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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NO. 1-3053
CHAMPION INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-1427390
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
ONE CHAMPION PLAZA
STAMFORD, CONNECTICUT 06921
(203) 358-7000
(ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
COMMON STOCK, $.50 PAR VALUE NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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. YESX. 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. [X]
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF FEBRUARY 28, 1997 WAS APPROXIMATELY $4,215,000,000.
AS OF FEBRUARY 28, 1997, 95,590,309 SHARES OF COMMON STOCK OF THE REGISTRANT
WERE OUTSTANDING.
PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1996 ARE INCORPORATED BY REFERENCE IN PARTS I, II AND
IV HEREOF. PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS SCHEDULED TO BE HELD ON MAY 15, 1997 ARE
INCORPORATED BY REFERENCE IN PART III HEREOF.
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PART I
ITEM 1. BUSINESS
GENERAL
Champion International Corporation was incorporated under the laws of the
State of New York on April 28, 1937. References to the "Company" include
Champion International Corporation and its subsidiaries at December 31, 1996,
unless the context otherwise requires.
The Company is one of the leading domestic manufacturers of paper for
business communications, commercial printing, publications and newspapers. In
addition, the Company has significant market pulp, plywood and lumber
manufacturing operations and owns or controls approximately 5,302,000 acres of
timberlands in the United States. The Company's Canadian and Brazilian
subsidiaries also own or control significant timber resources supporting their
operations.
The Company's business segments are paper and wood products. See Note 14 of
"Notes to Financial Statements" on pages 39 and 40 of the Company's Annual
Report to Shareholders for the fiscal year ended December 31, 1996 (the
"Company's 1996 Annual Report"), which Note is incorporated by reference herein,
for information concerning the Company's business segments and operations in
different geographic areas for 1994, 1995 and 1996.
PAPER
See the "Paper Net Sales" table on page 18 of the Company's 1996 Annual
Report, which table is incorporated by reference herein, for information
concerning the net sales to unaffiliated customers of the various products of
the paper business for 1994, 1995 and 1996.
FREE SHEET PAPERS
The free sheet papers business manufactures and sells coated and uncoated
free sheet papers, bleached paperboard and pulp. The principal manufacturing
properties of this operation consist of integrated pulp and paper mills at
Courtland, Alabama; Canton, North Carolina; Pensacola, Florida; and Quinnesec,
Michigan. As of December 31, 1996, these mills had an annual capacity of
approximately 2,359,000 tons of pulp and 2,280,000 tons of free sheet papers and
bleached paperboard.
A significant portion of the fiber requirements of the free sheet papers
business is supplied by its own mills. In addition, a portion of the fiber
requirements of this business is supplied by other Company pulp mills, and
approximately 3% of its fiber requirements in 1996 was purchased from third-
party suppliers.
The Company manufactures pulp for sale in the open market at the Quinnesec
mill. In 1996, approximately 65% of the pulp production of this mill, or
251,000 tons, was sold in the open market. The balance was used in the
production of paper at the Quinnesec mill and at other Company paper mills. In
addition, approximately 8% of the pulp produced at the Courtland and Pensacola
mills was sold in the open market in 1996.
Uncoated papers produced by the free sheet papers business are used for
computer forms, desktop printers, copier paper and envelope papers. Coated
papers are used in catalogs, magazines, textbooks, labels and annual reports.
In 1996, 62% of this operation's bleached paperboard production was used by
the Company's DairyPak unit, which converts polyethylene-coated paperboard into
milk and juice cartons and ovenable packaging. The balance either was sold to
independent purchasers, primarily for conversion to cups, or was exported.
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The Company leases substantial portions of the Courtland mill under 15 long-
term net leases which expire between 2007 and 2029. Each of these leases
provides for rental payments over its term sufficient to pay interest on and to
retire the industrial development or pollution control revenue bonds issued in
connection with the financing of the property subject to such lease. The
Company is required to purchase, or has the option to purchase, the property
subject to each such lease for a nominal sum at the time the related bonds are
retired.
The Company leases a printing facility at the Athens, Georgia DairyPak plant
until 2015. The lease provides for rental payments over its term sufficient to
pay interest on and to retire the industrial development revenue bonds issued to
finance the acquisition of that facility. The Company has the option to
purchase the facility for a nominal sum at the time the bonds are retired.
GROUNDWOOD PAPERS
The groundwood papers business manufactures and sells coated and uncoated
groundwood papers, newsprint and pulp. The manufacturing properties of this
operation consist of integrated pulp and paper mills at Bucksport, Maine and
Sartell, Minnesota, as well as integrated pulp and newsprint mills at Lufkin and
Sheldon, Texas. As of December 31, 1996, these mills had an annual capacity of
approximately 1,530,000 tons of pulp (which includes 166,000 tons of recycled
pulp) and 1,763,000 tons of groundwood papers and newsprint.
Most of the pulp produced by the groundwood papers business is used in its
own paper mills; approximately 3%, produced at the Sheldon mill, was sold in the
open market in 1996. In addition, a portion of the fiber requirements of this
business is supplied by other Company pulp mills, and approximately 20% of its
fiber requirements in 1996 was purchased from third-party suppliers.
The Company's coated and uncoated groundwood grades are used primarily for
consumer magazines, direct mail catalogs, directories, textbooks and coupons.
The Company leases the building which houses one of the paper machines at the
Sartell mill until 2008. Thereafter, the Company has options to renew the lease
for five terms of five years each. The Company also has the option to purchase
the building at its then-current market value at the end of the initial term in
2008 or at the end of each five-year renewal term.
SPECIALTY PAPERS
The specialty papers business manufactures and sells premium free sheet
papers, specialty groundwood papers, unbleached linerboard and kraft paper, and
manufactures pulp. The manufacturing properties of this operation consist of
integrated pulp and paper mills at Deferiet, New York and Roanoke Rapids, North
Carolina; and a paper mill at Hamilton, Ohio. As of December 31, 1996, these
mills had an annual capacity of approximately 607,000 tons of pulp, 364,000 tons
of free sheet and groundwood papers, 374,000 tons of linerboard and 132,000 tons
of kraft paper.
A significant portion of the fiber requirements of the specialty papers
business is supplied by its own mills. In addition, a portion of the fiber
requirements of this business is supplied by other Company pulp mills, and
approximately 18% of its fiber requirements in 1996 was purchased from third-
party suppliers.
Premium free sheet papers produced by the specialty papers business are used
for brochures, catalogs and annual reports. Specialty groundwood papers are
used for directories, labels and coupons. Unbleached linerboard is used for
corrugated boxes, and kraft paper is used for multiwall and grocery bags.
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PULP
For information concerning market pulp produced at the Courtland, Pensacola
and Quinnesec mills, see the section captioned "Free Sheet Papers" above; and
for information concerning market pulp produced at the Sheldon mill, see the
section captioned "Groundwood Papers" above.
Weldwood of Canada Limited, a wholly owned Canadian subsidiary ("Weldwood"),
manufactures bleached softwood kraft pulp at its mill in Hinton, Alberta,
Canada. As of December 31, 1996, this mill had an annual capacity of
approximately 463,000 tons. In 1996, approximately 28% of the mill's pulp
production was used in the Company's own free sheet papers and groundwood papers
mills. The balance was sold in the open market through the Company's
headquarters in Stamford, Connecticut, a Company sales office in Appleton,
Wisconsin and a Weldwood sales office in Bad Homburg, Germany.
Cariboo Pulp & Paper Company, a joint venture owned equally by Weldwood and
Daishowa-Marubeni International Limited, operates a bleached softwood kraft pulp
mill in Quesnel, British Columbia, Canada. As of December 31, 1996, this mill
had an annual capacity of approximately 370,000 tons. In 1996, approximately
22% of Weldwood's 50% share of the mill's pulp production was used in the
Company's own free sheet papers and groundwood papers mills. The balance of
Weldwood's share was sold in the open market through the Company's headquarters
in Stamford, Connecticut, a Company sales office in Appleton, Wisconsin and a
Weldwood sales office in Bad Homburg, Germany.
While certain of the Company's mills purchase pulp in the open market, the
Company and Weldwood overall are net sellers of pulp. In 1996, the Company and
Weldwood in the aggregate produced approximately 871,000 tons of pulp for sale
to unaffiliated purchasers, while the Company used approximately 283,000 tons of
pulp purchased from third-party suppliers, resulting in net market pulp of
approximately 588,000 tons.
BRAZIL
Champion Papel e Celulose Ltda., a 99.91%-owned subsidiary ("Champion
Papel"), is a major integrated manufacturer of pulp and free sheet papers in
Brazil. As of December 31, 1996, its mill had an annual capacity of
approximately 344,000 tons of pulp and 388,000 tons of paper. In addition to
being a leading supplier of free sheet papers in Brazil, Champion Papel exports
a substantial portion of its paper production.
SALES
The Company's domestic sales organization is responsible for the sale of
products produced by the Company's domestic free sheet papers business,
groundwood papers business and specialty papers business.
The sales organization maintains 17 regional sales offices throughout the
United States and an order services office in Hamilton, Ohio, serving the free
sheet papers business (excluding pulp), groundwood papers business (excluding
newsprint) and specialty papers business (excluding linerboard and kraft
paper). Generally, sales are made to direct purchasers and through paper
merchants and brokers.
Pulp produced at the Company's domestic mills for sale in the open market is
sold through the Company's headquarters in Stamford, Connecticut, as well as a
sales office in Appleton, Wisconsin.
Sales of newsprint are made by the sales organization through four sales
offices, as well as an order services office located in Lufkin, Texas. In
general, sales are made directly to publishers and printers.
Linerboard and kraft paper are sold to converters through three regional
sales offices and an order services office located in Roanoke Rapids, North
Carolina.
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In addition, the Company's international sales organization handles the
export sale of all of the Company's domestic pulp and paper products. This
organization is located at the Stamford, Connecticut headquarters.
PAPER DISTRIBUTION OPERATION
Nationwide Papers, a unit of the Company, is a distributor of paper, paper
products and industrial products. Its marketing operations are carried out
through 44 sales offices and 30 distribution centers in 20 states. At two of
the centers, Nationwide Papers converts rolls of bleached paperboard and coated
and uncoated papers into sheets. In 1996, approximately 75% of its sales were
attributable to merchandise purchased from numerous manufacturers other than the
Company. However, Nationwide Papers is not dependent on any single supplier for
such merchandise.
WOOD PRODUCTS
The Company is a major producer of plywood and lumber. The Company's wood
products business is conducted through its domestic wood products operations and
through the wood products operations of Weldwood.
The principal wood products manufacturing facilities operated by the Company
and by Weldwood are summarized under Item 2 of this Report. As of December 31,
1996, the Company had approximate annual capacities of 892 million square feet
(3/8" basis) of softwood plywood and 378 million board feet of softwood lumber.
As of December 31, 1996, Weldwood had approximate annual capacities of 345
million square feet (3/8" basis) of softwood plywood and 794 million board feet
of softwood lumber. However, as a result of the modernization of the plywood
plant in Quesnel, British Columbia, as discussed below under the section
captioned "Capital Program", it is anticipated that Weldwood's annual capacity
of softwood plywood will decline to 295 million square feet (3/8" basis) by mid-
1997.
The Company sells lumber and plywood through one sales office to wholesalers,
dealers, industrial users and retailers. Weldwood exports a significant amount
of lumber and plywood, and also sells such products through one sales office to
wholesalers (including a 50%-owned building materials distribution company),
industrial users and retailers in Canada.
See the "Wood Products Net Sales" table on page 20 of the Company's 1996
Annual Report, which table is incorporated by reference herein, for information
concerning the net sales to unaffiliated customers of the various products of
the wood products business for 1994, 1995 and 1996.
TIMBER PROPERTIES
The Company owns 4,788,333 acres and controls 513,689 acres of timberlands in
the United States. The Company's owned and controlled timberlands contain in
the aggregate approximately 19,068,000 cunits (one cunit equals one hundred
cubic feet of solid wood) of merchantable sawtimber and approximately 40,727,000
cunits of pulpwood. In 1996, the Company harvested approximately 34% of its
domestic fiber requirements from its owned and controlled timberlands. A
portion of the fiber harvested by the Company is sold in the domestic open
market and in the export market.
Broken down by region, the Company's domestic timber acreage and volume are
as follows: In the State of Washington, the Company owns 296,904 acres and
controls 476 acres of timberlands. These timberlands contain in the aggregate
approximately 8,532,000 cunits of merchantable sawtimber and approximately
519,000 cunits of pulpwood. In the South, primarily in Texas, North Carolina,
South Carolina, Alabama, Georgia, Florida, Tennessee and Virginia, the Company
owns 2,599,413 acres and controls 483,607 acres of timberlands containing in the
aggregate approximately 4,728,000 cunits of merchantable sawtimber and
approximately 22,498,000 cunits of pulpwood. The Company owns 1,892,016 acres
and controls 29,606 acres of timberlands in the North, primarily in Maine,
Michigan, New Hampshire, New York, Vermont and Wisconsin. These timberlands
contain in the
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aggregate approximately 5,808,000 cunits of merchantable sawtimber and
approximately 17,710,000 cunits of pulpwood.
The Company's domestic log and pulpwood requirements are procured from its
owned and controlled lands, as described above, as well as from open market
purchases, short-term timber purchase contracts with independent timber owners
and agencies of the United States and various state governments, and supply
agreements with other companies. In the opinion of management, these sources
will provide an adequate supply of logs and pulpwood to meet the Company's
principal raw materials requirements for the foreseeable future. It is expected
that the proportion of fiber derived from the Company's owned and controlled
lands, which has declined in recent years, will remain approximately one-third
until the late 1990s and will increase thereafter as more of the Company's
plantations, primarily in the South, reach maturity.
Supplementing the Company's domestic timberlands are its several seed
orchards and nursery operations. These facilities will enable the Company to
produce most of the trees which it plans to plant in the United States in the
future, including the approximately 65 million trees planned for planting in
1997.
Weldwood obtains raw materials for its wood products manufacturing operations
primarily from sustained-yield, long-term licenses which grant cutting rights on
government-owned timberlands and from long-term agreements with other companies
based on their harvesting licenses. Weldwood believes that these sources will
provide a substantial portion of the raw materials required by its wood products
manufacturing operations for the foreseeable future, with the balance to be
obtained from other third-party suppliers.
In British Columbia, Canada, Weldwood has rights to harvest approximately
543,000 cunits of merchantable sawtimber annually from long-term licenses and,
during the balance of the current terms of such licenses, has rights to harvest
an aggregate of approximately 6,826,000 cunits.
In Alberta, Canada, Weldwood has cutting rights through June 15, 2008 with
respect to approximately 2,461,000 acres of timberlands pursuant to an agreement
with the Provincial Government of Alberta. This agreement is renewable at
Weldwood's option, subject to Provincial Government approval, for successive 20-
year periods as long as the Hinton, Alberta pulp mill remains in operation.
Weldwood has the right to harvest approximately 671,000 cunits of pulpwood
annually under this agreement.
Cariboo Pulp & Paper Company holds certain rights to harvest up to 533,000
cunits of pulpwood annually from approximately 3,900,000 acres of government-
owned timberlands in British Columbia pursuant to a long-term license. Weldwood
believes that this source of pulpwood, as well as supplies of wood chips from
sawmills and plywood plants in the area, will satisfy the raw materials
requirements of Cariboo's pulp mill for the foreseeable future. Babine Forest
Products Company, a joint venture in which Weldwood has an indirect 58%
interest, operates a sawmill in British Columbia and is beneficially entitled to
harvest approximately 230,000 cunits of merchantable sawtimber annually pursuant
to long-term licenses. Houston Forest Products Company, a joint venture in
which Weldwood and Eurocan Pulp and Paper Company are equal participants,
operates a sawmill in British Columbia and is beneficially entitled to cut
approximately 229,000 cunits of merchantable sawtimber annually pursuant to a
long-term license.
Champion Papel owns or controls 1,390,376 acres of timberlands and savannah
in Brazil. The owned or controlled acreage includes 1,055,952 acres in the
State of Amapa, of which 199,201 acres are pine and eucalyptus plantations.
Champion Papel expects to plant additional eucalyptus and pine trees on its land
in Amapa until approximately 36% of such land is planted, with 50% legally
required to be left undisturbed, leaving the balance for natural features and
improvements.
Certain of the Company's land holdings have a value substantially in excess
of that of land primarily used for fiber supply purposes. The Company has sold
or contributed to its wholly owned real estate subsidiaries, net of land
repurchased by the Company, an aggregate of approximately 282,000 acres of such
land. These subsidiaries have sold approximately 228,200 acres, of which
approximately 44,100 acres were sold during 1996, for residential, recreational,
commercial or industrial purposes. The balance is being held for similar sale
or long-term apprecia-
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tion. A substantial portion of the land held by the Company's real estate
subsidiaries is located in Texas, Florida, Michigan and Minnesota.
MINERAL, OIL AND GAS RESOURCES
The Company owns or controls various mineral, oil and gas rights with respect
to approximately half of the timberlands owned or controlled by the Company in
the United States. The Company has conducted a general review of its domestic
mineral, oil and gas rights and presently is not aware of any significant
reserves or deposits except as discussed below.
The Company has oil and gas interests in fields located in Florida, Alabama,
Texas, Louisiana and Mississippi. Drilling operations are conducted by others
pursuant to leases and other agreements with the Company. The Company estimates
that proved reserves attributable to the Company's interests in such fields
aggregated approximately 1,000,000 barrels of oil and 3,000,000 Mcf (thousand
cubic feet) of natural gas as of December 31, 1996. The Company's share of
production from such fields was approximately 415,000 barrels of oil, 1,846,000
Mcf of natural gas and 3,250,000 gallons of gas products in 1996.
Proved oil and gas reserves attributable to the Company's non-operating
royalty interests and/or operating interests in the oil and gas fields described
above are based primarily upon estimates furnished by the operators of those
fields. The Company's share of production from such fields during each calendar
year is based on monthly production information received from the operators,
showing the application of such interests of the Company to actual production
volumes for such month.
The Company owns the surface rights and full or partial mineral rights to
considerable timberlands in Texas which overlay lignite deposits. The Company
estimates that it owns approximately 350 million tons of lignite reserves in
Texas, of which 80% is estimated to be recoverable. These lignite reserves
presently are not being mined due to current market conditions.
CAPITAL PROGRAM
The Company presently anticipates that capital spending will be approximately
$500 million in 1997, a significant portion of which will be devoted to
incremental improvements, routine capital replacements and environmental
compliance.
In late 1996, the Company suspended, pending further review, the $127 million
recycling project at the Courtland, Alabama mill. Alternatives under
consideration include installing a recycling facility at a different mill.
Weldwood, in 1995, began construction of a lumber mill and modernization of
the plywood plant in Quesnel, British Columbia. The new lumber mill will
replace the existing lumber mill and will have an annual capacity of
approximately 108 million board feet of lumber, an increase of approximately 13%
over the capacity of the existing lumber mill. The modernization of the plywood
plant, which will reduce production costs and permit the manufacture of
additional products, will decrease capacity by approximately one-third. The
lumber mill and plywood plant project is expected to be completed in 1998 at a
cost of approximately (U.S.) $80 million, of which (U.S.) $43 million had been
expended as of December 31, 1996.
In addition to the pine plantations and chip mill acquired through the
purchase of Amapa Florestal e Celulose in 1996, the Company plans to establish
eucalyptus and pine plantations and a new chipping operation in the State of
Amapa, Brazil in the next few years. The Company also has under consideration
the possible construction of a pulp and paper mill at Tres Lagoas, State of Mato
Grosso do Sul, Brazil in the next few years. Approximately $130 million had
been expended as of December 31, 1996 in connection with these projects.
Approximately $47 million of the anticipated capital spending in 1997 will be
devoted to these projects.
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The Company is considering a project to modernize the No. 5 paper machine at
the Bucksport, Maine mill. If a decision is made to proceed, the project is
expected to be completed in three years at a cost of approximately $63 million,
$25 million of which is included in the anticipated capital spending in 1997.
COMPETITION
See the first paragraph of Note 14 of "Notes to Financial Statements" on page
39 of the Company's 1996 Annual Report, which paragraph is incorporated by
reference herein, for information concerning competitive conditions.
FOREIGN OPERATIONS
For information concerning sales and income of the Company's foreign
subsidiaries, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations", incorporated by reference in Item 7 of this Report
from the Company's 1996 Annual Report.
See the second paragraph of Note 14 of "Notes to Financial Statements" on
page 39 of the Company's 1996 Annual Report, which paragraph is incorporated by
reference herein, for information concerning the risks associated with the
Company's foreign operations.
EMPLOYEES
The Company had 24,379 employees at December 31, 1996. Of these, 18,198 were
domestic employees, 55% of whom were covered by contracts with labor unions.
Overall, 63% of the Company's employees were covered by contracts with labor
unions.
Union contracts covering domestic operations will expire as follows: 1997 -
the Florida, Maine and Georgia wood products operations; 1998 - the Deferiet,
New York specialty papers mill and the Canton, North Carolina free sheet papers
mill; 1999 - the Roanoke Rapids, North Carolina kraft mill and the Lufkin and
Sheldon, Texas newsprint mills; 2000 - the Bucksport, Maine and Sartell,
Minnesota groundwood papers mills; 2001 - the Pensacola, Florida free sheet
papers mill and the Hamilton, Ohio specialty papers mill; 2002 - the Courtland,
Alabama free sheet papers mill.
The Quinnesec, Michigan mill is a non-union facility.
At Weldwood, union contracts covering the Hinton, Alberta pulp mill, the
joint venture pulp mill at Quesnel, British Columbia and all of Weldwood's wood
products facilities will expire in 1997.
The union contract which covers the paper industry in Brazil, including
Champion Papel, is renegotiated each year.
THE ENVIRONMENT
For information regarding environmental capital expenditures, hazardous
substance cleanup and other envi-ronmental matters affecting the Company, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", incorporated by reference in Item 7 of this Report from the
Company's 1996 Annual Report.
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ENERGY REQUIREMENTS
The Company believes that it will be able to meet its energy needs for the
foreseeable future. Wood wastes and pulping liquors, which are by-products from
the manufacture of wood products and pulp, provide a reliable and relatively
low-cost source of energy for the Company's primary manufacturing facilities.
The Company's domestic wood products manufacturing facilities and domestic pulp,
paper and kraft mills satisfy approximately half of their energy requirements
from such wood wastes and pulping liquors.
The Company's foreseeable needs for purchased energy have been anticipated,
and the Company believes that it has arranged for adequate sources of supply.
ITEM 2. PROPERTIES
In 1996, the Company's domestic and foreign manufacturing facilities operated
in excess of 96% of capacity in the paper segment and at full capacity for
lumber, studs and plywood. Production curtailments in the Company's paper
segment were attributable primarily to scheduled maintenance.
Reference is made to Item 1 of this Report for information concerning the
general character, adequacy and capacity of the principal plants, timber
properties and other materially important physical properties of the Company.
The following lists show the location, nature and ownership of the Company's
principal plants. None of these plants is subject to a mortgage and, except as
indicated, all are owned in fee.
PAPER
FREE SHEET PAPERS
(a) Integrated pulp and free sheet papers mills:
(i) Courtland, Alabama/1/;
(ii) Canton, North Carolina;
(iii) Pensacola, Florida; and
(iv) Quinnesec, Michigan.
(b) The Company operates a plant in Waynesville, North Carolina which
applies polyethylene coating to bleached paperboard and which also converts roll
stock into cut-size paper.
(c) The Company operates five plants which convert polyethylene-coated
paperboard into milk and juice cartons and one plant which converts
polyethylene-coated paperboard into ovenable packaging. All of these plants are
located in the United States/2/.
GROUNDWOOD PAPERS
(d) Integrated pulp and groundwood papers mills:
(i) Bucksport, Maine; and
(ii) Sartell, Minnesota/3/.
_________________________
/1/For Courtland, Alabama mill lease information, see Item 1 - "Paper" of this
Report.
/2/For lease information regarding one of these plants, located in Athens,
Georgia, see Item 1 - "Paper" of this Report.
/3/For Sartell, Minnesota mill lease information, see Item 1 - "Paper" of this
Report.
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(e) Integrated pulp and newsprint mills:
(i) Lufkin, Texas; and
(ii) Sheldon, Texas.
SPECIALTY PAPERS
(f) Integrated pulp and specialty papers mills:
(i) Deferiet, New York; and
(ii) Roanoke Rapids, North Carolina.
(g) The Company operates a specialty papers mill in Hamilton, Ohio.
PULP
(h) The Company's free sheet papers mills in Pensacola, Florida, Courtland,
Alabama and Quinnesec, Michigan and newsprint mill in Sheldon, Texas also
produce market pulp.
(i) Weldwood operates a pulp mill in Hinton, Alberta, Canada and owns 50% of
a joint venture which operates a pulp mill in Quesnel, British Columbia, Canada.
BRAZIL
(j) Champion Papel operates an integrated pulp and paper mill at Mogi Guacu,
Brazil.
WOOD PRODUCTS
(a) The Company operates three softwood plywood plants in the United States.
(b) Weldwood operates two softwood plywood plants in Canada. One of these
plants is located on leased land.
(c) The Company operates five softwood lumber mills in the United States.
(d) Weldwood operates three softwood lumber mills in Canada. One of these
mills is located on leased land.
(e) Decker Lake Forest Products Limited, a subsidiary in which Weldwood has
an indirect 58% interest, operates a softwood lumber mill in Canada.
(f) Each of Babine Forest Products Company and Houston Forest Products
Company, joint ventures in which Weldwood has an interest, operates a mill for
the production of softwood lumber in Canada. One of these mills is located on
leased land.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal and administrative proceedings and claims of
various types. While any litigation contains an element of uncertainty,
management, based upon the opinion of the Company's General Counsel, presently
believes that the outcome of each such proceeding or claim which is pending or
known to be threatened, or all of them combined, will not have a material
adverse effect on the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT/1/
L. Scott Barnard (age 54) is an Executive Vice President of the Company, a
position which he has held since August 1992. He has responsibility for the
Company's pulp and paper sales. From February 1989 to September 1996, he had
responsibility for sales and marketing for the printing and writing papers and
publication papers businesses.
Stephen B. Brown (age 57) is Senior Vice President and General Counsel of the
Company, a position which he has held since January 1, 1997. From April 1983 to
December 1996, he was Vice President-Senior Counsel.
Mark V. Childers (age 44) is Senior Vice President-Organizational Development
and Human Resources of the Company, a position which he has held since August
1992. From June 1991 to August 1992, he was Vice President-Organizational
Development Project.
Michael P. Corey (age 53) is a Senior Vice President of the Company, a
position which he has held since February 1997. He has responsibility for
corporate analysis, acquisitions and divestitures, mineral resources and the
Company's real estate subsidiaries. From December 1984 to February 1997, he was
Vice President-Corporate Analysis.
Richard J. Diforio, Jr. (age 61) is a Senior Vice President of the Company, a
position which he has held since November 1992. He has responsibility for
environmental, health and safety affairs. From September 1990 to November 1992,
he was Vice President-Environment, Health and Safety of the Company.
Joe K. Donald (age 54) is an Executive Vice President of the Company, a
position which he has held since August 1989. He has responsibility for the
Company's domestic pulp and paper manufacturing operations. From August 1989 to
September 1996, he headed the publication papers business.
Frank Kneisel (age 59) is Senior Vice President-Finance of the Company, a
position which he has held since January 1995. From November 1975 to December
1994, he was Treasurer of the Company. From May 1981 to December 1994, he was a
Vice President.
Burton G. MacArthur, Jr. (age 50) is an Executive Vice President of the
Company, a position which he has held since January 1990. He has responsibility
for the Company's marketing program, as well as for order services, purchasing,
transportation and logistics. From January 1990 to September 1996, he headed
the newsprint and kraft business.
Kenwood C. Nichols (age 57) is Vice Chairman and Executive Officer and a
director of the Company. He was elected Executive Officer in 1996. Since
August 1989, he has served as Vice Chairman and a director.
Richard E. Olson (age 59) was elected Chairman of the Board of Directors and
Chief Executive Officer of the Company in 1996. From December 1987 to 1996, he
was an Executive Vice President of the Company, with responsibility for
engineering, technology, manufacturing support and major projects.
Richard L. Porterfield (age 50) is an Executive Vice President of the
Company, a position which he has held since August 1992. He heads the forest
products unit, which consists of domestic timberlands operations and the
domestic wood products business. From January 1990 to August 1992, he was
Senior Vice President- Organizational Development and Human Resources of the
Company.
_______________________________
/1/The term of office for each executive officer expires at the Annual Meeting
of the Board of Directors of the Company scheduled to be held on May 15, 1997.
10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company had 19,272 record holders of its Common Stock as of February 28,
1997.
The Company's Common Stock is traded on the New York Stock Exchange.
Restrictions on the ability of the Company to pay cash dividends are included
in several of the Company's debt instruments and the Company's Restated
Certificate of Incorporation. At December 31, 1996, the most restrictive of
these limitations required the Company to maintain tangible net worth (as
defined below) of at least $2.61 billion. As a result of this requirement, such
amount is unavailable for the payment of dividends. Approximately $1.1 billion
of tangible net worth at December 31, 1996 was free of such restrictions.
Tangible net worth is defined as shareholders' equity minus goodwill,
unamortized debt discount and other like intangibles, all determined on a
consolidated basis for the Company.
For information concerning the high and low sales prices of the Company's
Common Stock for each quarterly period during the last two years and the amount
of dividends paid on the Company's Common Stock in each quarterly period during
the last two years, see the section on the inside back cover of the Company's
1996 Annual Report captioned "Common Stock Prices and Dividends Paid". Said
section is incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
There is incorporated by reference herein the table on pages 52 and 53 of the
Company's 1996 Annual Report captioned "Eleven-Year Selected Financial Data".
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
There is incorporated by reference herein the section on pages 44 to 51 of
the Company's 1996 Annual Report captioned "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
There is incorporated by reference herein the sections of the Company's 1996
Annual Report captioned "Consolidated Income", "Consolidated Balance Sheet",
"Consolidated Cash Flows", "Consolidated RetainedEarnings", "Notes to Financial
Statements" and "Report of Independent Public Accountants", which sections are
on pages 23, 24, 25, 26, 27 to 42 and 43, respectively, of the Company's 1996
Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the section captioned "Executive Officers of the Registrant" under Part I
of this Report for information concerning the Company's executive officers.
11
<PAGE>
For information concerning the directors of the Company, see the sections
captioned "The Board of Directors-The Nominees", "Information on the Nominees
and Directors", and "Committees" in the Company's definitive Proxy Statement for
the Annual Meeting of Shareholders scheduled to be held on May 15, 1997 (the
"Company's 1997 Proxy Statement"). Said sections are incorporated by reference
herein.
ITEM 11. EXECUTIVE COMPENSATION
There is incorporated by reference herein from the Company's 1997 Proxy
Statement the sections therein captioned "The Board of Directors-Directors'
Compensation"; and "Executive Compensation-Summary Compensation Table",
"Option/SAR Grant Table", "Option/SAR Exercise and Year-End Values Table",
"Pension Plan Table", and "Employment and Severance Agreements".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is incorporated by reference herein from the Company's 1997 Proxy
Statement the sections therein captioned "Principal Shareholders" and "Stock
Ownership by Nominees, Directors and Named Executive Officers".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is incorporated by reference herein from the Company's 1997 Proxy
Statement the section therein captioned "Transactions".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS. The following Consolidated Financial Statements
of Champion International Corporation and Subsidiaries, Notes to Financial
Statements and Report of Independent Public Accountants are incorporated by
reference herein from the Company's 1996 Annual Report:
<TABLE>
<CAPTION>
CAPTION IN COMPANY'S
DESCRIPTION 1996 ANNUAL REPORT (PAGE NUMBER)
----------- --------------------------------
<S> <C>
Consolidated Statements of Income for each of the
three years in the period ended December 31, 1996............. Consolidated Income (page 23)
Consolidated Balance Sheets at December 31, 1996 and 1995..... Consolidated Balance Sheet (page 24)
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 1996......... Consolidated Cash Flows (page.25)
Consolidated Statements of Retained Earnings for each of
the three years in the period ended December 31, 1996......... Consolidated Retained Earnings (page 26)
Notes to Financial Statements................................. Notes to Financial Statements.(pages 27 to 42)
Report of Independent Public Accountants with
respect to the financial statements listed above.............. Report of Independent Public Accountants (page 43)
</TABLE>
12
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES. All Financial Statement Schedules
have been omitted since the information is not applicable, is not required or is
included in the Consolidated Financial Statements or Notes to Financial
Statements listed under section (a) of this Item 14.
(c) EXHIBITS. Each Exhibit is listed according to the number assigned to
it in the Exhibit Table of Item 601 of Regulation S-K. The Exhibit numbers
preceded by an asterisk (*) indicate Exhibits physically filed with this Annual
Report on Form 10-K. All other Exhibit numbers indicate Exhibits filed by
incorporation by reference herein. Exhibit numbers 10.1 through 10.49, which
are preceded by a plus sign (+), are management contracts or compensatory plans
or arrangements.
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
3.1 Restated Certificate of Incorporation of the Company, filed in
the State of New York on October 20, 1986 (filed by incorporation
by reference to Exhibit 3.1 to the Company's Form 10-K for the
fiscal year ended December 31, 1986, Commission File No. 1-3053).
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of the Company, filed in the State of New York on
July 18, 1988 (filed by incorporation by reference to Exhibit 4.1
to the Company's Form 10-Q for the quarter ended June 30, 1988,
Commission File No. 1-3053).
3.3 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on December 6,
1989 (filed by incorporation by reference to Exhibit 4.1 to the
Company's Form 8-K dated December 14, 1989, Commission File No.
1-3053).
3.4 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on December 21,
1989 (filed by incorporation by reference to Exhibit 3.4 to the
Company's Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-3053).
3.5 By-Laws of the Company (filed by incorporation by reference to
Exhibit 3.1 to the Company's Form 10-Q for the quarter ended
September 30, 1996, Commission File No. 1-3053).
4 Letter agreement dated March 29, 1991 of the Company to furnish
to the Commission upon request copies of certain instruments with
respect to long-term debt (filed by incorporation by reference to
Exhibit 4 to the Company's Form 10-K for the fiscal year ended
December 31, 1990, Commission File No. 1-3053).
+10.1 Champion International Corporation 1986 Management Incentive
Program, consisting of the 1986 Stock Option Plan and the 1986
Contingent Compensation Plan (filed by incorporation by reference
to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended
June 30, 1986, Commission File No. 1-3053).
+10.2 Amendment to Champion International Corporation 1986 Management
Incentive Program (filed by incorporation by reference to Exhibit
10.1 to the Company's Form 10-Q for the quarter ended March 31,
1993, Commission File No. 1-3053).
+10.3 Champion International Corporation Supplemental Retirement Income
Plan (filed by incorporation by reference to Exhibit 10.7 to the
Company's Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-3053).
13
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
+10.4 Amendment dated as of January 1, 1994 to Champion International
Corporation Supplemental Retirement Income Plan (filed by
incorporation by reference to Exhibit 10.6 to the Company's Form
10-K for the fiscal year ended December 31, 1994, Commission File
No. 1-3053).
*+10.5 Champion International Corporation Nonqualified Supplemental
Savings Plan.
+10.6 Supplemental Retirement and Death Payments Agreement dated as of
August 1, 1964, as amended by letter agreement dated January 9,
1965, between the Company and Mr. Sigler (filed by incorporation
by reference to Exhibit 10.8 to the Company's Form 10-K for the
fiscal year ended December 31, 1990, Commission File No. 1-3053).
