November 12, 1997
Xx. Xxxxxx X. Xxxxx
0000 XX Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxx 00000
Dear Xxxxx:
This summarizes and confirms our agreement concerning your employment
as President and Chief Executive Officer of Weyerhaeuser Company (the
"Company"). You will also be elected to the Company's Board of Directors.
As President and Chief Executive Officer, your duties and responsibilities
shall be those normally and traditionally associated with such a position
and you shall not be required to perform other duties or engage in other
activities without your consent. Your office shall be located at the
Company's headquarters and you shall be provided with the usual and
customary administrative support and assistance.
Your employment with the Company will commence on a mutually agreeable
date no later than January 5, 1998 at an annual base salary of $925,000,
payable no less frequently than monthly in equal installments. Salary
reviews are currently done on a 12-month cycle and the Compensation
Committee of the Board will review your salary in February of 1999 (based
on a 16-month review).
You will be a participant in the incentive compensation plan for
Company senior executives. In this plan your target bonus will be 60% of
your base salary. Actual bonus amounts for the Chief Executive Officer are
determined by the Board of Directors and can range from 0 to 3 times target
in total. The Board will base your incentive compensation on three
components, each to be given equal weight in the total calculation and each
of which can range from 0 - 1 times your target bonus: (1) a short-term
incentive calculated as shown on Attachment A, based on the Company's
annual return on net assets compared to industry competitors; (2) an
intermediate-term incentive, calculated as shown on Attachment A, based on
total shareholder return compared to industry competitors and the S&P 500;
and (3) the Board's evaluation of your performance as Chief Executive
Officer based on quantifiable and measurable annual goals or targets agreed
to in advance with the Compensation Committee. You will, however, receive a
bonus for 1998 at no less than target (60% of base salary) which will be
payable in 1999.
Xx. Xxxxxx Xxxxx
November 12, 1997
Page 2
On your date of hire you will be entitled to a non-forfeitable payment
of up to $1,400,000 to compensate you for your losses due to any forfeiture
of the following items under your current employment:
. Deferred compensation
. Stock options (i.e., unvested options that cannot be exercised after
your current employment ends)
. Restricted stock (i.e., unvested shares of restricted stock that
cannot be sold by you after your current employment ends)
Your loss for deferred compensation will be determined based on the
actual amount forfeited in your deferred compensation account on the date
your current employment ends. The value of forfeited stock options and
restricted stock will be calculated using $33 as your current employer's
share price. The amount of the payment for your losses for the three items
shown above will be determined by Xxxxxxxx & Xxxxxxxxx or other mutually
agreeable independent actuary or financial consultant within 30 days after
your employment begins, will not be reduced to account for income taxes,
and will not exceed $1,400,000. You agree to defer this payment into a
"Share Equivalents" account under the Company's deferred compensation plan
and to elect payment at a date or event that is at least five years from
your date of hire. The Weyerhaeuser share price used for this Share
Equivalents deferral will be the closing price for the Company's shares as
reported in the Wall Street Journal on your first day of employment with
the Company and the payment, when made, shall reflect the increase, if any,
in the value of the Share Equivalents due to reinvested dividends and/or
share price increase occurring during the period of deferral as provided in
the deferred compensation plan.
You will be a participant in the Company's long-term incentive
compensation plan. The Board of Directors will approve a 150,000 share
initial option grant to you under the plan. This stock option will be
granted to you on your first day of employment with the Company. You will
receive a stock option grant in 1998 which will be determined by our
regular granting process. You will be eligible for stock option grants in
subsequent years, also determined by the regular process. The current stock
option target for the CEO position is 75,000 shares each year with a range
of 0 to 112,500 shares.
Xx. Xxxxxx Xxxxx
November 12, 1997
Page 3
You will be eligible for the regular salaried benefits outlined in the
employee handbook provided to you under separate cover. You will also be a
member of Weyerhaeuser's key group and eligible for the benefits accorded
this group. The enclosed Attachment B summarizes the current program.
The Board of Directors reserves the right to terminate your employment
at any time with or without cause. In the event that your employment is
terminated, you will be entitled to a special severance benefit which will
decrease based on the number of months you are employed by the Company.
