the  Committee  not to accept any  additional
         Deferral Commitments.  In the event of such a Partial Termination,  the
         Plan shall continue to operate and be effective with regard to Deferral
         Commitments  entered into prior to the  effective  date of such Partial
         Termination.

              (b) COMPLETE TERMINATION. The Corporation may completely terminate
         the Plan by  instructing  the  Committee  not to accept any  additional
         Deferral   Commitments,   and  by  terminating  all  ongoing   Deferral
         Commitments. In the event of Complete Termination, the Plan shall cease
         to operate and the  Employer  shall pay out to each  Participant  their
         Retirement  Account as if the Participant had terminated  service as of
         the effective date of the Complete Termination.  Payments shall be made
         in equal annual installments over the period listed below, based on the
         Retirement Account balance:

         RETIREMENT ACCOUNT BALANCE             PAYOUT PERIOD
         ----------------------------------------------------
         Less than $10,000                           1 Year
         $10,000 but less than $50,000               3 Years
         More than $50,000                           5 Years
         ====================================================

PAGE 14 - EXECUTIVE DEFERRED COMPENSATION PLAN



                            ARTICLE X--MISCELLANEOUS

10.1     UNFUNDED PLAN

         This Plan is intended to be an unfunded  plan  maintained  primarily to
provide  deferred  compensation  benefits for a select group of  "management  or
highly-compensated employees" within the meaning of Sections 201, 301 and 401 of
the Employee  Retirement Income Security Act of 1974, as amended ("ERISA"),  and
therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
Accordingly,  the Plan shall  terminate  and no further  benefits  shall  accrue
hereunder in the event it is determined by a court of competent  jurisdiction or
by an opinion of counsel that the Plan  constitutes an employee  pension benefit
plan within the meaning of Section 3(2) of ERISA which is not so exempt.  In the
event of such termination,  all ongoing Deferral Commitments shall terminate, no
additional  Deferral  Commitments  will be  accepted by the  Committee,  and the
amount of each Participant's vested Account balance shall be distributed to such
Participant  at such  time  and in such  manner  as the  Committee,  in its sole
discretion, determines.

10.2     UNSECURED GENERAL CREDITOR

         In  the  event  of  Employer's   insolvency,   Participants  and  their
Beneficiaries,  heirs, successors,  and assigns shall have no legal or equitable
rights,  interest or claims in any property or assets of the Employer, nor shall
they be  Beneficiaries  of, or have any rights,  claims or interests in any life
insurance  policies,  annuity contracts or the proceeds therefrom owned or which
may be acquired by the Employer.  In that event,  any and all of the  Employer's
assets and policies shall be, and remain, the general,  unpledged,  unrestricted
assets of the Employer.  The Employer's  obligation under the Plan shall be that
of an unfunded and unsecured promise of the Employer to pay money in the future.

10.3     TRUST FUND

         The  Employer  shall be  responsible  for the  payment of all  benefits
provided  under the Plan. At its  discretion,  the Employer may establish one or
more trusts,  with such  trustees as the Board may  approve,  for the purpose of
providing  for the  payment  of such  benefits.  Such  trust  or  trusts  may be
irrevocable,  but the  assets  thereof  shall be  subject  to the  claims of the
Employer's  creditors.  To the extent any benefits  provided  under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto,  but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Employer.

10.4     NONASSIGNABILITY

         Neither a  Participant  nor any other  person  shall  have any right to
commute,  sell,  assign,  transfer,  pledge,  anticipate,  mortgage or otherwise
encumber,  transfer,  hypothecate  or convey in  advance of actual  receipt  the
amounts,  if any,  payable  hereunder,  or any part thereof,  which are, and all
rights to which are, expressly declared to be unassignable and  nontransferable.
No part of the amounts  payable shall,  prior to actual  payment,  be subject to
seizure or  sequestration  for the payment of any debts,  judgments,  alimony or
separate  maintenance  owed  by a  Participant  or  any  other  person,  nor  be
transferable  by operation of law in the event of a  Participant's  or any other
person's bankruptcy or insolvency.

10.5     NOT A CONTRACT OF EMPLOYMENT

         The terms and  conditions of the Plan shall not be deemed to constitute
a contract of  employment  between the  Employer  and the  Participant,  and the
Participant (or his or her Beneficiary) shall have no

PAGE 15 - EXECUTIVE DEFERRED COMPENSATION PLAN



rights  against the Employer  except as may otherwise be  specifically  provided
herein. Moreover,  nothing in the Plan shall be deemed to give a Participant the
right to be  retained in the service of the  Employer or to  interfere  with the
right of the Employer to discipline or discharge the Participant at any time.

10.6     PROTECTIVE PROVISIONS

         A Participant  will  cooperate  with the Employer by furnishing any and
all information requested by the Employer, in order to facilitate the payment of
benefits hereunder, and by taking such physical examinations as the Employer may
deem necessary and taking such other action as may be requested by the Employer.

10.7     TERMS

         Whenever  any words are used  herein in the  masculine,  they  shall be
construed as though they were used in the feminine in all cases where they would
so apply;  and  wherever  any words are used  herein in the  singular  or in the
plural,  they shall be  construed  as though they were used in the plural or the
singular, as the case may be, in all cases where they would so apply.

10.8     CAPTIONS

         The captions of the articles,  sections and  paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or construction
of any of its provisions.