+10.7 Restated Agreement between the Company and Mr. Sigler, as amended
as of February 19, 1987, providing certain employment, severance
and retirement arrangements (filed by incorporation by reference
to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended
June 30, 1987, Commission File No. 1-3053).
+10.8 Agreement Relating to Legal Expenses dated February 19, 1987
between the Company and Mr. Sigler providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 19.2 to
the Company's Form 10-Q for the quarter ended June 30, 1987,
Commission File No. 1-3053).
+10.9 Amendment dated as of April 21, 1988 to Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 19.1 to the
Company's Form 10-Q for the quarter ended June 30, 1988,
Commission File No. 1-3053).
+10.10 Amendment dated as of August 18, 1988 to Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 10.10 to the
Company's Form 10-K for the fiscal year ended December 31, 1988,
Commission File No. 1-3053).
+10.11 Amendment dated as of August 18, 1988 to Agreement Relating to
Legal Expenses dated February 19, 1987 between the Company and
Mr. Sigler (filed by incorporation by reference to Exhibit 10.11
to the Company's Form 10-K for the fiscal year ended December 31,
1988, Commission File No. 1-3053).
+10.12 Amendment dated as of September 19, 1991 to Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 10.12 to the
Company's Form 10-K for the fiscal year ended December 31, 1991,
Commission File No. 1-3053).
+10.13 Amendment dated as of November 17, 1994 to Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 10.15 to the
Company's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-3053).
+10.14 Agreement dated November 17, 1994 between the Company and Mr.
Sigler relating to post-employment consulting services (filed by
incorporation by reference to Exhibit 10.16 to the Company's Form
10-K for the fiscal year ended December 31, 1994, Commission File
No. 1-3053).
14
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
+10.15 Amendment dated as of August 15, 1996 to (i) Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987 and (ii) Agreement dated November 17, 1994 between the
Company and Mr. Sigler (filed by incorporation by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
September 30, 1996, Commission File No. 1-3053).
*+10.16 Amendment dated as of November 21, 1996 to Agreement dated
November 17, 1994 between the Company and Mr. Sigler.
+10.17 Agreement dated as of August 18, 1988 between the Company and Mr.
Heist providing certain employment, severance and retirement
arrangements (filed by incorporation by reference to Exhibit
10.17 to the Company's Form 10-K for the fiscal year ended
December 31, 1988, Commission File No. 1-3053).
+10.18 Agreement Relating to Legal Expenses dated August 18, 1988
between the Company and Mr. Heist providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.18 to
the Company's Form 10-K for the fiscal year ended December 31,
1988, Commission File No. 1-3053).
+10.19 Amendment dated as of September 19, 1991 to Agreement dated as of
August 18, 1988 between the Company and Mr. Heist (filed by
incorporation by reference to Exhibit 10.15 to the Company's Form
10-K for the fiscal year ended December 31, 1991, Commission File
No. 1-3053).
+10.20 Amendment dated as of August 15, 1996 to Agreement dated August
18, 1988 between the Company and Mr. Heist (filed by
incorporation by reference to Exhibit 10.2 to the Company's Form
10-Q for the quarter ended September 30, 1996, Commission File
No. 1-3053).
+10.21 Agreement dated as of October 18, 1990 between the Company and
Mr. Nichols providing certain employment, severance and
retirement arrangements (filed by incorporation by reference to
Exhibit 10.16 to the Company's Form 10-K for the fiscal year
ended December 31, 1990, Commission File No. 1-3053).
+10.22 Agreement Relating to Legal Expenses dated October 18, 1990
between the Company and Mr. Nichols providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.17 to
the Company's Form 10-K for the fiscal year ended December 31,
1990, Commission File No. 1-3053).
+10.23 Amendment dated as of September 19, 1991 to Agreement dated as of
October 18, 1990 between the Company and Mr. Nichols (filed by
incorporation by reference to Exhibit 10.18 to the Company's Form
10-K for the fiscal year ended December 31, 1991, Commission File
No. 1-3053).
+10.24 Agreement dated as of August 18, 1988 between the Company and Mr.
Olson providing certain severance arrangements (filed by
incorporation by reference to Exhibit 10.23 to the Company's Form
10-K for the fiscal year ended December 31, 1990, Commission File
No. 1-3053).
15
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
+10.25 Agreement Relating to Legal Expenses dated August 18, 1988
between the Company and Mr. Olson providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.24 to
the Company's Form 10-K for the fiscal year ended December 31,
1990, Commission File No. 1-3053).
+10.26 Amendment dated as of September 19, 1991 to Agreement dated as of
August 18, 1988 between the Company and Mr. Olson (filed by
incorporation by reference to Exhibit 10.28 to the Company's Form
10-K for the fiscal year ended December 31, 1991, Commission File
No. 1-3053).
*+10.27 Agreement dated as of October 18, 1990 between the Company and
Mr. Donald providing certain severance arrangements.
*+10.28 Agreement Relating to Legal Expenses dated October 18, 1990
between the Company and Mr. Donald providing reimbursement of
certain legal expenses following a change in control of the
Company.
*+10.29 Amendment dated as of September 19, 1991 to Agreement dated as of
October 18, 1990 between the Company and Mr. Donald.
*+10.30 Amendment dated as of November 21, 1996 to Agreement dated as of
October 18, 1990 between the Company and Mr. Donald.
*+10.31 Agreement dated as of October 18, 1990 between the Company and
Mr. Barnard providing certain severance arrangements.
*+10.32 Agreement Relating to Legal Expenses dated October 18, 1990
between the Company and Mr. Barnard providing reimbursement of
certain legal expenses following a change in control of the
Company.
*+10.33 Amendment dated as of September 19, 1991 to Agreement dated as of
October 18, 1990 between the Company and Mr. Barnard.
*+10.34 Agreement dated as of October 18, 1990 between the Company and
Mr. Porterfield providing certain severance arrangements.
*+10.35 Agreement Relating to Legal Expenses dated October 18, 1990
between the Company and Mr. Porterfield providing reimbursement
of certain legal expenses following a change in control of the
Company.
*+10.36 Amendment dated as of September 19, 1991 to Agreement dated as of
October 18, 1990 between the Company and Mr. Porterfield.
*+10.37 Agreement dated as of February 19, 1987 between the Company and
Mr. Fuller providing certain severance arrangements.
*+10.38 Agreement Relating to Legal Expenses dated February 19, 1987
between the Company and Mr. Fuller providing reimbursement of
certain legal expenses following a change in control of the
Company.
*+10.39 Amendment dated as of April 21, 1988 to Agreement dated as of
February 19, 1987 between the Company and Mr. Fuller.
16
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
*+10.40 Amendment dated as of September 19, 1991 to Agreement dated as of
February 19, 1987 between the Company and Mr. Fuller.
+10.41 Trust Agreement dated as of February 19, 1987 between the Company
and Fleet National Bank of Connecticut securing certain payments
under the contracts listed as Exhibit numbers 10.7 through 10.40,
among others, following a change in control of the Company (filed
by incorporation by reference to Exhibit 19.11 to the Company's
Form 10-Q for the quarter ended June 30, 1987, Commission File
No. 1-3053).
+10.42 Amendment dated as of August 18, 1988 to Trust Agreement dated as
of February 19, 1987 between the Company and Fleet National Bank
of Connecticut (filed by incorporation by reference to Exhibit
10.29 to the Company's Form 10-K for the fiscal year ended
December 31, 1988, Commission File No. 1-3053).
+10.43 Champion International Corporation Executive Life Insurance Plan
(filed by incorpor-ation by reference to Exhibit 10.27 to the
Company's Form 10-K for the fiscal year ended December 31, 1990,
Commission File No. 1-3053).
+10.44 Amendment dated as of January 1, 1994 to Champion International
Corporation Executive Life Insurance Plan (filed by incorporation
by reference to Exhibit 10.33 to the Company's Form 10-K for the
fiscal year ended December 31, 1994, Commission File No. 1-3053).
+10.45 Second amendment dated as of July 17, 1996 to Champion
International Corporation Executive Life Insurance Plan (filed by
incorporation by reference to Exhibit 10.2 to the Company's Form
10-Q for the quarter ended June 30, 1996, Commission File No. 1-
3053).
+10.46 Extract from the minutes of the meeting of the Board of
Directors of the Company held on October 18, 1979 relating to the
$50,000 of group term life insurance provided by the Company for
non-employee directors (filed by incorporation by reference to
Exhibit 10.28 to the Company's Form 10-K for the fiscal year
ended December 31, 1990, Commission File No. 1-3053).
+10.47 Resolutions of the Board of Directors of the Company adopted on
September 19, 1991 relating to the compensation of directors
(filed by incorporation by reference to Exhibit 19 to the
Company's Form 10-Q for the quarter ended September 30, 1991,
Commission File No. 1-3053).
+10.48 Resolutions of the Board of Directors of the Company adopted on
August 18, 1994 relating to the compensation of directors (filed
by incorporation by reference to Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended September 30, 1994, Commission
File No. 1-3053).
+10.49 Retirement Plan for Outside Directors, benefit accruals under
which ceased on January 1, 1997 (filed by incorporation by
reference to Exhibit 19 to the Company's Form 10-Q for the
quarter ended September 30, 1992, Commission File No. 1-3053).
*11 Schedule showing calculation of primary earnings per common share
and fully diluted earnings per common share.
*13 Portions of the Company's 1996 Annual Report which are
specifically incorporated by reference herein.
17
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
*21 List of significant subsidiaries of the Company.
*23.1 Opinion and Consent of the Senior Vice President and General
Counsel of the Company.
*23.2 Consent of Arthur Andersen LLP.
*24 Power of Attorney relating to the execution and filing of this
Annual Report on Form 10-K and all amendments hereto.
*27 Financial Data Schedule.
(d) REPORTS ON FORM 8-K. The Company filed a Current Report on Form 8-K
dated November 1, 1996 reporting the sale of $200,000,000 principal amount of
the Company's 7.20% Debentures due November 1, 2026, pursuant to the Company's
shelf registration statement (No. 33-62819).
* * *
FORWARD-LOOKING STATEMENTS
Certain statements in this Report (including statements incorporated by
reference herein) that are neither reported financial results nor other
historical information are forward-looking statements. Such forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties that could cause actual results and Company plans and objectives
to differ materially from those expressed in the forward-looking statements.
Such risks and uncertainties include, but are not limited to, changes in the
United States and international economies; changes in worldwide demand for the
Company's products; changes in worldwide production and production capacity in
the forest products industry; competitive pricing pressures for the Company's
products; and changes in raw material, energy and other costs.
18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 27TH DAY OF MARCH,
1997.
CHAMPION INTERNATIONAL CORPORATION
(Registrant)
By /s/ Lawrence A. Fox
------------------------------
(LAWRENCE A. FOX)
VICE PRESIDENT AND SECRETARY
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 date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------- --------------
<S> <C> <C>
Chairman of the Board,
Chief Executive Officer
and Director (Principal
Richard E. Olson* Executive Officer) March 27, 1997
- -----------------------------------
(RICHARD E. OLSON)
Vice Chairman and Executive
Officer and Director (Principal
Kenwood C. Nichols* Accounting Officer) March 27, 1997
- -----------------------------------
(KENWOOD C. NICHOLS)
Senior Vice President-
Finance (Principal
Frank Kneisel* Financial Officer) March 27, 1997
- -----------------------------------
(FRANK KNEISEL)
Lawrence A. Bossidy* Director March 27, 1997
- -----------------------------------
(LAWRENCE A. BOSSIDY)
Robert A. Charpie* Director March 27, 1997
__________________________
(ROBERT A. CHARPIE)
H. Corbin Day*
__________________________ Director March 27, 1997
(H. CORBIN DAY)
Alice F. Emerson* Director March 27, 1997
___________________________
(ALICE F. EMERSON)
Allan E. Gotlieb* Director March 27, 1997
___________________________
(ALLAN E. GOTLIEB)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------- --------------
<S> <C> <C>
Sybil C. Mobley* Director March 27, 1997
_________________________
(SYBIL C. MOBLEY)
Lawrence G. Rawl* Director March 27, 1997
- -------------------------
(LAWRENCE G. RAWL)
Walter V. Shipley* Director March 27, 1997
- --------------------------
(WALTER V. SHIPLEY)
Richard E. Walton* Director March 27, 1997
__________________________
(RICHARD E. WALTON)
John L. Weinberg* Director March 27, 1997
___________________________
(JOHN L. WEINBERG)
*By /s/ Lawrence A. Fox March 27, 1997
-------------------------------
(LAWRENCE A. FOX)
</TABLE>
A power of attorney authorizing Stephen B. Brown, Lawrence A. Fox and Richard
E. Olson and each of them to sign this Report and all amendments hereto as
attorneys-in-fact for officers and directors of the registrant is filed as
Exhibit 24 hereto.
20
<PAGE>
EXHIBIT 10.5
CHAMPION INTERNATIONAL CORPORATION
----------------------------------
NONQUALIFIED SUPPLEMENTAL SAVINGS PLAN
--------------------------------------
(as amended and restated effective as of March 1, 1996)
INTRODUCTION
------------
Champion International Corporation hereby amends and restates the Champion
International Corporation Nonqualified Supplemental Savings Plan, effective as
of March 1, 1996. The Plan was originally adopted effective as of August 1,
1994. This Plan is an unfunded deferred compensation arrangement maintained by
Champion International Corporation for the purpose of providing supplemental
retirement savings primarily for a select group of management or highly
compensated employees.
ARTICLE I - DEFINITIONS
-----------------------
1.1 "Beneficiary" means the person or persons entitled to receive the
-----------
distributions, if any, payable under the Plan upon or after a Participant's
death. Each Participant may designate a Beneficiary by filing the proper form
with the Committee. A Participant may designate one or more contingent
Beneficiaries to receive any distributions after the death of a prior
Beneficiary. A designation shall be effective upon said filing, provided that
it is so filed during such Participant's lifetime, and may be changed from time
to time by the Participant.
1.2 "Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, and regulations relating thereto.
1.3 "Code Section 401(a)(17) Limitation" means the applicable compensation
----------------------------------
limitation set forth in section 401(a)(17) of the Code (as adjusted as provided
therein) (or any corresponding successor provision).
1.4 "Committee" means the Champion International Corporation Pension and
---------
Employee Benefits Committee (or its delegate(s)) which is responsible for the
administration of this Plan in accordance with the provisions of the Plan as set
forth in this document.
1.5 "Company" means Champion International Corporation, a New York corporation,
-------
or any successor thereto, including any successor to substantially all of its
assets which adopts and assumes the Plan at the time of transfer.
1.6 "Compensation" means with respect to any Plan Year, the total of base
------------
pay, cash bonuses, foreign service premium, and temporary disability earnings
paid to an Executive by an Employer or which would otherwise be so paid but for
a deferral election under this Plan, the Savings Plan,
<PAGE>
and/or a plan subject to section 125 of the Code. "Compensation" shall also
include any deferred bonuses under any management incentive bonus program(s),
any "basic" 12 week interim pay under the Employer's "Special Termination
Benefits" policies for employees, and any payments under the "Sustained
Performance Incentive Program" if maintained by the Employer.
1.7 "Deferral Election" means the form described in Section 2.2 of the Plan.
-----------------
1.8 "Deferred Compensation Account" means the account to be established by
-----------------------------
the Company as a book reserve to reflect the amounts deferred by a Participant
and the matching contributions by the Employer under Article II, as adjusted by
earnings (or losses) under Article III.
1.9 "Effective Date" means March 1, 1996.
--------------
1.10 "Employer" means the Company and any affiliate of the Company which,
--------
with the authorization of the Company, has adopted the Plan, and any successor
or assignee of any of them.
1.11 "Excess Compensation" means that portion of an Executive's Compensation
-------------------
which is in excess of the Code Section 401(a)(17) Limitation.
1.12 "Executive" means any employee of an Employer who is: (a) classified
---------
as Grade 20 to 34 by the Employer (except for any employee classified as Grade
31 or 33 but not administered as Grade 20 to 34) and whose Savings Plan Earnings
in any Plan Year exceed the applicable Code Section 401(a)(17) Limitation; (b)
classified as Grade 20 or higher and designated by the Committee as a member of
the select group of management or highly compensated employees eligible for
participation in the Plan; (c) a Vice President; (d) a Listed Executive; (e) and
any other employee designated by the Committee as a member of the select group
of management or highly compensated employees eligible for participation in the
Plan.
1.13 "Listed Executive" means any employee of an Employer whose name appears on
----------------
the list attached hereto as Schedule A.
1.14 "Management Incentive Award" means any bonus awarded under the Champion
-------------------------- --------
International Corporation Management Incentive Program or under any other
- ------------------------------------------------------
management incentive program maintained by an Employer that may be designated by
the Committee as deferrable under Section 2.2(b) of the Plan.
1.15 "Participant" means any Executive who elects to participate in the Plan
-----------
in accordance with Article II or a person who was such at the time of his death
or termination of service and who retains, or whose Beneficiary retains, a
benefit under the Plan which has not been distributed.
1.16 "Plan" means the Champion International Corporation Nonqualified
---- -----------------------------------------------
Supplemental Savings Plan as set forth in this instrument, and as it may be
- -------------------------
amended thereafter.
<PAGE>
1.17 "Plan Year" means the calendar year.
---------
1.18 "Savings Plan" means the Champion International Corporation Savings Plan
------------ -----------------------------------------------
#077 as in effect on the Effective Date and as subsequently amended, and any
- ----
successor or replacement plan for such plan.
1.19 "Savings Plan Earnings" means "Earnings" as defined in the Savings Plan
---------------------
without giving effect to the $200,000 limitation expressed therein and without
otherwise giving effect to the Code Section 401(a)(17) Limitation.
ARTICLE II - DEFERRAL ELECTIONS AND
------------------------------------
EMPLOYER MATCHING CONTRIBUTIONS
-------------------------------
2.1 General. Each Executive may elect in accordance with this Article II
-------
to defer a part of his Excess Compensation and/or a part (or all) of any
Management Incentive Award earned for a Plan Year and thereby become a
Participant under the Plan.
2.2 Deferral Election. A Participant desiring to exercise an election under
-----------------
Section 2.1 shall file with the Employer a Deferral Election in accordance with
(a) and/or (b) below, as applicable, in such form as the Committee may
prescribe. Such election shall be irrevocable, provided however, in the event a
Participant is faced with an unforeseeable emergency (as defined in Section 4.3)
during the Plan Year, such Participant, with the approval of the Committee, may
revoke his election for the remainder of such Plan Year.
(a) Deferral of Excess Compensation. A Deferral Election of a Participant
-------------------------------
who is not a Listed Executive may authorize the Employer to defer a percentage
of his Excess Compensation and provide that his Excess Compensation be reduced
by a whole percentage of not less than one percent (1%) nor more than eight
percent (8%) (sixteen percent (16%) effective January 1, 1997), as determined by
the Participant. Notwithstanding the foregoing, an Executive's Deferral
Elections under this Section 2.2(a) for the short 1994 Plan Year and/or for any
of the Plan Years 1995 through 1997 may specify deferral amounts in excess of 8%
(sixteen percent (16%) effective January 1, 1997), of his Excess Compensation
for said Plan Years so that such Executives who were elected officers on August
1, 1994 may defer during said Plan Years amounts that they could have deferred
if the Plan had been in effect for calendar years 1989 through 1993 and the
entire year of 1994 (whether or not they were elected officers during any or all
calendar years 1989 through 1993 or the portion of 1994 prior to August 1,
1994), or so that such Executives who are not elected officers on August 1, 1994
may defer during said Plan Years amounts that they could have deferred if the
Plan had been in effect for the 1993 calendar year and the entire year of 1994.
(b) Deferral of Management Incentive Awards. A Deferral Election of a
---------------------------------------
Participant may authorize the Employer to defer all or any part of any
Management Incentive Award and
<PAGE>
provide that the Management Incentive Award be reduced by the amount of such
deferral. A Participant who elects to defer any part of a Management Incentive
Award shall be required, with respect to the Plan Year in which the Management
Incentive Award would otherwise be paid, to make before-tax contributions to the
Savings Plan in an amount equal to the maximum before-tax contribution permitted
under the Savings Plan. A violation of the Savings Plan contribution requirement
of the preceding sentence shall not be deemed to have occurred if the
Participant elects to make such required contribution under the Savings Plan,
but the amount the Participant may contribute to the Savings Plan is reduced (or
there is a refund from the Savings Plan) by reason of the actual deferral
percentage test of section 401(k) (3) of the Code, by reason of section 415 of
the Code, or by reason of any other provision of law that limits the amount that
a Participant is permitted to contribute to the Savings Plan.
2.3 Time of Election. A Participant's Deferral Election must be delivered to
----------------
the Employer by such date as the Committee shall specify, which date shall be
prior to the beginning of the Plan Year in which the Excess Compensation and/or
Management Incentive Award subject to such election are earned.
Notwithstanding the foregoing, for the 1996 Plan Year only, a Participant may
deliver to the Employer a Deferral Election that provides for the deferral of
the Participant's 1996 Management Incentive Award (which would be paid in 1997)
on or before March 31, 1996. With respect to an employee of an Employer who
becomes an Executive during a Plan Year and who wishes to make a deferral
election under this Article II for such Plan Year, he must deliver his Deferral
Election to the Employer within the 30-day period following the day he becomes
an Executive but only with respect to Compensation earned after the date such
Compensation Deferral Election is delivered to the Employer.
2.4 Commencement of Deferrals. A Deferral Election shall be effective for the
-------------------------
entire Plan Year to which it relates but only with respect to Compensation of
the Participant earned for services rendered after the election is made in
accordance with Sections 2.2 and 2.3. The deferral of Excess Compensation
pursuant to such election shall not commence until the pay period following the
pay period in which the Participant's aggregate Compensation paid to date for
such Plan Year actually exceeds the Code Section 401(a)(17) Limitation then in
effect. The deferral of a Management Incentive Award shall occur when the
Management Incentive Award would otherwise be paid to the Participant.
2.5 Crediting of Accounts. Compensation otherwise payable to the Participant
---------------------
during the applicable Plan Year but deferred in accordance with Section 2.2
shall be credited to the Participant's Deferred Compensation Account as soon as
administratively feasible after his Compensation is so reduced.
2.6 Matching Contributions. Each Employer shall credit matching contributions
----------------------
to the Deferred Compensation Account of each Participant who has a Deferral
Election under Section 2.2(a) with respect to his Excess Compensation in effect
for all or part of the Plan Year. The amount of such matching contributions
shall be calculated by reference to the Participant's Excess Compensation
deferrals for the Plan Year and shall be equal to fifty percent (50%) of the
amount of the first six percent (6%) of Excess Compensation deferred.
Notwithstanding the
<PAGE>
foregoing, with respect to Executives who for the short 1994 Plan Year and/or
any of the Plan Years 1995 through 1997 make deferral elections with respect to
Excess Compensation in excess of 8% (sixteen percent (16%) effective January 1,
1997) as permitted under Section 2.2(a), matching contributions with respect to
such excess deferrals shall be equal to fifty percent (50%) of the amount of the
first six percent (6%) of aggregate Excess Compensation deferred for the years
to which such excess deferrals relate as provided in the second sentence of
Section 2.2(a). Matching contributions under this Section 2.6 shall be credited
to Participants' Deferred Compensation Accounts on the same periodic basis as
matching contributions are credited to participants' accounts under the Savings
Plan.
ARTICLE III - CREDITING OF EARNINGS
-----------------------------------
3.1 General. Subject to Section 3.4, there shall be credited to
-------
Participants' Deferred Compensation Accounts earnings (or losses) as if such
Deferred Compensation Accounts were actually invested in the investment funds
and Company Stock Fund available under the Savings Plan as determined under this
Article III.
3.2 Investment of Participant Deferrals. With respect to that part of each
-----------------------------------
Participant's Deferred Compensation Account attributable to his elective
deferrals under Section 2.2, each Participant shall elect to have earnings (or
losses) credited to his Deferred Compensation Account from among the investment
funds made available under the Savings Plan with respect to participant before-
tax elective deferrals under said plan. Such an election shall be made in
writing, on a form provided by the Committee, and delivered to the Employer
prior to the beginning of each Plan Year by such date as the Committee shall
determine. An investment election shall be effective for the entire Plan Year
to which it relates unless modified by the Participant during the Plan Year.
Such modifications may be made periodically on the same basis as participant
investment elections under the Savings Plan may be modified. If a Participant
fails to make and deliver an election for the following Plan Year by the date as
determined by the Committee, then his Deferred Compensation Account shall be
credited with the earnings (losses) under the investment election most recently
in effect.
3.3 Investment of Employer Matching Contributions. With respect to that part
---------------------------------------------
of each Participant's Deferred Compensation Account attributable to Employer
matching contributions under Section 2.6, the Company shall credit each
Participant's Deferred Compensation Account with earnings (or losses) as if such
matching contributions were invested in the "Company Stock Fund" under the
Savings Plan.
3.4 Crediting of Earnings. The rates of return throughout each Plan Year for
---------------------
the investment funds and Company Stock Fund referenced under Sections 3.2 and
3.3 shall be the same as the actual rates of return for said funds as under the
Savings Plan. For each Plan Year, each Participant's Deferred Compensation
Account shall be increased or decreased as if it had earned such rates of
return. Such increase or decrease shall be based on the varying balances of the
Deferred Compensation Accounts throughout the Plan Year and shall be credited to
said
<PAGE>
accounts on the same periodic basis as investment earnings (losses) are credited
to participants' accounts under the Savings Plan.
ARTICLE IV - PLAN BENEFITS
--------------------------
4.1 Vesting. Subject to Section 8.1, a Participant's rights to that part of
-------
his Deferred Compensation Account attributable to his elective deferrals under
Section 2.2, as adjusted for earnings (or losses) under Article III, shall be
nonforfeitable at all times. A Participant's rights to that part of his
Deferred Compensation Account attributable to the crediting of Employer matching
contributions under Section 2.6, as adjusted for earnings (or losses) under
Article III, shall become nonforfeitable on the same basis as Employer matching
contributions under the Savings Plan.
4.2 Distributions. Subject to Section 4.3, the nonforfeitable amounts
-------------
represented by a Participant's Deferred Compensation Account shall become
distributable upon the Participant's separation from service with all Employers
due to his retirement, death, disability (in accordance with the definition of
"Disability" under the Savings Plan), or other termination of employment. At
the time a Participant makes his yearly Deferral Election under Article II of
the Plan, he also shall elect whether the nonforfeitable amounts represented by
his Deferred Compensation Account shall commence to be paid to him as soon as
administratively feasible upon his separation from service with all Employers or
as of a later date specified by the Participant. Such an election also shall
specify whether such amounts shall be paid in a single sum cash distribution, or
in up to ten (10) annual cash installments (as well as the amounts of such
installments) payable to the Participant while living with any remaining
nonforfeitable amount in his Deferred Compensation Account payable after his
death to his Beneficiary in a single sum in accordance with Article V.
4.3 Withdrawal for Unforeseeable Emergency. Notwithstanding the provisions of
--------------------------------------
Section 4.2 to the contrary, in the event that a Participant is faced with an
unforeseeable emergency (as defined below), the Participant may request a
withdrawal from the nonforfeitable portion of his Deferred Compensation Account
in an amount sufficient to meet such emergency. Any such withdrawal shall be
paid in a single sum distribution. For purposes of this Section 4.3, an
unforeseeable emergency is a 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 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 Committee shall determine whether
the circumstances presented by the Participant constitute an unforeseeable
emergency. Such circumstances and the Committee's determination 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 his elective deferrals under
this Plan.
<PAGE>
4.4 Commencement of Payment. At the time for payment designated by the
-----------------------
Participant in accordance with Section 4.2, the nonforfeitable amounts
represented by the Participant's Deferred Compensation Account, increased by any
nonforfeitable amounts due to be credited but not yet credited under Sections
2.5 and 2.6, and decreased by any withdrawals under Section 4.3, shall commence
to be paid in a single sum distribution or in installments as elected by the
Participant in accordance with Section 4.2. If installment payments are
elected, the first annual installment shall be payable as of the commencement
date elected by the Participant under Section 4.2 and the remaining installments
shall be payable on the annual anniversary of that commencement date. The
installment payments shall be in such amounts as elected by the Participant on
his most recent yearly election form completed prior to his separation from
service or other termination of employment. If a Participant's Deferred
Compensation Account is paid in installments, such account shall continue to be
credited with earnings (or losses) under Article III until payment of the final
installment.
ARTICLE V - DEATH BENEFIT
-------------------------
5.1 Terms. Upon the death of a Participant, any unpaid nonforfeitable amounts
-----
represented by the Participant's Deferred Compensation Account, increased by any
amounts due to be credited but not yet credited under Sections 2.5 and 2.6,
shall be payable to the Participant's Beneficiary in a single sum distribution
as soon as administratively feasible after the Participant's death.
ARTICLE VI - ADMINISTRATION OF PLAN
-----------------------------------
6.1 General Administration. The Committee shall be responsible for the general
----------------------
administration of the Plan and for carrying out its provisions. The Committee
shall have full power and authority to interpret, construe and administer the
Plan.
6.2 General Powers. All provisions set forth in the Savings Plan with respect
--------------
to the administrative powers and duties of the Committee and the procedures for
filing claims shall also be applicable with respect to the Plan. The Committee
shall be entitled to rely conclusively upon all calculations, certificates,
opinions and reports furnished by any actuary, accountant, controller, counsel
or other person employed or engaged by the Committee with respect to the Plan.
ARTICLE VII - AMENDMENT OR TERMINATION
--------------------------------------
7.1 Amendment or Termination. The Plan may be amended in whole or in part from
------------------------
time to time, or terminated, by action of the Committee. Such termination and
any such amendment shall be binding on each Employer, Executive and Beneficiary.
Notice of such termination or
<PAGE>
amendment shall be given in writing to each Employer, Participant and
Beneficiary of a deceased Participant.
7.2 Effect of Amendment or Termination. No amendment or termination of the
----------------------------------
Plan shall directly or indirectly deprive any current or former Participant or
Beneficiary of all or any portion of any benefit under this Plan, payment of
which has not been made prior to the effective date of such amendment or
termination.
ARTICLE VIII - GENERAL PROVISIONS
---------------------------------
8.1 No Funding or Interest in Assets. The Plan shall at all times be entirely
--------------------------------
unfunded and no provision shall at any time be made with respect to segregating
any assets of an Employer for payment of any benefits hereunder. No Participant
or his designated Beneficiary shall acquire any property interest in his
Deferred Compensation Account or any other assets of the Employer, their rights
being limited to receiving from the Employer deferred payments as set forth in
this Plan and these rights are conditioned upon continued compliance with the
terms and conditions of this Plan. To the extent that any Participant or
Beneficiary acquires a right to receive benefits under this Plan, such right
shall be no greater than the right of any unsecured general creditor of the
Employer.
8.2 Assignment or Alienation. Except as required by law, no right of a
------------------------
Participant or designated Beneficiary to receive payments under this Plan shall
be subject to transfer, anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy
or similar process or assignment by operation of law and any attempt, voluntary
or involuntary, to effect any such action shall be null and void and of no
effect.
8.3 General Conditions. Any retirement benefit or any other benefit payable
------------------
under the Savings Plan shall be paid solely in accordance with the terms and
conditions of the Savings Plan and nothing in this Plan shall operate or be
construed in any way to modify, amend or affect the terms and provisions of the
Savings Plan.
8.4 No Guaranty of Benefits. Nothing contained in the Plan shall constitute a
-----------------------
guaranty by any person that the assets of an Employer will be sufficient to pay
any benefit hereunder.
8.5 No Enlargement of Rights. No Participant or Beneficiary shall have any
------------------------
right to a benefit under the Plan except in accordance with the terms of the
Plan. Establishment of the Plan shall not be construed to give any Participant
the right to be retained in the service of an Employer.
8.6 Construction. This Plan shall be construed under the laws of the State of
------------
Connecticut. Article headings are for convenience only and shall not be
considered as part of the terms and provisions of the Plan. Words in the
masculine gender shall include the feminine, and the singular shall include the
plural, and vice versa, unless qualified by the context.
<PAGE>
8.7 Withholding of Taxes. The Company shall withhold from any amounts payable
--------------------
under the Plan, all federal, state, and local taxes that the Company determines
is legally required.
8.8 Binding on Successors, Purchasers, Transferees and Assignees. The Plan
------------------------------------------------------------
shall be binding upon any successor or successors of the Company and of any
other Employer whether by merger, consolidation, or otherwise. In the event of
the sale or transfer of substantially all of the assets of the Company or of any
other Employer to any successor, purchaser, transferee or assignee, the Company
and such other Employer each agrees that as a condition of such sale or
transfer, the successor, purchaser, transferee or assignee shall adopt and
assume the Plan at the time of the sale, transfer or assignment including,
without limitation, all obligations which have accrued or may accrue in the
future, and shall be bound by all the terms and provisions of the Plan, and the
Company and such other Employer shall remain fully liable under the Plan. If
the Company or any other Employer assigns or otherwise transfers or attempts to
delegate its duties or responsibilities pursuant to the Plan to any party, the
Company and such other Employer each agrees that it shall remain obligated
hereunder in addition to the obligation hereunder of such party. If a merger,
consolidation, sale, or transfer is made as provided in this Section, the
provisions of this Section shall continue in full force and effect, and
thereafter for all purposes of this Section and the application thereof, the
immediate successor, purchaser, transferee or assignee and all subsequent
successors, purchasers, transferees and assignees shall be deemed to be and
shall be considered as the Company or as any other Employer hereunder, as the
case may be. No other such merger, consolidation, sale, or transfer shall be
made except in compliance with the provisions of this Section.
IN WITNESS WHEREOF, the undersigned, as duly authorized by the Pension and
Employee Benefits Committee of Champion International Corporation, on behalf of
said Committee, has executed this amendment and restatement of the Plan as
evidence of its adoption effective as of March 1, 1996.
January 31, 1997 /s/ William C. Foster
--------------------------------------------
William C. Foster
Senior Associate Counsel-Human Resources
<PAGE>
SCHEDULE A
----------
CHAMPION INTERNATIONAL CORPORATION
NONQUALIFIED SUPPLEMENT SAVINGS PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF MARCH 1, 1996)
-------------------------------------------------------
Listed Executives
-----------------
Name SSN
---- ---
Carraway, James W. ###-##-####
Danielsson, Lars G. ###-##-####
Green, Charles E. ###-##-####
Green, Mary E. ###-##-####
MacBrayne III, John M. ###-##-####
O'Brien, Edward D. ###-##-####
Steltenkamp, Michael S. ###-##-####
Suh, Samuel ###-##-####
Van Horn, James L. ###-##-####
<PAGE>
EXHIBIT 10.16
THIS AGREEMENT between Champion International Corporation, a New York
corporation (the "Company"), and Andrew C. Sigler (the "Executive") is effective
as of November 21, 1996.
WHEREAS, the Company and the Executive entered into a Letter Agreement
dated November 17, 1994, as amended August 15, 1996 (the "Letter Agreement");
and
WHEREAS, the parties desire to amend the Letter Agreement in the manner set
forth below;
NOW THEREFORE, it is hereby agreed by and between the parties as follows:
1. The paragraph of the Letter Agreement that begins with the words "In
consideration for" is hereby amended in its entirety to read:
"In consideration for the performance of the duties of advisor
and consultant, you will (i) be compensated at an annual rate of
$50,000 for a period of five years from the date of your retirement;
(ii) have the right, for a period of ten years from the date of your
retirement, to the use of an airplane on the terms more fully
described in Exhibit "A" hereto; and (iii) be provided, during your
lifetime, with suitable office accommodations, appropriate secretarial
and chauffeur services, all telephone, fax and other customary
administrative support services that you may require. Each annual
payment of $50,000 will be made in a single lump sum on the
anniversary of the date of your retirement. You also will be entitled
to reimbursement for all reasonable expenses incurred in the
performance of your duties as advisor and consultant."