This benefit will be equal to 36 months base pay during your first 24
months of employment with the Company. The amount of this benefit will then
decrease by one month for each additional month you are employed (e.g.,
after 29 months, your severance would be 31 months of base pay) until it
reaches 24 months after 36 months of employment. Thereafter, your severance
benefit would be 24 months of base pay.
The severance benefit described above will not be paid if you resign,
retire, die or are terminated for gross or willful misconduct, deliberate
refusal or failure to perform your duties, conviction of a felony or for
gross negligence in job performance. The severance benefit will commence
after 30 days notification of termination and will be paid on a monthly
basis. This benefit will be in lieu of any other notice policy or severance
plan offered by the Company.
You will be entitled to a Supplemental Retirement Benefit described in
the enclosed Attachment C, the "Supplemental Retirement Agreement for
Xxxxxx X. Xxxxx."
The Company will reimburse your relocation expenses in accordance with
its standard "Weyerhaeuser Relocation Program," and the "Optional
Relocation Programs," copies of which are enclosed as Attachment D. You
will also be reimbursed for your attorney fees incurred in connection with
this agreement.
This agreement shall bind any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company, in the same manner and to
the same extent that the Company would be obligated under this agreement if
no succession had taken place. The level of benefits, plans, programs and
compensation described or referred to in this agreement, and as they exist
on this date, shall not, as applied to you, be reduced during your
employment by the Company without your prior written consent.
Xx. Xxxxxx Xxxxx
November 12, 1997
Page 4
If the foregoing reflects your understanding of our agreement, please
indicate by signing and returning the enclosed copy of this letter.
Sincerely,
WEYERHAEUSER COMPANY
/s/ Xxxx X. Xxxxxxxxx, Xx.
Xxxx X. Xxxxxxxxx, Xx.
President
Agreed to and accepted this 20th day of
----
November, 1997.
/s/ Xxxxxx X. Xxxxx
-------------------
Xxxxxx X. Xxxxx
Attachment A
Short-term incentive
Funding for this portion of the CEO's annual bonus is based on company
performance relative to 13 competitors (see next page), measured by
one-year XXXX-XXXX:
-----------------------------------------------------------
Relative ranking Funding multiple
-----------------------------------------------------------
1 1.00x target bonus
2 0.90
3 0.80
4 0.70
5 0.60
6 0.50
7 0.40
8 0.30
9 0.20
10 0.10
11 through 14 0.00
-----------------------------------------------------------
Example: If Weyerhaeuser's EBIT-RONA ranking is No. 3 in the industry, the
short-term component would be 0.80x target bonus.
Note: Weyerhaeuser's EBIT-RONA must be at least 8 percent for funding to
occur under the short-term incentive component.
Intermediate-term
This second portion of the annual bonus is based on company performance
relative to 13 competitors (see next page) and to the S&P 500, measured by
Total Shareholder Return (TSR) over a three-year period:
---------------------------------------------------------------------
Industry Comparison - S&P Comparison -
70% Weighting 30% Weighting
--------------------------------- ----------------------------------
Peer-group Funding S&P 500 Funding
ranking multiple percentile multiple
----------------------------------------------------------------------
#1-2 1.00x target bonus 75 1.00xtarget bonus
3 0.83 70 0.83
4 0.66 65 0.66
5 0.49 60 0.49
6 0.33 55 0.33
7 0.16 50 0.16
8-14 0.00 <50 0.00
---------------------------------------------------------------------
Example: If Weyerhaeuser's three-year TSR is No. 6 in the industry peer
group, and in the 60th percentile compared to the S&P 500, then the funding
for this component would be (0.33 x 70%) + (0.49 x 30%) = 0.23 + 0.14 = 0.37x
target bonus.
Note: If Weyerhaeuser's three-year TSR is a negative number, then the above
funding levels for the intermediate-term component will be reduced by 50
percent.
Attachment A
Page 2
Determination of Performance Factors: The EBIT-RONA, TSR and Company
rankings established each year for the short-term and intermediate-term
incentives will be the same as those established for the management
incentive plan that applies to other senior managers of the Company.
