EXHIBIT 10.4
AMENDMENT AGREEMENT
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This Amendment Agreement made as of May 28, 1999 amends the Agreement
between Champion International Corporation, a New York corporation (the
"Company"), and L. Xxxxx Xxxxxxx (the "Executive") effective October 18, 1990
(as heretofore amended, the "Existing Agreement", and as amended hereby, the
"Agreement").
The Company considers it essential and in the best interests of its
shareholders to xxxxxx the continued employment of its senior management
personnel. The Executive is an important member of the Company's senior
management. The Company wishes to provide additional incentive for the
Executive to continue to serve the Company by increasing the benefits provided
to the Executive in certain events following a Change in Control to a level
which is more in line with comparable benefits provided by other large publicly-
owned U.S. forest products companies. The Company also wishes to amend the
Existing Agreement to eliminate any provision that could be an impediment to the
Company engaging in a transaction to be accounted for on a pooling-of-interests
basis, if the Company"s Board of Directors determines that such a transaction
would be in the best interests of the Company"s shareholders.
NOW, THEREFORE, the parties agree that the Existing Agreement is
hereby amended as follows:
1. Subparagraph 1(a)(i) of the Existing Agreement is amended by
deletion of the proviso at the end of the last sentence thereof.
2. Clauses (x) and (y) of subparagraph 1(a)(ii) of the Existing
Agreement are amended to read in their entirety as follows:
"(x) a lump sum equal to twenty-four times the highest total monthly
compensation (as defined in subparagraph 1(a)(i)) in the event of a
termination solely of the kind referred to in clauses (A), (B) and (G) of
subparagraph 1(b)(ii), or a lump sum equal to thirty-six times such highest
total monthly compensation in the event of any other kind of termination
(as defined in subparagraph 1 (b)), shall be paid as soon as practicable
after such termination; (y) the benefits required to be provided thereafter
to the Executive, his spouse and family, set forth in attached Exhibit A,
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shall be valued at the cost of acquiring insurance policies which would
provide such benefit coverage for a two-year period in the event of a
termination solely of the kind referred to in clauses (A), (B) and (G) of
subparagraph 1(b)(ii) or for a three-year period in the event of any other
kind of termination (as defined in subparagraph 1(b)), and
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such cost shall be paid in a lump sum as soon as practicable after
termination;".
3. The definition of "Code" in subparagraph 1(a)(iii) of the
Existing Agreement is amended to refer to the "Internal Revenue Code of 1986, as
amended from time to time". Subparagraph 1(a)(iii) is further amended by adding
the following sentence at the end of such subparagraph:
"Notwithstanding the foregoing provisions of this subparagraph 1(a)(iii),
if, in the opinion of the accounting firm or firms whose opinion or
opinions with respect to pooling-of-interests accounting is or are required
as a condition to the consummation of a Change in Control transaction
intended to qualify for pooling-of-interests accounting treatment,
implementation of such provisions (or the provisions of any other Company
agreement or plan or action of the Company's Board of Directors (the
"Board") or committee thereof with respect to other equity awards, stock-
based or stock-measured compensation or compensation which may be payable
in stock) would preclude such transaction from so qualifying, the Board,
acting prior to the Change in Control, unilaterally may require that
options, other equity awards (including contingently credited shares,
performance share units and restricted stock units), stock-based or stock-
measured compensation or compensation which may be payable in stock held by
the Executive (or to which the Executive may be entitled) be treated in
connection with such transaction and thereafter in a way that does not
preclude such transaction from so qualifying and that the Board deems to be
fair to the Executive (including, but not limited to, eliminating any
acceleration of vesting or payment and requiring the conversion of such
options and awards to options and awards of the corporation acquiring
control of the Company or its assets in such transaction, or the settlement
of such options and awards in shares of such corporation)."
4. Subparagraph 1(a)(iv) of the Existing Agreement is amended by
deleting the words "for the termination period set forth in such subparagraph
1(a)(i)" at the end of the first sentence thereof and the words "during the
termination period set forth in subparagraph 1(a)(i) above" at the end of the
second sentence thereof and, in each case, replacing such words with the
following:
"for a period of two years in the event of a termination solely of the kind
referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or for a
period of three years in the event of any other kind of termination (as
defined in subparagraph 1(b))."
5. Subparagraph 1(a)(v) of the Existing Agreement is amended by
deleting the words "(whether or not any such period shall be accelerated)," in
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the first sentence thereof and replacing such words with the following:
"or, in the event of the termination of the Executive within three years
following a Change in Control, during a period of two years in the event of
a termination solely of the kind referred to in clauses (A), (B) and (G) of
subparagraph 1(b)(ii) or during a period of three years in the event of any
other kind of termination (as defined in subparagraph 1(b)),"
Subparagraph 1(a)(v) is further amended to delete the words "under subparagraph
1(a)(i) above" in the proviso at the end of the first sentence thereof.