2. The Letter Agreement as amended by this Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
3. The Company and the Executive understand and agree that all references
in the Letter Agreement to the provisions thereof that are amended hereby shall
be deemed to be references to such provisions as amended hereby.
4. Except as amended hereby, all of the terms and conditions set forth in
the Letter Agreement, including without limitation Exhibit "A" thereto, shall
continue in full force and effect without change.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has executed this
Agreement, all as of November 21, 1996.
Champion International Corporation
By /s/ Lawrence G. Rawl
------------------------------------
Chairman of the Compensation and
Stock Option Committee
ATTEST:
/s/ Lawrence A. Fox
- -------------------------------
Vice President and Secretary
/s/ Andrew C. Sigler
---------------------------------------
Andrew C. Sigler
<PAGE>
EXHIBIT 10.27
AGREEMENT
between
CHAMPION INTERNATIONAL CORPORATION
and
JOE K. DONALD
Effective October 18, 1990
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Paragraph
Number Title Page
- --------- -------------------- ----
<S> <C> <C> <C>
1 Termination 1
(a) Termination Payments 1
(i) Monthly Payments 1
(ii) Lump Sum Payment Upon Termination
Following a Change in Control 1
(iii) Cash-Out of Options and Contingently 1
Credited Shares
(iv) Payment of Value of Excess Benefit 2
and Supplemental Retirement Plan
Payments
(v) Participation in Benefit Plans 2
(b) Definition of Termination 3
(c) Definition of Cause 3
(d) Definition of Change in Control 4
2 Termination During Month 4
3 Post-termination Obligations 4
of Executive; Default by Company
(a) Assistance in Litigation 4
(b) Detrimental Conduct 5
(c) Discoveries and Inventions 5
(d) Reimbursement of Expenses 5
(e) Competition 5
(f) Failure to Comply 5
(g) Post-termination Default in 6
Payments or Benefits
4 Determination of Benefits 6
5 (a) Time of Payment 6
(b) Withholding of Taxes 7
6 Decisions by Company 7
7 Prior Agreements 7
8 Consolidation or Merger 7
9 (a) Non-assignability 7
(b) No Attachment 7
(c) Binding Agreement 8
(d) Unfunded Obligations; Trust 8
Agreement
10 (a) Amendment of Agreement 9
(b) No Waiver 9
11 Severability 9
12 Headings 9
13 Governing Law 9
14 Parachute Tax 10
15 Notices 10
16 Arbitration 10
</TABLE>
i
<PAGE>
EXHIBITS
--------
<TABLE>
<CAPTION>
Page
Exhibit Reference
- ---------- --------------------------------------- ---------
<S> <C> <C>
A Certain benefits to be provided after a 1
termination following a change in control
B Payments and benefits subject to 6
acceleration in event of default in
payments or benefits by Company after
cessation of employment
C Form of Trust Agreement 8
D Amounts to be deposited in trust upon a 8
potential change in control
</TABLE>
DEFINED TERMS
-------------
<TABLE>
<CAPTION>
Page
Defined Term Paragraph Reference
- ----------------------------- --------------- ---------
<S> <C> <C>
Agreement Introduction 1
Cause 1(c) 3
Change in Control 1(d) 4
Code 1(a)(iii) 2
Company Introduction 1
Executive Introduction 1
Fair Market Value 1(a)(iii) 2
Legal Expense Agreement 1(b)(ii) 3
Potential Change in Control 9(d)(vii) 9
Termination 1(b) 3
</TABLE>
ii
<PAGE>
THIS AGREEMENT between CHAMPION INTERNATIONAL CORPORATION, a New York
corporation (the "Company"), and JOE K. DONALD (the "Executive"), effective
October 18, 1990 (the "Agreement").
W I T N E S S E T H:
WHEREAS, the Executive is now in the employ of the Company; and
WHEREAS, the Executive was elected an Executive Vice President of the
Company on August 17, 1989; and
WHEREAS, the Company wishes to provide additional incentive for the
Executive to continue in the employ of the Company;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Termination
-----------
In the event of a termination, as defined in subparagraph 1(b) below, the
following provisions of this paragraph 1 shall apply.
(a) Termination Payments
--------------------
(i) Monthly payments. Subject to compliance with the applicable
----------------
provisions of paragraph 3 below, the Company shall pay the Executive or, in the
event of his subsequent death, his beneficiary or beneficiaries or his estate,
as the case may be, as severance pay or liquidated damages, or both, a monthly
sum equal to the highest total monthly compensation (highest total of annual
salary plus annual bonus for any calendar year of employment, divided by
twelve), paid to the Executive. Such payments shall commence on the last day of
the month next following the termination of employment of the Executive and
shall continue until the last day of the twenty-fourth full calendar month
following the termination of employment of the Executive, provided, however,
that such payments shall not continue beyond the earlier of (A) the last day of
the month next preceding his normal retirement date under the Company's pension
plan, and (B) the last day of the month next preceding the month in which he
shall, with his written consent, commence receiving his retirement allowance
under the Company's pension plan.
(ii) Lump Sum Payment upon Termination following a Change in Control.
---------------------------------------------------------------
Anything in subparagraph 1(a)(i) above or elsewhere in this Agreement to the
contrary notwithstanding, if termination of the Executive occurs within three
years following a Change in Control: (x) the total of the monthly payments
provided for in subparagraph 1(a)(i) above shall be accelerated and paid in a
lump sum as soon as practicable after such termination if termination occurs
before the last day of the month next preceding the Executive's normal
retirement date under the Company's pension plan; if termination occurs on or
after such last day, no payment pursuant to subparagraph 1(a)(i) or (ii) shall
be made to the Executive; (y) the benefits required to be provided thereafter to
the Executive, his spouse and family, set forth in attached Exhibit A, shall be
---------
valued at the cost of acquiring insurance policies which would provide such
benefit coverage over the period of time involved in subparagraph 1(a)(i) above,
and such cost shall be paid in a lump sum as soon as practicable after
termination; and (z) the Executive shall be paid the amount payable, if any,
pursuant to subparagraph 1(a)(iii) and the amount payable pursuant to
subparagraph 1(a)(iv).
(iii) Cash-Out of Options and Contingently Credited Shares. In the
----------------------------------------------------
event that the Executive shall, at the time of termination of his employment
within three years following a Change in Control, (A) hold an outstanding and
unexercised (whether or not exercisable at the time) option or options
theretofore granted by the Company to him prior to the Change in Control, (B)
have shares contingently credited to him prior to the Change in Control under
the Company's Contingent Compensation Plan or 1986 Contingent Compensation Plan
or a successor plan, or both hold such option and have such shares contingently
credited to him,
1
<PAGE>
unless the Executive shall have given the Company written notice to the contrary
within thirty (30) days following such termination of employment, the Company
shall pay him, in a lump sum, an amount equal to the excess above the option
price, of each such option that is not an Incentive Stock Option as defined in
Section 422A of the Internal Revenue Code of 1986 as amended (the "Code"), of
the Fair Market Value of Company shares at the time of termination, and the Fair
Market Value at the time of termination of the shares, if any, so contingently
credited. Solely for the purpose of this subparagraph 1(a)(iii), Fair Market
Value at the time of termination shall mean the higher of (i) the average of the
reported closing prices of the Common Shares of the Company, as reported in "New
York Stock Exchange Composite Transactions" of the Eastern Edition of The Wall
--------
Street Journal, for the last trading day prior to the termination and for each
- --------------
trading day of the preceding sixty calendar days, and (ii) in the event that a
Change in Control of the Company, as defined in subparagraph 1(d) below, shall
have taken place prior to termination as the result of a tender or exchange
offer, and such Change in Control was consummated within three years of
termination, an amount equal to the highest consideration paid for Common Shares
of the Company in the course of such tender or exchange offer.
(iv) Payment of Value of Excess Benefit and Supplement Retirement Plan
-----------------------------------------------------------------
Payments Benefits. Anything in this Agreement to the contrary notwithstanding,
- -----------------
in the event of a termination of the Executive's employment within three years
following a Change in Control, the Executive shall be entitled to a monthly
retirement allowance for life payable on a straight life annuity basis, equal to
the benefit payable, if any, under the Company's excess benefit and supplemental
retirement plans, utilizing the monthly payments set forth in subparagraph
1(a)(i) above for purposes of the pension calculation for the termination period
set forth in such subparagraph 1(a)(i). For the purposes of this clause (iv),
the excess benefit and supplemental retirement plans payments shall include the
pension enhancement resulting from service credit for pension benefit during the
termination period set forth in subparagraph 1(a)(i) above. Such retirement
allowance shall be valued and discounted in the manner set forth in subparagraph
3(g) below relating to default in payments or benefits and shall be paid in a
lump sum as soon as practicable after such termination.
(v) Participation in Benefit Plans. The Executive shall be eligible
-------------------------------
to receive, during any period that he shall be entitled to receive payments from
the Company under subparagraph 1(a)(i) above (whether or not any such period
shall be accelerated), as if the Executive had continued to be employed by the
Company during such period, any benefits and emoluments for which key executives
are eligible under any hospitalization, health care or dental care plan, life or
other insurance or death benefit plan, travel and accident insurance, executive
or contingent compensation plan, restricted stock or stock purchase plan,
retirement income or pension plan, vacation plan, or other present or future
employee benefit plans or programs of the Company for which key executives are
eligible, in accordance with the provisions of any such plan or program,
provided, however, that during the period that the Executive is so entitled to
receive payments under subparagraph 1(a)(i) above, he shall not be eligible to
participate in the Company's Savings Plan for Salaried Employees or to receive
option grants under any stock option plan of the Company. Nothing in this
Agreement shall preclude the Company from terminating or amending any such
employee benefit plan or program so as to eliminate, reduce or otherwise change
any benefit payable thereunder. To the extent that such benefits or service
credits for benefits shall not be payable or provided under such plans or
programs by reason of the Executive no longer being an employee of the Company,
the Company shall itself pay or provide for payment of such benefits and service
credit for benefits.
2
<PAGE>
(b) Definition of Termination
-------------------------
The term "termination" for purposes of this Agreement shall mean:
(i) The termination by the Company of the Executive's full-time
employment with the Company for any reason other than Cause; or
(ii) Any (A) failure to elect or re-elect the Executive to an office
and position at least equal to the office and position he held immediately prior
to such failure, or removal of the Executive from such office or position, (B)
material change by the Company of the Executive's functions, duties or
responsibilities without his express written consent as a result of which change
the Executive's position with the Company shall be or become of less dignity,
responsibility, importance or scope than the position he held at the time of
such material change, and any such material change shall be deemed a continuing
breach of this Agreement, (C) reduction in the monthly base salary of the
Executive below the highest monthly base salary paid from and after October 18,
1990, (D) liquidation, dissolution, consolidation or merger of the Company, or
transfer of all or substantially all of its assets, other than in compliance
with the provisions of paragraph 8 below, or (E) breach of this Agreement by the
Company, or breach of the Agreement Relating to Legal Expenses between the
Company and the Executive dated October 18, 1990 (the "Legal Expense
Agreement"); provided that in any such event the Executive elects to terminate
his employment under this Agreement upon not less than sixty days' advance
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four calendar months after the event giving rise to
the election.
(c) Definition of Cause
-------------------
For the purpose of any provision of this Agreement, the termination of the
Executive's employment shall be deemed to have been for Cause only if
termination of his employment shall have been the result of an act or acts of
dishonesty on the part of the Executive constituting a felony and resulting or
intended to result directly or indirectly in gain or personal enrichment at the
expense of the Company; provided that there shall have been delivered to the
Executive a certified copy of a resolution of the Board of Directors of the
Company adopted by the affirmative vote of not less than three-fourths of the
entire membership of the Board of Directors at a meeting called and held for
that purpose and at which the Executive was given an opportunity to be heard,
finding that the Executive was guilty of such conduct, specifying the
particulars thereof in detail.
Anything in this subparagraph 1(c) or elsewhere in this Agreement to the
contrary notwithstanding, the employment of the Executive shall in no event be
considered to have been terminated by the Company for Cause if termination of
his employment took place (A) as the result of bad judgment or negligence on the
part of the Executive, or (B) as the result of an act or omission without intent
of gaining therefrom directly or indirectly a profit to which the Executive was
not legally entitled, or (C) because of an act or omission believed by the
Executive in good faith to have been in or not opposed to the interests of the
Company, or (D) for any act or omission in respect of which a determination
could properly be made that the Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses under (I)
the Restated Certificate of Incorporation or By-Laws of the Company, or (II) the
laws of the State of New York, or (III) the directors' and officer's liability
insurance of the Company, in each case either as in effect at the time of this
Agreement or in effect at the time of such act or omission, or (E) as the result
of an act or omission which occurred more than twelve calendar months prior to
the Executive's having been given notice of the termination of his employment
for such act or omission unless the commission of such act or such omission
could not at the time of such commission or
3
<PAGE>
omission have been known to a member of the Board of Directors of the Company
(other than the Executive, if he is then a member of the Board of Directors), in
which case more than twelve calendar months from the date that the commission of
such act or such omission was or could reasonably have been so known, or (F) as
the result of a continuing course of action which commenced and was or could
reasonably have been known to a member of the Board of Directors of the Company
(other than the Executive, if he is then a member of the Board of Directors)
more than twelve calendar months prior to notice having been given to the
Executive of the termination of his employment.
(d) Definition of Change in Control
-------------------------------
For the purpose of this Agreement, a Change in Control of the Company
shall be deemed to have occurred if
(i) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities;
(ii) during any period within two (2) consecutive years there shall
cease to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
(iii) the shareholders of the Company approve (A) a plan of complete
liquidation of the Company or (B) the sale or other disposition of all or
substantially all the Company's assets.
2. Termination During Month
------------------------
In the event that the employment of the Executive shall terminate prior to
the end of a calendar month as a result of a termination described in paragraph
1 above, the Company shall pay the Executive, in addition to any other amounts
payable by the Company hereunder, a lump cash sum which shall in no event be
less than the salary plus any bonus to which the Executive would have been
entitled had he remained in full-time employment until the end of the month in
which his employment shall so terminate.
3. Post-termination Obligations of Executive; Default by Company
-------------------------------------------------------------
All payments and benefits to the Executive under this Agreement after his
full-time employment with the Company shall have terminated shall be subject to
compliance with the following provisions, which compliance shall be subject to
the proviso in subparagraph 3(e) below. Anything in this paragraph 3 or
elsewhere in this Agreement to the contrary notwithstanding, the Executive may
continue to serve as a director, after his full-time employment with the Company
shall have terminated, of any corporation which he has served as a director for
the last six months of his full-time employment with the Company.
(a) Assistance In Litigation
------------------------
The Executive shall, upon reasonable notice, furnish such information and
proper assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is or may become a party.
4
<PAGE>
(b) Detrimental Conduct
-------------------
The Executive shall not to the material detriment of the Company knowingly
disclose or reveal to any unauthorized person any manufacturing or trade secret
or other confidential information relating to the Company, its subsidiaries or
affiliates, or to any of the businesses operated by them and confirms that such
information constitutes the exclusive property of the Company. The Executive
shall not otherwise knowingly act or conduct himself to the material detriment
of the Company, its subsidiaries or affiliates, or in a manner which is
materially inimical or contrary to their interests, including, without
limitation, through competition materially detrimental to the Company, its
subsidiaries or affiliates, in any of the businesses in which they may be
engaged at the time of termination of his employment. The Executive recognizes
that the restrictions on his activities contained in this Agreement are required
for the reasonable protection of the Company and its investments.
(c) Discoveries and Inventions
--------------------------
If, while employed by the Company or during a period of one year after
termination of such employment, the Executive shall have made, either solely or
jointly with others, any discovery, improvements or invention which would
pertain or relate in any way to the business, products, publications or
processes of the Company, its subsidiaries or affiliates at the time of
termination of his employment, such discovery, improvement or invention (whether
or not of a patentable nature) shall be the exclusive property of the Company.
The Executive shall execute and deliver to the Company without further
compensation any documents which the Company may deem necessary or appropriate
to prepare or prosecute applications for patents upon such discovery,
improvement or invention, to assign and transfer to the Company his entire
right, title and interest in and to such discovery, improvement or invention,
and patents therefor, or otherwise more fully and perfectly to evidence the
Company's ownership thereof.
(d) Reimbursement of Expenses
-------------------------
The Company shall pay or reimburse the Executive for all reasonable travel
and other expenses incurred by the Executive in performing his obligations under
this paragraph 3.
(e) Competition
-----------
The Executive shall not engage in competition with any of the businesses in
which the Company, its subsidiaries or affiliates may be engaged at the time of
termination of his employment if such competition should be materially
detrimental to the Company, its subsidiaries or affiliates.
(f) Failure to Comply
-----------------
If the Executive, for any reason other than death or disability, shall,
without the written consent of the Company, fail to comply with any provision of
this paragraph 3, his rights to any future payments or other benefits hereunder
shall terminate, and the Company's obligations to make such payments and provide
such benefits shall cease; provided, however, that no failure to comply with any
provision of this paragraph 3 shall be deemed to have occurred unless and until
the Executive shall have received written notice on behalf of the Board of
Directors of the Company, specifying the conduct alleged to constitute such
failure, and has thereafter continued to engage in such conduct after a
reasonable opportunity and a reasonable period, but in no event more than sixty
days after receipt of such notice, to refrain from such conduct. In no event
shall the Executive be under any obligation to repay to the Company any amounts
theretofore paid to him.
5
<PAGE>
(g) Post-termination Default in Payments or Benefits
------------------------------------------------
If, after the Executive ceases to be an employee of the Company, the
Company should (i) default in payment of all or any part of the payments
required to be made hereunder or under the Legal Expense Agreement, or (ii) fail
to pay for or provide any benefits required to be provided hereunder, and if the
Company should not remedy such default or failure within thirty (30) days after
having received notice of such default or failure from the Executive, his
spouse, or such other person or entity who or which is entitled thereto, the
applicable payments or benefits set forth in Exhibit B shall, at the sole
---------
election of the Executive, his spouse, or such other person or entity then
entitled thereto, exercised in writing signed by the Executive, his spouse or
such other person or entity, and delivered to the Company within 90 days after
the expiration of such thirty-day period, be accelerated and become immediately
due and payable in a lump sum equal to the total of (x) the severance payment
set forth in Exhibit B, if applicable, and (y) the cost of acquiring insurance
---------
policies which would provide the disability, medical and dental coverages set
forth in Exhibit B, if applicable, and (z) all amounts, if any, payable under
---------
the excess benefit and supplemental retirement plans set forth in Exhibit B in
---------
an actuarially equivalent lump sum calculated by utilizing the 1983 GAM Table
(or such other pensioner annuity mortality table as the Company with the
Executive's written consent or, following his death, his spouse's or other
Beneficiary's consent, shall determine) and discounted to a present value amount
by applying a discount rate, equal to the arithmetic average of (i.e., one-
twelfth of the sum of) the single employer interest rates for immediate
annuities promulgated by the Pension Benefit Guaranty Corporation each month
during the calendar year immediately preceding the date of payment as set forth
in Appendix B to Part 2619 of 29 Code of Federal Regulations or such successor
to such Appendix B as may be in effect during such calendar year, to all such
retirement payments which otherwise would become due thereafter. In the event
the election referred to in the preceding sentence has been made, then the total
amount due and payable from the Company pursuant to this subparagraph shall be
the sum of all accelerated amounts, together with any expenses incurred in
enforcing payment thereof (including all reasonable legal fees). In making the
foregoing retirement payment calculations, the intent is to compute a lump sum
amount which will provide the Executive and his spouse or other Beneficiary, as
the case may be, with the same amount, after deduction of all federal, state and
municipal income taxes, as he and his spouse or other Beneficiary, as the case
may be, would have retained, after all such income taxes, had payments and
benefits been made and provided as originally scheduled and without
acceleration. It is understood and agreed that this subparagraph 3(g) shall not
apply to any default or failure to pay, as described in the first sentence of
this subparagraph 3(g), which occurs during the Executive's period of
employment; upon any such default or failure to pay, the Executive shall be
entitled to such payments as may be applicable pursuant to subparagraph 1(a).
4. Determination of Benefits
-------------------------
Whenever under this Agreement it is necessary to determine whether one
benefit is less than, equal to or larger than another, whether or not such
benefits are provided under this Agreement, such determination shall be made by
the Company's independent consulting actuary, using mortality, interest and any
other assumptions normally used at the time by such actuary in determining
actuarial equivalents for the purpose of employee benefit plans of the Company.
5. (a) Time of Payment
---------------
Anything in this Agreement to the contrary notwithstanding, the Company
may, for its
6
<PAGE>
own administrative convenience or for any other reason deemed by it sufficient,
accelerate payment to the Executive of any sums due under this Agreement
following termination of his employment; provided, however, that payments by the
Company under this Agreement in any one calendar year shall not, as a result of
such acceleration, together with any payments required to be made under the
pension plan of the Company, exceed an amount equal to (i) 80 percent of his
monthly rate of salary paid for the last full calendar month of his employment,
multiplied by (ii) the number 12.
(b) Withholding of Taxes
--------------------
The Company may withhold from any benefits payable under this Agreement all
federal, state, city or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
6. Decisions by Company
--------------------
Except as otherwise expressly provided in this Agreement, any decision or
action by the Company relating to this Agreement, its operation or its
termination, shall be made by the Board of Directors. Any decision or action of
such Board shall, to the extent permitted by law, be by the affirmative vote of
not less than three-fourths of the members of the Board of Directors then in
office; provided, however, that in the event of any dispute as to any benefit
payable under this Agreement, the Executive shall have the same rights as a
Participant under the Company's pension plan in effect at the time with respect
to the method of determining such dispute and enforcing his rights with respect
thereto.
7. Prior Agreements
----------------
This Agreement shall supersede any prior employment and severance agreement
between the Company or any predecessor of the Company and the Executive, but
this Agreement shall not affect or operate to reduce any benefit or compensation
of any kind not expressly provided for in this Agreement, including, without
limitation, any employee stock option or stock appreciation right and any
agreements under the Company's Restricted Share Performance Plan.
8. Consolidation or Merger
-----------------------
Nothing in this Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all of its assets to,
another corporation which assumes this Agreement and all obligations of the
Company hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the term, "Company", shall refer to such other corporation and this
Agreement shall continue in full force and effect.
9. (a) Non-assignability
-----------------
Neither this Agreement nor any right or interest hereunder shall be
assignable by the Executive or the beneficiaries of the Executive or by his
legal representatives without the Company's prior written consent; provided,
however, that nothing in this subparagraph 9(a) shall preclude (i) the Executive
from designating a beneficiary to receive any benefit payable on his death, and
(ii) the legal representatives of the estate of the Executive from assigning any
rights hereunder to the person or persons entitled thereto under his will or, in
the case of intestacy, to the person or persons entitled thereto under the laws
of intestacy applicable to his estate.
(b) No Attachment
-------------
Except as otherwise required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrances, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
7
<PAGE>
(c) Binding Agreement
-----------------
This Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns.
(d) Unfunded Obligations; Trust Agreement
-------------------------------------
(i) All payments to be made hereunder shall be made from the general
funds of the Company. To the extent that any person or entity acquires a right
to receive any payment hereunder, such right shall be no greater than the right
of an unsecured general creditor of the Company except to the extent otherwise
provided by law. No person who is entitled to payments hereunder shall have any
right, title or interest in or to any assets or investments which may be
acquired or made by the Company to aid it in meeting its obligations hereunder.
(ii) Anything in this subparagraph 9(d) or elsewhere in this
Agreement to the contrary notwithstanding, the Company may provide the Executive
with collateral security, in the form of a bank letter of credit, an interest in
a trust or otherwise, to secure a portion of any or all of the Company's
obligations to the Executive under this Agreement and any other agreement. In
this connection, the Company has entered into a Trust Agreement substantially in
the form attached hereto as Exhibit C and, under the circumstances and upon the
----------
terms and conditions set forth therein, the Executive will be a beneficiary
under the Trust therein established, this Agreement and the Legal Expense
Agreement (and its related memorandum) will be listed on Exhibit I of such Trust
Agreement, the amounts to be deposited with the trustee under the Trust
Agreement shall be those set forth on the Schedule of Amounts to be Deposited in
Trust Upon a Potential Change in Control, a copy of which is attached hereto as
Exhibit D, and any other benefits which the Company, in its sole discretion,
- ---------
shall agree to secure by the Trust Agreement.
(iii) If a Potential Change in Control should take place while the
Executive is in the employ of the Company, the value of the benefits set forth
in Exhibit D to be delivered by the Company to the trustee under such Trust
---------
Agreement shall be equal to the total of (x) the severance, options,
contingently credited shares and legal expenses payments set forth in Exhibit D,
---------
(y) the cost of acquiring insurance policies which would provide the disability,
medical and dental coverages set forth in Exhibit D, and (z) all amounts, if
---------
any, payable under the excess benefit and supplemental retirement plans payments
(as described in subparagraph 1(a)(iv) above) set forth in Exhibit D.
---------
(iv) The value of the excess benefit and supplemental retirement plans
payments shall be an actuarially equivalent amount calculated by utilizing the
1983 GAM Table (or such other pensioner annuity mortality table as the Company
with the Executive's written consent, or following his death, his spouse's or
other Beneficiary's consent, shall determine) and discounted to a present value
amount by applying a discount rate, equal to the arithmetic average of (i.e.,
one-twelfth of the sum of) the single employer interest rates for immediate
annuities promulgated by the Pension Benefit Guaranty Corporation each month
during the calendar year immediately preceding the date of payment as set forth
in Appendix B to Part 2619 of 29 Code of Federal Regulations or such successor
to such Appendix B as may be in effect during such calendar year, to all such
retirement benefits which otherwise would become due thereafter. In making the
foregoing retirement payment calculations, the intent is to compute a lump sum
payment which will provide the Executive with the same amount of benefit, after
deduction of all federal, state and municipal income taxes, as he would have
retained, after all such income taxes, had payments been made as originally
scheduled and without acceleration.
(v) Anything in this subparagraph 9(d) or elsewhere in this Agreement
to the
8
<PAGE>
contrary notwithstanding, the amount to be paid by the Company to the trustee
pursuant to the preceding provisions of this subparagraph 9(d) shall be reduced
by the amount, if any, that the Board of Directors of the Company expressly
determines, in its sole discretion on the advice of the Company's independent
public accountants or its tax counsel or other experts selected by the Board of
Directors, as a result of the application of the provisions of paragraph 14
below, is not expected to be paid by the trustee to the Executive and his
beneficiary or beneficiaries.
(vi) The Company shall continue to be liable to make all payments and
provide all benefits required to be made and provided hereunder to the extent
such payments have not been made or such benefits have not been provided through
the above-mentioned trust. (vii) For purposes of this Agreement, a "Potential
Change in Control" shall be deemed to have occurred if
(A) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the Company;
(B) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a Change in Control of the Company;
(C) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes
the beneficial owner, directly or indirectly, of securities of the
Company representing ten percent (10%) or more of the combined voting
power of the Company's then outstanding securities; or
(D) the Board of Directors adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control of the
Company has occurred.
10. (a) Amendment of Agreement
----------------------
No amendment or modification of this Agreement shall be deemed effective
unless and until executed in writing.
(b) No Waiver
---------
No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel to enforce any provision of this Agreement,
except by written instrument of the party charged with such waiver or estoppel.
Any written waiver shall not be deemed a continuing waiver unless specifically
stated, shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
11. Severability
------------
If for any reason any provision of this Agreement shall be held invalid,
such invalidity shall not affect any other provision of this Agreement not held
so invalid, and all other such provisions shall to the full extent consistent
with law continue in full force and effect. If any such provision shall be held
invalid in part, such invalidity shall in no way affect the rest of such
provision not held so invalid, and the rest of such provision, together with all
other provisions of this Agreement, shall likewise to the full extent consistent
with law continue in full force and effect.
12. Headings
--------
The headings of paragraphs are included solely for convenience of reference
and shall not control the meaning or interpretation of any of the provisions of
this Agreement.
13. Governing Law
-------------
The validity, interpretation, construction, performance and enforcement of
this Agreement shall be governed by the laws of the State of New York without
giving effect to the principles of conflict of laws thereof.
9
<PAGE>
14. Parachute Tax
-------------
If the payments and benefits provided for the Executive under this
Agreement, together with any other payments and benefits that the Executive may
have a right to receive from the Company or any other person or entity, would
result in "excess parachute payments" (as defined in Section 280G of the Code),
the payments and benefits to be made and provided to the Executive and his
beneficiary or beneficiaries pursuant to this Agreement shall be reduced to the
largest whole-dollar amount that will result in there being no such "excess
parachute payment." The existence or absence of any such "excess parachute
payment," the amount of any such reduction, and the item or items to be reduced,
if any, shall be determined, in each case, by the Executive or, following his
death, his beneficiary or beneficiaries, and the specifics of such determination
shall be delivered in writing to the Company and to the trustee of the Trust
referred to in subparagraph 9(d)(ii) above, at the time of the Executive's
termination within three years after a Change in Control, or as soon as
practicable thereafter, by the Executive or, following his death, his
beneficiary or beneficiaries. The reasonable fees and expenses of such tax
counsel and financial advisor as may reasonably be called upon to assist the
Executive or his beneficiary or beneficiaries in the foregoing endeavors shall
be paid by the Company.
15. Notices
-------
All notices, requests, demands and other communications provided for by
this Agreement shall be in writing and shall be sufficiently given if and when
mailed in the continental United States by registered or certified mail, return
receipt requested, or personally delivered to the party entitled thereto at the
address stated below, which address shall be such address as the addressee may
have given most recently by a similar notice. Any such notice shall be deemed
to have been received on the date of delivery.
To the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
To the Executive: Mr. Joe K. Donald
One Champion Plaza
Stamford, CT 06921
16. Arbitration
-----------
Any dispute between the Executive and the Company as to the interpretation
or application of any of the provisions of this Agreement may, at the
Executive's election, be determined by binding arbitration within the greater
New York City metropolitan area or the State of Connecticut in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court of competent jurisdiction.
All fees and expenses of such arbitration shall be paid by the Company subject
to repayment by the Executive if and to the extent that a judgment should be
rendered against him beyond appeal and such fees and expenses were not incurred
by him while acting in good faith.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has signed this Agreement,
all as of October 18, 1990.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
---------------------------------------
Chairman of the Board of Directors
Attest:
/s/ Lawrence A. Fox
- --------------------------------
Secretary
/s/ Joe K. Donald
---------------------------------------
Joe K. Donald
11
<PAGE>
Exhibit A
---------
[subparagraph 1(a)(ii)(y)]
Schedule of Certain Benefit Coverages during the
Severance Payment Period under Subparagraph 1(a)(i)
after a Termination following a Change in Control
---------------------------------------------------
` Disability: Same as for active employees.
` Medical: Same as for active employees
less retiree medical benefit,
if any.
` Dental: Same as for active employees.
For other benefit coverages after termination following a Change in
Control, see subparagraph 1(a)(ii)(x) and (z).
o0o
<PAGE>
Exhibit B
---------
[subparagraph 3(g)]
Schedule of Payments and Benefits upon
a Breach after Cessation of Employment
--------------------------------------
` Severance: 2 years termination payments (or the unpaid balance
thereof); however, payments not to cover the period, if
any, after the last day of the month next preceeding the
Executive's normal retirement date under the Company's
pension plan. Payments are based on highest total of
salary and annual bonus for any calendar year of
employment.
` Retirement: All unpaid amounts, if any, payable under the excess
benefit and supplemental retirement plans of the Company.
` Disability: Same as for active employees, during the 2 year
termination payment period or balance thereof.
` Medical: Same as for active employees less retiree medical
benefit, if any, during the 2 year termination payment
period or balance thereof.
` Dental: Same as for active employees, during the 2 year
termination payment period or balance thereof.
o0o
<PAGE>
Exhibit C
---------
[subparagraph 9(d)]
FORM OF TRUST AGREEMENT
-----------------------
TRUST AGREEMENT (the "Trust"), dated as of February 19, 1987, by and
between Champion International Corporation, a New York corporation (the
"Company"), and Connecticut National Bank (the "Trustee").
WHEREAS, the Company is obligated under the individual agreements set
forth on Exhibit I (together with any additional agreements included on Exhibit
I pursuant to Section 2.01(c) hereof, the "Agreements") to make specified
payments to certain of the Company's executives (together with any additional
executives and retired executives included on Exhibit I pursuant to Section
2.01(c) hereof, the "Executives"); and
WHEREAS, the aforesaid obligations of the Company are not funded or
otherwise secured, and the Company has agreed, to the extent practicable, to
assure that the future payment of certain of said obligations will not be
improperly withheld in the event that a "Change in Control" (as defined herein)
of the Company should occur; and
WHEREAS, for purposes of assuring that such payments will not be
improperly withheld, the Company desires to deposit with the Trustee, subject
only to the claims of the Company's existing or future general creditors in the
event of bankruptcy or insolvency (as hereinafter provided), amounts of cash or
marketable securities sufficient to fund such payments;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the parties hereto agree
as follows:
ARTICLE I
THE AGREEMENTS
--------------
SECTION 1.01 Agreements. The agreements subject to this Trust
------------------------
consist of the Agreements listed from time to time on Exhibit I hereof
respectively. The Company shall continue to be liable to the Executives to make
all payments required under the terms of such Agreements to the extent such
payments have not been made pursuant to this Trust.
ARTICLE II
TRUST AND THE TRUST CORPUS
--------------------------
SECTION 2.01 Trust.
-----
(a) The Company will deliver to the Trustee to be held in trust
hereunder, concurrently with the execution of this Trust, the sum of $100 in
cash, and upon the occurrence of a "Potential Change in Control" (as defined in
Section 3.02), (i) an additional amount in cash (or in marketable securities
having a fair market value equal to such amount, or some combination thereof)
representing the sum of the amounts, determined as provided in Section 4.02,
which is estimated to be sufficient to fund the Company's obligations to pay to
the Executives certain amounts and benefits due to them pursuant to the
Agreements and (ii) an amount estimated by the Trustee to be sufficient to pay
all of the Trustee's fees and expenses hereunder with respect to the period of
time that this Trust Agreement shall be in effect.
(b) The payment by the Company pursuant to Section 2.01(a)(i) hereof
shall be accompanied by a Payment Schedule for each Executive as required by
Section 4.02(a) hereof.
(c) The Company may, subject to the provisions of Section 2.01(d),
from time to time prior to the occurrence of a Change in Control revise Exhibit
I in order to include thereon (A) additional Executives, and (B) additional
Agreements
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with respect to any Executive. If a revised Exhibit I is delivered to the
Trustee with respect to any Executive upon or after the occurrence of a
Potential Change in Control, the Company will deliver to the Trustee,
concurrently with such revised Exhibit I:
(x) a Payment Schedule or a revised Payment Schedule, as applicable,
with respect to such Executive which complies with Section
4.02(a) and which sets forth the additional amount delivered to
the Trustee with respect to such Executive, and
(y) an amount which is estimated to be sufficient when added to the
amount or amounts previously delivered to the Trustee to fund the
Company's obligations under the Payment Schedule or the revised
Payment Schedule, as applicable, pursuant to such Executive's
Agreements.