10.9     GOVERNING LAW; ARBITRATION

         The provisions of the Plan shall be construed and interpreted according
to the laws of the State of Oregon.  Any  dispute or claim that arises out of or
that relates to the Plan or to the interpretation, breach, or enforcement of the
Plan,  must be resolved by mandatory  arbitration  in  accordance  with the then
effective  arbitration rules of Arbitration  Service of Portland,  Inc., and any
judgment upon the award rendered  pursuant to such arbitration may be entered in
any court having jurisdiction thereof.

10.10    VALIDITY

         In case any  provision of the Plan shall be held illegal or invalid for
any reason,  said illegality or invalidity  shall not affect the remaining parts
hereof,  but the Plan shall be  construed  and  enforced as if such  illegal and
invalid provision had never been inserted herein.

10.11    NOTICE

         Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient if in writing and hand delivered,  or sent by
registered or certified mail, to any member of the Committee or the Secretary of
the  Employer.  Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.

10.12    SUCCESSORS

         The  provisions  of the Plan shall bind and inure to the benefit of the
Employer and its  successors  and assigns.  The term  successors  as used herein
shall include any corporate or other business entity which

PAGE 16 - EXECUTIVE DEFERRED COMPENSATION PLAN



shall,  whether by merger,  consolidation,  purchase or otherwise acquire all or
substantially all of the business and assets of the Employer,  and successors of
any such corporation or other business entity.

                                         LOUISIANA-PACIFIC CORPORATION


                                    By:  /s/ Mark A. Suwyn
                                         Chairman and Chief Executive Officer


                                    By:  /s/ Anton C. Kirchhof
                                         Secretary


                                 Dated:  July 1, 1997

PAGE 17 - EXECUTIVE DEFERRED COMPENSATION PLAN

                          LOUISIANA-PACIFIC CORPORATION
                                AND SUBSIDIARIES


                                                            STATE/
                                                            PROVINCE/COUNTRY
                                                            OF DOMICILE
                                                            -----------

LOUISIANA-PACIFIC CORPORATION                                DELAWARE

     DOMESTIC SUBSIDIARIES
     ---------------------

         ASSOCIATED CHEMISTS, INC.                           OREGON
         CREATIVE POINT, INC.                                CALIFORNIA
         GREENSTONE INDUSTRIES, INC.                         DELAWARE
                 PACIFIC RIM RECYCLING, INC.                 DELAWARE
                 GREENSTONE INDUSTRIES-FT. WAYNE, INC.       INDIANA
         KETCHIKAN PULP COMPANY                              WASHINGTON
         LOUISIANA-PACIFIC CORPORATION (W. VA.)              WEST VIRGINIA
         LOUISIANA-PACIFIC POLYMERS, INC.                    OREGON
         LOUISIANA-PACIFIC TIMBER COMPANY                    OREGON
                 L-PSPV, INC.                                DELAWARE
         LPS CORPORATION                                     OREGON
                 L-P REDWOOD, LLC                            DELAWARE
                 LOUISIANA-PACIFIC SAMOA, INC.               OREGON
         NEW WAVERLY TRANSPORTATION, INC.                    TEXAS

     FOREIGN SUBSIDIARIES
     --------------------

         LOUISIANA-PACIFIC CANADA LTD.                       BRITISH COLUMBIA,
                                                              CANADA
                 LOUISIANA-PACIFIC CANADA DAWSON CREEK LTD   BRITISH COLUMBIA,
                                                              CANADA
         LOUISIANA-PACIFIC CANADA PULP CO.                   NOVA SCOTIA,
                                                              CANADA
         LOUISIANA-PACIFIC DE MEXICO, S.A. DE C.V.           MEXICO
         LOUISIANA-PACIFIC, S.A. DE C.V.                     MEXICO
         LOUISIANA-PACIFIC DE VENEZUELA, C.A.                VENEZUELA
         LOUISIANA-PACIFIC COILLTE IRELAND LIMITED           IRELAND
         L-P FOREIGN SALES CORPORATION                       GUAM

                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation of our
report  included  in this  Form  10-K into the  registratnt's  previously  filed
Registration  Statement  File Nos.  2-97014,  33-42276,  33-62944,  33-62317 and
333-10987.


                                      ARTHUR ANDERSEN LLP

Portland, Oregon
  March 27, 1998



Deloitte &
 Touche LLP
- -----------                   --------------------------------------------------
                              Suite 3900               Telephone: (503) 222-1341
                              111 S.W. Fifth Avenue    Facsimile: (503) 224-2172
                              Portland, Oregon 97204-3698

INDEPENDENT AUDITORS' CONSENT

We consent to the  incorporation  by reference in  Registration  Statement  Nos.
2-97014,  33-42276,  33-62944,  33-62317,  and  333-10987  of  Louisiana-Pacific
Corporation on Form S-8 of our report dated February 6, 1998,  appearing in this
Annual Report on Form 10-K of  Louisiana-Pacific  Corporation for the year ended
December 31, 1997.


/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Portland, Oregon
March 27, 1998
 

5 This schedule contains summary financial information extracted from Consolidated Financial Statements and Notes included in this Form 10-K and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 31,900 0 146,200 (2,000) 258,800 596,800 2,433,900 (1,242,100) 2,578,400 319,300 572,300 0 0 117,000 1,169,200 2,578,400 2,402,500 2,402,500 2,322,600 2,523,500 0 0 30,900 (150,000) (43,600) (101,800) 0 0 0 (101,800) (.94) 0