6. Subparagraph 1(b)(ii) of the Existing Agreement is amended by
deleting the word "or" immediately before clause (E) thereof and by adding the
following clauses (F) and (G) immediately before the proviso at the end of such
subparagraph:
", (F) within three years following a Change in Control, the relocation of
the Executive's principal place of employment other than to (x) the Borough
of Manhattan in the City of New York, New York, or (y) any other location
that is not more than thirty-five (35) miles by automobile from the
location of the Executive's principal place of employment immediately prior
to the Change in Control, or (G) within three years following a Change in
Control, the Executive is no longer eligible for benefits or incentive
compensation at the same level as his peers in the Company".
7. Subparagraph 1(d) of the Existing Agreement is amended to read in
its entirety as follows:
"(d) Definition of Change in Control
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For the purpose of this Agreement, a "Change in Control" of the
Company shall be deemed to have occurred if the event set forth in any one
of the following paragraphs shall have occurred:
(i) any Person (as defined in this subparagraph 1(d)) is or
becomes the Beneficial Owner (within the meaning set forth in Rule 13d-3
under the Securities Exchange Act of 1934, as in effect on the date hereof
(the 'Exchange Act')), directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates (as defined
in this subparagraph 1(d)) representing 30% or more of the combined voting
power of the Company"s then outstanding securities; or
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(ii) the following individuals cease for any reason to constitute
a majority of the number of directors then serving on the Board:
individuals who, on May 28, 1999, constitute the Board and any new director
(other than a director whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of
directors of the Company) whose appointment or election by the Board or
nomination for election by the Company"s shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on May 28, 1999 or whose
appointment, election or nomination for election was previously so approved
or recommended; or
(iii) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any other
corporation or entity, other than a merger or consolidation if the number
of members on the board of directors (or similar governing body) of the
corporation or entity which is the surviving corporation or entity in such
merger or consolidation (whether the Company or another corporation or
entity) (or if the surviving corporation or entity is controlled by another
corporation or entity, the board of directors (or similar governing body)
of such controlling corporation or entity) immediately after such merger or
consolidation (the "Surviving Board") who were directors of the Company
immediately prior to such merger or consolidation constitutes a majority of
the members on the Surviving Board immediately after such merger or
consolidation; or
(iv) the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company"s assets to an entity unless the number
of members of the board of directors (or similar governing body) of such
entity (or if such entity is controlled by any other entity immediately
after such sale or disposition, the board of directors or similar governing
body of such other entity) immediately after such sale or disposition (the
"Controlling Board") who were directors of the Company immediately prior to
such sale or disposition constitutes a majority the members of the
Controlling Board immediately after such sale or disposition.
For purposes of this subparagraph 1(d):
'Person' shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Company or any of its Subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its Subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substan-
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tially the same proportions as their ownership of stock of the Company.
'Affiliate' and 'controlled' shall have the meanings set forth in Rule 12b-
2 under the Exchange Act."
8. Subparagraph 5(b) of the Existing Agreement is amended by adding
the following language at the beginning thereof: "Subject to paragraph 14,".
9. The last sentence of paragraph 8 of the Existing Agreement is
replaced by the following four sentences:
"Upon such a consolidation, merger or transfer of assets and assumption,
(i) the term 'Company' shall refer to the 'Continuing Corporation', that
is, the corporation which survived such consolidation or merger (whether
the prior-to-the-transaction 'Company' or another corporation) or to which
such assets are transferred, and (ii) the term 'Board' shall refer to the
board of directors (or similar governing body) of the Continuing
Corporation (except that, in determining whether or not such merger,
consolidation or transfer constitutes a Change in Control under
subparagraph 1(d), the terms 'Company' and 'Board' shall refer to the
prior-to-the-transaction 'Company' or 'Board'). Upon such a consolidation,
merger or transfer of assets and assumption, this Agreement shall continue
in full force and effect. Whether or not a consolidation, merger or
transfer of assets (or any other transaction) constitutes a Change in
Control under subparagraph 1(d), any subsequent transaction involving a
Continuing Corporation (or involving any corporation or entity directly or
indirectly controlling the Continuing Corporation) which meets the
definition of Change in Control under subparagraph 1(d) shall constitute a
Change in Control for all purposes of this Agreement. The provisions of
this paragraph 8 shall apply to any subsequent consolidation or merger of
any such corporation into or with, or any subsequent transfer by any such
corporation of all or substantially all of its assets to, another
corporation."
10. Clause (x) of subparagraph 9(d)(iii) of the Existing Agreement is
amended by adding the words "and Excise Tax Gross-Up amount" immediately after
the words "legal expenses payments" therein.