Such Payment Schedule or revised Payment Schedule shall be effective in
accordance with the provisions of Section 4.02(b). A revised Exhibit I shall be
effective upon the later of (C) receipt by Trustee of such revised Exhibit I and
(D) receipt by the Trustee of all amounts required under this Section 2.01(c),
if any, and such revised Exhibit I shall supersede any and all such Exhibits
previously delivered to the Trustee.
(d) In no event may Exhibit I be revised to eliminate any Executive
or any Agreements with respect to any Executive without such Executive's written
consent, except as provided in the following sentence. Prior to the occurrence
of a Change in Control, the Company shall deliver instructions to the Trustee to
delete the name of, and the Agreements with respect to, an Executive from
Exhibit I promptly following the termination of his employment with the Company
prior to the occurrence of a Change in Control. The Trustee shall make such
deletions and shall be able to rely upon such instructions and shall have no
duty to inquire with respect to the termination of such Executive's employment
with the Company. The deletions described in the immediately preceding sentence
may not be made with respect to instructions delivered to the Trustee on or
after the occurrence of a Change in Control of the Company. Notwithstanding the
foregoing, following a Potential Change in Control the Company may, in its
discretion, add retired Executives and their agreements with the Company to
Exhibit I in accordance with Section 2.01(c) to assure that the payment of
certain amounts payable by the Company to such retired Executives under such
agreements will not be improperly withheld following a Change in Control.
SECTION 2.02 Trust Corpus.
------------
(a) As used herein, the term "Trust Corpus" shall mean the amounts
delivered to the Trustee as described in Section 2.01 and 4.02(b) hereof in
whatever form held or invested as provided herein. The Trust Corpus shall be
held, invested and reinvested by the Trustee in cash or marketable securities
only in accordance with this Section 2.02. The Trustee shall use its good faith
efforts to invest or reinvest from time to time all or such part of the Trust
Corpus as it believes prudent under the circumstances in either one or a
combination of the following investments:
(i) investments in direct obligations of the United
States of America or agencies of the United States of America
or obligations unconditionally and fully guaranteed as to
principal and interest by the United States of America, in each
case maturing within one year or less from the date of
acquisition; or
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(ii) investments in negotiable certificates of deposit (in
each case maturing within one (1) year or less from the date of
acquisition) issued by a commercial bank organized and existing under
the laws of the United States of America or any state thereof having a
combined capital and surplus of at least $1,000,000,000, including the
Trustee's banking department;
provided, however, that the Trustee shall not be liable for any failure to
- -----------------
maximize the income earned on that portion of the Trust Corpus as is from time
to time invested or reinvested as set forth above, nor for any loss of income
due to liquidation of any investment which the Trustee, in its sole discretion,
believes necessary to make payments or to reimburse expenses under the terms of
this Trust.
(b) The Trust is intended to be grantor trust within the meaning of
Section 671 of the Internal Revenue Code of 1986, as amended (the "Code"),
except as hereinafter provided, all interest and other income earned on the
investment of the Trust Corpus shall be the property of the Company and shall
not constitute a part of the Trust Corpus. Except as provided in Section
4.02(a), the interest and other income earned in any calendar quarter shall be
paid over to the Company by the Trustee as promptly as practicable after the end
of such calendar quarter.
(c) All losses of principal in respect of, and expenses (including,
as provided in Section 5.01(g) hereof, any expenses of the Trustee) charged
against, the Trust Corpus shall be for the account of the Company and the
Company shall be obligated to promptly reimburse the Trust Corpus for any loss
in principal amount of, or expense charged against, the Trust Corpus except to
the extent that such amounts have been applied to reduce amounts payable to the
Company pursuant to Section 2.02(b) hereof. To the extent any such losses and
expenses are not reimbursed by the Company, the aggregate amount payable to an
Executive under the applicable Payment Schedule shall be reduced by a portion of
such losses and expenses, as determined on a pro rata basis.
ARTICLE III
CHANGE IN CONTROL
-----------------
SECTION 3.01 Definition of Change in Control.
-------------------------------
For purposes of this Trust, a Change in Control of the Company shall be deemed
to
have occurred if
(a) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities;
(b) during any period within two (2) consecutive years (not including
any period prior to the Company's 1987 Annual Meeting of Shareholders) there
shall cease to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
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(c) the shareholders of the Company approve (i) a plan of
complete liquidation of the Company or (ii) the sale or other disposition
of all or substantially all the Company's assets.
SECTION 3.02 Definition of a Potential Change in Control. For
-------------------------------------------
purposes of this Trust, a Potential Change in Control shall be deemed to have
occurred if
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the Company;
(b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated would
constitute a Change in Control of the Company;
(c) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing ten percent (10%) or more of the combined voting power of the
Company's then outstanding securities; or
(d) the Board of Directors adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control of the Company has
occurred.
SECTION 3.03 Notification of the Trustee. The Company shall notify
---------------------------
the Trustee of the occurrence of a Potential Change in Control and the Company
shall or an Executive may notify the Trustee of the occurrence of a Change in
Control, and the Trustee may rely on such notice or on any other actual notice,
satisfactory to the Trustee, of such a change or potential change which the
Trustee may receive. The Trustee shall have no obligation to make an
independent determination as to the occurrence of a Potential Change in Control
or Change in Control.
ARTICLE IV
RELEASE OF THE TRUST CORPUS
---------------------------
The Trustee shall hold the Trust Corpus in its possession under the
provisions of this Trust Agreement until authorized to deliver the Trust Corpus
or any specified portion thereof as follows:
SECTION 4.01 Delivery to the Company.
-----------------------
(a) Any amount in excess of $100 delivered to the Trustee pursuant to
Section 2.01 hereof or otherwise constituting part of the Trust Corpus shall be
returned to the Company, unless within six (6) months of such delivery to the
Trustee a Change in Control shall have occurred. Such six month period shall be
renewed (i) for any Potential Change in Control which occurs during any initial
six month period or (ii) by a resolution adopted by the Board of Directors and
delivered to the Trustee by the Company to the effect that such an initial six
month period (or a six month period that is renewed in accordance with clause
(i) of this Section 4.01(a)) shall start anew.
(b) Any amount held by the Trustee for the benefit of an Executive
shall be paid to the Company immediately following the final payment of all
amounts payable to such Executive pursuant to the terms of the Executive's
Agreement, as certified to the Trustee by the Executive.
(c) Upon the termination of the Trust as provided in the first
sentence of Section 6.01(a), the Trustee shall pay to the Company the amount of
the Trust Corpus, less all payments, expenses, taxes and other charges under
this Trust Agreement as of such date of termination, provided that in the event
that the Trust shall continue with respect to one or more Executives in
accordance with the provisions of Section 6.01(b), the Trustee shall pay to the
Company the amount that would have been payable to the Company if the Trust had
terminated as provided in Section 6.01(a), less (i) the amounts subject to
litigation or arbitration for each such Executive, as certified to the Trustee
by each such Executive, and (ii) an amount
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estimated by the Trustee to be sufficient to pay all of the Trustee's fees and
expenses with respect to the additional period of time that the Trust shall
continue in effect pursuant to Section 6.01(b).
SECTION 4.02 Deliveries to Executives.
------------------------
(a) The Company shall deliver to the Trustee, upon the occurrence of
a Potential Change in Control, a separate schedule for each Executive (the
"Payment Schedule') indicating (x) the amounts delivered to the Trustee for the
benefit of each such Executive pursuant to Section 2.01(a)(i) in accordance with
such Executive's Agreements and (y) the amounts payable in respect of such
Executive, or providing a formula or instructions acceptable to the Trustee for
determining the amounts so payable. The Payment Schedule shall include
instructions as to the amount of interest, if any, accruing in respect of an
Executive and such instructions may be revised from time to time prior to the
occurrence of a Change in Control. Each Payment Schedule also shall be
delivered by the Company to such Executive. The aggregate payment to be made
hereunder to an Executive by the Trustee shall not exceed the aggregate amount
delivered to the Trustee for the benefit of such Executive as indicated in the
Payment Schedule applicable to such Executive. The Trustee shall make payments
to each Executive under the Payment Schedule applicable to such Executive upon
receipt by the Trustee of a written request for payment signed by the Executive
or, following his death, his beneficiary or beneficiaries. Such request shall
set forth each of the following items: (i) the specific amount of payment
requested, (ii) the specific Agreement or Agreements and the specific section or
sections of such Agreements under which such payment is to be made, (iii) the
existence or absence of any "excess parachute payment" (as defined in Section
280G of the Code) respecting the amount payable to such Executive in accordance
with the applicable Payment Schedule and (iv) the amount of any reduction in the
amount otherwise payable to such Executive in accordance with the applicable
Payment Schedule and the item or items to be reduced, if any. The Trustee shall
rely upon such written request in making payments under the Payment Schedule and
shall have no duty to inquire into the amounts, instructions or formulas set
forth in the Payment Schedule or the Executive's right to such payments.
(b) The Company may from time to time after the occurrence of a
Potential Change in Control deliver concurrently to the Trustee (i) a revised
Payment Schedule with respect to any Executive which sets forth the aggregate
amounts payable with respect to such Executive and (ii) an amount which is
estimated to be sufficient when added to the amount or amounts previously
delivered to the Trustee to fund the Company's obligations pursuant to such
Executive's Agreements. A revised Payment Schedule shall be effective upon the
later of (x) receipt by the Trustee of such revised Payment Schedule and (y)
receipt by the Trustee of all amounts required under Section 4.02(b)(ii) and
such revised Payment Schedule shall supersede any and all Payment Schedules
previously delivered by the Company to the Trustee with respect to such
Executive.
(c) Except as provided in this Section 4.02(c), a revised Payment
Schedule may not reduce the amounts payable with respect to an Executive
pursuant to the prior Payment Schedule for such Executive except with the
written consent of such Executive.
(i) After a Potential Change in Control and before a Change in Control,
the Company shall deliver to the Trustee, promptly following the
termination of an Executive's employment with the Company, a revised
Payment Schedule with respect to such Executive which deletes all of the
amounts set forth on the prior Payment Schedule for such Executive. The
Trustee may rely
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<PAGE>
upon such revised Payment Schedule and shall have no duty to inquire with
respect to the termination of such Executive's employment with the Company.
The Trustee shall return to the Company all amounts previously delivered by
the Company to the Trustee for the benefit of such Executive.
Notwithstanding the foregoing, following a Potential Change in Control the
Company may, in its discretion, deliver Payment Schedules for retired
Executives in accordance with Section 4.02(a) hereof.
(ii) After a Potential Change in Control and before a Change in Control,
the Company may deliver a revised Payment Schedule with respect to an
Executive which reduces the amounts payable in respect of such Executive
pursuant to his prior Payment Schedule as the result of a more accurate
calculation by the Company of the amount of the benefits to which such
Executive is entitled pursuant to his Agreements. The Trustee may rely on
such revised Payment Schedule and shall have no duty to inquire with
respect to said calculation. The Trustee shall return to the Company an
amount equal to such reduction.
A revised Payment Schedule of the type described in this Section 4.02(c) may not
be delivered to, or honored by, the Trustee on or after the occurrence of a
Change in Control of the Company. A revised Payment Schedule shall be effective
upon its receipt by the Trustee and shall supersede any and all Payment
Schedules previously delivered by the Company to the Trustee with respect to
such Executive.
(d) The Trustee shall be permitted to withhold from any payment due
to an Executive hereunder the amount required by law to be so withheld under
federal, state and local withholding requirements or otherwise, and shall pay
over to the appropriate government authority the amounts so withheld. The
Trustee may rely on instructions from the Company as to any required withholding
and shall be fully protected under Section 5.01(g) hereof in relying on such
instructions.
(e) Except as otherwise provided herein, in the event of any final
determination by the Internal Revenue Service or a court of competent
jurisdiction, which determination is not appealable or the time for appeal or
protest of which has expired, or the receipt by the Trustee of a substantially
unqualified opinion of tax counsel selected by the Trustee with the written
consent of the Company, which determination determines, or which opinion
concludes, that the Executives or any particular Executive, is subject to
federal income taxation on amounts held in Trust hereunder prior to the
distribution to the Executives or Executive of such amounts, the Trustee shall,
on receipt by the Trustee of such opinion or notice of such determination, pay
to each Executive the portion of the Trust Corpus includible in such Executive's
federal gross income.
SECTION 4.03 Deliveries to Creditors of the Company. It is the
--------------------------------------
intent of the parties hereto that the Trust Corpus is and shall remain at all
times subject to the claims of the general creditors of the Company in the event
of bankruptcy or insolvency as hereinafter provided, but in no other event.
Accordingly, the Company shall not create a security interest in the Trust
Corpus in favor of the Executives or any creditor. If the Trustee receives the
notice provided for in Section 4.04 hereof, or otherwise receives actual notice
that the Company is insolvent or bankrupt as defined in Section 4.04 hereof, the
Trustee will make no further distributions of the Trust Corpus to any of the
Executives but will deliver the entire amount of the Trust Corpus only as a
court of competent jurisdiction, or duly appointed receiver or other person
authorized to act by such a court, may direct to make the Trust Corpus available
to satisfy the claims of the Company's general creditors. The Trustee shall
resume
6
<PAGE>
holding the Trust Corpus under the terms hereof and resume any distribution of
Trust Corpus to the Executives under the terms hereof, upon no less than thirty
(30) days advance notice to the Company, if it determines that the Company was
not, or is no longer, bankrupt or insolvent. Unless the Trustee has actual
knowledge of the Company's bankruptcy or insolvency, the Trustee shall have no
duty to inquire whether the Company is bankrupt or insolvent.
SECTION 4.04 Notification of Bankruptcy or Insolvency. The Company,
----------------------------------------
through its Board of Directors and Chief Executive Officer, shall advise the
Trustee promptly in writing of the Company's bankruptcy or insolvency. The
Company shall be deemed to be bankrupt or insolvent in the following
circumstances:
(a) The Company is subject to a pending proceeding as a debtor under
the Bankruptcy Reform Act of 1978, as amended; or
(b) The Company shall generally not pay its debts as such debts
become due or shall cease to pay its debts in the ordinary course of business.
ARTICLE V
TRUSTEE
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SECTION 5.01 Trustee.
-------
(a) The duties and responsibilities of the Trustee shall be limited
to those expressly set forth in this Trust, and no implied covenants or
obligations shall be read into this Trust against the Trustee.
(b) If all or any part of the Trust Corpus is at any time attached,
garnished, or levied upon by any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by a court affecting such property or any part thereof,
then and in any of such events the Trustee is authorized, in its sole
discretion, to rely upon and comply with any such order, judgment or decree, and
it shall not be liable to the Company or any Executive by reason of such
compliance even though such order, judgment or decree subsequently may be
reversed, modified, annulled, set aside or vacated.
(c) The Trustee shall maintain such books, records and accounts as
may be necessary for the proper administration of the Trust Corpus, including,
without limitation, as provided in Article II hereof, and shall render to the
Company, on or prior to each January 31 following the date of this Trust until
the termination of this Trust (and on the date of such termination), an
accounting with respect to the Trust Corpus as of the end of the then most
recent calendar year (and as of the date of such termination). The Trustee will
at all times maintain a separate bookkeeping account for each Executive to which
it will credit each amount delivered by the Company to the Trustee with respect
to such Executive. Upon the written request of an Executive or the Company, the
Trustee shall deliver to such Executive or the Company, as the case may be, a
written report setting forth the amount held in the Trust for such Executive (or
each Executive if such request is made by the Company) and a record of the
deposits made with respect thereto by the Company. Unless the Company or any
Executive shall have filed with the Trustee written exceptions or objections to
any such statement and account within one hundred eighty (180) days after
receipt thereof, the Company or the Executive shall be deemed to have approved
such statement and account, and in such case the Trustee shall be forever
released and discharged with respect to all matters and things reported in such
statement and account as though it had been settled by a decree of a court of
competent jurisdiction in an action or proceeding to which the Company and the
Executive were parties.
(d) The Trustee shall not be liable for any act taken or omitted to
be taken hereunder if taken or omitted to be taken by it in good faith, absent
the gross
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negligence or wilful misconduct of the Trustee. The Trustee shall also be fully
protected in relying upon any notice given hereunder which it in good faith
believes to be genuine and executed and delivered in accordance with this Trust.
(e) The Trustee may consult with legal counsel to be selected by it,
and the Trustee shall not be liable for any action taken or suffered by it in
accordance with the advice of such counsel.
(f) The Trustee shall be reimbursed by the Company for its reasonable
expenses incurred in connection with the performance of its duties hereunder and
shall be paid reasonable fees for the performance of such duties in the manner
provided by paragraph (g) of this Section 5.01.
(g) The Company agrees to indemnify and hold harmless the Trustee
from and against any and all damages, losses, claims or expenses as incurred
(including expenses of investigation and fees and disbursements of counsel to
the Trustee and any taxes imposed on the Trust Corpus or income of the Trust)
arising out of or in connection with the performance by the Trustee of its
duties hereunder, other than such damages, losses, claims or expenses arising
out of the Trustee's gross negligence or wilful misconduct. Any amount payable
to the Trustee under paragraph (f) of this Section 5.01 or this paragraph (g)
shall be paid by the Company promptly upon demand therefor by the Trustee or, in
the event that the Company fails to make such payment, from the Trust Corpus.
In the event that payment is made hereunder to the Trustee from the Trust
Corpus, the Trustee shall promptly notify the Company in writing of the amount
of such payment. The Company agrees that, upon receipt of such notice, it will
deliver to the Trustee to be held in the Trust an amount in cash (or in
marketable securities or in some combination thereof) equal to any payments made
from the Trust Corpus to the Trustee pursuant to paragraph (f) of this Section
5.01 or this paragraph (g). The failure of the Company to transfer any such
amount shall not in any way impair the Trustee's right to indemnification,
reimbursement and payment pursuant to paragraph (f) of this Section 5.01 or this
paragraph (g).
SECTION 5.02 Successor Trustee. The Trustee may resign and be
-----------------
discharged from its duties hereunder at any time by giving notice in writing of
such resignation to the Company and each Executive specifying a date (not less
than thirty (30) days after the giving of such notice) when such resignation
shall take effect. Promptly after such notice, the Company (or, if a Change in
Control shall previously have occurred, Executive(s) having at least 65%
percent of all amounts then held in the Trust credited to their accounts shall
appoint a successor trustee, such trustee to become Trustee hereunder upon the
resignation date specified in such notice. If the Company fails to appoint a
successor trustee or if such Executive(s) are unable to so agree upon a
successor trustee within thirty (30) days after such notice, the Trustee shall
be entitled, at the expense of the Company, to petition a United States
District Court or any of the courts of the State of New York having
jurisdiction to appoint its successor. The Trustee shall continue to serve
until its successor accepts the trust and receives delivery of the Trust
Corpus. The Company (or, if a Change in Control shall previously have
occurred, Executive(s) having at least 65% percent of all amounts then held in
the Trust credited to their accounts) may at any time substitute a new trustee
by giving fifteen (15) days notice thereof to the Trustee then acting. In the
event of such removal or resignation, the Trustee shall duly file with the
Company and, on and after a Change in Control, the Executives a written
statement or statements of accounts and proceedings as provided in Section
5.01(c) hereof for the period since the last previous annual accounting of the
Trust, and if written objection to such account is not filed as provided in
Section 5.01(c) hereof, the Trustee shall to the maximum extent
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<PAGE>
permitted by applicable law be forever released and discharged from all
liability and accountability with respect to the propriety of its acts and
transactions shown in such account. The Trustee and any successor thereto
appointed hereunder shall be a commercial bank which is not an affiliate of the
Company, but which is a national banking association or established under the
laws of one of the states of the United States, and which has equity in excess
of $100 million.
SECTION 5.03 Settlement of Accounts. Notwithstanding any other
----------------------
provision of this Agreement, in the event of the termination of the Trust, or
the resignation or discharge of the Trustee, the Trustee shall have the right
to a settlement of its accounts, which accounting may be made, at the option of
the Trustee, either (a) by a judicial settlement in a court of competent
jurisdiction; or (b) by agreement of settlement, release and indemnity from the
Company to the Trustee.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 6.01 Termination.
-------------------------
(a) Except as provided in Section 6.01(b) of this Agreement, this
Trust shall terminate forty-two months after the occurrence of a Change in
Control, or, if earlier, upon the earliest of either of the following events:
(i) the exhaustion of the Trust Corpus; or (ii) the final payment of all
amounts payable to all of the Executives pursuant to the Agreements, as
certified to the Trustee by each Executive. Promptly upon termination of this
Trust, any remaining portion of the Trust Corpus, less all payments, expenses,
taxes and other charges under this Trust Agreement as of such date of
termination, shall be paid to the Company.
(b) Notwithstanding any other provision of this Agreement, in the
situation where the payments under an Executive's Agreements are the subject of
litigation or arbitration, and if the Trust Corpus has not been exhausted with
respect to such Executive, the Trust shall not terminate and the funds held in
the Trust with respect to such Executive shall continue to be held by the
Trustee until the final resolution of such litigation or arbitration. The
Trustee may assume that no Agreement of an Executive is the subject of such
litigation or arbitration unless the Trustee receives written notice from an
Executive or the Company with respect to such litigation or arbitration. The
Trustee may rely upon written notice from an Executive as to the final
resolution of such litigation or arbitration. Following such final resolution,
the Trust shall terminate with respect to each Executive described in this
Section 6.01(b) upon the earliest of either of the following events: (i) the
exhaustion of the Trust Corpus held by the Trustee with respect to such
Executive; or (ii) the final payment of all amounts payable to the Executive
pursuant to such Executive's Agreements, as certified to the Trustee by such
Executive. Promptly upon termination of this Trust with respect to an
Executive described in Section 6.01(b), any remaining portion of the Trust
Corpus held by the Trustee with respect to such Executive shall be paid to the
Company. At such time as the Trust shall be terminated with respect to all
such Executives, the Trust Corpus, less all payments, expenses, taxes and other
charges attributable to the extension of the Trust term beyond the termination
date described in Section 6.01(a), shall be paid promptly to the Company.
SECTION 6.02 Amendment and Waiver. Except as provided in Sections
--------------------
2.01(c),(d) and 4.02(b),(c), this Trust may not be amended except by an
instrument in writing signed on behalf of the parties hereto together with the
written consent of Executives having at least 65% of all amounts then held in
the Trust credited to their accounts. The parties hereto, together with the
consent of Executives having at least 65% of all amounts then held in the Trust
credited to their accounts,
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may at any time waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto or an Executive
to any such waiver shall
be valid if set forth in an instrument in writing signed on behalf of such party
or Executive. This Trust may not be amended nor may compliance with any
provisions hereunder be waived except by an instrument in writing signed on
behalf of the parties hereto and by at least seventy-five percent (75%) of the
Executives in the situation where, prior to such amendment or waiver, no payment
has been made by the Company pursuant to Section 2.01(a)(i) that is then held by
the Trustee. Notwithstanding the foregoing, any such amendment or waiver may be
made prior to a Change in Control by written agreement of the parties hereto
without obtaining the consent of the Executives if such amendment or waiver does
not adversely affect the rights of the Executives hereunder. Except as provided
in Sections 2.01(c),(d) and 4.02(b),(c), no amendment or waiver relating to this
Trust may be made (i) with respect to the amount of funds to be delivered by the
Company to the Trustee with respect to an Executive or by the Trustee to such
Executive, or the timing of such deliveries or (ii) which amends Section 6.01,
unless such Executive, in the case of clause (i) or, all Executives in the case
of clause (ii), agree in writing to such amendment or waiver.
ARTICLE VII
GENERAL PROVISIONS
------------------
SECTION 7.01 Further Assurances. The Company shall, at any time and
------------------
from time to time, upon the reasonable request of the Trustee, execute and
deliver such further instruments and do such further acts as may be necessary or
proper to effectuate the purposes of this Trust.
SECTION 7.02 Certain Provisions Relating to this Trust. (a) This
-----------------------------------------
Trust sets forth the entire understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior agreements, arrangements
and understandings relating thereto. This Trust shall be binding upon and inure
to the benefit of the parties and their respective successors and legal
representatives.
(b) If by the end of the eight-month period following the date
hereof, or such later date as the Company and the Trustee shall agree, counsel
is unable to deliver to the Company a favorable opinion that is satisfactory to
the Company, substantially to the effect that
(i) the Company will be treated as the owner of the Trust under Section 677
of the Code and Section 1.677(a)-1(d) of the regulations. Under Section
671, the Company must include all of the income, deductions and credits
against tax of the Trust in computing its own taxable income and credits,
and
(ii) the transfer of assets to the Trust will not constitute a transfer
of property for purposes of Section 83 of the Code or Section 1.83-3(e) of
the regulations, and
(iii) under Section 451 of the Code, amounts will be includible in the
gross income of the Executives only in the taxable year or years in which
such amounts are actually distributed or made available by the Trustee,
the Trust shall immediately terminate and the amount of the Trust Corpus, less
all payments, expenses, taxes and other charges under this Trust Agreement, if
any, as of such date, shall be returned to the Company as soon as possible.
Upon termination of the Trust, the Executives shall have no rights under this
Trust Agreement.
(c) This Trust shall be governed by and construed in accordance with
the laws of the State of New York, other than and without reference to any
10
<PAGE>
provisions of such laws regarding choice of laws or conflict of laws.
(d) In the event that any provision of this Trust or the application
thereof to any person or circumstances shall be determined by a court of proper
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Trust, or the application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision of this Trust shall be valid and enforced
to the fullest extent permitted by law.
(e) The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.
SECTION 7.03 Alienation. The right of any Trust Beneficiary (as
----------
hereinafter defined) to any benefit or to any payment hereunder shall not be
subject to alienation or assignment.
SECTION 7.04 Arbitration. Any dispute between the Executives and
-----------
the Company or the Trustee as to the interpretation or application of the
provisions of this Trust and amounts payable hereunder may, at the election of
any party to such dispute (or, if more than one (1) Executive is such a party,
at the election of seventy-five percent (75%) of such Executives), be determined
by binding arbitration within the greater New York City metropolitan area or the
State of Connecticut in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court of competent jurisdiction. All fees and expenses of such
arbitration shall be paid by the Trustee and considered an expense of the Trust
under Section 5.01(g).
SECTION 7.05 Notices. Any notice, report, demand or waiver required
-------
or permitted hereunder shall be in writing and shall be given personally or by
prepaid registered or certified mail, return receipt requested, addressed as
follows:
If to the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
If to the Trustee: Connecticut National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Employee Benefits
Administration - MSN 215
If to an Executive, to the address of such Executive as listed next to his name
on Exhibit I hereto.
A notice shall be deemed received upon the date of delivery if given
personally or, if given by mail, upon the receipt thereof. A change of address
may be given by any party to another by similar notice.
SECTION 7.06 Trust Beneficiaries. Each Executive is an intended
-------------------
beneficiary ("Trust Beneficiary") under this Trust, and as a Trust Beneficiary
shall be entitled to enforce all terms and provisions hereof with the same force
and effect as if such person had been a party hereto. The term Trust
Beneficiary shall, to the extent provided in the Agreements respecting a
deceased Executive, also mean the legal representative of the estate of such
deceased Executive and the surviving spouse of the deceased Executive or
beneficiary designated by such Executive in accordance with the terms of such
Agreements.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Trust as of the
date first written above.
CHAMPION INTERNATIONALCORPORATION
By /s/ Andrew C. Sigler
----------------------------------------------
Andrew C. Sigler
Chairman and Chief Executive Officer
CONNECTICUT NATIONAL BANK
By /s/ Thomas F. Mullaney, Jr.
------------------------------------------
Thomas F. Mullaney, Jr.
Executive Vice-President
12
<PAGE>
Exhibit I
AGREEMENTS BETWEEN CHAMPION INTERNATIONAL
CORPORATION AND CERTAIN EXECUTIVES
<TABLE>
<CAPTION>
Agreement and
Name and Address Title Date of Agreement
- --------------------------- ------------------------- ------------------------
<S> <C> <C>
Mr. John A. Ball Senior Vice President February 19, 1987:
One Champion Plaza -Restated Agreement /1/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Gerald J. Beiser Senior Vice President- February 19, 1987:
One Champion Plaza Finance -Restated Agreement /1/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. William H. Burchfield Executive Vice President February 19, 1987:
One Champion Plaza -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Mark A. Fuller, Jr. Executive Vice President February 19, 1987:
One Champion Plaza -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Marvin H. Ginsky Senior Vice President February 19, 1987:
One Champion Plaza and General Counsel -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. L. C. Heist President and Chief August 18, 1988:
One Champion Plaza Operating Officer -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Kenwood C. Nichols Vice Chairman February 19, 1987:
One Champion Plaza -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Richard E. Olson Executive Vice President August 18, 1988:
One Champion Plaza -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Andrew C. Sigler Chairman and Chief February 19, 1987:
One Champion Plaza Executive Officer -Restated Agreement /1/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses /3/
- -------------------------
</TABLE>
/1/ As Amended April 21, 1988 and August 18, 1988
/2/ As Amended April 21, 1988
/3/ As Amended August 18, 1988
<PAGE>
AMENDMENT TO
TRUST AGREEMENT DATED AS OF
FEBRUARY 19, 1987 BETWEEN CHAMPION
INTERNATIONAL CORPORATION AND CONNECTICUT NATIONAL BANK
-------------------------------------------------------
This Amendment between Champion International Corporation, a New York
corporation (the "Company"), and Connecticut National Bank (the "Trustee") is
effective as of August 18, 1988 and amends the Trust Agreement dated as of
February 19, 1987 between the Company and the Trustee (the "Trust").
WHEREAS, the Company and the Trustee have entered into the Trust; and
WHEREAS, the Company and the Trustee wish to amend the Trust in order to
(1) ensure that it is in compliance with the rule against perpetuities and with
applicable restraints on alienation, and (2) clarify the circumstances in which
interest earned
on the investment of Trust Corpus may be paid to the Executives; and
WHEREAS. all of the Executives have agreed in writing to this Amendment as
required by Section 6.02 of the Trust;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Section 4.01 of the Trust is hereby amended by adding a new
subsection (d) thereto, as follows:
"(d) Notwithstanding any provision of this Agreement, upon termination
of the Trust as provided in Section 6.01(c) the Trustee shall pay to the Company
all amounts held hereunder."
2. The second, third and fourth sentences of Section 4.02(a) of the
Trust are hereby amended in their entirety to read as follows:
"Each Payment Schedule also shall be delivered by the Company to such
Executive. The Payment Schedule shall include instructions as to the
amount of interest (if any) to accrue for the benefit of an Executive, from
the date on which the Trustee receives a written request for payment signed
by the Executive (or his beneficiary or beneficiaries) as hereinafter
provided until the date on which such payment is made, in respect of such
payment; such instructions may be revised from time to time prior to the
occurrence of a Change in Control. The aggregate payment to be made
hereunder to an Executive by the Trustee shall not exceed the aggregate
amount delivered to the Trustee for the benefit of such Executive, plus
interest (if any) thereon as described in the immediately preceding
sentence, all as indicated in the Payment Schedule applicable to such
Executive."
3. Subsection (a) of Section 6.01 of the Trust is hereby amended to
delete the first nine words thereof (i.e., "Except as provided in Section
6.01(b) of this Agreement,") and to substitute the following therefor: "Except
as provided in Sections 6.01(b) and 6.01(c) of this Agreement,".
4. Subsection (b) of Section 6.01 of the Trust is hereby amended to
delete the first seven words thereof (i.e., "Notwithstanding any other
provision of this Agreement,") and to substitute the following therefor:
Notwithstanding any other provision of this Agreement except Section 6.01(c),".
<PAGE>
5. Section 6.01 of the Trust is hereby amended by adding a new
subsection (c) thereto, as follows:
"(c) Notwithstanding any other provision of this Agreement, this
Trust shall terminate in all events and under all circumstances not later
than twenty-one years after the death of the last survivor of the
Executives who were included on Exhibit I hereto at the time this Trust was
executed, such Executives being John A. Ball, Gerald J. Beiser, William H.
Burchfield, Aubrey L. Cole, Mark A. Fuller, Jr., Marvin H. Ginsky, Judson
Hannigan, L. C. Heist, Robert F. Longbine, Kenwood C. Nichols, Philip R.
O'Connell and Andrew C. Sigler. Promptly upon termination of this Trust
pursuant to this Section 6.01(c), the Trustee shall pay to the Company all
amounts held hereunder."
6. All capitalized terms used herein and not defined herein shall
have the meanings assigned to them in the Trust.
7. Except as amended hereby, all of the provisions of the Trust shall
continue in full force and effect without change.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
----------------------------------
Chairman and Chief Executive Officer
CONNECTICUT NATIONAL BANK
----------------------------------
By /s/ Thomas J. Botticelli
Thomas J. Botticelli
AGREED TO:
/s/ John A. Ball /s/ Judson Hannigan
- ----------------------------------------- -----------------------
John A. Ball Judson Hannigan
/s/ Gerald J. Beiser /s/ L. C. Heist
- ----------------------------------------- -----------------------
Gerald J. Beiser L.C. Heist
/s/ William H. Burchfield /s/ Kenwood C. Nichols
- ----------------------------------------- -----------------------
William H. Burchfield Kenwood C. Nichols
/s/ Aubrey L. Cole /s/ Philip R. O'Connell
- ----------------------------------------- -----------------------
Aubrey L. Cole Philip R. O'Connell
/s/ Mark A. Fuller, Jr. /s/ Richard E. Olson
- ----------------------------------------- -----------------------
Mark A. Fuller, Jr. Richard E. Olson
/s/ Marvin H. Ginsky /s/ Andrew C. Sigler
- ----------------------------------------- -----------------------
Marvin H. Ginsky Andrew C. Sigler
2
<PAGE>
Exhibit D
---------
[subparagraph 9(d)]
Schedule of Amounts to be Deposited in Trust
Upon a Potential Change in Control*
--------------------------------------------
` Severance: 2 years termination payments; 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. Payments are
based on highest total of salary and annual bonus for
any calendar year of employment.
` Retirement: All amounts, if any, payable under the excess benefit
and supplemental retirement plans of the Company.
` Disability: Same as for active employees, for the 2 year termination
payment period (or balance thereof).
` Medical: Same as for active employees less retiree medical
benefit, if any, for the 2 year termination payment
period (or balance thereof).
` Dental: Same as for active employees, for the 2 year termination
payment period (or balance thereof).
` Options: Fund for those options referred to in subparagraph
1(a)(iii) hereof. "Spread" to be calculated on the basis
of the closing price of Common Shares of the Company as
reported in "New York Stock Exchange Composite
Transactions" of the Eastern Edition of The Wall Street
---------------
Journal for the trading day immediately after the
-------
Potential Change in Control.
` Contingently
Credited Shares: Fund for those contingently credited shares referred to
in subparagraph 1(a)(iii) hereof in an amount per share
equal to the closing price of Common Shares of the
Company as reported in "New York Stock Exchange
Composite Transactions" of the Eastern Edition of The
---
Wall Street Journal for the trading day immediately
-------------------
after the Potential Change in Control.
` Legal Expenses: An amount equal to twelve times the monthly base salary
paid at time of deposit into trust.