The 13 competitor companies:
. Boise Cascade
. Bowater
. Champion
. Georgia-Pacific
. International Paper
. Louisiana Pacific
. XxxXxxxxxx Xxxxxxx
. Potlatch
. Stone
. Temple-Inland
. Union Camp
. Westvaco
. Willamette
Attachment B
Summary of Supplemental Benefits and
Stock Ownership Expectations
for the
Top Management Team
Supplemental Benefits
---------------------
In addition to the benefit package described in the Weyerhaeuser Handbook
for Salaried Employees, the following additional benefits are provided to
you as a member of the Top Management Team.
1. Weyerhaeuser "Stock Equivalents" - effective 1995
Under the executive compensation salary and bonus deferral plan, you are
eligible for an additional bonus deferral option which allows you to invest
in Weyerhaeuser "stock equivalents." Under this option, the company will
increase the value of the deferral by 15 percent.
A minimum five-year deferral period applies to the stock equivalents
account. If you leave the company in less than five years (for reasons
other than retirement, disability or death), the added 15 percent is
forfeited. If you retire, you must hold the account for at least five years
before receiving payment.
Account growth is based on the appreciation (or depreciation) of
Weyerhaeuser stock. Dividends are reinvested in additional share
equivalents.
2. Supplemental Life Insurance - effective July 1, 1989
In addition to your company-provided basic life insurance of one times
salary, you will receive supplemental life insurance in an amount 2-1/2
times your basic life insurance amount. The maximum coverage is $500,000
when combined with your basic life amount. All costs for this coverage will
be paid by the company.
The beneficiary you designate under your basic life insurance is
automatically assigned as beneficiary under this program. Your human
resources manager will help you make a change at any time.
Tax Implications
----------------
The value of company-provided life insurance in excess of $50,000 is
considered taxable income to you. The Internal Revenue Service provides tax
tables which consider the premium, the amount of coverage, and your age in
order to arrive at the taxable value ("imputed income") of the insurance to
you. Your annual W-2 statement will reflect this calculation of your
imputed income. Because of these potential tax implications, if you decide
that the value of your insurance to you is less than its imputed income,
you have the right to decline participation in these programs.
Attachment B
Page 2
When You Leave the Company
--------------------------
The insurance section of your benefits handbook will explain what happens
to your coverage when you retire or leave the company.
3. Vacations
You are immediately eligible for five weeks vacation per year without
regard to length of service. There is no provision for banking or saving
vacation from year to year.
4. Financial Counseling
To assist you in managing your financial affairs, the company contracts
with several firms that provide comprehensive financial planning and
investment advisory services. One of these firms will contact you directly
to begin their services. The company pays the cost of your first year in
this program. After the initial year, the company pay approximately one
half of the cost and you will be responsible for the remaining charges if
you elect to continue.
Stock Ownership Requirements
----------------------------
In order to strengthen the commitment and alignment of top leaders with
company interests, members of the Top Management Team are expected to hold
the following multiples of base pay in Weyerhaeuser stock:
Salary Level Multiple of Salary
------------ -----------------
CEO 3.0x
56, 57 2.0x
53-55 1.5x
< 52 1.0x
-
Transition Period
Current members have until December 31, 2000 to meet the requirement. New
TMT members must meet the requirement by the later of: December 31, 2000 or
four years from their date of hire.
Tracking and Reporting
You will be asked periodically to report your level of stock ownership to
the Corporate Compensation Department. Summary information will be prepared
for review by the CEO and board of directors. (Individual levels of
ownership will be kept confidential.)
Attachment B
Page 3
Ways to Fulfill the Expectation
Your ownership level includes stock acquired through:
. Company stock account in the Investment Growth Plan (401(k)). Both the
company match and your allocation of salary deferrals will apply.
. Performance Share Plan.
. "Stock equivalents" bonus deferral.
. Stock received through exercising stock options (unexercised stock
options will not apply).
. Direct purchases of Weyerhaeuser stock through a broker.
Attachment C
SUPPLEMENTAL RETIREMENT AGREEMENT
For Xxxxxx X. Xxxxx
In consideration of your employment with Weyerhaeuser
Company (the "Company"), the Company will provide you with
the Supplemental Retirement Benefit ("SRB") described below.
TARGET BENEFIT PAYABLE AT AGE 65
The SRB, when combined with the vested accrued benefits
payable at age 65 from each of the following plans: the
Weyerhaeuser Company Retirement Plan for Salaried Employees;
the Weyerhaeuser Supplemental Retirement Plan; the
Willamette Industries Retirement Plan and Supplemental
Retirement Plan (the "Current Employer Plans"), is
approximately equal to the retirement benefit you would have
earned if you had been employed by Weyerhaeuser since June
, 1972 (your "Original Hire Date").