11. Subparagraph 9(d)(v) of the Existing Agreement is amended in its
entirety to read as follows: "(v) [Intentionally Omitted]."
12. Exhibit A to the Existing Agreement is amended by changing the
reference to "subparagraph 1(a)(i)" therein to refer to "subparagraph 1(a)(ii)".
13. Exhibit B to the Existing Agreement is amended by deleting the
words "; however, payments not to cover the period, if any, after the last day
of the month next preceding the Executive"s normal retirement date under the
Com-
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pany's pension plan".
14. Exhibit D to the Existing Agreement is amended by (i) changing
each reference therein to "2 years" and "2 year" to "3 years" and "3 year",
respectively, (ii) deleting the footnote, which states that "This Exhibit D does
not reflect the possible reduction provided for in subparagraph 9(d)(v) hereof",
(iii) deleting the words "; however, payments not to cover the period, if any,
after the last day of the month next preceding the Executive"s normal retirement
date under the Company's pension plan", and (iv) adding the following language
at the end thereof:
" . Excise Tax Gross-Up An amount equal to the Company's estimate
of the amount payable pursuant to
paragraph 14.
Notwithstanding the foregoing, no amounts shall be deposited in Trust with
respect to options or contingently credited shares (or other equity awards)
if the Potential Change in Control relates to a transaction approved by the
Board and intended to qualify for pooling-of-interests accounting treatment
and the Board, prior to the Change in Control, decides to exercise its
power under the last sentence of subparagraph 1(a)(iii) with respect to
such options and contingently credited shares (and other equity awards);
provided, however, that if the Board, prior to the Change in Control,
determines that such transaction will not be consummated and that an
alternative Change in Control transaction not intended to qualify for
pooling-of-interests accounting treatment will be consummated, such amounts
shall promptly be deposited in Trust."
15. Paragraph 14 of the Existing Agreement is amended to read in its
entirety as follows:
"14. Excise Tax Gross-Up. Whether or not a termination occurs,
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if any of the payments or benefits received or to be received by the
Executive in connection with a Change in Control or the Executive"s
termination of employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Company, any person
(as defined in subparagraph 1(d)) whose actions result in a Change in
Control or any person affiliated with either the Company or the person
whose actions result in a Change in Control) (such payments or benefits,
excluding the payment or payments to be made pursuant to this paragraph 14,
being hereinafter referred to as the 'Initial Payments') will be subject to
the excise tax (the 'Excise Tax') imposed under Section 4999 of the Code,
the Company shall pay to the Executive an additional amount (the 'Gross-Up
Payment') such that the net amount retained by the Executive, after
subtraction of any Excise Tax on the Initial Payments and any federal,
state and local (and foreign, if any) income and employment taxes and
Excise Tax upon the payment or payments
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provided by this paragraph 14, shall be equal to the Initial Payments.
Notwithstanding any of the provisions of this paragraph 14, to the extent,
if any, that, in the opinion of the accounting firm or firms whose opinion
or opinions with respect to pooling-of-interests accounting is or are
required as a condition to the consummation of a Change in Control
transaction intended to qualify for pooling-of-interests accounting
treatment, implementation of the provisions of this paragraph 14 would
preclude such transaction from so qualifying, the term 'Initial Payments'
shall not include any 'parachute payments' (within the meaning of section
280G(b)(2) of the Code) resulting from the treatment accorded (whether in
connection with the transaction or thereafter) to stock options, other
equity awards, stock-based or stock-measured compensation or compensation
which may be payable in stock pursuant to subparagraph 1(a)(iii) or
pursuant to any Company plan or other agreement or Board (or Board
committee) action relating to such options, awards or compensation.
"The determination of whether any of the Initial Payments will be
subject to the Excise Tax and the amount of such Excise Tax will be made by
tax counsel ('Tax Counsel') reasonably acceptable to the Executive and
selected (and compensated) by the Company. For purposes of such
determination, (x) all of the Initial Payments shall be treated as
'parachute payments' (within the meaning of section 280G(b)(2) of the Code)
unless, in the written opinion of Tax Counsel, such payments or benefits
(in whole or in part) do not constitute parachute payments, including by
reason of section 280G(b)(4)(A) of the Code, (y) all 'excess parachute
payments' (within the meaning of section 280G(b)(l) of the Code) shall be
treated as subject to the Excise Tax unless, in the written opinion of Tax
Counsel, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the meaning
of section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as
defined in Section 280G(b)(3) of the Code) allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax, and (z) the
value of any noncash benefits or any deferred payment or benefit shall be
determined by the Company in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income
tax at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local (and
foreign, if any) income taxes at the highest marginal rate of taxation in
the state and locality of the Executive"s residence on the date of
termination of the Executive"s employment (or if there has been no such
termination, the date on which the Gross-Up Payment is calculated for
purposes of this paragraph 14), net of the reduction in federal income
taxes (if any) which is available from deduction of such state and local
(and foreign, if any) taxes.