________________
* This Exhibit D does not reflect the possible reduction provided for in
subparagraph 9(d)(v) hereof.
o0o
<PAGE>
EXHIBIT 10.28
Champion International Corporation
One Champion Plaza
Stamford, CT 06921
October 18, 1990
Mr. Joe K. Donald
One Champion Plaza
Stamford, CT 06921
Re: Agreement Relating to Legal Expenses
Dated October 18, 1990
------------------------------------
Dear Joe:
As an inducement for you to continue in the employ of Champion
International Corporation (the "Company"), the Board of Directors of the Company
has today authorized entering into an Agreement between you and the Company
effective October 18, 1990 (the "Agreement"). One of the principal purposes in
entering into the Agreement is to provide you with reasonable assurance in the
event of a change in control of the Company against loss of rights to benefits
that you could reasonably expect to receive in the absence of such a change in
control, and thereby provide an inducement for you to remain in the employ of
the Company notwithstanding the possibility of a change in its control.
As a separate and additional inducement for you to remain in the employment
of the Company, and to provide you with reasonable assurance that the purposes
of the Agreement and this Agreement Relating to Legal Expenses (the "Legal
Expense Agreement") (collectively, the "Secured Agreements") will not be
frustrated as a result of the cost of their enforcement should a claim or
dispute be instituted or arise upon or within forty-two months following a
Change in Control of the Company (as defined in the Agreement) and arise out of
or relate to any provision of the Secured Agreements, the Company agrees to pay,
in consideration of such continued employment, all legal expenses which you may
incur in any such claim or dispute. Such legal expenses shall be paid in the
amount provided in, and otherwise in accordance with the terms and conditions
of, the memorandum attached to, incorporated in and by this reference made part
of, this Legal Expense Agreement.
By virtue of the mutual promises set forth in this Agreement Relating to
Legal Expenses and the Agreement and other good and valuable consideration the
receipt and sufficiency of which you and the Company hereby acknowledge, your
signature at the foot of this letter will constitute this letter a binding
agreement and it shall thereupon be binding upon and inure to the benefit of
you, your spouse, any other beneficiaries and your estate, and the Company and
its successors and assigns, including any corporation with or into which the
Company may consolidate or merge or to which the Company may transfer all or
substantially all of its assets. If you are deceased and survived by a
beneficiary, then your beneficiary may act for herself or himself in enforcing
her or his rights under this Legal Expense Agreement as your survivor, and may
also act for you with respect to any rights to payments which became due and
remained unpaid during your lifetime.
<PAGE>
For the Company's files, please execute the enclosed copy of this Legal
Expense Agreement and return it in an envelope marked "Confidential" to Lionel
N. Zimmer.
Sincerely,
CHAMPION INTERNATIONAL CORPORATION
Attest: By /s/ Andrew C. Sigler
----------------------------------
Chairman of the Board of Directors
/s/ Lawrence A. Fox
- -----------------------------
Secretary
Agreed: October 18, 1990
/s/ Joe K. Donald
- --------------------------------
Joe K. Donald
-2-
<PAGE>
Memorandum of Terms and Conditions Referred to in
the Agreement Relating to Legal Expenses
dated October 18, 1990 between
Champion International Corporation and Joe K. Donald
----------------------------------------------------
1. Reference hereafter to the Agreement Relating to Legal Expenses (the
"Legal Expense Agreement") shall be deemed to refer also to this memorandum.
Terms used or referred to in the Legal Expense Agreement shall have the same
meaning or reference in this memorandum as in the Legal Expense Agreement.
2. The Company shall, upon presentation of appropriate commercial
invoices, pay all legal expenses, which includes reasonable legal fees, court
costs, arbitration costs, and ordinary and necessary out-of-pocket costs of
attorneys, billed to and payable by you or by anyone claiming under or through
you (such person being hereinafter referred to as your "beneficiary"), in
connection with bringing, prosecuting, defending, litigating, arbitrating,
negotiating or settling any claim or dispute by or against you or your
beneficiary, or any claim or dispute between you or your beneficiary and the
Company or any third party, that may be instituted or arise upon or within
forty-two months following a Change in Control of the Company, as defined in the
Agreement, and that may arise out of or relate to the Secured Agreements, or any
of them, or the validity, operation, interpretation, enforceability or breach
thereof, provided that:
(a) you and your beneficiary shall repay to the Company any such expenses
theretofore paid by or on behalf of the Company if and to the extent that a
judgment should be rendered against you or your beneficiary by the judicial or
arbitration forum that adjudicates such dispute beyond appeal, and such expenses
were not incurred by you or your beneficiary while acting in good faith, and
provided further, that
(b) in the case of any request that the Company pay attorneys' fees or
expenses, the Company shall have received a statement signed by the attorney or
firm of attorneys rendering the bill setting forth the services that had been,
and will be, performed, and provided further, that
(c) in the case of any claim or dispute by or against you or your
beneficiary, the claim for legal fees hereunder shall be made in writing, with
specific reference to the provisions of the Legal Expense Agreement, delivered
in the manner provided in subparagraph 4(c) below, in no event later than forty-
two months after a Change in Control of the Company.
3. (a) At any time after the date hereof but in no event later than a
Potential Change in Control of the Company as defined in the Agreement, if you
are in the employ of the Company at such time, the Company will, at its own
expense, set aside in trust, or establish, extend, renew and maintain an
irrevocable bank letter of credit in favor of you or, in the event of your
death, your beneficiary, in an amount equal to twelve (12) times the monthly
base salary being paid to you at such time.
(b) The Company agrees that, as soon as practicable, it will enter into
a trust agreement agreement substantially in the form attached to the Agreement
(the "Trust Agreement"), and agrees that, upon the terms, conditions and
procedures set forth therein, you will be named a beneficiary of the Trust
Agreement, and this Legal Expense Agreement will be listed on Exhibit I of the
Trust Agreement as one of the agreements which is subject to the trust
established by the Trust Agreement. If the Company shall become liable for the
payment of legal expenses under paragraph 2 above, you or, in the event of your
death, your beneficiary shall request the Company in
<PAGE>
writing, in accordance with the terms, conditions and procedures set forth in
such paragraph 2, to make such payment and, if the Company shall fail to do so
fully within a reasonable time after receipt of such written demand, you may
request the trustee of such trust, in accordance with the terms, conditions and
procedures set forth in the Trust Agreement, to make such payment to the extent
that the Company had failed to do so. The Company shall continue to be liable
to make all payments required under the terms of this Legal Expense Agreement to
the extent such payments have not been made pursuant to the Trust Agreement.
(c) If the Company establishes, extends, renews and maintains an
irrevocable bank letter of credit in favor of you or your beneficiary, you or,
in the event of your death, your beneficiary, shall be entitled to draw upon
such letter of credit only if and to the extent that the Company shall fail to
discharge its obligations under paragraph 2 above within a reasonable time after
receipt of written demand by you or your beneficiary. As and when any funds are
paid by the bank under such letter of credit, the Company shall renew such
letter of credit at its own expense to the extent of the funds so paid. The
Company need not establish or renew any such letter of credit for any period
subsequent to the date on which an attorney or a firm of attorneys selected by
mutual agreement of the Company and you or, in the event of your death, your
beneficiary, the fees and expenses of which attorney or firm of attorneys shall
be borne by the Company, shall determine, after consultation with the Company
and you or, in the event of your death, your beneficiary, that all obligations
of the parties under the Secured Agreements have been substantially satisfied.
(d) The bank that shall issue any such letter of credit shall be a
national or state bank having a combined capital, surplus and undivided profits
and reserves of not less than One Hundred Million Dollars ($100,000,000).
4. (a) Any dispute between you and the Company as to the interpretation
or application of the provisions of either of the Secured Agreements may at your
election be determined by binding arbitration within the greater New York City
metropolitan area or the State of Connecticut in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court of competent jurisdiction. All fees and
expenses of such arbitration shall be paid by the Company subject to repayment
in accordance with the terms and conditions set forth in clause (a) of paragraph
2 above.
(b) Anything to the contrary notwithstanding, all payments and other
provisions required to be made by the Company under this Legal Expense Agreement
to or on behalf of you or your beneficiaries shall be subject to the withholding
of such amounts, if any, relating to tax and other payroll deductions as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation. In lieu of withholding such amounts, the Company may accept
other provisions to the end that it has sufficient funds to pay all taxes
required by law to be withheld in respect of any or all of such payments.
(c) All notices, requests, demands and other communications provided for
by this Legal Expense Agreement shall be in writing and shall be sufficiently
given if and when mailed in the continental United States by registered or
certified mail, return receipt requested, or personally delivered to the party
entitled thereto at the address stated below, which address shall be such
address as the addressee may have given most recently by a similar notice. Any
such notice shall be deemed to have been received on the date of
2
<PAGE>
delivery.
To the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
To the Executive: Mr. Joe K. Donald
One Champion Plaza
Stamford, CT 06921
(d) No provision of this Legal Expense Agreement may be amended,
modified or waived unless such amendment, modification or waiver shall be
authorized by the Board of Directors of the Company or any authorized committee
of the Board of Directors and shall be agreed to in writing, signed by you and
by an officer of the Company thereunto duly authorized. Except as otherwise
specifically provided in this Legal Expense Agreement, no waiver by either party
hereto of any breach by the other party hereto of any condition or provision of
this Legal Expense Agreement to be performed by such other party shall be deemed
a waiver of a subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same time or at any prior or
subsequent time.
(e) Anything in this Legal Expense Agreement to the contrary
notwithstanding:
(i) In the event that any provision of this Legal Expense Agreement,
or portion thereof, shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Legal Expense
Agreement and parts of such provision not so invalid or unenforceable shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law;
(ii) Any provision of this Legal Expense Agreement, or portion
thereof, which may be invalid or unenforceable in any jurisdiction shall be
limited by construction thereof, to the end that such provision, or portion
thereof, shall be valid and enforceable in such jurisdiction; and
(iii) Any provision of this Legal Expense Agreement, or portion
thereof, which may for any reason be invalid or unenforceable in any
jurisdiction shall remain in effect and be enforceable in any jurisdiction in
which such provision, or portion thereof, shall be valid and enforceable.
(f) Except as otherwise provided herein, this Legal Expense Agreement
shall be binding upon and inure to the benefit of the Company and any successor
of the Company, including, without limitation, any corporation or corporations
acquiring directly or indirectly all or substantially all of the assets of the
Company whether by merger, consolidation, sale or otherwise (and such successor
shall thereafter be deemed embraced within the term "the Company" for the
purposes of this Legal Expense Agreement), but shall not otherwise be assignable
by the Company.
(g) The validity, interpretation, construction, performance and
enforcement of this Legal Expense Agreement shall be governed by the laws of the
State of New York without giving effect to the principles of conflicts of laws
thereof.
(h) There shall be no right of set-off or counterclaim in respect of
any claim, debt or obligation against any payments to you, your beneficiaries or
estate, provided for in this Legal Expense Agreement.
(i) The Company and you recognize that each party will have no adequate
remedy at law for breach by the other of any of the agreements
3
<PAGE>
contained in this Legal Expense Agreement and, in the event of any such breach,
the Company and you hereby agree and consent that the other shall be entitled to
a decree of specific performance, mandamus or other appropriate remedy to
enforce performance of such agreements.
(j) No right or interest to or in any payments shall be assignable by
you; provided, however, that this provision shall not preclude you from
designating one or more beneficiaries to receive any amount that may be payable
after your death and shall not preclude the legal representative of your estate
from assigning any right hereunder to the person or persons entitled thereto
under your will or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to your estate.
(k) No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
(l) In the event of your death or a judicial determination of your
incompetence, reference in this Legal Expense Agreement to you shall be deemed,
where appropriate, to refer to your legal representative or, where appropriate,
to your beneficiary or beneficiaries.
(m) If any event provided for in this Legal Expense Agreement is
scheduled to take place on a legal holiday, such event shall take place on the
next succeeding day that is not a legal holiday.
(n) This Legal Expense Agreement shall be binding upon and shall inure
to the benefit of you, your heirs and legal representatives, and the Company and
its successors as provided in subparagraph 4(f) hereof.
(o) This instrument and the Agreement contain the entire agreement of
the parties relating to the subject matter of this Legal Expense Agreement and
supersedes and replaces all prior agreements and understandings with respect to
such subject matter, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Legal
Expense Agreement which are not set forth herein.
5. The Legal Expense Agreement is not intended to confer upon you any
right to continue in the employ of the Company or to affect any rights of the
Company, subject to any agreement or agreements between you and the Company
relating to your employment by the Company, to terminate your employment at any
time with or without assigning a reason therefor.
oOo
4
<PAGE>
EXHIBIT 10.29
AMENDMENT EFFECTIVE AS OF SEPTEMBER 19, 1991
TO OCTOBER 18, 1990 AGREEMENT
--------------------------------------------
This Agreement between Champion International Corporation, a New York
corporation (the "Company"), and Joe K. Donald (the "Executive") is effective as
of September 19, 1991.
WHEREAS, the Company and the Executive entered into an Agreement dated
October 18, 1990 (the "Agreement") relating to the employment of the Executive
by the Company; and
WHEREAS, The Company and the Executive wish to amend the Agreement in order
to (1) provide that any benefits thereunder which constitute "parachute
payments" for Federal tax purposes be paid in an amount the net effect of which
is intended to result in the Executive receiving "parachute payments" from all
sources equal to the greater of (i) the total of the "parachute payments" from
all sources, less income taxes and any Federal excise tax thereon, and (ii) the
maximum amount of "parachute payments" that can be paid without triggering such
Federal excise tax, less income taxes thereon; and (2) expressly allow the
Executive to engage the Company's independent consulting actuary to assist in
"parachute payment" determinations;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Paragraph 14 of the Agreement is hereby amended in its entirety to read as
follows:
"14. Parachute Tax
-------------
(a) Except in the specific circumstance hereinafter described in this paragraph
14, the Company shall pay to the Executive the full amount to which he is
entitled under this Agreement.
(b)
(i) If any payments or benefits received or to be received by the
Executive under this Agreement, or any other payments or benefits received
or to be received by the Executive from the Company or any other person,
constitute "parachute payments" within the meaning of Section 280G(b)(2) or
any successor provision of the Code (such payments or benefits being
hereinafter referred to as the "Parachute Payments"), and
(ii) If the aggregate present value of the Parachute Payments from all
sources, minus (A) any excise tax imposed under Section 4999 of the Code
(or any similar tax that may hereafter be imposed) (the "Excise Tax") and
(B) the net amount of federal, state and local income tax on such aggregate
present value, would be less than the maximum amount of Parachute Payments
from all sources that can be paid without triggering the Excise Tax, after
deduction of the net amount of federal, state and local income tax on such
maximum amount, then
(iii) the Parachute Payments to be paid by the Company to the
Executive under this Agreement shall be reduced to a lump sum amount (if
any) such that the aggregate present value of the Parachute Payments from
all sources is equal to the maximum amount of Parachute Payments that can
be paid without triggering the Excise Tax.
<PAGE>
Anything in this subparagraph 14(b) to the contrary notwithstanding, it
is understood and agreed that the amount to be paid by the Company to the
Executive pursuant to this subparagraph 14(b) in the specific circumstance
described herein may be less, but never more, than the amount to which he would
otherwise be entitled under this Agreement.
(c) All matters to be determined pursuant to subparagraph 14(b) including,
without limitation, the existence or absence of any Parachute Payments, the
aggregate present value of any Parachute Payments, the amount of the Excise Tax
(if any), the net amount of federal, state and local income tax (assuming the
highest applicable marginal rate in each case), the maximum amount of Parachute
Payments that can be paid without triggering the Excise Tax, the amount of any
reduction in the Parachute Payments to be paid by the Company to the Executive
under this Agreement and the item or items (if any) to be reduced, shall be
determined by the Executive or, following his death, his beneficiary or
beneficiaries. The specifics of such determination shall be delivered in
writing to the Company and to the trustee of the Trust referred to in
subparagraph 9(d)(ii) above at the time of the Executive's termination within
three years after a Change in Control, or as soon as practicable thereafter, by
the Executive or, following his death, his beneficiary or beneficiaries. The
reasonable fees and expenses of such tax counsel and financial advisor as may
reasonably be called upon to assist the Executive or his beneficiary or
beneficiaries in the foregoing determinations shall be paid by the Company.
Without limiting the generality of the immediately preceding sentence, the
Executive or his beneficiary or beneficiaries may select as such financial
advisor Hewitt Associates or such other person or firm as may be serving at the
time as the Company's independent consulting actuary."
2. Except as amended hereby, all of the terms and conditions set forth in
the Agreement shall continue in full force and effect without change.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has executed this
Agreement, all as of September 19, 1991.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
------------------------------------
Chairman of the Board of Directors
Attest:
/s/ Lawrence A. Fox
- ----------------------------
Secretary
/s/ Joe K. Donald
-----------------------------------
Joe K. Donald
-2-
<PAGE>
EXHIBIT 10.30
AMENDMENT EFFECTIVE AS OF NOVEMBER 21, 1996
TO OCTOBER 18, 1990 AGREEMENT
-------------------------------------------
This Agreement between Champion International Corporation, a New York
corporation (the "Company"), and Joe K. Donald (the "Executive") is effective as
of November 21, 1996.
WHEREAS, the Company and the Executive entered into an Agreement dated
October 18, 1990, as amended September 19, 1991 (the "Agreement"), relating to
the employment of the Executive by the Company; and
WHEREAS, the Company and the Executive desire to amend the Agreement in
order to include certain provisions relating to the cessation of employment
under specified circumstances between September 1, 1998 and August 14, 2000;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. A new paragraph 17 is added to the Agreement as follows:
"17. Special Provisions Relating to Cessation of Employment Under Certain
--------------------------------------------------------------------
Circumstances Between September 1, 1998 and August 31, 1999
- -----------------------------------------------------------
(a) Termination Payments
--------------------
If the Executive's full-time employment with the Company ceases as the
result of his voluntary separation from service at any time during the period
from and including September 1, 1998 to and including August 31, 1999 (the
"First Special Period"), then, subject to compliance by the Executive with
paragraphs 3 and 19, the following provisions of this subparagraph (a) shall
apply: The Company shall pay to the Executive or, in the event of his death
following his voluntary separation from service, his beneficiary or
beneficiaries or his estate, as the case may be, a monthly sum equal to the
highest total monthly compensation (highest total of annual salary plus annual
bonus for any calendar year of employment, divided by twelve) paid to the
Executive. Such payments shall commence on the last day of the month next
following the Executive's voluntary separation from service and shall continue
until the last day of the twenty-fourth full calendar month following the
Executive's voluntary separation from service, provided, however, that such
payments shall not continue beyond the last day of the month next preceding the
month in which he shall, with his written consent, commence receiving his
retirement allowance under the Company's pension plan. (Termination payments in
the case of termination without Cause at any time, including during the First
Special Period, are provided for in paragraph 1.)
<PAGE>
(b) Annual Bonus
------------
If the Executive's full-time employment with the Company ceases as the
result of his termination without Cause or his voluntary separation from service
at any time during the First Special Period, then, subject to compliance by the
Executive with paragraphs 3 and 19, the following provisions of this
subparagraph (b) shall apply: The Compensation and Stock Option Committee of
the Board of Directors of the Company (the "Compensation Committee") shall
determine the amount of annual bonus, if any, that would have been paid to the
Executive for the calendar year (i.e., 1998 or 1999) in which his employment
ceased if he had remained in the Company's employment for the entire calendar
year. If the Compensation Committee determines that such an annual bonus would
have been paid, then the Company shall pay to the Executive an amount equal to
such annual bonus multiplied by a fraction, the numerator of which is equal to
the number of days during such calendar year that he was a full-time employee of
the Company and the denominator of which is 365. Any such payment shall be made
as soon as practicable following the cessation of employment of the Executive.
Any such payment shall be in addition to termination payments made pursuant to
either paragraph 1 in the case of a termination without Cause or subparagraph
17(a) in the case of a voluntary separation from service during the First
Special Period.
(c) Notice of Cessation of Employment
---------------------------------
Voluntary separation from service: In order to be entitled to the payments
provided for in subparagraphs 17(a) and (b) in the case of a voluntary
separation from service, the Executive shall give written notice thereof to the
Company during the First Special Period. Such voluntary separation from service
shall be effective upon receipt of such notice by the Company.
Termination without Cause: (x) In the case of an actual termination
without Cause, as specified in subparagraph 1(b)(i), during the First Special
Period, the Executive shall not be required to give any notice to the Company in
order to be entitled to the payment provided for in subparagraph 17(b). (y)
In the case of the occurrence during the First Special Period of one or more of
the constructive-termination-without-Cause events specified in subparagraph
1(b)(ii), the Executive shall give written notice to the Company during the
First Special Period of his election to cease employment with the Company in
order to be entitled to the payment provided for in subparagraph 17(b). Such
cessation of employment shall be effective upon receipt of such notice by the
Company. Such notice also shall entitle the Executive to the applicable
payments provided for in paragraph 1 and shall be in lieu of, and shall release
the Executive from the obligation to give, sixty days' advance written notice of
his cessation of employment pursuant to subparagraph 1(b)(ii)."
2
<PAGE>
2. A new paragraph 18 is added to the Agreement as follows:
"18. Special Provisions Relating to Termination Without Cause Between
----------------------------------------------------------------
September 1, 1999 and August 14, 2000
- -------------------------------------
(a) Stock Award
-----------
If the Executive's full-time employment with the Company ceases as the
result of his termination without Cause at any time during the period from and
including September 1, 1999 to and including August 14, 2000 (the "Second
Special Period"), then, subject to compliance by the Executive with paragraphs 3
and 19, the following provisions of this subparagraph (a) shall apply: The
Company shall award 6,000 shares of the Common Stock of the Company to the
Executive as soon as practicable following the termination without Cause of the
Executive, subject to subparagraph 18(d). Such award shall be in addition to
termination payments made pursuant to paragraph 1.
(b) Adjustments
-----------
The number of shares provided in subparagraph 18(a) shall be subject to
adjustment in accordance with the anti-dilution provisions of the agreement
between the Executive and the Company (the "Stock Award Contract") relating to
the award of an aggregate of 40,000 shares of the Common Stock of the Company to
the Executive in installments if the Executive is employed by the Company on
August 15, 1998, August 15, 2000 and August 15, 2002.
(c) Notice of Cessation of Employment
---------------------------------
In the case of an actual termination without Cause, as specified in
subparagraph 1(b)(i), during the Second Special Period, the Executive shall not
be required to give any notice to the Company in order to be entitled to the
stock award provided for in subparagraph 18(a).
In the case of the occurrence during the Second Special Period of one or
more of the constructive-termination-without-Cause events specified in sub-
paragraph 1(b)(ii), the Executive shall give written notice to the Company
during the Second Special Period of his election to cease employment with the
Company in order to be entitled to the stock award provided for in subparagraph
18(a). Such cessation of employment shall be effective upon receipt of such
notice by the Company. Such notice also shall entitle the Executive to the
applicable payments provided for in paragraph 1 and shall be in lieu of, and
shall release the Executive from the obligation to give, sixty days' advance
written notice of his cessation of employment pursuant to subparagraph 1(b)(ii).
3
<PAGE>
(d) Taxes
-----
Promptly after the Executive becomes entitled to the stock award provided
for in subparagraph 18(a), the Company shall notify the Executive of the amount
which it is required to withhold for federal, state, local and other taxes in
respect of the award. The Executive shall have the right to direct the Company
to withhold a portion of the shares to which he is entitled pursuant to
subparagraph 18(a) in satisfaction of his tax obligations in respect of the
award. In the absence of such a direction from the Executive, the Company shall
not be required to issue shares pursuant to subparagraph 18(a) until it has
received from the Executive an amount in cash equal to the amount which it has
notified the Executive is required to be withheld in respect of the award.
(e) Stock Award Contract
--------------------
Nothing herein shall be deemed to modify in any way the terms of the Stock
Award Contract. The termination without Cause of the Executive during the
Second Special Period shall entitle the Executive to the stock award provided
for in subparagraph 18(a), but shall not entitle the Executive to any award
pursuant to the Stock Award Contract."
3. A new paragraph 19 is added to the Agreement as follows:
"19. Provisions Relating to Benefits Under Paragraphs 17 and 18
----------------------------------------------------------
(a) Competition
-----------
By accepting the payments provided for in subparagraph 17(a) or (b) or the
stock award provided for in subparagraph 18(a), the Executive will be deemed to
have agreed that he shall not engage in any competition with any of the
businesses in which the Company or its subsidiaries or affiliates may be engaged
at the time of the cessation of his employment, including without limitation
entering into employment or consulting arrangements with any entity that engages
in such competition, for a period of two years after the cessation of his
employment. In such event, the provisions of this subparagraph 19(a) shall
apply and the provisions of subparagraph 3(e) shall not apply.
The Executive agrees that the Company may seek enforcement of the
provisions of this subparagraph 19(a) by injunctive or other equitable relief.
(b) Cessation of Employment Other Than as Specified in Paragraph 17
---------------------------------------------------------------
or 18
-----
It is understood and agreed that the provisions of paragraph 17 shall
apply only to the cessation of the Executive's employment under the
circumstances specified therein during the First Special Period. Such
provisions shall not apply to the cessation of the Executive's employment under
any other circumstances during
4
<PAGE>
the First Special Period or under any circumstances before or after the First
Special Period.
It is understood and agreed that the provisions of paragraph 18 shall apply
only to the termination without Cause of the Executive's employment during the
Second Special Period. Such provisions shall not apply to the cessation of the
Executive's employment under any other circumstances during the Second Special
Period or under any circumstances before or after the Second Special Period."
4. Subparagraph 1(a)(v) is amended to add the words "or subparagraph 17(a)
below" immediately after the words "under subparagraph 1(a)(i) above" at both
places in which the words "under subparagraph 1(a)(i) above" appear.
5. Subparagraph 1(b)(ii) is amended to add the words ", subject to
subparagraphs 17(c) and 18(c)," immediately after the words "provided that".
6. Paragraph 2 is amended to add the words "or subparagraph 17(a) below"
immediately after the words "described in paragraph 1 above".
7. The Agreement, as amended by this amendment, shall be governed by and
construed in accordance with the laws of the State of New York.
8. The Company and the Executive understand and agree that all references
in the Agreement to the provisions thereof that are amended hereby shall be
deemed to be references to such provisions as amended hereby.
9. Except as amended hereby, all of the terms and conditions set forth in
the Agreement shall continue in full force and effect without change.
IN WITNESS WHEREOF, the Company has caused this amendment to be executed
and its seal to be affixed hereto, and the Executive has executed this
amendment, all as of November 21, 1996.
Champion International Corporation
By /s/ R. E. Olson
----------------------------------------
Chairman of the Board of Directors
ATTEST:
/s/ Lawrence A. Fox
- -----------------------------
Vice President and Secretary
/s/ Joe K. Donald
----------------------------------------
Joe K. Donald
5
<PAGE>
EXHIBIT 10.31
AGREEMENT
between
CHAMPION INTERNATIONAL CORPORATION
and
L. SCOTT BARNARD
Effective October 18, 1990
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Paragraph
Number Title Page
- --------- ----- ----
<S> <C> <C>
1 Termination 1
(a) Termination Payments 1
(i) Monthly Payments 1
(ii) Lump Sum Payment Upon Termination
Following a Change in Control 1
(iii) Cash-Out of Options and Contingently 1
Credited Shares
(iv) Payment of Value of Excess Benefit 2
and Supplemental Retirement Plan
Payments
(v) Participation in Benefit Plans 2
(b) Definition of Termination 3
(c) Definition of Cause 3
(d) Definition of Change in Control 4
2 Termination During Month 4
3 Post-termination Obligations 4
of Executive; Default by Company
(a) Assistance in Litigation 4
(b) Detrimental Conduct 5
(c) Discoveries and Inventions 5
(d) Reimbursement of Expenses 5
(e) Competition 5
(f) Failure to Comply 5
(g) Post-termination Default in 6
Payments or Benefits
4 Determination of Benefits 6
5 (a) Time of Payment 6
(b) Withholding of Taxes 7
6 Decisions by Company 7
7 Prior Agreements 7
8 Consolidation or Merger 7
9 (a) Non-assignability 7
(b) No Attachment 7
(c) Binding Agreement 8
(d) Unfunded Obligations; Trust 8
Agreement
10 (a) Amendment of Agreement 9
(b) No Waiver 9
11 Severability 9
12 Headings 9
13 Governing Law 9
14 Parachute Tax 10
15 Notices 10
16 Arbitration 10
</TABLE>
i
<PAGE>
EXHIBITS
--------
<TABLE>
<CAPTION>
Page
Exhibit Reference
- -------- ---------
<S> <C> <C>
A Certain benefits to be provided after a 1
termination following a change in control
B Payments and benefits subject to 6
acceleration in event of default in
payments or benefits by Company after
cessation of employment
C Form of Trust Agreement 8
D Amounts to be deposited in trust upon a 8
potential change in control
</TABLE>
DEFINED TERMS
-------------
<TABLE>
<CAPTION> Page
Defined Term Paragraph Reference
- ------------ --------- ---------
<S> <C> <C>
Agreement Introduction 1
Cause 1(c) 3
Change in Control 1(d) 4
Code 1(a)(iii) 2
Company Introduction 1
Executive Introduction 1
Fair Market Value 1(a)(iii) 2
Legal Expense Agreement 1(b)(ii) 3
Potential Change in Control 9(d)(vii) 9
Termination 1(b) 3
</TABLE>
ii
<PAGE>
THIS AGREEMENT between CHAMPION INTERNATIONAL CORPORATION, a New York
corporation (the "Company"), and L. SCOTT BARNARD (the "Executive"), effective
October 18, 1990 (the "Agreement").
W I T N E S S E T H:
WHEREAS, the Executive is now in the employ of the Company; and
WHEREAS, the Executive is Vice President - Printing Papers; and
WHEREAS, the Company wishes to provide additional incentive for the
Executive to continue in the employ of the Company;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Termination
-----------
In the event of a termination, as defined in subparagraph 1(b) below, the
following provisions of this paragraph 1 shall apply.
(a) Termination Payments
--------------------
(i) Monthly payments. Subject to compliance with the applicable
----------------
provisions of paragraph 3 below, the Company shall pay the Executive or, in the
event of his subsequent death, his beneficiary or beneficiaries or his estate,
as the case may be, as severance pay or liquidated damages, or both, a monthly
sum equal to the highest total monthly compensation (highest total of annual
salary plus annual bonus for any calendar year of employment, divided by
twelve), paid to the Executive. Such payments shall commence on the last day of
the month next following the termination of employment of the Executive and
shall continue until the last day of the twenty-fourth full calendar month
following the termination of employment of the Executive, provided, however,
that such payments shall not continue beyond the earlier of (A) the last day of
the month next preceding his normal retirement date under the Company's pension
plan, and (B) the last day of the month next preceding the month in which he
shall, with his written consent, commence receiving his retirement allowance
under the Company's pension plan.
(ii) Lump Sum Payment upon Termination following a Change in Control.
---------------------------------------------------------------
Anything in subparagraph 1(a)(i) above or elsewhere in this Agreement to the
contrary notwithstanding, if termination of the Executive occurs within three
years following a Change in Control: (x) the total of the monthly payments
provided for in subparagraph 1(a)(i) above shall be accelerated and paid in a
lump sum as soon as practicable after such termination if termination occurs
before the last day of the month next preceding the Executive's normal
retirement date under the Company's pension plan; if termination occurs on or
after such last day, no payment pursuant to subparagraph 1(a)(i) or (ii) shall
be made to the Executive; (y) the benefits required to be provided thereafter to
the Executive, his spouse and family, set forth in attached Exhibit A, shall be
---------
valued at the cost of acquiring insurance policies which would provide such
benefit coverage over the period of time involved in subparagraph 1(a)(i) above,
and such cost shall be paid in a lump sum as soon as practicable after
termination; and (z) the Executive shall be paid the amount payable, if any,
pursuant to subparagraph 1(a)(iii) and the amount payable pursuant to
subparagraph 1(a)(iv).
(iii) Cash-Out of Options and Contingently Credited Shares. In the
----------------------------------------------------
event that the Executive shall, at the time of termination of his employment
within three years following a Change in Control, (A) hold an outstanding and
unexercised (whether or not exercisable at the time) option or options
theretofore granted by the Company to him prior to the Change in Control, (B)
have shares contingently credited to him prior to the Change in Control under
the Company's Contingent Compensation Plan or 1986 Contingent Compensation Plan
or a successor plan, or both hold such option and have such shares contingently
credited to him,
1
<PAGE>
unless the Executive shall have given the Company written notice to the contrary
within thirty (30) days following such termination of employment, the Company
shall pay him, in a lump sum, an amount equal to the excess above the option
price, of each such option that is not an Incentive Stock Option as defined in
Section 422A of the Internal Revenue Code of 1986 as amended (the "Code"), of
the Fair Market Value of Company shares at the time of termination, and the Fair
Market Value at the time of termination of the shares, if any, so contingently
credited. Solely for the purpose of this subparagraph 1(a)(iii), Fair Market
Value at the time of termination shall mean the higher of (i) the average of the
reported closing prices of the Common Shares of the Company, as reported in "New
York Stock Exchange Composite Transactions" of the Eastern Edition of The Wall
--------
Street Journal, for the last trading day prior to the termination and for each
- --------------
trading day of the preceding sixty calendar days, and (ii) in the event that a
Change in Control of the Company, as defined in subparagraph 1(d) below, shall
have taken place prior to termination as the result of a tender or exchange
offer, and such Change in Control was consummated within three years of
termination, an amount equal to the highest consideration paid for Common Shares
of the Company in the course of such tender or exchange offer.
(iv) Payment of Value of Excess Benefit and Supplement Retirement Plan
-----------------------------------------------------------------
Payments Benefits. Anything in this Agreement to the contrary notwithstanding,
- -----------------
in the event of a termination of the Executive's employment within three years
following a Change in Control, the Executive shall be entitled to a monthly
retirement allowance for life payable on a straight life annuity basis, equal to
the benefit payable, if any, under the Company's excess benefit and supplemental
retirement plans, utilizing the monthly payments set forth in subparagraph
1(a)(i) above for purposes of the pension calculation for the termination period
set forth in such subparagraph 1(a)(i). For the purposes of this clause (iv),
the excess benefit and supplemental retirement plans payments shall include the
pension enhancement resulting from service credit for pension benefit during the
termination period set forth in subparagraph 1(a)(i) above. Such retirement
allowance shall be valued and discounted in the manner set forth in subparagraph
3(g) below relating to default in payments or benefits and shall be paid in a
lump sum as soon as practicable after such termination.
(v) Participation in Benefit Plans. The Executive shall be eligible
-------------------------------
to receive, during any period that he shall be entitled to receive payments from
the Company under subparagraph 1(a)(i) above (whether or not any such period
shall be accelerated), as if the Executive had continued to be employed by the
Company during such period, any benefits and emoluments for which key executives
are eligible under any hospitalization, health care or dental care plan, life or
other insurance or death benefit plan, travel and accident insurance, executive
or contingent compensation plan, restricted stock or stock purchase plan,
retirement income or pension plan, vacation plan, or other present or future
employee benefit plans or programs of the Company for which key executives are
eligible, in accordance with the provisions of any such plan or program,
provided, however, that during the period that the Executive is so entitled to
receive payments under subparagraph 1(a)(i) above, he shall not be eligible to
participate in the Company's Savings Plan for Salaried Employees or to receive
option grants under any stock option plan of the Company. Nothing in this
Agreement shall preclude the Company from terminating or amending any such
employee benefit plan or program so as to eliminate, reduce or otherwise change
any benefit payable thereunder. To the extent that such benefits or service
credits for benefits shall not be payable or provided under such plans or
programs by reason of the Executive no longer being an employee of the Company,
the Company shall itself pay or provide for payment of such benefits and service
credit for benefits.
