EXHIBIT 10.2
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 Kenwood X. 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. The first sentence of Paragraph 4 of the Existing Agreement is
amended by deleting the words "effective September 1, 1989, (a) a salary at a
monthly rate which is the higher of (A) $31,250," and replacing those words with
the following: "effective January 1, 1999, (a) a salary at a monthly rate which
is the higher of (A) $58,334,".
2. Paragraph 5 of the Existing Agreement is amended by deleting the
words "(whether or not any such period shall have been accelerated)," in the
first sentence thereof and the words"(regardless of whether or not any such
period shall have been accelerated)" in the third sentence thereof and, in each
case, 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), (E) and
(H) of subparagraph 8(b)(ii) or during a period of three years in the event
of any other kind of termination (as defined in subparagraph 8(b)),"
Paragraph 5 is further amended to delete the words "under subparagraph 6(a)
(during
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any period of long-term disability) or 8(a)(i) below" in the proviso at the end
of the first sentence thereof.
3. Subparagraph 8(a)(i) of the Existing Agreement is amended by
deletion of the proviso at the end of the last sentence thereof.
4. Clauses (x) and (y) of subparagraph 8(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 8(a)(i)) in the event of a
termination solely of the kind referred to in clauses (A), (B), (E) and (H)
of subparagraph 8(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 8 (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 C, shall be valued at the cost of acquiring insurance
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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), (E) and (H) of subparagraph 8(b)(ii) or for a three-year period in the
event of any other kind of termination (as defined in subparagraph 8(b)),
and such cost shall be paid in a lump sum as soon as practicable after
termination;".
5. The definition of "Code" in subparagraph 8(a)(iii) of the
Existing Agreement is amended to refer to the "Internal Revenue Code of 1986, as
amended from time to time". Subparagraph 8(a)(iii) is further amended by adding
the following sentence at the end of such subparagraph:
"Notwithstanding the foregoing provisions of this subparagraph 8(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
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(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)."
6. Subparagraph 8(a)(iv) of the Existing Agreement is amended by
inserting the following at the end of the first sentence thereof:
"; provided, however, that, for purposes of this subparagraph 8(a)(iv), the
ten-consecutive-year period referred to in the definition of 'Average
Annual Compensation' set forth in subparagraph 9(b)(i) shall end on the
second anniversary of the termination (and the total compensation for each
of the last two years of such period shall equal one-half (1/2) of the
lump sum payment set forth in clause (x) of subparagraph 8(a)(ii)) in the
event of a termination solely of the kind referred to in clauses (A), (B),
(E) and (H) of subparagraph 8(b)(ii) or such ten-consecutive-year period
shall end on the third anniversary of the termination (and the total
compensation for each of the last three years of such period shall equal
one-third (1/3) of the lump sum payment set forth in clause (x) of
subparagraph 8(a)(ii)) in the event of any other kind of termination (as
defined in subparagraph 8(b))".
7. Subparagraph 8(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), (G) and (H) immediately before the proviso at the end of
such subparagraph:
", (F) reduction in the monthly base salary of the Executive below the
highest monthly base salary paid from and after October 18, 1990, (G)
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 (H) 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".
8. Subparagraph 8(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:
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(i) any Person (as defined in this subparagraph 8(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 8(d)) representing 30% or more of the combined voting
power of the Company"s then outstanding securities; or
(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 8(d):
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`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 substantially 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."
9. The first sentence of subparagraph 9(d)(i) of the Existing
Agreement is amended to read in its entirety as follows:
"Upon the retirement of the Executive pursuant to subparagraph 9(b) above,
the Executive shall automatically be paid his excess retirement allowance
(and any related excess survivor retirement allowance ) in a lump sum as
soon as practicable after such retirement."
10. Subparagraph 9(d)(ii) is amended to read in its entirety as
follows: "(ii) [Intentionally Omitted]".
11. The words "an election by the Executive" in the first sentence of
subparagraph 9(d)(iii) of the Existing Agreement are amended to read in their
entirety as follows: "a lump sum payment to the Executive". The third and
fourth sentences of subparagraph 9(d)(iii) are deleted. Subparagraph 9(d)(iii)
is further amended by the deletion therein of all references to subparagraph
9(d)(ii), sometimes referred to as clause (ii) of subparagraph 9(d).
12. Subparagraph 12(b) of the Existing Agreement is amended by adding
the following language at the beginning thereof: "Subject to paragraph 21,".
13. The last sentence of paragraph 15 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 8(d), the terms `Company' and `Board' shall refer to the
prior-to-the-transaction `Company' or `Board'). Upon
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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 8(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 8(d) shall constitute a Change in Control for all purposes of
this Agreement. The provisions of this paragraph 15 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."
14. Clause (x) of subparagraph 16(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. Subparagraph 16(d)(iii) is
further amended by deleting all of the words from "(z)" through the end of such
subparagraph and replacing such words with the following: "(z) the retirement
payments (as described in subparagraph 8(a)(iv)) set forth in Exhibit G."
15. Subparagraph 16(d)(v) of the Existing Agreement is amended in its
entirety to read as follows: "(v) [Intentionally Omitted]".
16. Exhibit C to the Existing Agreement is amended by changing the
reference to "subparagraph 8(a)(i)" therein to refer to "subparagraph 8(a)(ii)".
17. Exhibit D 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
Company's pension plan".
18. Exhibit G 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 G does
not reflect the possible reduction provided for in subparagraph 16(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", (iv) deleting the reference
to "For Active Employees" and the provision "For Retired Employees", and (v)
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 21.
Notwithstanding the foregoing, no amounts shall be deposited in Trust with
respect to options or contingently credited shares (or other equity awards)
if
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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 8(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."
19. Paragraph 21 of the Existing Agreement is amended to read in its
entirety as follows:
"21. 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 8(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 21,
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 provided by this paragraph 21,
shall be equal to the Initial Payments. Notwithstanding any of the
provisions of this paragraph 21, 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 21 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 8(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
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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 21), 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.
"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 16(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 21, 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
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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 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."
20. 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
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take any Disqualifying Action.
21. 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 8(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 to the amendments
described in this Section 21 which are needed to facilitate such amendments.
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
Attest:
/s/ Xxxxxxxx X. Xxx
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Secretary
/s/ Kenwood X. Xxxxxxx
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Executive
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