-----
Consistent with this approach, your SRB will be equal to
your:
. Weyerhaeuser Target Benefit less
----
. Current Employer Retirement Benefit less
----
. Weyerhaeuser Salaried Retirement Benefit less
----
. Weyerhaeuser Supplemental Retirement Benefit
For purposes of this Agreement, the above benefits are
described as follows:
. Weyerhaeuser Target Benefit- The single annuity
retirement benefit payable at age 65 under the Weyerhaeuser
Company Retirement plan for Salaried Employees and the
Weyerhaeuser Supplemental Retirement Plan (the "Weyerhaeuser
Plans"), assuming that your service for both benefit and
eligibility purposes of this Agreement began on your
Original Hire Date and ends on the date of termination of
employment from the Company.
The terms of the Weyerhaeuser Plans in effect at the time of
your termination from the Company will apply in the
calculation of this target benefit, with the exception that
the "Rule of 85" provisions will not apply.
. Current Employer Retirement Benefit - Your vested single
annuity payable at age 65 retirement benefit from your
Current Employer Plans earned to your date of termination
from Willamette Industries.
. Weyerhaeuser Salaried Retirement Benefit - Your vested
single annuity payable at age 65 retirement benefit from
your Weyerhaeuser Company Retirement Plan for Salaried
Employees (if any).
. Weyerhaeuser Supplemental Retirement Benefit - Your
vested single annuity payable at age 65 retirement benefit
from your Weyerhaeuser Company Supplemental Retirement Plan
(if any).
Attachment C
Page 2
PAYMENT PRIOR TO AGE 65
. If payment of the SRB begins prior to age 65, the benefit
amount otherwise payable at age 65 will be reduced using the
early retirement reduction factors in the Weyerhaeuser
Company Plan for Salaried Plans at the time of your
termination from Weyerhaeuser. For purposes of determining
eligibility for the reduction, your service with your
current employer will be considered.
While the SRB will first be calculated as a single annuity,
you can elect to have your SRB paid in any form of payment
available from the Weyerhaeuser Company Retirement Plan for
Salaried Employees at the time of your termination from
employment with Weyerhaeuser Company. Your SRB is an
unfunded commitment by the Company to pay you these amounts
out of the general assets of the Company.
This Agreement does not in any way guarantee that you will
qualify for a benefit under the Weyerhaeuser Company
Retirement Plan for Salaried Employees or the Weyerhaeuser
Company Supplemental Retirement Plan. You must independently
meet the benefit eligibility requirements outlined in that
plan on the date you actually terminate from the Company.
For eligibility and benefit purposes, your service with your
current employer will be considered for the Salaried Retiree
Health Plan in effect at the time your employment
terminates. This plan will likely include cost sharing by
you and the Company. If the Company's portion of the cost
share is based on service, then the service used for this
calculation will be the same as the service used in
calculating the Weyerhaeuser Target Benefit in this
Agreement.
The above terms and conditions are agreed to this
20th day of November, 1997.
---- --------
/s/ Xxxxxx X. Xxxxx
-------------------
by Xxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxx
------------------
Xxxxxx X. Xxxx, Senior Vice President,
Human Resources & Information Technology
Weyerhaeuser Company
Attachment D
Weyerhaeuser
Relocation
Program
Attachment D
Page 2
Sometime in your career, you may have the opportunity to take a job in a
different city, county or state. The prospect may be exciting, but what
about the move?
Weyerhaeuser's Relocation Program can help.
Through this program, Employee Relocation Services (ERS) offers
professional assistance with your move, helping you understand the
company's relocation policy, matching your moving needs with available
resources, helping you solve any problems you may encounter to get the most
out of your relocation program.
After your supervisor approves your move, ERS will give you a call to
explain your relocation package options and discuss your individual needs.
We'll then send you a relocation package and help you throughout the move.
The program's core package, outlined below, is offered to full-time,
salaried employees newly hired or already working with the company.
Depending on the situation, your hiring supervisor may add optional
programs to meet your unique moving needs.