2
<PAGE>
(b) Definition of Termination
-------------------------
The term "termination" for purposes of this Agreement shall mean:
(i) The termination by the Company of the Executive's full-time
employment with the Company for any reason other than Cause; or
(ii) Any (A) failure to appoint or re-appoint or elect or re-elect the
Executive to an office and position at least equal to the office and position he
held immediately prior to such failure, or removal of the Executive from such
office or position, (B) material change by the Company of the Executive's
functions, duties or responsibilities without his express written consent as a
result of which change the Executive's position with the Company shall be or
become of less dignity, responsibility, importance or scope than the position he
held at the time of such material change, and any such material change shall be
deemed a continuing breach of this Agreement, (C) reduction in the monthly base
salary of the Executive below the highest monthly base salary paid from and
after October 18, 1990, (D) liquidation, dissolution, consolidation or merger of
the Company, or transfer of all or substantially all of its assets, other than
in compliance with the provisions of paragraph 8 below, or (E) breach of this
Agreement by the Company, or breach of the Agreement Relating to Legal Expenses
between the Company and the Executive dated October 18, 1990 (the "Legal Expense
Agreement"); provided that in any such event the Executive elects to terminate
his employment under this Agreement upon not less than sixty days' advance
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four calendar months after the event giving rise to
the election.
(c) Definition of Cause
-------------------
For the purpose of any provision of this Agreement, the termination of the
Executive's employment shall be deemed to have been for Cause only if
termination of his employment shall have been the result of an act or acts of
dishonesty on the part of the Executive constituting a felony and resulting or
intended to result directly or indirectly in gain or personal enrichment at the
expense of the Company; provided that there shall have been delivered to the
Executive a certified copy of a resolution of the Board of Directors of the
Company adopted by the affirmative vote of not less than three-fourths of the
entire membership of the Board of Directors at a meeting called and held for
that purpose and at which the Executive was given an opportunity to be heard,
finding that the Executive was guilty of such conduct, specifying the
particulars thereof in detail.
Anything in this subparagraph 1(c) or elsewhere in this Agreement to the
contrary notwithstanding, the employment of the Executive shall in no event be
considered to have been terminated by the Company for Cause if termination of
his employment took place (A) as the result of bad judgment or negligence on the
part of the Executive, or (B) as the result of an act or omission without intent
of gaining therefrom directly or indirectly a profit to which the Executive was
not legally entitled, or (C) because of an act or omission believed by the
Executive in good faith to have been in or not opposed to the interests of the
Company, or (D) for any act or omission in respect of which a determination
could properly be made that the Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses under (I)
the Restated Certificate of Incorporation or By-Laws of the Company, or (II) the
laws of the State of New York, or (III) the directors' and officer's liability
insurance of the Company, in each case either as in effect at the time of this
Agreement or in effect at the time of such act or omission, or (E) as the result
of an act or omission which occurred more than twelve calendar months prior to
the Executive's having been given notice of the termination of his employment
for such act or omission unless the commission of such act or such omission
could not at the time of such commission or
3
<PAGE>
omission have been known to a member of the Board of Directors of the Company
(other than the Executive, if he is then a member of the Board of Directors), in
which case more than twelve calendar months from the date that the commission of
such act or such omission was or could reasonably have been so known, or (F) as
the result of a continuing course of action which commenced and was or could
reasonably have been known to a member of the Board of Directors of the Company
(other than the Executive, if he is then a member of the Board of Directors)
more than twelve calendar months prior to notice having been given to the
Executive of the termination of his employment.
(d) Definition of Change in Control
-------------------------------
For the purpose of this Agreement, a Change in Control of the Company
shall be deemed to have occurred if
(i) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities;
(ii) during any period within two (2) consecutive years there shall
cease to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
(iii) the shareholders of the Company approve (A) a plan of complete
liquidation of the Company or (B) the sale or other disposition of all or
substantially all the Company's assets.
2. Termination During Month
------------------------
In the event that the employment of the Executive shall terminate prior to
the end of a calendar month as a result of a termination described in paragraph
1 above, the Company shall pay the Executive, in addition to any other amounts
payable by the Company hereunder, a lump cash sum which shall in no event be
less than the salary plus any bonus to which the Executive would have been
entitled had he remained in full-time employment until the end of the month in
which his employment shall so terminate.
3. Post-termination Obligations of Executive; Default by Company
-------------------------------------------------------------
All payments and benefits to the Executive under this Agreement after his
full-time employment with the Company shall have terminated shall be subject to
compliance with the following provisions, which compliance shall be subject to
the proviso in subparagraph 3(e) below. Anything in this paragraph 3 or
elsewhere in this Agreement to the contrary notwithstanding, the Executive may
continue to serve as a director, after his full-time employment with the Company
shall have terminated, of any corporation which he has served as a director for
the last six months of his full-time employment with the Company.
(a) Assistance In Litigation
------------------------
The Executive shall, upon reasonable notice, furnish such information and
proper assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is or may become a party.
4
<PAGE>
(b) Detrimental Conduct
-------------------
The Executive shall not to the material detriment of the Company knowingly
disclose or reveal to any unauthorized person any manufacturing or trade secret
or other confidential information relating to the Company, its subsidiaries or
affiliates, or to any of the businesses operated by them and confirms that such
information constitutes the exclusive property of the Company. The Executive
shall not otherwise knowingly act or conduct himself to the material detriment
of the Company, its subsidiaries or affiliates, or in a manner which is
materially inimical or contrary to their interests, including, without
limitation, through competition materially detrimental to the Company, its
subsidiaries or affiliates, in any of the businesses in which they may be
engaged at the time of termination of his employment. The Executive recognizes
that the restrictions on his activities contained in this Agreement are required
for the reasonable protection of the Company and its investments.
(c) Discoveries and Inventions
--------------------------
If, while employed by the Company or during a period of one year after
termination of such employment, the Executive shall have made, either solely or
jointly with others, any discovery, improvements or invention which would
pertain or relate in any way to the business, products, publications or
processes of the Company, its subsidiaries or affiliates at the time of
termination of his employment, such discovery, improvement or invention (whether
or not of a patentable nature) shall be the exclusive property of the Company.
The Executive shall execute and deliver to the Company without further
compensation any documents which the Company may deem necessary or appropriate
to prepare or prosecute applications for patents upon such discovery,
improvement or invention, to assign and transfer to the Company his entire
right, title and interest in and to such discovery, improvement or invention,
and patents therefor, or otherwise more fully and perfectly to evidence the
Company's ownership thereof.
(d) Reimbursement of Expenses
-------------------------
The Company shall pay or reimburse the Executive for all reasonable travel
and other expenses incurred by the Executive in performing his obligations under
this paragraph 3.
(e) Competition
-----------
The Executive shall not engage in competition with any of the businesses in
which the Company, its subsidiaries or affiliates may be engaged at the time of
termination of his employment if such competition should be materially
detrimental to the Company, its subsidiaries or affiliates.
(f) Failure to Comply
-----------------
If the Executive, for any reason other than death or disability, shall,
without the written consent of the Company, fail to comply with any provision of
this paragraph 3, his rights to any future payments or other benefits hereunder
shall terminate, and the Company's obligations to make such payments and provide
such benefits shall cease; provided, however, that no failure to comply with any
provision of this paragraph 3 shall be deemed to have occurred unless and until
the Executive shall have received written notice on behalf of the Board of
Directors of the Company, specifying the conduct alleged to constitute such
failure, and has thereafter continued to engage in such conduct after a
reasonable opportunity and a reasonable period, but in no event more than sixty
days after receipt of such notice, to refrain from such conduct. In no event
shall the Executive be under any obligation to repay to the Company any amounts
theretofore paid to him.
5
<PAGE>
(g) Post-termination Default in Payments or Benefits
------------------------------------------------
If, after the Executive ceases to be an employee of the Company, the
Company should (i) default in payment of all or any part of the payments
required to be made hereunder or under the Legal Expense Agreement, or (ii) fail
to pay for or provide any benefits required to be provided hereunder, and if the
Company should not remedy such default or failure within thirty (30) days after
having received notice of such default or failure from the Executive, his
spouse, or such other person or entity who or which is entitled thereto, the
applicable payments or benefits set forth in Exhibit B shall, at the sole
---------
election of the Executive, his spouse, or such other person or entity then
entitled thereto, exercised in writing signed by the Executive, his spouse or
such other person or entity, and delivered to the Company within 90 days after
the expiration of such thirty-day period, be accelerated and become immediately
due and payable in a lump sum equal to the total of (x) the severance payment
set forth in Exhibit B, if applicable, and (y) the cost of acquiring insurance
---------
policies which would provide the disability, medical and dental coverages set
forth in Exhibit B, if applicable, and (z) all amounts, if any, payable under
---------
the excess benefit and supplemental retirement plans set forth in Exhibit B in
---------
an actuarially equivalent lump sum calculated by utilizing the 1983 GAM Table
(or such other pensioner annuity mortality table as the Company with the
Executive's written consent or, following his death, his spouse's or other
Beneficiary's consent, shall determine) and discounted to a present value amount
by applying a discount rate, equal to the arithmetic average of (i.e., one-
twelfth of the sum of) the single employer interest rates for immediate
annuities promulgated by the Pension Benefit Guaranty Corporation each month
during the calendar year immediately preceding the date of payment as set forth
in Appendix B to Part 2619 of 29 Code of Federal Regulations or such successor
to such Appendix B as may be in effect during such calendar year, to all such
retirement payments which otherwise would become due thereafter. In the event
the election referred to in the preceding sentence has been made, then the total
amount due and payable from the Company pursuant to this subparagraph shall be
the sum of all accelerated amounts, together with any expenses incurred in
enforcing payment thereof (including all reasonable legal fees). In making the
foregoing retirement payment calculations, the intent is to compute a lump sum
amount which will provide the Executive and his spouse or other Beneficiary, as
the case may be, with the same amount, after deduction of all federal, state and
municipal income taxes, as he and his spouse or other Beneficiary, as the case
may be, would have retained, after all such income taxes, had payments and
benefits been made and provided as originally scheduled and without
acceleration. It is understood and agreed that this subparagraph 3(g) shall not
apply to any default or failure to pay, as described in the first sentence of
this subparagraph 3(g), which occurs during the Executive's period of
employment; upon any such default or failure to pay, the Executive shall be
entitled to such payments as may be applicable pursuant to subparagraph 1(a).
4. Determination of Benefits
-------------------------
Whenever under this Agreement it is necessary to determine whether one
benefit is less than, equal to or larger than another, whether or not such
benefits are provided under this Agreement, such determination shall be made by
the Company's independent consulting actuary, using mortality, interest and any
other assumptions normally used at the time by such actuary in determining
actuarial equivalents for the purpose of employee benefit plans of the Company.
5. (a) Time of Payment
---------------
Anything in this Agreement to the contrary notwithstanding, the Company
may, for its
6
<PAGE>
own administrative convenience or for any other reason deemed by it sufficient,
accelerate payment to the Executive of any sums due under this Agreement
following termination of his employment; provided, however, that payments by the
Company under this Agreement in any one calendar year shall not, as a result of
such acceleration, together with any payments required to be made under the
pension plan of the Company, exceed an amount equal to (i) 80 percent of his
monthly rate of salary paid for the last full calendar month of his employment,
multiplied by (ii) the number 12.
(b) Withholding of Taxes
--------------------
The Company may withhold from any benefits payable under this Agreement all
federal, state, city or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
6. Decisions by Company
--------------------
Except as otherwise expressly provided in this Agreement, any decision or
action by the Company relating to this Agreement, its operation or its
termination, shall be made by the Board of Directors. Any decision or action of
such Board shall, to the extent permitted by law, be by the affirmative vote of
not less than three-fourths of the members of the Board of Directors then in
office; provided, however, that in the event of any dispute as to any benefit
payable under this Agreement, the Executive shall have the same rights as a
Participant under the Company's pension plan in effect at the time with respect
to the method of determining such dispute and enforcing his rights with respect
thereto.
7. Prior Agreements
----------------
This Agreement shall supersede any prior employment and severance agreement
between the Company or any predecessor of the Company and the Executive, but
this Agreement shall not affect or operate to reduce any benefit or compensation
of any kind not expressly provided for in this Agreement, including, without
limitation, any employee stock option or stock appreciation right and any
agreements under the Company's Restricted Share Performance Plan.
8. Consolidation or Merger
-----------------------
Nothing in this Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all of its assets to,
another corporation which assumes this Agreement and all obligations of the
Company hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the term, "Company", shall refer to such other corporation and this
Agreement shall continue in full force and effect.
9. (a) Non-assignability
-----------------
Neither this Agreement nor any right or interest hereunder shall be
assignable by the Executive or the beneficiaries of the Executive or by his
legal representatives without the Company's prior written consent; provided,
however, that nothing in this subparagraph 9(a) shall preclude (i) the Executive
from designating a beneficiary to receive any benefit payable on his death, and
(ii) the legal representatives of the estate of the Executive from assigning any
rights hereunder to the person or persons entitled thereto under his will or, in
the case of intestacy, to the person or persons entitled thereto under the laws
of intestacy applicable to his estate.
(b) No Attachment
-------------
Except as otherwise required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrances, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
7
<PAGE>
(c) Binding Agreement
-----------------
This Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns.
(d) Unfunded Obligations; Trust Agreement
-------------------------------------
(i) All payments to be made hereunder shall be made from the general
funds of the Company. To the extent that any person or entity acquires a right
to receive any payment hereunder, such right shall be no greater than the right
of an unsecured general creditor of the Company except to the extent otherwise
provided by law. No person who is entitled to payments hereunder shall have any
right, title or interest in or to any assets or investments which may be
acquired or made by the Company to aid it in meeting its obligations hereunder.
(ii) Anything in this subparagraph 9(d) or elsewhere in this
Agreement to the contrary notwithstanding, the Company may provide the Executive
with collateral security, in the form of a bank letter of credit, an interest in
a trust or otherwise, to secure a portion of any or all of the Company's
obligations to the Executive under this Agreement and any other agreement. In
this connection, the Company has entered into a Trust Agreement substantially in
the form attached hereto as Exhibit C and, under the circumstances and upon the
----------
terms and conditions set forth therein, the Executive will be a beneficiary
under the Trust therein established, this Agreement and the Legal Expense
Agreement (and its related memorandum) will be listed on Exhibit I of such Trust
Agreement, the amounts to be deposited with the trustee under the Trust
Agreement shall be those set forth on the Schedule of Amounts to be Deposited in
Trust Upon a Potential Change in Control, a copy of which is attached hereto as
Exhibit D, and any other benefits which the Company, in its sole discretion,
- ---------
shall agree to secure by the Trust Agreement.
(iii) If a Potential Change in Control should take place while the
Executive is in the employ of the Company, the value of the benefits set forth
in Exhibit D to be delivered by the Company to the trustee under such Trust
---------
Agreement shall be equal to the total of (x) the severance, options,
contingently credited shares and legal expenses payments set forth in Exhibit D,
---------
(y) the cost of acquiring insurance policies which would provide the disability,
medical and dental coverages set forth in Exhibit D, and (z) all amounts, if
---------
any, payable under the excess benefit and supplemental retirement plans payments
(as described in subparagraph 1(a)(iv) above) set forth in Exhibit D.
---------
(iv) The value of the excess benefit and supplemental retirement plans
payments shall be an actuarially equivalent amount calculated by utilizing the
1983 GAM Table (or such other pensioner annuity mortality table as the Company
with the Executive's written consent, or following his death, his spouse's or
other Beneficiary's consent, shall determine) and discounted to a present value
amount by applying a discount rate, equal to the arithmetic average of (i.e.,
one-twelfth of the sum of) the single employer interest rates for immediate
annuities promulgated by the Pension Benefit Guaranty Corporation each month
during the calendar year immediately preceding the date of payment as set forth
in Appendix B to Part 2619 of 29 Code of Federal Regulations or such successor
to such Appendix B as may be in effect during such calendar year, to all such
retirement benefits which otherwise would become due thereafter. In making the
foregoing retirement payment calculations, the intent is to compute a lump sum
payment which will provide the Executive with the same amount of benefit, after
deduction of all federal, state and municipal income taxes, as he would have
retained, after all such income taxes, had payments been made as originally
scheduled and without acceleration.
(v) Anything in this subparagraph 9(d) or elsewhere in this Agreement
to the
8
<PAGE>
contrary notwithstanding, the amount to be paid by the Company to the trustee
pursuant to the preceding provisions of this subparagraph 9(d) shall be reduced
by the amount, if any, that the Board of Directors of the Company expressly
determines, in its sole discretion on the advice of the Company's independent
public accountants or its tax counsel or other experts selected by the Board of
Directors, as a result of the application of the provisions of paragraph 14
below, is not expected to be paid by the trustee to the Executive and his
beneficiary or beneficiaries.
(vi) The Company shall continue to be liable to make all payments and
provide all benefits required to be made and provided hereunder to the extent
such payments have not been made or such benefits have not been provided through
the above-mentioned trust.
(vii) For purposes of this Agreement, a "Potential Change in Control"
shall be deemed to have occurred if
(A) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control of the
Company;
(B) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a Change in Control of the Company;
(C) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or
becomes the beneficial owner, directly or indirectly, of securities
of the Company representing ten percent (10%) or more of the combined
voting power of the Company's then outstanding securities; or
(D) the Board of Directors adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control
of the Company has occurred.
10. (a) Amendment of Agreement
----------------------
No amendment or modification of this Agreement shall be deemed effective
unless and until executed in writing.
(b) No Waiver
---------
No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel to enforce any provision of this Agreement,
except by written instrument of the party charged with such waiver or estoppel.
Any written waiver shall not be deemed a continuing waiver unless specifically
stated, shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
11. Severability
------------
If for any reason any provision of this Agreement shall be held invalid,
such invalidity shall not affect any other provision of this Agreement not held
so invalid, and all other such provisions shall to the full extent consistent
with law continue in full force and effect. If any such provision shall be held
invalid in part, such invalidity shall in no way affect the rest of such
provision not held so invalid, and the rest of such provision, together with all
other provisions of this Agreement, shall likewise to the full extent consistent
with law continue in full force and effect.
12. Headings
--------
The headings of paragraphs are included solely for convenience of reference
and shall not control the meaning or interpretation of any of the provisions of
this Agreement.
13. Governing Law
-------------
The validity, interpretation, construction, performance and enforcement of
this Agreement shall be governed by the laws of the State of New York without
giving effect to the principles of conflict of laws thereof.
9
<PAGE>
14. Parachute Tax
-------------
If the payments and benefits provided for the Executive under this
Agreement, together with any other payments and benefits that the Executive may
have a right to receive from the Company or any other person or entity, would
result in "excess parachute payments" (as defined in Section 280G of the Code),
the payments and benefits to be made and provided to the Executive and his
beneficiary or beneficiaries pursuant to this Agreement shall be reduced to the
largest whole-dollar amount that will result in there being no such "excess
parachute payment." The existence or absence of any such "excess parachute
payment," the amount of any such reduction, and the item or items to be reduced,
if any, shall be determined, in each case, by the Executive or, following his
death, his beneficiary or beneficiaries, and the specifics of such determination
shall be delivered in writing to the Company and to the trustee of the Trust
referred to in subparagraph 9(d)(ii) above, at the time of the Executive's
termination within three years after a Change in Control, or as soon as
practicable thereafter, by the Executive or, following his death, his
beneficiary or beneficiaries. The reasonable fees and expenses of such tax
counsel and financial advisor as may reasonably be called upon to assist the
Executive or his beneficiary or beneficiaries in the foregoing endeavors shall
be paid by the Company.
15. Notices
-------
All notices, requests, demands and other communications provided for by
this Agreement shall be in writing and shall be sufficiently given if and when
mailed in the continental United States by registered or certified mail, return
receipt requested, or personally delivered to the party entitled thereto at the
address stated below, which address shall be such address as the addressee may
have given most recently by a similar notice. Any such notice shall be deemed
to have been received on the date of delivery.
To the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
To the Executive: Mr. L. Scott Barnard
One Champion Plaza
Stamford, CT 06921
16. Arbitration
-----------
Any dispute between the Executive and the Company as to the interpretation
or application of any of the provisions of this Agreement may, at the
Executive's election, be determined by binding arbitration within the greater
New York City metropolitan area or the State of Connecticut in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court of competent jurisdiction.
All fees and expenses of such arbitration shall be paid by the Company subject
to repayment by the Executive if and to the extent that a judgment should be
rendered against him beyond appeal and such fees and expenses were not incurred
by him while acting in good faith.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has signed this Agreement,
all as of October 18, 1990.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
-----------------------------------
Chairman of the Board of Directors
Attest:
/s/ Lawrence A. Fox
- --------------------------------
Secretary
/s/ L. Scott Barnard
-----------------------------------
L. Scott Barnard
11
<PAGE>
Exhibit A
---------
[subparagraph 1(a)(ii)(y)]
Schedule of Certain Benefit Coverages during the
Severance Payment Period under Subparagraph 1(a)(i)
after a Termination following a Change in Control
---------------------------------------------------
` Disability: Same as for active employees.
` Medical: Same as for active employees
less retiree medical benefit,
if any.
` Dental: Same as for active employees.
For other benefit coverages after termination following a Change in
Control, see subparagraph 1(a)(ii)(x) and (z).
o0o
<PAGE>
Exhibit B
---------
[subparagraph 3(g)]
Schedule of Payments and Benefits upon
a Breach after Cessation of Employment
--------------------------------------
<TABLE>
<CAPTION>
<S> <C>
` Severance: 2 years termination payments (or the unpaid balance thereof); 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. Payments are based on highest total of salary and annual
bonus for any calendar year of employment.
` Retirement: All unpaid amounts, if any, payable under th excess benefit and supplemental retirement plans of the
Company.
` Disability: Same as for active employees, during the 2 year termination payment period or balance thereof.
` Medical: Same as for active employees less retiree medical benefit, if any, during the 2 year termination
payment period or balance there.
` Dental: Same as for active employees, during the 2 year termination payment period or balance thereof.
</TABLE>
o0o
<PAGE>
Exhibit C
---------
[subparagraph 9(d)]
FORM OF TRUST AGREEMENT
-----------------------
TRUST AGREEMENT (the "Trust"), dated as of February 19, 1987, by and
between Champion International Corporation, a New York corporation (the
"Company"), and Connecticut National Bank (the "Trustee").
WHEREAS, the Company is obligated under the individual agreements set
forth on Exhibit I (together with any additional agreements included on Exhibit
I pursuant to Section 2.01(c) hereof, the "Agreements") to make specified
payments to certain of the Company's executives (together with any additional
executives and retired executives included on Exhibit I pursuant to Section
2.01(c) hereof, the "Executives"); and
WHEREAS, the aforesaid obligations of the Company are not funded or
otherwise secured, and the Company has agreed, to the extent practicable, to
assure that the future payment of certain of said obligations will not be
improperly withheld in the event that a "Change in Control" (as defined herein)
of the Company should occur; and
WHEREAS, for purposes of assuring that such payments will not be
improperly withheld, the Company desires to deposit with the Trustee, subject
only to the claims of the Company's existing or future general creditors in the
event of bankruptcy or insolvency (as hereinafter provided), amounts of cash or
marketable securities sufficient to fund such payments;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the parties hereto agree
as follows:
ARTICLE I
THE AGREEMENTS
--------------
SECTION 1.01 Agreements. The agreements subject to this Trust
------------------------
consist of the Agreements listed from time to time on Exhibit I hereof
respectively. The Company shall continue to be liable to the Executives to make
all payments required under the terms of such Agreements to the extent such
payments have not been made pursuant to this Trust.
ARTICLE II
TRUST AND THE TRUST CORPUS
--------------------------
SECTION 2.01 Trust.
-----
(a) The Company will deliver to the Trustee to be held in trust
hereunder, concurrently with the execution of this Trust, the sum of $100 in
cash, and upon the occurrence of a "Potential Change in Control" (as defined in
Section 3.02), (i) an additional amount in cash (or in marketable securities
having a fair market value equal to such amount, or some combination thereof)
representing the sum of the amounts, determined as provided in Section 4.02,
which is estimated to be sufficient to fund the Company's obligations to pay to
the Executives certain amounts and benefits due to them pursuant to the
Agreements and (ii) an amount estimated by the Trustee to be sufficient to pay
all of the Trustee's fees and expenses hereunder with respect to the period of
time that this Trust Agreement shall be in effect.
(b) The payment by the Company pursuant to Section 2.01(a)(i) hereof
shall be accompanied by a Payment Schedule for each Executive as required by
Section 4.02(a) hereof.
(c) The Company may, subject to the provisions of Section 2.01(d),
from time to time prior to the occurrence of a Change in Control revise Exhibit
I in order to include thereon (A) additional Executives, and (B) additional
Agreements
1
<PAGE>
with respect to any Executive. If a revised Exhibit I is delivered to the
Trustee with respect to any Executive upon or after the occurrence of a
Potential Change in Control, the Company will deliver to the Trustee,
concurrently with such revised Exhibit I:
(x) a Payment Schedule or a revised Payment Schedule, as applicable,
with respect to such Executive which complies with Section
4.02(a) and which sets forth the additional amount delivered to
the Trustee with respect to such Executive, and
(y) an amount which is estimated to be sufficient when added to the
amount or amounts previously delivered to the Trustee to fund the
Company's obligations under the Payment Schedule or the revised
Payment Schedule, as applicable, pursuant to such Executive's
Agreements.
Such Payment Schedule or revised Payment Schedule shall be effective in
accordance with the provisions of Section 4.02(b). A revised Exhibit I shall be
effective upon the later of (C) receipt by Trustee of such revised Exhibit I and
(D) receipt by the Trustee of all amounts required under this Section 2.01(c),
if any, and such revised Exhibit I shall supersede any and all such Exhibits
previously delivered to the Trustee.
(d) In no event may Exhibit I be revised to eliminate any Executive
or any Agreements with respect to any Executive without such Executive's written
consent, except as provided in the following sentence. Prior to the occurrence
of a Change in Control, the Company shall deliver instructions to the Trustee to
delete the name of, and the Agreements with respect to, an Executive from
Exhibit I promptly following the termination of his employment with the Company
prior to the occurrence of a Change in Control. The Trustee shall make such
deletions and shall be able to rely upon such instructions and shall have no
duty to inquire with respect to the termination of such Executive's employment
with the Company. The deletions described in the immediately preceding sentence
may not be made with respect to instructions delivered to the Trustee on or
after the occurrence of a Change in Control of the Company. Notwithstanding the
foregoing, following a Potential Change in Control the Company may, in its
discretion, add retired Executives and their agreements with the Company to
Exhibit I in accordance with Section 2.01(c) to assure that the payment of
certain amounts payable by the Company to such retired Executives under such
agreements will not be improperly withheld following a Change in Control.
SECTION 2.02 Trust Corpus.
------------
(a) As used herein, the term "Trust Corpus" shall mean the amounts
delivered to the Trustee as described in Section 2.01 and 4.02(b) hereof in
whatever form held or invested as provided herein. The Trust Corpus shall be
held, invested and reinvested by the Trustee in cash or marketable securities
only in accordance with this Section 2.02. The Trustee shall use its good faith
efforts to invest or reinvest from time to time all or such part of the Trust
Corpus as it believes prudent under the circumstances in either one or a
combination of the following investments:
(i) investments in direct obligations of the United
States of America or agencies of the United States of America
or obligations unconditionally and fully guaranteed as to
principal and interest by the United States of America, in each
case maturing within one year or less from the date of
acquisition; or
2
<PAGE>
(ii) investments in negotiable certificates of deposit
(in each case maturing within one (1) year or less from the date
of acquisition) issued by a commercial bank organized and existing
under the laws of the United States of America or any state
thereof having a combined capital and surplus of at least
$1,000,000,000, including the Trustee's banking department;
provided, however, that the Trustee shall not be liable for any
-------- -------
failure to maximize the income earned on that portion of the Trust
Corpus as is from time to time invested or reinvested as set forth
above, nor for any loss of income due to liquidation of any
investment which the Trustee, in its sole discretion, believes
necessary to make payments or to reimburse expenses under the
terms of this Trust.
(b) The Trust is intended to be grantor trust within the meaning of
Section 671 of the Internal Revenue Code of 1986, as amended (the "Code"),
except as hereinafter provided, all interest and other income earned on the
investment of the Trust Corpus shall be the property of the Company and shall
not constitute a part of the Trust Corpus. Except as provided in Section
4.02(a), the interest and other income earned in any calendar quarter shall be
paid over to the Company by the Trustee as promptly as practicable after the end
of such calendar quarter.
(c) All losses of principal in respect of, and expenses (including,
as provided in Section 5.01(g) hereof, any expenses of the Trustee) charged
against, the Trust Corpus shall be for the account of the Company and the
Company shall be obligated to promptly reimburse the Trust Corpus for any loss
in principal amount of, or expense charged against, the Trust Corpus except to
the extent that such amounts have been applied to reduce amounts payable to the
Company pursuant to Section 2.02(b) hereof. To the extent any such losses and
expenses are not reimbursed by the Company, the aggregate amount payable to an
Executive under the applicable Payment Schedule shall be reduced by a portion of
such losses and expenses, as determined on a pro rata basis.
ARTICLE III
CHANGE IN CONTROL
-----------------
SECTION 3.01 Definition of Change in Control.
-------------------------------
For purposes of this Trust, a Change in Control of the Company shall be deemed
to have occurred if
(a) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities;
(b) during any period within two (2) consecutive years (not including
any period prior to the Company's 1987 Annual Meeting of Shareholders) there
shall cease to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
3
<PAGE>
(c) the shareholders of the Company approve (i) a plan of
complete liquidation of the Company or (ii) the sale or other
disposition of all or substantially all the Company's assets.
SECTION 3.02 Definition of a Potential Change in Control. For
-------------------------------------------
purposes of this Trust, a Potential Change in Control shall be deemed to have
occurred if
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the Company;
(b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated would
constitute a Change in Control of the Company;
(c) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing ten percent (10%) or more of the combined voting power of the
Company's then outstanding securities; or
(d) the Board of Directors adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control of the Company has
occurred.
SECTION 3.03 Notification of the Trustee. The Company shall notify
---------------------------
the Trustee of the occurrence of a Potential Change in Control and the Company
shall or an Executive may notify the Trustee of the occurrence of a Change in
Control, and the Trustee may rely on such notice or on any other actual notice,
satisfactory to the Trustee, of such a change or potential change which the
Trustee may receive. The Trustee shall have no obligation to make an
independent determination as to the occurrence of a Potential Change in Control
or Change in Control.
ARTICLE IV
RELEASE OF THE TRUST CORPUS
---------------------------
The Trustee shall hold the Trust Corpus in its possession under the
provisions of this Trust Agreement until authorized to deliver the Trust Corpus
or any specified portion thereof as follows:
SECTION 4.01 Delivery to the Company.
-----------------------
(a) Any amount in excess of $100 delivered to the Trustee pursuant to
Section 2.01 hereof or otherwise constituting part of the Trust Corpus shall be
returned to the Company, unless within six (6) months of such delivery to the
Trustee a Change in Control shall have occurred. Such six month period shall be
renewed (i) for any Potential Change in Control which occurs during any initial
six month period or (ii) by a resolution adopted by the Board of Directors and
delivered to the Trustee by the Company to the effect that such an initial six
month period (or a six month period that is renewed in accordance with clause
(i) of this Section 4.01(a)) shall start anew.
(b) Any amount held by the Trustee for the benefit of an Executive
shall be paid to the Company immediately following the final payment of all
amounts payable to such Executive pursuant to the terms of the Executive's
Agreement, as certified to the Trustee by the Executive.
(c) Upon the termination of the Trust as provided in the first
sentence of Section 6.01(a), the Trustee shall pay to the Company the amount of
the Trust Corpus, less all payments, expenses, taxes and other charges under
this Trust Agreement as of such date of termination, provided that in the event
that the Trust shall continue with respect to one or more Executives in
accordance with the provisions of Section 6.01(b), the Trustee shall pay to the
Company the amount that would have been payable to the Company if the Trust had
terminated as provided in Section 6.01(a), less (i) the amounts subject to
litigation or arbitration for each such Executive, as certified to the Trustee
by each such Executive, and (ii) an amount
4
<PAGE>
estimated by the Trustee to be sufficient to pay all of the Trustee's fees and
expenses with respect to the additional period of time that the Trust shall
continue in effect pursuant to Section 6.01(b).
SECTION 4.02 Deliveries to Executives.
------------------------
(a) The Company shall deliver to the Trustee, upon the occurrence of
a Potential Change in Control, a separate schedule for each Executive (the
"Payment Schedule') indicating (x) the amounts delivered to the Trustee for the
benefit of each such Executive pursuant to Section 2.01(a)(i) in accordance with
such Executive's Agreements and (y) the amounts payable in respect of such
Executive, or providing a formula or instructions acceptable to the Trustee for
determining the amounts so payable. The Payment Schedule shall include
instructions as to the amount of interest, if any, accruing in respect of an
Executive and such instructions may be revised from time to time prior to the
occurrence of a Change in Control. Each Payment Schedule also shall be
delivered by the Company to such Executive. The aggregate payment to be made
hereunder to an Executive by the Trustee shall not exceed the aggregate amount
delivered to the Trustee for the benefit of such Executive as indicated in the
Payment Schedule applicable to such Executive. The Trustee shall make payments
to each Executive under the Payment Schedule applicable to such Executive upon
receipt by the Trustee of a written request for payment signed by the Executive
or, following his death, his beneficiary or beneficiaries. Such request shall
set forth each of the following items: (i) the specific amount of payment
requested, (ii) the specific Agreement or Agreements and the specific section or
sections of such Agreements under which such payment is to be made, (iii) the
existence or absence of any "excess parachute payment" (as defined in Section
280G of the Code) respecting the amount payable to such Executive in accordance
with the applicable Payment Schedule and (iv) the amount of any reduction in the
amount otherwise payable to such Executive in accordance with the applicable
Payment Schedule and the item or items to be reduced, if any. The Trustee shall
rely upon such written request in making payments under the Payment Schedule and
shall have no duty to inquire into the amounts, instructions or formulas set
forth in the Payment Schedule or the Executive's right to such payments.
(b) The Company may from time to time after the occurrence of a
Potential Change in Control deliver concurrently to the Trustee (i) a revised
Payment Schedule with respect to any Executive which sets forth the aggregate
amounts payable with respect to such Executive and (ii) an amount which is
estimated to be sufficient when added to the amount or amounts previously
delivered to the Trustee to fund the Company's obligations pursuant to such
Executive's Agreements. A revised Payment Schedule shall be effective upon the
later of (x) receipt by the Trustee of such revised Payment Schedule and (y)
receipt by the Trustee of all amounts required under Section 4.02(b)(ii) and
such revised Payment Schedule shall supersede any and all Payment Schedules
previously delivered by the Company to the Trustee with respect to such
Executive.
(c) Except as provided in this Section 4.02(c), a revised Payment
Schedule may not reduce the amounts payable with respect to an Executive
pursuant to the prior Payment Schedule for such Executive except with the
written consent of such Executive.
(i) After a Potential Change in Control and before a Change in Control,
the Company shall deliver to the Trustee, promptly following the
termination of an Executive's employment with the Company, a revised
Payment Schedule with respect to such Executive which deletes all of the
amounts set forth on the prior Payment Schedule for such Executive. The
Trustee may rely
5
<PAGE>
upon such revised Payment Schedule and shall have no duty to inquire with
respect to the termination of such Executive's employment with the Company.
The Trustee shall return to the Company all amounts previously delivered by
the Company to the Trustee for the benefit of such Executive.