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"As soon as practicable following any such determination of the
Gross-Up Payment by the Tax Counsel, the Company shall provide the
specifics of the determination in writing to the Executive and to the
trustee of the trust referred to in subparagraph 9(d)(ii). The Gross-Up
Payment will be made in cash by the Company to the Executive not later than
the fifth business day following the date on which the Executive's
termination occurs (or, if no termination shall have occurred, not later
than the thirtieth (30th) business day immediately following the event that
resulted in the imposition of the Excise Tax)(in either case, the 'Payment
Date'). If the amount of the Gross-Up Payment cannot be accurately
determined on or before the Payment Date, the Company shall pay to the
Executive on such day an estimate, as determined in good faith in
accordance with this paragraph 14, of the minimum amount to which the
Executive is clearly entitled and shall pay the remainder of the Gross-Up
Payment (together with interest on the unpaid remainder (or on all of the
Gross-Up Payment to the extent the Company fails to make such payment when
due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event later than the
thirtieth (30/th/) day after a Payment Date. In the event that the amount
of the estimated Gross-Up Payment made to the Executive exceeds the amount
subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth (5/th/) business
day after demand by the Company (together with interest at 120% of the rate
provided in Section 1274(b)(2)(B) of the Code).
"In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, within the five (5)
business days immediately following the date that the amount of such
reduction in the Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to the amount of such reduction (including
the Excise Tax component and the federal, state and local (and foreign, if
any) income and employment tax components of the Gross-Up Payment), to the
extent that such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive's taxable income and wages for
purposes of federal, state and local (and foreign, if any) income and
employment taxes, plus interest on the amount of such repayment at 120% of
the rate provided in section 1274(b)(2)(B) of the Code. In the event that
the Excise Tax is determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall pay to the Executive an
additional Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) within the five (5) business days immediately following the date
that the amount of such excess is finally determined. The Executive and
the Company shall each reasonably cooperate
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with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax
with respect to the Initial Payments."
16. The parties agree that (i) if the Company wishes to engage
in a Change in Control transaction intended to qualify for pooling-of-interests
accounting treatment, and (ii) if, in the opinion of the accounting firm or
firms whose opinion or opinions with respect to pooling-of-interests accounting
is or are required as a condition to the consummation of such transaction, (x)
the implementation of any provision of this Amendment Agreement or of any
provision of the Existing Agreement or (y) the taking of any action by the
Executive (including, without limitation, the sale of securities of the Company
or the exercise of stock options or stock appreciation rights granted by the
Company) (the "Disqualifying Action") would disqualify such transaction from
pooling-of-interests accounting treatment, then: with respect to (x), such
provision shall be null and void from the date hereof automatically and without
any action on the part of the Company or the Executive, and all the provisions
of the Existing Agreement not so nullified, as amended by all the provisions of
this Amendment Agreement not so nullified, shall remain in full force and
effect; and with respect to (y), the Executive agrees not to take any
Disqualifying Action.
17. The Executive hereby consents to amendment by the Company
(if the Company so elects and subject to the approval of the trustee then
serving, if required) of the Trust Agreement dated as of February 19, 1987, by
and between the Company and Fleet National Bank, as amended as of August 18,
1988 (the "Benefits Trust") which was established to assure the payment of
benefits under the individual agreements listed on Exhibit I thereto (which
include the Existing Agreement) as follows: amend Section 2.02(a) of the
Benefits Trust to include, as a third alternative form of investment for the
assets of the Benefits Trust, a letter of credit payable to the commercial bank
serving as trustee of the Benefits Trust from time to time, with the proceeds
thereof to be used in accordance with the provisions of the Benefits Trust. The
parties hereto agree (and the Executive consents) that the Company shall
promptly amend (x) Section 3.01 of the Benefits Trust (subject to the approval
of the trustee serving thereunder, if required) to define a "Change in Control"
as such term is defined in subparagraph 1(d) of the Agreement, and (y) Section
4.02(a) of the Benefits Trust (subject to the approval of the trustee
thereunder, if required) to delete clauses (iii) and (iv) in the next-to-last
sentence thereof. The Executive agrees that, upon the Company"s request, the
Executive will sign any additional documents indicating the Executive"s consent
tothe amendments described in this Section 17 which are needed to facilitate
such amendments.
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IN WITNESS WHEREOF, the parties have executed this Amendment Agreement
as of the date first above written.
CHAMPION INTERNATIONAL CORPORATION
By:/s/ Xxxxxxx X. Xxxxx
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Chairman of the Board of Directors
Attest:
/s/ Xxxxxxxx X. Xxx
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Secretary
/s/ L. Xxxxx Xxxxxxx
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Executive
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