Since your new supervisor decides if your new job requires a change in
residence, you must get his or her approval before incurring move-related
expenses.
The Core Package
Destination Services/House Hunting
An important step in relocating is an orientation to the new community and
finding a place to live. ERS can help you make the best possible choice by
referring you to a good home-finding service. This service connects you to
a real estate or rental agency in your new town that will give you
individual attention and expert advice about the new location. Reasonable
meal, lodging and transportation expenses will be covered for you and your
spouse.
En Route
Weyerhaeuser will cover the cost of transporting your family by your own
car or by air, rail or bus, and will reimburse you for you and your
family's meals and lodging en route.
Temporary Living
Weyerhaeuser understands how difficult and frustrating it is to be
separated from your family or to wait for your new home. The company will
reimburse meal and lodging expenses for up to 30 days before your family
arrives; trips back to visit your family must be approved in advance by
your new supervisor.
If you need more than 30 days of temporary living, ERS helps you develop a
plan to meet your needs while considering cost containment.
If your new residence isn't vacant or ready after your family arrives,
Weyerhaeuser will reimburse you for lodging and meals for an additional 10
days.
Household Goods Transportation
ERS will choose a van line when your move is authorized, and you can
discuss your special needs with the van line representative. Weyerhaeuser
will handle all arrangements to pack, transport and unpack your household
goods, and will pay the van line directly for all aspects of the move. All
shipments are insured to a maximum of $100,000 by Weyerhaeuser Company.
If needed, 30 days' storage is available at your destination.
Relocation Allowance
If you've moved before, you're probably familiar with the expenses involved
in a transfer. In order to help, Weyerhaeuser has established a Relocation
Allowance. You'll be paid an amount equivalent to one month's salary at
your new job - up to $4,000 (less taxes) - to meet special needs as you
relocate.
Income Tax Protection
Under current law, the money you receive from Weyerhaeuser to assist you in
your move must be reported as income. You may, however, be able to claim a
tax deduction for some of it (check with the IRS to find out what you can
deduct). Weyerhaeuser will also add a payment to offset the extra taxes
you'll incur from nondeductible reimbursements that are considered income
by the IRS.
Attachment D
Page 3
Optional Relocation Programs
Depending on the situation, your new supervisor will determine your
eligibility for optional programs.
Home Marketing Assistance
Weyerhaeuser encourages you to market your home - which must be your
primary residence - through a Realtor. The company offers marketing
assistance to improve your chances of getting the best price for your home.
This program provides expert direction in Realtor selection and management,
and in marketing strategy development. Weyerhaeuser will refer you to a
relocation company whose counselors have years of experience in real
estate, relocation and home financing.
Home Sale Closing Costs
Through this program, Weyerhaeuser covers many of the expenses involved in
the sale of your home, including real estate commission, documentary
stamps, attorney's fees related to the title transfer, transfer taxes
related to the sale, and settlement fees.
Home Buy-Out Program
If you or your Realtor's home-marketing efforts are unsuccessful,
Weyerhaeuser offers the Home Buy-Out Program through an outside relocation
company. In addition to relieving you of the burden of selling your home,
the program releases your equity, allowing you to close promptly on your
new home.
Attachment D
Page 4
This program is offered to salaried employees who own single-family homes
or condominiums that are their primary residence. To qualify, a home must
not be difficult to market, have a value greater than $400,000, or be on
more than five acres.
New Home Purchase Closing Costs
This program covers many of the costs associated with the transfer of
ownership and financing of your new home and can direct you to mortgage
companies that offer special financing packages for transferees with direct
billing to Weyerhaeuser. Weyerhaeuser will reimburse you for closing costs
such as mortgage origination and/or discount points, title transfer and
insurance charges, appraisal and credit report.
Renters Assistance
As a renter, you are bound by your lease. Weyerhaeuser will reimburse you
for penalties associated with breaking your lease. At your new location,
the company will pay finder's fees to locate housing for you and your
family.
Mobile and Manufactured Home Sale Closing Costs
Weyerhaeuser will reimburse you for typical selling and closing costs for
your unit and the land on which it's located, provided the two are sold
together. ERS can help you in selecting an agent or broker experienced in
mobile home sales.
All benefits outlined above have limitations; please make no decisions
until you speak with ERS.