Notwithstanding the foregoing, following a Potential Change in Control the
Company may, in its discretion, deliver Payment Schedules for retired
Executives in accordance with Section 4.02(a) hereof.
(ii) After a Potential Change in Control and before a Change in Control,
the Company may deliver a revised Payment Schedule with respect to an
Executive which reduces the amounts payable in respect of such Executive
pursuant to his prior Payment Schedule as the result of a more accurate
calculation by the Company of the amount of the benefits to which such
Executive is entitled pursuant to his Agreements. The Trustee may rely on
such revised Payment Schedule and shall have no duty to inquire with
respect to said calculation. The Trustee shall return to the Company an
amount equal to such reduction.
A revised Payment Schedule of the type described in this Section 4.02(c) may not
be delivered to, or honored by, the Trustee on or after the occurrence of a
Change in Control of the Company. A revised Payment Schedule shall be effective
upon its receipt by the Trustee and shall supersede any and all Payment
Schedules previously delivered by the Company to the Trustee with respect to
such Executive.
(d) The Trustee shall be permitted to withhold from any payment due
to an Executive hereunder the amount required by law to be so withheld under
federal, state and local withholding requirements or otherwise, and shall pay
over to the appropriate government authority the amounts so withheld. The
Trustee may rely on instructions from the Company as to any required withholding
and shall be fully protected under Section 5.01(g) hereof in relying on such
instructions.
(e) Except as otherwise provided herein, in the event of any final
determination by the Internal Revenue Service or a court of competent
jurisdiction, which determination is not appealable or the time for appeal or
protest of which has expired, or the receipt by the Trustee of a substantially
unqualified opinion of tax counsel selected by the Trustee with the written
consent of the Company, which determination determines, or which opinion
concludes, that the Executives or any particular Executive, is subject to
federal income taxation on amounts held in Trust hereunder prior to the
distribution to the Executives or Executive of such amounts, the Trustee shall,
on receipt by the Trustee of such opinion or notice of such determination, pay
to each Executive the portion of the Trust Corpus includible in such Executive's
federal gross income.
SECTION 4.03 Deliveries to Creditors of the Company. It is the
--------------------------------------
intent of the parties hereto that the Trust Corpus is and shall remain at all
times subject to the claims of the general creditors of the Company in the event
of bankruptcy or insolvency as hereinafter provided, but in no other event.
Accordingly, the Company shall not create a security interest in the Trust
Corpus in favor of the Executives or any creditor. If the Trustee receives the
notice provided for in Section 4.04 hereof, or otherwise receives actual notice
that the Company is insolvent or bankrupt as defined in Section 4.04 hereof, the
Trustee will make no further distributions of the Trust Corpus to any of the
Executives but will deliver the entire amount of the Trust Corpus only as a
court of competent jurisdiction, or duly appointed receiver or other person
authorized to act by such a court, may direct to make the Trust Corpus available
to satisfy the claims of the Company's general creditors. The Trustee shall
resume
6
<PAGE>
holding the Trust Corpus under the terms hereof and resume any distribution of
Trust Corpus to the Executives under the terms hereof, upon no less than thirty
(30) days advance notice to the Company, if it determines that the Company was
not, or is no longer, bankrupt or insolvent. Unless the Trustee has actual
knowledge of the Company's bankruptcy or insolvency, the Trustee shall have no
duty to inquire whether the Company is bankrupt or insolvent.
SECTION 4.04 Notification of Bankruptcy or Insolvency. The Company,
----------------------------------------
through its Board of Directors and Chief Executive Officer, shall advise the
Trustee promptly in writing of the Company's bankruptcy or insolvency. The
Company shall be deemed to be bankrupt or insolvent in the following
circumstances:
(a) The Company is subject to a pending proceeding as a debtor under
the Bankruptcy Reform Act of 1978, as amended; or
(b) The Company shall generally not pay its debts as such debts
become due or shall cease to pay its debts in the ordinary course of business.
ARTICLE V
TRUSTEE
-------
SECTION 5.01 Trustee.
-------
(a) The duties and responsibilities of the Trustee shall be limited
to those expressly set forth in this Trust, and no implied covenants or
obligations shall be read into this Trust against the Trustee.
(b) If all or any part of the Trust Corpus is at any time attached,
garnished, or levied upon by any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by a court affecting such property or any part thereof,
then and in any of such events the Trustee is authorized, in its sole
discretion, to rely upon and comply with any such order, judgment or decree, and
it shall not be liable to the Company or any Executive by reason of such
compliance even though such order, judgment or decree subsequently may be
reversed, modified, annulled, set aside or vacated.
(c) The Trustee shall maintain such books, records and accounts as
may be necessary for the proper administration of the Trust Corpus, including,
without limitation, as provided in Article II hereof, and shall render to the
Company, on or prior to each January 31 following the date of this Trust until
the termination of this Trust (and on the date of such termination), an
accounting with respect to the Trust Corpus as of the end of the then most
recent calendar year (and as of the date of such termination). The Trustee will
at all times maintain a separate bookkeeping account for each Executive to which
it will credit each amount delivered by the Company to the Trustee with respect
to such Executive. Upon the written request of an Executive or the Company, the
Trustee shall deliver to such Executive or the Company, as the case may be, a
written report setting forth the amount held in the Trust for such Executive (or
each Executive if such request is made by the Company) and a record of the
deposits made with respect thereto by the Company. Unless the Company or any
Executive shall have filed with the Trustee written exceptions or objections to
any such statement and account within one hundred eighty (180) days after
receipt thereof, the Company or the Executive shall be deemed to have approved
such statement and account, and in such case the Trustee shall be forever
released and discharged with respect to all matters and things reported in such
statement and account as though it had been settled by a decree of a court of
competent jurisdiction in an action or proceeding to which the Company and the
Executive were parties.
(d) The Trustee shall not be liable for any act taken or omitted to
be taken hereunder if taken or omitted to be taken by it in good faith, absent
the gross
7
<PAGE>
negligence or wilful misconduct of the Trustee. The Trustee shall also be fully
protected in relying upon any notice given hereunder which it in good faith
believes to be genuine and executed and delivered in accordance with this Trust.
(e) The Trustee may consult with legal counsel to be selected by it,
and the Trustee shall not be liable for any action taken or suffered by it in
accordance with the advice of such counsel.
(f) The Trustee shall be reimbursed by the Company for its reasonable
expenses incurred in connection with the performance of its duties hereunder and
shall be paid reasonable fees for the performance of such duties in the manner
provided by paragraph (g) of this Section 5.01.
(g) The Company agrees to indemnify and hold harmless the Trustee
from and against any and all damages, losses, claims or expenses as incurred
(including expenses of investigation and fees and disbursements of counsel to
the Trustee and any taxes imposed on the Trust Corpus or income of the Trust)
arising out of or in connection with the performance by the Trustee of its
duties hereunder, other than such damages, losses, claims or expenses arising
out of the Trustee's gross negligence or wilful misconduct. Any amount payable
to the Trustee under paragraph (f) of this Section 5.01 or this paragraph (g)
shall be paid by the Company promptly upon demand therefor by the Trustee or, in
the event that the Company fails to make such payment, from the Trust Corpus.
In the event that payment is made hereunder to the Trustee from the Trust
Corpus, the Trustee shall promptly notify the Company in writing of the amount
of such payment. The Company agrees that, upon receipt of such notice, it will
deliver to the Trustee to be held in the Trust an amount in cash (or in
marketable securities or in some combination thereof) equal to any payments made
from the Trust Corpus to the Trustee pursuant to paragraph (f) of this Section
5.01 or this paragraph (g). The failure of the Company to transfer any such
amount shall not in any way impair the Trustee's right to indemnification,
reimbursement and payment pursuant to paragraph (f) of this Section 5.01 or this
paragraph (g).
SECTION 5.02 Successor Trustee. The Trustee may resign and be
-----------------
discharged from its duties hereunder at any time by giving notice in writing of
such resignation to the Company and each Executive specifying a date (not less
than thirty (30) days after the giving of such notice) when such resignation
shall take effect. Promptly after such notice, the Company (or, if a Change in
Control shall previously have occurred, Executive(s) having at least 65%
percent of all amounts then held in the Trust credited to their accounts shall
appoint a successor trustee, such trustee to become Trustee hereunder upon the
resignation date specified in such notice. If the Company fails to appoint a
successor trustee or if such Executive(s) are unable to so agree upon a
successor trustee within thirty (30) days after such notice, the Trustee shall
be entitled, at the expense of the Company, to petition a United States
District Court or any of the courts of the State of New York having
jurisdiction to appoint its successor. The Trustee shall continue to serve
until its successor accepts the trust and receives delivery of the Trust
Corpus. The Company (or, if a Change in Control shall previously have
occurred, Executive(s) having at least 65% percent of all amounts then held in
the Trust credited to their accounts) may at any time substitute a new trustee
by giving fifteen (15) days notice thereof to the Trustee then acting. In the
event of such removal or resignation, the Trustee shall duly file with the
Company and, on and after a Change in Control, the Executives a written
statement or statements of accounts and proceedings as provided in Section
5.01(c) hereof for the period since the last previous annual accounting of the
Trust, and if written objection to such account is not filed as provided in
Section 5.01(c) hereof, the Trustee shall to the maximum extent
8
<PAGE>
permitted by applicable law be forever released and discharged from all
liability and accountability with respect to the propriety of its acts and
transactions shown in such account. The Trustee and any successor thereto
appointed hereunder shall be a commercial bank which is not an affiliate of the
Company, but which is a national banking association or established under the
laws of one of the states of the United States, and which has equity in excess
of $100 million.
SECTION 5.03 Settlement of Accounts. Notwithstanding any other
----------------------
provision of this Agreement, in the event of the termination of the Trust, or
the resignation or discharge of the Trustee, the Trustee shall have the right
to a settlement of its accounts, which accounting may be made, at the option of
the Trustee, either (a) by a judicial settlement in a court of competent
jurisdiction; or (b) by agreement of settlement, release and indemnity from the
Company to the Trustee.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 6.01 Termination.
-------------------------
(a) Except as provided in Section 6.01(b) of this Agreement, this
Trust shall terminate forty-two months after the occurrence of a Change in
Control, or, if earlier, upon the earliest of either of the following events:
(i) the exhaustion of the Trust Corpus; or (ii) the final payment of all
amounts payable to all of the Executives pursuant to the Agreements, as
certified to the Trustee by each Executive. Promptly upon termination of this
Trust, any remaining portion of the Trust Corpus, less all payments, expenses,
taxes and other charges under this Trust Agreement as of such date of
termination, shall be paid to the Company.
(b) Notwithstanding any other provision of this Agreement, in the
situation where the payments under an Executive's Agreements are the subject of
litigation or arbitration, and if the Trust Corpus has not been exhausted with
respect to such Executive, the Trust shall not terminate and the funds held in
the Trust with respect to such Executive shall continue to be held by the
Trustee until the final resolution of such litigation or arbitration. The
Trustee may assume that no Agreement of an Executive is the subject of such
litigation or arbitration unless the Trustee receives written notice from an
Executive or the Company with respect to such litigation or arbitration. The
Trustee may rely upon written notice from an Executive as to the final
resolution of such litigation or arbitration. Following such final resolution,
the Trust shall terminate with respect to each Executive described in this
Section 6.01(b) upon the earliest of either of the following events: (i) the
exhaustion of the Trust Corpus held by the Trustee with respect to such
Executive; or (ii) the final payment of all amounts payable to the Executive
pursuant to such Executive's Agreements, as certified to the Trustee by such
Executive. Promptly upon termination of this Trust with respect to an
Executive described in Section 6.01(b), any remaining portion of the Trust
Corpus held by the Trustee with respect to such Executive shall be paid to the
Company. At such time as the Trust shall be terminated with respect to all
such Executives, the Trust Corpus, less all payments, expenses, taxes and other
charges attributable to the extension of the Trust term beyond the termination
date described in Section 6.01(a), shall be paid promptly to the Company.
SECTION 6.02 Amendment and Waiver. Except as provided in Sections
--------------------
2.01(c),(d) and 4.02(b),(c), this Trust may not be amended except by an
instrument in writing signed on behalf of the parties hereto together with the
written consent of Executives having at least 65% of all amounts then held in
the Trust credited to their accounts. The parties hereto, together with the
consent of Executives having at least 65% of all amounts then held in the Trust
credited to their accounts,
9
<PAGE>
may at any time waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto or an Executive to
any such waiver shall be valid if set forth in an instrument in writing signed
on behalf of such party or Executive. This Trust may not be amended nor may
compliance with any provisions hereunder be waived except by an instrument in
writing signed on behalf of the parties hereto and by at least seventy-five
percent (75%) of the Executives in the situation where, prior to such amendment
or waiver, no payment has been made by the Company pursuant to Section
2.01(a)(i) that is then held by the Trustee. Notwithstanding the foregoing, any
such amendment or waiver may be made prior to a Change in Control by written
agreement of the parties hereto without obtaining the consent of the Executives
if such amendment or waiver does not adversely affect the rights of the
Executives hereunder. Except as provided in Sections 2.01(c),(d) and
4.02(b),(c), no amendment or waiver relating to this Trust may be made (i) with
respect to the amount of funds to be delivered by the Company to the Trustee
with respect to an Executive or by the Trustee to such Executive, or the timing
of such deliveries or (ii) which amends Section 6.01, unless such Executive, in
the case of clause (i) or, all Executives in the case of clause (ii), agree in
writing to such amendment or waiver.
ARTICLE VII
GENERAL PROVISIONS
------------------
SECTION 7.01 Further Assurances. The Company shall, at any time and
------------------
from time to time, upon the reasonable request of the Trustee, execute and
deliver such further instruments and do such further acts as may be necessary or
proper to effectuate the purposes of this Trust.
SECTION 7.02 Certain Provisions Relating to this Trust. (a) This
-----------------------------------------
Trust sets forth the entire understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior agreements, arrangements
and understandings relating thereto. This Trust shall be binding upon and inure
to the benefit of the parties and their respective successors and legal
representatives.
(b) If by the end of the eight-month period following the date
hereof, or such later date as the Company and the Trustee shall agree, counsel
is unable to deliver to the Company a favorable opinion that is satisfactory to
the Company, substantially to the effect that
(i) the Company will be treated as the owner of the Trust under Section 677
of the Code and Section 1.677(a)-1(d) of the regulations. Under Section
671, the Company must include all of the income, deductions and credits
against tax of the Trust in computing its own taxable income and credits,
and
(ii) the transfer of assets to the Trust will not constitute a transfer
of property for purposes of Section 83 of the Code or Section 1.83-3(e) of
the regulations, and
(iii) under Section 451 of the Code, amounts will be includible in the
gross income of the Executives only in the taxable year or years in which
such amounts are actually distributed or made available by the Trustee,
the Trust shall immediately terminate and the amount of the Trust Corpus, less
all payments, expenses, taxes and other charges under this Trust Agreement, if
any, as of such date, shall be returned to the Company as soon as possible.
Upon termination of the Trust, the Executives shall have no rights under this
Trust Agreement.
(c) This Trust shall be governed by and construed in accordance with
the laws of the State of New York, other than and without reference to any
10
<PAGE>
provisions of such laws regarding choice of laws or conflict of laws.
(d) In the event that any provision of this Trust or the application
thereof to any person or circumstances shall be determined by a court of proper
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Trust, or the application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision of this Trust shall be valid and enforced
to the fullest extent permitted by law.
(e) The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.
SECTION 7.03 Alienation. The right of any Trust Beneficiary (as
----------
hereinafter defined) to any benefit or to any payment hereunder shall not be
subject to alienation or assignment.
SECTION 7.04 Arbitration. Any dispute between the Executives and
-----------
the Company or the Trustee as to the interpretation or application of the
provisions of this Trust and amounts payable hereunder may, at the election of
any party to such dispute (or, if more than one (1) Executive is such a party,
at the election of seventy-five percent (75%) of such Executives), be determined
by binding arbitration within the greater New York City metropolitan area or the
State of Connecticut in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court of competent jurisdiction. All fees and expenses of such
arbitration shall be paid by the Trustee and considered an expense of the Trust
under Section 5.01(g).
SECTION 7.05 Notices. Any notice, report, demand or waiver required
-------
or permitted hereunder shall be in writing and shall be given personally or by
prepaid registered or certified mail, return receipt requested, addressed as
follows:
If to the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
If to the Trustee: Connecticut National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Employee Benefits
Administration - MSN 215
If to an Executive, to the address of such Executive as listed next to his name
on Exhibit I hereto.
A notice shall be deemed received upon the date of delivery if given
personally or, if given by mail, upon the receipt thereof. A change of address
may be given by any party to another by similar notice.
SECTION 7.06 Trust Beneficiaries. Each Executive is an intended
-------------------
beneficiary ("Trust Beneficiary") under this Trust, and as a Trust Beneficiary
shall be entitled to enforce all terms and provisions hereof with the same force
and effect as if such person had been a party hereto. The term Trust
Beneficiary shall, to the extent provided in the Agreements respecting a
deceased Executive, also mean the legal representative of the estate of such
deceased Executive and the surviving spouse of the deceased Executive or
beneficiary designated by such Executive in accordance with the terms of such
Agreements.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Trust as of the
date first written above.
CHAMPION INTERNATIONALCORPORATION
By /s/ Andrew C. Sigler
----------------------------------------------
Andrew C. Sigler
Chairman and Chief Executive Officer
CONNECTICUT NATIONAL BANK
By /s/ Thomas F. Mullaney, Jr.
------------------------------------------
Thomas F. Mullaney, Jr.
Executive Vice-President
12
<PAGE>
Exhibit I
AGREEMENTS BETWEEN CHAMPION INTERNATIONAL
CORPORATION AND CERTAIN EXECUTIVES
<TABLE>
<CAPTION>
Agreement and
Name and Address Title Date of Agreement
- --------------------------- ------------------------- ------------------------
<S> <C> <C>
Mr. John A. Ball Senior Vice President February 19, 1987:
One Champion Plaza -Restated Agreement /1/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Gerald J. Beiser Senior Vice President- February 19, 1987:
One Champion Plaza Finance -Restated Agreement /1/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. William H. Burchfield Executive Vice President February 19, 1987:
One Champion Plaza -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Mark A. Fuller, Jr. Executive Vice President February 19, 1987:
One Champion Plaza -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Marvin H. Ginsky Senior Vice President February 19, 1987:
One Champion Plaza and General Counsel -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. L. C. Heist President and Chief August 18, 1988:
One Champion Plaza Operating Officer -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Kenwood C. Nichols Vice Chairman February 19, 1987:
One Champion Plaza -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Richard E. Olson Executive Vice President August 18, 1988:
One Champion Plaza -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Andrew C. Sigler Chairman and Chief February 19, 1987:
One Champion Plaza Executive Officer -Restated Agreement /1/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses /3/
- -------------------------
</TABLE>
/1/ As Amended April 21, 1988 and August 18, 1988
/2/ As Amended April 21, 1988
/3/ As Amended August 18, 1988
<PAGE>
AMENDMENT TO
TRUST AGREEMENT DATED AS OF
FEBRUARY 19, 1987 BETWEEN CHAMPION
INTERNATIONAL CORPORATION AND CONNECTICUT NATIONAL BANK
-------------------------------------------------------
This Amendment between Champion International Corporation, a New York
corporation (the "Company"), and Connecticut National Bank (the "Trustee") is
effective as of August 18, 1988 and amends the Trust Agreement dated as of
February 19, 1987 between the Company and the Trustee (the "Trust").
WHEREAS, the Company and the Trustee have entered into the Trust; and
WHEREAS, the Company and the Trustee wish to amend the Trust in order to
(1) ensure that it is in compliance with the rule against perpetuities and with
applicable restraints on alienation, and (2) clarify the circumstances in which
interest earned on the investment of Trust Corpus may be paid to the Executives;
and WHEREAS. all of the Executives have agreed in writing to this Amendment as
required by Section 6.02 of the Trust;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Section 4.01 of the Trust is hereby amended by adding a new
subsection (d) thereto, as follows:
"(d) Notwithstanding any provision of this Agreement, upon termination
of the Trust as provided in Section 6.01(c) the Trustee shall pay to the Company
all amounts held hereunder."
2. The second, third and fourth sentences of Section 4.02(a) of the
Trust are hereby amended in their entirety to read as follows:
"Each Payment Schedule also shall be delivered by the Company to such
Executive. The Payment Schedule shall include instructions as to the
amount of interest (if any) to accrue for the benefit of an Executive, from
the date on which the Trustee receives a written request for payment signed
by the Executive (or his beneficiary or beneficiaries) as hereinafter
provided until the date on which such payment is made, in respect of such
payment; such instructions may be revised from time to time prior to the
occurrence of a Change in Control. The aggregate payment to be made
hereunder to an Executive by the Trustee shall not exceed the aggregate
amount delivered to the Trustee for the benefit of such Executive, plus
interest (if any) thereon as described in the immediately preceding
sentence, all as indicated in the Payment Schedule applicable to such
Executive."
3. Subsection (a) of Section 6.01 of the Trust is hereby amended to
delete the first nine words thereof (i.e., "Except as provided in Section
6.01(b) of this Agreement,") and to substitute the following therefor: "Except
as provided in Sections 6.01(b) and 6.01(c) of this Agreement,".
4. Subsection (b) of Section 6.01 of the Trust is hereby amended to
delete the first seven words thereof (i.e., "Notwithstanding any other
provision of this Agreement,") and to substitute the following therefor:
Notwithstanding any other provision of this Agreement except Section 6.01(c),".
<PAGE>
5. Section 6.01 of the Trust is hereby amended by adding a new
subsection (c) thereto, as follows:
"(c) Notwithstanding any other provision of this Agreement, this
Trust shall terminate in all events and under all circumstances not later
than twenty-one years after the death of the last survivor of the
Executives who were included on Exhibit I hereto at the time this Trust was
executed, such Executives being John A. Ball, Gerald J. Beiser, William H.
Burchfield, Aubrey L. Cole, Mark A. Fuller, Jr., Marvin H. Ginsky, Judson
Hannigan, L. C. Heist, Robert F. Longbine, Kenwood C. Nichols, Philip R.
O'Connell and Andrew C. Sigler. Promptly upon termination of this Trust
pursuant to this Section 6.01(c), the Trustee shall pay to the Company all
amounts held hereunder."
6. All capitalized terms used herein and not defined herein shall
have the meanings assigned to them in the Trust.
7. Except as amended hereby, all of the provisions of the Trust shall
continue in full force and effect without change.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
-------------------------------
Chairman and Chief Executive Officer
CONNECTICUT NATIONAL BANK
By /s/ Thomas J. Botticelli
--------------------------------
Thomas J. Botticelli
AGREED TO:
/s/ John A. Ball /s/ Judson Hannigan
- ------------------------------- -----------------------------------
John A. Ball Judson Hannigan
/s/ Gerald J. Beiser /s/ L.C. Heist
- ------------------------------- -----------------------------------
Gerald J. Beiser L.C. Heist
/s/ William H. Burchfield /s/ Kenwood C. Nichols
- ------------------------------- -----------------------------------
William. H. Burchfield Kenwood C. Nichols
/s/ Aubrey L. Cole /s/ Philip R. O'Connell
- ------------------------------- -----------------------------------
Aubrey L. Cole Philip R.O'Connell
/s/ Mark A. Fuller, Jr. /s/ Richard E. Olson
- ------------------------------- -----------------------------------
Mark A. Fuller, Jr. Richard E. Olson
/s/ Marvin H. Ginsky /s/ Andrew C. Sigler
- ------------------------------- -----------------------------------
Marvin H. Ginsky Andrew C. Sigler
</TABLE>
2
<PAGE>
Exhibit D
---------
[subparagraph 9(d)]
Schedule of Amounts to be Deposited in Trust
Upon a Potential Change in Control*
--------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
` Severance: 2 years termination payments; 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. Payments are
based on highest total of salary and annual bonus for any calendar year
of employment.
` Retirement: All amounts, if any, payable under the excess benefit and supplemental
retirement plans of the Company.
` Disability: Same as for active employees, for the 2 year termination payment period
(or balance thereof).
` Medical: Same as for active employees, for the 2 year termination payment period
(or balance thereof).
` Options: Fund for those options referred to in subparagraph 1(a)(iii) hereof.
"Spread" to be calculated on the basis of the closing price of Common
Shares of the Company as reported in "New York Stock Exchange
Composite Transactions" of the Eastern Edition of The Wall Street
---------------
Journal for the trading day immediately after the Potential Change in
-------
Control.
` Contingently
Credited Shares: Fund for those contingently credited shares referred to in
subparagraph 1(a)(iii) hereof in an amount per share equal to the
closing price of Common Shares of the Company as reported in "New
York Stock Exchange Composite Transactions" of the Eastern Edition of
The Wall Street Journal for the trading day immediately after the
-----------------------
Potential Change in Control.
` Legal Expenses: An amount equal to twelve times the monthly base salary paid at time of
deposit into trust.
</TABLE>
________________
* This Exhibit D does not reflect the possible reduction provided for in
subparagraph 9(d)(v) hereof.
o0o
Execagr/exh10.31
<PAGE>
EXHIBIT 10.32
Champion International Corporation
One Champion Plaza
Stamford, CT 06921
October 18, 1990
Mr. L. Scott Barnard
One Champion Plaza
Stamford, CT 06921
Re: Agreement Relating to Legal Expenses
Dated October 18, 1990
------------------------------------------------
Dear Scott:
As an inducement for you to continue in the employ of Champion
International Corporation (the "Company"), the Board of Directors of the Company
has today authorized entering into an Agreement between you and the Company
effective October 18, 1990 (the "Agreement"). One of the principal purposes in
entering into the Agreement is to provide you with reasonable assurance in the
event of a change in control of the Company against loss of rights to benefits
that you could reasonably expect to receive in the absence of such a change in
control, and thereby provide an inducement for you to remain in the employ of
the Company notwithstanding the possibility of a change in its control.
As a separate and additional inducement for you to remain in the employment
of the Company, and to provide you with reasonable assurance that the purposes
of the Agreement and this Agreement Relating to Legal Expenses (the "Legal
Expense Agreement") (collectively, the "Secured Agreements") will not be
frustrated as a result of the cost of their enforcement should a claim or
dispute be instituted or arise upon or within forty-two months following a
Change in Control of the Company (as defined in the Agreement) and arise out of
or relate to any provision of the Secured Agreements, the Company agrees to pay,
in consideration of such continued employment, all legal expenses which you may
incur in any such claim or dispute. Such legal expenses shall be paid in the
amount provided in, and otherwise in accordance with the terms and conditions
of, the memorandum attached to, incorporated in and by this reference made part
of, this Legal Expense Agreement.
By virtue of the mutual promises set forth in this Agreement Relating to
Legal Expenses and the Agreement and other good and valuable consideration the
receipt and sufficiency of which you and the Company hereby acknowledge, your
signature at the foot of this letter will constitute this letter a binding
agreement and it shall thereupon be binding upon and inure to the benefit of
you, your spouse, any other beneficiaries and your estate, and the Company and
its successors and assigns, including any corporation with or into which the
Company may consolidate or merge or to which the Company may transfer all or
substantially all of its assets. If you are deceased and survived by a
beneficiary, then your beneficiary may act for herself or himself in enforcing
her or his rights under this Legal Expense Agreement as your survivor, and may
also act for you with respect to any rights to payments which became due and
remained unpaid during your lifetime.
<PAGE>
For the Company's files, please execute the enclosed copy of this Legal
Expense Agreement and return it in an envelope marked "Confidential" to Lionel
N. Zimmer.
Sincerely,
CHAMPION INTERNATIONAL CORPORATION
Attest: By /s/ Andrew C. Sigler
------------------------------
Chairman of the Board of Directors
/s/ Lawrence A. Fox
- -----------------------------
Secretary
Agreed: October 18, 1990
/s/ L. Scott Barnard
- --------------------------------
L. Scott Barnard
-2-
<PAGE>
Memorandum of Terms and Conditions Referred to in
the Agreement Relating to Legal Expenses
dated October 18, 1990 between
Champion International Corporation and L. Scott Barnard
-------------------------------------------------------
1. Reference hereafter to the Agreement Relating to Legal Expenses (the
"Legal Expense Agreement") shall be deemed to refer also to this memorandum.
Terms used or referred to in the Legal Expense Agreement shall have the same
meaning or reference in this memorandum as in the Legal Expense Agreement.
2. The Company shall, upon presentation of appropriate commercial
invoices, pay all legal expenses, which includes reasonable legal fees, court
costs, arbitration costs, and ordinary and necessary out-of-pocket costs of
attorneys, billed to and payable by you or by anyone claiming under or through
you (such person being hereinafter referred to as your "beneficiary"), in
connection with bringing, prosecuting, defending, litigating, arbitrating,
negotiating or settling any claim or dispute by or against you or your
beneficiary, or any claim or dispute between you or your beneficiary and the
Company or any third party, that may be instituted or arise upon or within
forty-two months following a Change in Control of the Company, as defined in the
Agreement, and that may arise out of or relate to the Secured Agreements, or any
of them, or the validity, operation, interpretation, enforceability or breach
thereof, provided that:
(a) you and your beneficiary shall repay to the Company any such expenses
theretofore paid by or on behalf of the Company if and to the extent that a
judgment should be rendered against you or your beneficiary by the judicial or
arbitration forum that adjudicates such dispute beyond appeal, and such expenses
were not incurred by you or your beneficiary while acting in good faith, and
provided further, that
(b) in the case of any request that the Company pay attorneys' fees or
expenses, the Company shall have received a statement signed by the attorney or
firm of attorneys rendering the bill setting forth the services that had been,
and will be, performed, and provided further, that
(c) in the case of any claim or dispute by or against you or your
beneficiary, the claim for legal fees hereunder shall be made in writing, with
specific reference to the provisions of the Legal Expense Agreement, delivered
in the manner provided in subparagraph 4(c) below, in no event later than forty-
two months after a Change in Control of the Company.
3. (a) At any time after the date hereof but in no event later than a
Potential Change in Control of the Company as defined in the Agreement, if you
are in the employ of the Company at such time, the Company will, at its own
expense, set aside in trust, or establish, extend, renew and maintain an
irrevocable bank letter of credit in favor of you or, in the event of your
death, your beneficiary, in an amount equal to twelve (12) times the monthly
base salary being paid to you at such time.
(b) The Company has entered into a trust agreement substantially in the
form attached to the Agreement (the "Trust Agreement"), and agrees that, upon
the terms, conditions and procedures set forth therein, you will be named a
beneficiary of the Trust Agreement, and this Legal Expense Agreement will be
listed on Exhibit I of the Trust Agreement as one of the agreements which is
subject to the trust established by the Trust Agreement. If the Company shall
become liable for the payment of legal expenses under paragraph 2 above, you or,
in the event of your death, your beneficiary shall request the Company in
<PAGE>
writing, in accordance with the terms, conditions and procedures set forth in
such paragraph 2, to make such payment and, if the Company shall fail to do so
fully within a reasonable time after receipt of such written demand, you may
request the trustee of such trust, in accordance with the terms, conditions and
procedures set forth in the Trust Agreement, to make such payment to the extent
that the Company had failed to do so. The Company shall continue to be liable
to make all payments required under the terms of this Legal Expense Agreement to
the extent such payments have not been made pursuant to the Trust Agreement.
(c) If the Company establishes, extends, renews and maintains an
irrevocable bank letter of credit in favor of you or your beneficiary, you or,
in the event of your death, your beneficiary, shall be entitled to draw upon
such letter of credit only if and to the extent that the Company shall fail to
discharge its obligations under paragraph 2 above within a reasonable time after
receipt of written demand by you or your beneficiary. As and when any funds are
paid by the bank under such letter of credit, the Company shall renew such
letter of credit at its own expense to the extent of the funds so paid. The
Company need not establish or renew any such letter of credit for any period
subsequent to the date on which an attorney or a firm of attorneys selected by
mutual agreement of the Company and you or, in the event of your death, your
beneficiary, the fees and expenses of which attorney or firm of attorneys shall
be borne by the Company, shall determine, after consultation with the Company
and you or, in the event of your death, your beneficiary, that all obligations
of the parties under the Secured Agreements have been substantially satisfied.
(d) The bank that shall issue any such letter of credit shall be a
national or state bank having a combined capital, surplus and undivided profits
and reserves of not less than One Hundred Million Dollars ($100,000,000).
4. (a) Any dispute between you and the Company as to the interpretation
or application of the provisions of either of the Secured Agreements may at your
election be determined by binding arbitration within the greater New York City
metropolitan area or the State of Connecticut in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court of competent jurisdiction. All fees and
expenses of such arbitration shall be paid by the Company subject to repayment
in accordance with the terms and conditions set forth in clause (a) of paragraph
2 above.
(b) Anything to the contrary notwithstanding, all payments and other
provisions required to be made by the Company under this Legal Expense Agreement
to or on behalf of you or your beneficiaries shall be subject to the withholding
of such amounts, if any, relating to tax and other payroll deductions as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation. In lieu of withholding such amounts, the Company may accept
other provisions to the end that it has sufficient funds to pay all taxes
required by law to be withheld in respect of any or all of such payments.
(c) All notices, requests, demands and other communications provided for
by this Legal Expense Agreement shall be in writing and shall be sufficiently
given if and when mailed in the continental United States by registered or
certified mail, return receipt requested, or personally delivered to the party
entitled thereto at the address stated below, which address shall be such
address as the addressee may have given most recently by a similar notice. Any
such notice shall be deemed to have been received on the date of
2
<PAGE>
delivery.
To the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
To the Executive: Mr. L. Scott Barnard
One Champion Plaza
Stamford, CT 06921
(d) No provision of this Legal Expense Agreement may be amended,
modified or waived unless such amendment, modification or waiver shall be
authorized by the Board of Directors of the Company or any authorized committee
of the Board of Directors and shall be agreed to in writing, signed by you and
by an officer of the Company thereunto duly authorized. Except as otherwise
specifically provided in this Legal Expense Agreement, no waiver by either party
hereto of any breach by the other party hereto of any condition or provision of
this Legal Expense Agreement to be performed by such other party shall be deemed
a waiver of a subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same time or at any prior or
subsequent time.
(e) Anything in this Legal Expense Agreement to the contrary
notwithstanding:
(i) In the event that any provision of this Legal Expense Agreement,
or portion thereof, shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Legal Expense
Agreement and parts of such provision not so invalid or unenforceable shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law;
(ii) Any provision of this Legal Expense Agreement, or portion
thereof, which may be invalid or unenforceable in any jurisdiction shall be
limited by construction thereof, to the end that such provision, or portion
thereof, shall be valid and enforceable in such jurisdiction; and
(iii) Any provision of this Legal Expense Agreement, or portion
thereof, which may for any reason be invalid or unenforceable in any
jurisdiction shall remain in effect and be enforceable in any jurisdiction in
which such provision, or portion thereof, shall be valid and enforceable.
(f) Except as otherwise provided herein, this Legal Expense Agreement
shall be binding upon and inure to the benefit of the Company and any successor
of the Company, including, without limitation, any corporation or corporations
acquiring directly or indirectly all or substantially all of the assets of the
Company whether by merger, consolidation, sale or otherwise (and such successor
shall thereafter be deemed embraced within the term "the Company" for the
purposes of this Legal Expense Agreement), but shall not otherwise be assignable
by the Company.
(g) The validity, interpretation, construction, performance and
enforcement of this Legal Expense Agreement shall be governed by the laws of the
State of New York without giving effect to the principles of conflicts of laws
thereof.
(h) There shall be no right of set-off or counterclaim in respect of
any claim, debt or obligation against any payments to you, your beneficiaries or
estate, provided for in this Legal Expense Agreement.
(i) The Company and you recognize that each party will have no adequate
remedy at law for breach by the other of any of the agreements
3
<PAGE>
contained in this Legal Expense Agreement and, in the event of any such breach,
the Company and you hereby agree and consent that the other shall be entitled to
a decree of specific performance, mandamus or other appropriate remedy to
enforce performance of such agreements.
(j) No right or interest to or in any payments shall be assignable by
you; provided, however, that this provision shall not preclude you from
designating one or more beneficiaries to receive any amount that may be payable
after your death and shall not preclude the legal representative of your estate
from assigning any right hereunder to the person or persons entitled thereto
under your will or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to your estate.
(k) No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
(l) In the event of your death or a judicial determination of your
incompetence, reference in this Legal Expense Agreement to you shall be deemed,
where appropriate, to refer to your legal representative or, where appropriate,
to your beneficiary or beneficiaries.
(m) If any event provided for in this Legal Expense Agreement is
scheduled to take place on a legal holiday, such event shall take place on the
next succeeding day that is not a legal holiday.
(n) This Legal Expense Agreement shall be binding upon and shall inure
to the benefit of you, your heirs and legal representatives, and the Company and
its successors as provided in subparagraph 4(f) hereof.
(o) This instrument and the Agreement contain the entire agreement of
the parties relating to the subject matter of this Legal Expense Agreement and
supersede and replace all prior agreements and understandings with respect to
such subject matter, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Legal
Expense Agreement which are not set forth herein.
5. The Legal Expense Agreement is not intended to confer upon you any
right to continue in the employ of the Company or to affect any rights of the
Company, subject to any agreement or agreements between you and the Company
relating to your employment by the Company, to terminate your employment at any
time with or without assigning a reason therefor.
oOo
4
<PAGE>
EXHIBIT 10.33
AMENDMENT EFFECTIVE AS OF SEPTEMBER 19, 1991
TO OCTOBER 18, 1990 AGREEMENT
-----------------------------------------------
This Agreement between Champion International Corporation, a New York
corporation (the "Company"), and L. Scott Barnard (the "Executive") is effective
as of September 19, 1991.
WHEREAS, the Company and the Executive entered into an Agreement dated
October 18, 1990 (the "Agreement") relating to the employment of the Executive
by the Company; and
WHEREAS, The Company and the Executive wish to amend the Agreement in order
to (1) provide that any benefits thereunder which constitute "parachute
payments" for Federal tax purposes be paid in an amount the net effect of which
is intended to result in the Executive receiving "parachute payments" from all
sources equal to the greater of (i) the total of the "parachute payments" from
all sources, less income taxes and any Federal excise tax thereon, and (ii) the
maximum amount of "parachute payments" that can be paid without triggering such
Federal excise tax, less income taxes thereon; and (2) expressly allow the
Executive to engage the Company's independent consulting actuary to assist in
"parachute payment" determinations;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Paragraph 14 of the Agreement is hereby amended in its entirety to read as
follows:
"14. Parachute Tax
-------------
(a) Except in the specific circumstance hereinafter described in this paragraph
14, the Company shall pay to the Executive the full amount to which he is
entitled under this Agreement.
(b)
(i) If any payments or benefits received or to be received by the
Executive under this Agreement, or any other payments or benefits received
or to be received by the Executive from the Company or any other person,
constitute "parachute payments" within the meaning of Section 280G(b)(2) or
any successor provision of the Code (such payments or benefits being
hereinafter referred to as the "Parachute Payments"), and
(ii) If the aggregate present value of the Parachute Payments from all
sources, minus (A) any excise tax imposed under Section 4999 of the Code
(or any similar tax that may hereafter be imposed) (the "Excise Tax") and
(B) the net amount of federal, state and local income tax on such aggregate
present value, would be less than the maximum amount of Parachute Payments
from all sources that can be paid without triggering the Excise Tax, after
deduction of the net amount of federal, state and local income tax on such
maximum amount, then
(iii) the Parachute Payments to be paid by the Company to the
Executive under this Agreement shall be reduced to a lump sum amount (if
any) such that the aggregate present value of the Parachute Payments from
all sources is equal to the maximum amount of Parachute Payments that can
be paid without triggering the Excise Tax.
<PAGE>
Anything in this subparagraph 14(b) to the contrary notwithstanding, it
is understood and agreed that the amount to be paid by the Company to the
Executive pursuant to this subparagraph 14(b) in the specific circumstance
described herein may be less, but never more, than the amount to which he would
otherwise be entitled under this Agreement.
(c) All matters to be determined pursuant to subparagraph 14(b) including,
without limitation, the existence or absence of any Parachute Payments, the
aggregate present value of any Parachute Payments, the amount of the Excise Tax
(if any), the net amount of federal, state and local income tax (assuming the
highest applicable marginal rate in each case), the maximum amount of Parachute
Payments that can be paid without triggering the Excise Tax, the amount of any
reduction in the Parachute Payments to be paid by the Company to the Executive
under this Agreement and the item or items (if any) to be reduced, shall be
determined by the Executive or, following his death, his beneficiary or
beneficiaries. The specifics of such determination shall be delivered in
writing to the Company and to the trustee of the Trust referred to in
subparagraph 9(d)(ii) above at the time of the Executive's termination within
three years after a Change in Control, or as soon as practicable thereafter, by
the Executive or, following his death, his beneficiary or beneficiaries. The
reasonable fees and expenses of such tax counsel and financial advisor as may
reasonably be called upon to assist the Executive or his beneficiary or
beneficiaries in the foregoing determinations shall be paid by the Company.
Without limiting the generality of the immediately preceding sentence, the
Executive or his beneficiary or beneficiaries may select as such financial
advisor Hewitt Associates or such other person or firm as may be serving at the
time as the Company's independent consulting actuary."
2. Except as amended hereby, all of the terms and conditions set forth in
the Agreement shall continue in full force and effect without change.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has executed this
Agreement, all as of September 19, 1991.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
----------------------------------
Chairman of the Board of Directors
Attest:
/s/ Lawrence A. Fox
- ---------------------
Secretary
/s/ L. Scott Barnard
----------------------------------
L. Scott Barnard
-2-
<PAGE>
EXHIBIT 10.34
AGREEMENT
between
CHAMPION INTERNATIONAL CORPORATION
and
RICHARD L. PORTERFIELD
Effective October 18, 1990
<PAGE>
Table of Contents
-----------------
Paragraph
Number Title Page
- ----------- -------------------- ----
1 Termination 1
(a) Termination Payments 1
(i) Monthly Payments 1
(ii) Lump Sum Payment Upon Termination
Following a Change in Control 1
(iii) Cash-Out of Options and Contingently 1
Credited Shares
(iv) Payment of Value of Excess Benefit 2
and Supplemental Retirement Plan
Payments
(v) Participation in Benefit Plans 2
(b) Definition of Termination 3
(c) Definition of Cause 3
(d) Definition of Change in Control 4
2 Termination During Month 4
3 Post-termination Obligations 4
of Executive; Default by Company
(a) Assistance in Litigation 4
(b) Detrimental Conduct 5
(c) Discoveries and Inventions 5
(d) Reimbursement of Expenses 5
(e) Competition 5
(f) Failure to Comply 5
(g) Post-termination Default in 6
Payments or Benefits
4 Determination of Benefits 6
5 (a) Time of Payment 6
(b) Withholding of Taxes 7
6 Decisions by Company 7
7 Prior Agreements 7
8 Consolidation or Merger 7
9 (a) Non-assignability 7
(b) No Attachment 7
(c) Binding Agreement 8
(d) Unfunded Obligations; Trust 8
Agreement
10 (a) Amendment of Agreement 9
(b) No Waiver 9
11 Severability 9
12 Headings 9
13 Governing Law 9
14 Parachute Tax 10
15 Notices 10
16 Arbitration 10
i
<PAGE>
EXHIBITS
--------
Page
Exhibit Reference
- ------- ---------
A Certain benefits to be provided after a 1
termination following a change in control
B Payments and benefits subject to 6
acceleration in event of default in
payments or benefits by Company after
cessation of employment
C Form of Trust Agreement 8
D Amounts to be deposited in trust upon a 8
potential change in control
DEFINED TERMS
-------------
Page
Defined Term Paragraph Reference
- ----------------------------- --------------- ---------
Agreement Introduction 1
Cause 1(c) 3
Change in Control 1(d) 4
Code 1(a)(iii) 2
Company Introduction 1
Executive Introduction 1
Fair Market Value 1(a)(iii) 2
Legal Expense Agreement 1(b)(ii) 3
Potential Change in Control 9(d)(vii) 9
Termination 1(b) 3
ii
<PAGE>
THIS AGREEMENT between CHAMPION INTERNATIONAL CORPORATION, a New York
corporation (the "Company"), and RICHARD L. PORTERFIELD (the "Executive"),
effective October 18, 1990 (the "Agreement").
W I T N E S S E T H:
WHEREAS, the Executive is now in the employ of the Company; and
WHEREAS, the Executive was elected Senior Vice President - Organizational
Development and Human Resources of the Company on January 18, 1990; and
WHEREAS, the Company wishes to provide additional incentive for the
Executive to continue in the employ of the Company;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Termination
-----------
In the event of a termination, as defined in subparagraph 1(b) below, the
following provisions of this paragraph 1 shall apply.
(a) Termination Payments
--------------------
(i) Monthly payments. Subject to compliance with the applicable
----------------
provisions of paragraph 3 below, the Company shall pay the Executive or, in the
event of his subsequent death, his beneficiary or beneficiaries or his estate,
as the case may be, as severance pay or liquidated damages, or both, a monthly
sum equal to the highest total monthly compensation (highest total of annual
salary plus annual bonus for any calendar year of employment, divided by
twelve), paid to the Executive. Such payments shall commence on the last day of
the month next following the termination of employment of the Executive and
shall continue until the last day of the twenty-fourth full calendar month
following the termination of employment of the Executive, provided, however,
that such payments shall not continue beyond the earlier of (A) the last day of
the month next preceding his normal retirement date under the Company's pension
plan, and (B) the last day of the month next preceding the month in which he
shall, with his written consent, commence receiving his retirement allowance
under the Company's pension plan.
(ii) Lump Sum Payment upon Termination following a Change in Control.
---------------------------------------------------------------
Anything in subparagraph 1(a)(i) above or elsewhere in this Agreement to the
contrary notwithstanding, if termination of the Executive occurs within three
years following a Change in Control: (x) the total of the monthly payments
provided for in subparagraph 1(a)(i) above shall be accelerated and paid in a
lump sum as soon as practicable after such termination if termination occurs
before the last day of the month next preceding the Executive's normal
retirement date under the Company's pension plan; if termination occurs on or
after such last day, no payment pursuant to subparagraph 1(a)(i) or (ii) shall
be made to the Executive; (y) the benefits required to be provided thereafter to
the Executive, his spouse and family, set forth in attached Exhibit A, shall be
---------
valued at the cost of acquiring insurance policies which would provide such
benefit coverage over the period of time involved in subparagraph 1(a)(i) above,
and such cost shall be paid in a lump sum as soon as practicable after
termination; and (z) the Executive shall be paid the amount payable, if any,
pursuant to subparagraph 1(a)(iii) and the amount payable pursuant to
subparagraph 1(a)(iv).
(iii) Cash-Out of Options and Contingently Credited Shares. In the
----------------------------------------------------
event that the Executive shall, at the time of termination of his employment
within three years following a Change in Control, (A) hold an outstanding and
unexercised (whether or not exercisable at the time) option or options
theretofore granted by the Company to him prior to the Change in Control, (B)
have shares contingently credited to him prior to the Change in Control under
the Company's Contingent Compensation Plan or 1986 Contingent Compensation Plan
or a successor plan, or both hold such option and have such shares contingently
credited to him,
1
<PAGE>
unless the Executive shall have given the Company written notice to the contrary
within thirty (30) days following such termination of employment, the Company
shall pay him, in a lump sum, an amount equal to the excess above the option
price, of each such option that is not an Incentive Stock Option as defined in
Section 422A of the Internal Revenue Code of 1986 as amended (the "Code"), of
the Fair Market Value of Company shares at the time of termination, and the Fair
Market Value at the time of termination of the shares, if any, so contingently
credited. Solely for the purpose of this subparagraph 1(a)(iii), Fair Market
Value at the time of termination shall mean the higher of (i) the average of the
reported closing prices of the Common Shares of the Company, as reported in "New
York Stock Exchange Composite Transactions" of the Eastern Edition of The Wall
--------
Street Journal, for the last trading day prior to the termination and for each
- --------------
trading day of the preceding sixty calendar days, and (ii) in the event that a
Change in Control of the Company, as defined in subparagraph 1(d) below, shall
have taken place prior to termination as the result of a tender or exchange
offer, and such Change in Control was consummated within three years of
termination, an amount equal to the highest consideration paid for Common Shares
of the Company in the course of such tender or exchange offer.
(iv) Payment of Value of Excess Benefit and Supplement Retirement Plan
-----------------------------------------------------------------
Payments Benefits. Anything in this Agreement to the contrary notwithstanding,
- -----------------
in the event of a termination of the Executive's employment within three years
following a Change in Control, the Executive shall be entitled to a monthly
retirement allowance for life payable on a straight life annuity basis, equal to
the benefit payable, if any, under the Company's excess benefit and supplemental
retirement plans, utilizing the monthly payments set forth in subparagraph
1(a)(i) above for purposes of the pension calculation for the termination period
set forth in such subparagraph 1(a)(i). For the purposes of this clause (iv),
the excess benefit and supplemental retirement plans payments shall include the
pension enhancement resulting from service credit for pension benefit during the
termination period set forth in subparagraph 1(a)(i) above. Such retirement
allowance shall be valued and discounted in the manner set forth in subparagraph
3(g) below relating to default in payments or benefits and shall be paid in a
lump sum as soon as practicable after such termination.
(v) Participation in Benefit Plans. The Executive shall be eligible
-------------------------------
to receive, during any period that he shall be entitled to receive payments from
the Company under subparagraph 1(a)(i) above (whether or not any such period
shall be accelerated), as if the Executive had continued to be employed by the
Company during such period, any benefits and emoluments for which key executives
are eligible under any hospitalization, health care or dental care plan, life or
other insurance or death benefit plan, travel and accident insurance, executive
or contingent compensation plan, restricted stock or stock purchase plan,
retirement income or pension plan, vacation plan, or other present or future
employee benefit plans or programs of the Company for which key executives are
eligible, in accordance with the provisions of any such plan or program,
provided, however, that during the period that the Executive is so entitled to
receive payments under subparagraph 1(a)(i) above, he shall not be eligible to
participate in the Company's Savings Plan for Salaried Employees or to receive
option grants under any stock option plan of the Company. Nothing in this
Agreement shall preclude the Company from terminating or amending any such
employee benefit plan or program so as to eliminate, reduce or otherwise change
any benefit payable thereunder. To the extent that such benefits or service
credits for benefits shall not be payable or provided under such plans or
programs by reason of the Executive no longer being an employee of the Company,
the Company shall itself pay or provide for payment of such benefits and service
credit for benefits.
2
<PAGE>
(b) Definition of Termination
-------------------------
The term "termination" for purposes of this Agreement shall mean:
(i) The termination by the Company of the Executive's full-time
employment with the Company for any reason other than Cause; or
(ii) Any (A) failure to elect or re-elect the Executive to an office
and position at least equal to the office and position he held immediately prior
to such failure, or removal of the Executive from such office or position, (B)
material change by the Company of the Executive's functions, duties or
responsibilities without his express written consent as a result of which change
the Executive's position with the Company shall be or become of less dignity,
responsibility, importance or scope than the position he held at the time of
such material change, and any such material change shall be deemed a continuing
breach of this Agreement, (C) reduction in the monthly base salary of the
Executive below the highest monthly base salary paid from and after October 18,
1990, (D) liquidation, dissolution, consolidation or merger of the Company, or
transfer of all or substantially all of its assets, other than in compliance
with the provisions of paragraph 8 below, or (E) breach of this Agreement by the
Company, or breach of the Agreement Relating to Legal Expenses between the
Company and the Executive dated October 18, 1990 (the "Legal Expense
Agreement"); provided that in any such event the Executive elects to terminate
his employment under this Agreement upon not less than sixty days' advance
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four calendar months after the event giving rise to
the election.
(c) Definition of Cause
-------------------
For the purpose of any provision of this Agreement, the termination of the
Executive's employment shall be deemed to have been for Cause only if
termination of his employment shall have been the result of an act or acts of
dishonesty on the part of the Executive constituting a felony and resulting or
intended to result directly or indirectly in gain or personal enrichment at the
expense of the Company; provided that there shall have been delivered to the
Executive a certified copy of a resolution of the Board of Directors of the
Company adopted by the affirmative vote of not less than three-fourths of the
entire membership of the Board of Directors at a meeting called and held for
that purpose and at which the Executive was given an opportunity to be heard,
finding that the Executive was guilty of such conduct, specifying the
particulars thereof in detail.
Anything in this subparagraph 1(c) or elsewhere in this Agreement to the
contrary notwithstanding, the employment of the Executive shall in no event be
considered to have been terminated by the Company for Cause if termination of
his employment took place (A) as the result of bad judgment or negligence on the
part of the Executive, or (B) as the result of an act or omission without intent
of gaining therefrom directly or indirectly a profit to which the Executive was
not legally entitled, or (C) because of an act or omission believed by the
Executive in good faith to have been in or not opposed to the interests of the
Company, or (D) for any act or omission in respect of which a determination
could properly be made that the Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses under (I)
the Restated Certificate of Incorporation or By-Laws of the Company, or (II) the
laws of the State of New York, or (III) the directors' and officer's liability
insurance of the Company, in each case either as in effect at the time of this
Agreement or in effect at the time of such act or omission, or (E) as the result
of an act or omission which occurred more than twelve calendar months prior to
the Executive's having been given notice of the termination of his employment
for such act or omission unless the commission of such act or such omission
could not at the time of such commission or
3
<PAGE>
omission have been known to a member of the Board of Directors of the Company
(other than the Executive, if he is then a member of the Board of Directors), in
which case more than twelve calendar months from the date that the commission of
such act or such omission was or could reasonably have been so known, or (F) as
the result of a continuing course of action which commenced and was or could
reasonably have been known to a member of the Board of Directors of the Company
(other than the Executive, if he is then a member of the Board of Directors)
more than twelve calendar months prior to notice having been given to the
Executive of the termination of his employment.
(d) Definition of Change in Control
-------------------------------
For the purpose of this Agreement, a Change in Control of the Company
shall be deemed to have occurred if
(i) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities;
(ii) during any period within two (2) consecutive years there shall
cease to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
(iii) the shareholders of the Company approve (A) a plan of complete
liquidation of the Company or (B) the sale or other disposition of all or
substantially all the Company's assets.
2. Termination During Month
------------------------
In the event that the employment of the Executive shall terminate prior to
the end of a calendar month as a result of a termination described in paragraph
1 above, the Company shall pay the Executive, in addition to any other amounts
payable by the Company hereunder, a lump cash sum which shall in no event be
less than the salary plus any bonus to which the Executive would have been
entitled had he remained in full-time employment until the end of the month in
which his employment shall so terminate.
3. Post-termination Obligations of Executive; Default by Company
-------------------------------------------------------------
All payments and benefits to the Executive under this Agreement after his
full-time employment with the Company shall have terminated shall be subject to
compliance with the following provisions, which compliance shall be subject to
the proviso in subparagraph 3(e) below. Anything in this paragraph 3 or
elsewhere in this Agreement to the contrary notwithstanding, the Executive may
continue to serve as a director, after his full-time employment with the Company
shall have terminated, of any corporation which he has served as a director for
the last six months of his full-time employment with the Company.
(a) Assistance In Litigation
------------------------
The Executive shall, upon reasonable notice, furnish such information and
proper assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is or may become a party.
4
<PAGE>
(b) Detrimental Conduct
-------------------
The Executive shall not to the material detriment of the Company knowingly
disclose or reveal to any unauthorized person any manufacturing or trade secret
or other confidential information relating to the Company, its subsidiaries or
affiliates, or to any of the businesses operated by them and confirms that such
information constitutes the exclusive property of the Company. The Executive
shall not otherwise knowingly act or conduct himself to the material detriment
of the Company, its subsidiaries or affiliates, or in a manner which is
materially inimical or contrary to their interests, including, without
limitation, through competition materially detrimental to the Company, its
subsidiaries or affiliates, in any of the businesses in which they may be
engaged at the time of termination of his employment. The Executive recognizes
that the restrictions on his activities contained in this Agreement are required
for the reasonable protection of the Company and its investments.
(c) Discoveries and Inventions
--------------------------
If, while employed by the Company or during a period of one year after
termination of such employment, the Executive shall have made, either solely or
jointly with others, any discovery, improvements or invention which would
pertain or relate in any way to the business, products, publications or
processes of the Company, its subsidiaries or affiliates at the time of
termination of his employment, such discovery, improvement or invention (whether
or not of a patentable nature) shall be the exclusive property of the Company.
The Executive shall execute and deliver to the Company without further
compensation any documents which the Company may deem necessary or appropriate
to prepare or prosecute applications for patents upon such discovery,
improvement or invention, to assign and transfer to the Company his entire
right, title and interest in and to such discovery, improvement or invention,
and patents therefor, or otherwise more fully and perfectly to evidence the
Company's ownership thereof.
(d) Reimbursement of Expenses
-------------------------
The Company shall pay or reimburse the Executive for all reasonable travel
and other expenses incurred by the Executive in performing his obligations under
this paragraph 3.
(e) Competition
-----------
The Executive shall not engage in competition with any of the businesses in
which the Company, its subsidiaries or affiliates may be engaged at the time of
termination of his employment if such competition should be materially
detrimental to the Company, its subsidiaries or affiliates.
(f) Failure to Comply
-----------------
If the Executive, for any reason other than death or disability, shall,
without the written consent of the Company, fail to comply with any provision of
this paragraph 3, his rights to any future payments or other benefits hereunder
shall terminate, and the Company's obligations to make such payments and provide
such benefits shall cease; provided, however, that no failure to comply with any
provision of this paragraph 3 shall be deemed to have occurred unless and until
the Executive shall have received written notice on behalf of the Board of
Directors of the Company, specifying the conduct alleged to constitute such
failure, and has thereafter continued to engage in such conduct after a
reasonable opportunity and a reasonable period, but in no event more than sixty
days after receipt of such notice, to refrain from such conduct. In no event
shall the Executive be under any obligation to repay to the Company any amounts
theretofore paid to him.
5
<PAGE>
(g) Post-termination Default in Payments or Benefits
------------------------------------------------
If, after the Executive ceases to be an employee of the Company, the
Company should (i) default in payment of all or any part of the payments
required to be made hereunder or under the Legal Expense Agreement, or (ii) fail
to pay for or provide any benefits required to be provided hereunder, and if the
Company should not remedy such default or failure within thirty (30) days after
having received notice of such default or failure from the Executive, his
spouse, or such other person or entity who or which is entitled thereto, the
applicable payments or benefits set forth in Exhibit B shall, at the sole
---------
election of the Executive, his spouse, or such other person or entity then
entitled thereto, exercised in writing signed by the Executive, his spouse or
such other person or entity, and delivered to the Company within 90 days after
the expiration of such thirty-day period, be accelerated and become immediately
due and payable in a lump sum equal to the total of (x) the severance payment
set forth in Exhibit B, if applicable, and (y) the cost of acquiring insurance
---------
policies which would provide the disability, medical and dental coverages set
forth in Exhibit B, if applicable, and (z) all amounts, if any, payable under
---------
the excess benefit and supplemental retirement plans set forth in Exhibit B in
---------
an actuarially equivalent lump sum calculated by utilizing the 1983 GAM Table
(or such other pensioner annuity mortality table as the Company with the
Executive's written consent or, following his death, his spouse's or other
Beneficiary's consent, shall determine) and discounted to a present value amount
by applying a discount rate, equal to the arithmetic average of (i.e., one-
twelfth of the sum of) the single employer interest rates for immediate
annuities promulgated by the Pension Benefit Guaranty Corporation each month
during the calendar year immediately preceding the date of payment as set forth
in Appendix B to Part 2619 of 29 Code of Federal Regulations or such successor
to such Appendix B as may be in effect during such calendar year, to all such
retirement payments which otherwise would become due thereafter. In the event
the election referred to in the preceding sentence has been made, then the total
amount due and payable from the Company pursuant to this subparagraph shall be
the sum of all accelerated amounts, together with any expenses incurred in
enforcing payment thereof (including all reasonable legal fees). In making the
foregoing retirement payment calculations, the intent is to compute a lump sum
amount which will provide the Executive and his spouse or other Beneficiary, as
the case may be, with the same amount, after deduction of all federal, state and
municipal income taxes, as he and his spouse or other Beneficiary, as the case
may be, would have retained, after all such income taxes, had payments and
benefits been made and provided as originally scheduled and without
acceleration. It is understood and agreed that this subparagraph 3(g) shall not
apply to any default or failure to pay, as described in the first sentence of
this subparagraph 3(g), which occurs during the Executive's period of
employment; upon any such default or failure to pay, the Executive shall be
entitled to such payments as may be applicable pursuant to subparagraph 1(a).
4. Determination of Benefits
-------------------------
Whenever under this Agreement it is necessary to determine whether one
benefit is less than, equal to or larger than another, whether or not such
benefits are provided under this Agreement, such determination shall be made by
the Company's independent consulting actuary, using mortality, interest and any
other assumptions normally used at the time by such actuary in determining
actuarial equivalents for the purpose of employee benefit plans of the Company.
5. (a) Time of Payment
---------------
Anything in this Agreement to the contrary notwithstanding, the Company
may, for its
6
<PAGE>
own administrative convenience or for any other reason deemed by it sufficient,
accelerate payment to the Executive of any sums due under this Agreement
following termination of his employment; provided, however, that payments by the
Company under this Agreement in any one calendar year shall not, as a result of
such acceleration, together with any payments required to be made under the
pension plan of the Company, exceed an amount equal to (i) 80 percent of his
monthly rate of salary paid for the last full calendar month of his employment,
multiplied by (ii) the number 12.
(b) Withholding of Taxes
--------------------
The Company may withhold from any benefits payable under this Agreement all
federal, state, city or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
6. Decisions by Company
--------------------
Except as otherwise expressly provided in this Agreement, any decision or
action by the Company relating to this Agreement, its operation or its
termination, shall be made by the Board of Directors. Any decision or action of
such Board shall, to the extent permitted by law, be by the affirmative vote of
not less than three-fourths of the members of the Board of Directors then in
office; provided, however, that in the event of any dispute as to any benefit
payable under this Agreement, the Executive shall have the same rights as a
Participant under the Company's pension plan in effect at the time with respect
to the method of determining such dispute and enforcing his rights with respect
thereto.
7. Prior Agreements
----------------
This Agreement shall supersede any prior employment and severance agreement
between the Company or any predecessor of the Company and the Executive, but
this Agreement shall not affect or operate to reduce any benefit or compensation
of any kind not expressly provided for in this Agreement, including, without
limitation, any employee stock option or stock appreciation right and any
agreements under the Company's Restricted Share Performance Plan.
8. Consolidation or Merger
-----------------------
Nothing in this Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all of its assets to,
another corporation which assumes this Agreement and all obligations of the
Company hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the term, "Company", shall refer to such other corporation and this
Agreement shall continue in full force and effect.
9. (a) Non-assignability
-----------------
Neither this Agreement nor any right or interest hereunder shall be
assignable by the Executive or the beneficiaries of the Executive or by his
legal representatives without the Company's prior written consent; provided,
however, that nothing in this subparagraph 9(a) shall preclude (i) the Executive
from designating a beneficiary to receive any benefit payable on his death, and
(ii) the legal representatives of the estate of the Executive from assigning any
rights hereunder to the person or persons entitled thereto under his will or, in
the case of intestacy, to the person or persons entitled thereto under the laws
of intestacy applicable to his estate.
(b) No Attachment
-------------
Except as otherwise required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrances, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
7
<PAGE>
(c) Binding Agreement
-----------------
This Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns.
(d) Unfunded Obligations; Trust Agreement
-------------------------------------
(i) All payments to be made hereunder shall be made from the general
funds of the Company. To the extent that any person or entity acquires a right
to receive any payment hereunder, such right shall be no greater than the right
of an unsecured general creditor of the Company except to the extent otherwise
provided by law. No person who is entitled to payments hereunder shall have any
right, title or interest in or to any assets or investments which may be
acquired or made by the Company to aid it in meeting its obligations hereunder.
(ii) Anything in this subparagraph 9(d) or elsewhere in this
Agreement to the contrary notwithstanding, the Company may provide the Executive
with collateral security, in the form of a bank letter of credit, an interest in
a trust or otherwise, to secure a portion of any or all of the Company's
obligations to the Executive under this Agreement and any other agreement. In
this connection, the Company has entered into a Trust Agreement substantially in
the form attached hereto as Exhibit C and, under the circumstances and upon the
----------
terms and conditions set forth therein, the Executive will be a beneficiary
under the Trust therein established, this Agreement and the Legal Expense
Agreement (and its related memorandum) will be listed on Exhibit I of such Trust
Agreement, the amounts to be deposited with the trustee under the Trust
Agreement shall be those set forth on the Schedule of Amounts to be Deposited in
Trust Upon a Potential Change in Control, a copy of which is attached hereto as
Exhibit D, and any other benefits which the Company, in its sole discretion,
- ---------
shall agree to secure by the Trust Agreement.
(iii) If a Potential Change in Control should take place while the
Executive is in the employ of the Company, the value of the benefits set forth
in Exhibit D to be delivered by the Company to the trustee under such Trust
---------
Agreement shall be equal to the total of (x) the severance, options,
contingently credited shares and legal expenses payments set forth in Exhibit D,
---------
(y) the cost of acquiring insurance policies which would provide the disability,
medical and dental coverages set forth in Exhibit D, and (z) all amounts, if
---------
any, payable under the excess benefit and supplemental retirement plans payments
(as described in subparagraph 1(a)(iv) above) set forth in Exhibit D.
---------
(iv) The value of the excess benefit and supplemental retirement plans
payments shall be an actuarially equivalent amount calculated by utilizing the
1983 GAM Table (or such other pensioner annuity mortality table as the Company
with the Executive's written consent, or following his death, his spouse's or
other Beneficiary's consent, shall determine) and discounted to a present value
amount by applying a discount rate, equal to the arithmetic average of (i.e.,
one-twelfth of the sum of) the single employer interest rates for immediate
annuities promulgated by the Pension Benefit Guaranty Corporation each month
during the calendar year immediately preceding the date of payment as set forth
in Appendix B to Part 2619 of 29 Code of Federal Regulations or such successor
to such Appendix B as may be in effect during such calendar year, to all such
retirement benefits which otherwise would become due thereafter. In making the
foregoing retirement payment calculations, the intent is to compute a lump sum
payment which will provide the Executive with the same amount of benefit, after
deduction of all federal, state and municipal income taxes, as he would have
retained, after all such income taxes, had payments been made as originally
scheduled and without acceleration.
(v) Anything in this subparagraph 9(d) or elsewhere in this Agreement
to the
8
<PAGE>
contrary notwithstanding, the amount to be paid by the Company to the trustee
pursuant to the preceding provisions of this subparagraph 9(d) shall be reduced
by the amount, if any, that the Board of Directors of the Company expressly
determines, in its sole discretion on the advice of the Company's independent
public accountants or its tax counsel or other experts selected by the Board of
Directors, as a result of the application of the provisions of paragraph 14
below, is not expected to be paid by the trustee to the Executive and his
beneficiary or beneficiaries.
(vi) The Company shall continue to be liable to make all payments and
provide all benefits required to be made and provided hereunder to the extent
such payments have not been made or such benefits have not been provided through
the above-mentioned trust. (vii) For purposes of this Agreement, a "Potential
Change in Control" shall be deemed to have occurred if
(A) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the Company;
(B) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a Change in Control of the Company;
(C) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes
the beneficial owner, directly or indirectly, of securities of the
Company representing ten percent (10%) or more of the combined voting
power of the Company's then outstanding securities; or
(D) the Board of Directors adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control of the
Company has occurred.
10. (a) Amendment of Agreement
----------------------
No amendment or modification of this Agreement shall be deemed effective
unless and until executed in writing.
(b) No Waiver
---------
No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel to enforce any provision of this Agreement,
except by written instrument of the party charged with such waiver or estoppel.
Any written waiver shall not be deemed a continuing waiver unless specifically
stated, shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
11. Severability
------------
If for any reason any provision of this Agreement shall be held invalid,
such invalidity shall not affect any other provision of this Agreement not held
so invalid, and all other such provisions shall to the full extent consistent
with law continue in full force and effect. If any such provision shall be held
invalid in part, such invalidity shall in no way affect the rest of such
provision not held so invalid, and the rest of such provision, together with all
other provisions of this Agreement, shall likewise to the full extent consistent
with law continue in full force and effect.
12. Headings
--------
The headings of paragraphs are included solely for convenience of reference
and shall not control the meaning or interpretation of any of the provisions of
this Agreement.
13. Governing Law
-------------
The validity, interpretation, construction, performance and enforcement of
this Agreement shall be governed by the laws of the State of New York without
giving effect to the principles of conflict of laws thereof.
9
<PAGE>
14. Parachute Tax
-------------
If the payments and benefits provided for the Executive under this
Agreement, together with any other payments and benefits that the Executive may
have a right to receive from the Company or any other person or entity, would
result in "excess parachute payments" (as defined in Section 280G of the Code),
the payments and benefits to be made and provided to the Executive and his
beneficiary or beneficiaries pursuant to this Agreement shall be reduced to the
largest whole-dollar amount that will result in there being no such "excess
parachute payment." The existence or absence of any such "excess parachute
payment," the amount of any such reduction, and the item or items to be reduced,
if any, shall be determined, in each case, by the Executive or, following his
death, his beneficiary or beneficiaries, and the specifics of such determination
shall be delivered in writing to the Company and to the trustee of the Trust
referred to in subparagraph 9(d)(ii) above, at the time of the Executive's
termination within three years after a Change in Control, or as soon as
practicable thereafter, by the Executive or, following his death, his
beneficiary or beneficiaries. The reasonable fees and expenses of such tax
counsel and financial advisor as may reasonably be called upon to assist the
Executive or his beneficiary or beneficiaries in the foregoing endeavors shall
be paid by the Company.
15. Notices
-------
All notices, requests, demands and other communications provided for by
this Agreement shall be in writing and shall be sufficiently given if and when
mailed in the continental United States by registered or certified mail, return
receipt requested, or personally delivered to the party entitled thereto at the
address stated below, which address shall be such address as the addressee may
have given most recently by a similar notice. Any such notice shall be deemed
to have been received on the date of delivery.
To the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
To the Executive: Mr. Richard L. Porterfield
One Champion Plaza
Stamford, CT 06921
16. Arbitration
-----------
Any dispute between the Executive and the Company as to the interpretation
or application of any of the provisions of this Agreement may, at the
Executive's election, be determined by binding arbitration within the greater
New York City metropolitan area or the State of Connecticut in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court of competent jurisdiction.
All fees and expenses of such arbitration shall be paid by the Company subject
to repayment by the Executive if and to the extent that a judgment should be
rendered against him beyond appeal and such fees and expenses were not incurred
by him while acting in good faith.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has signed this Agreement,
all as of October 18, 1990.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
----------------------------------
Chairman of the Board of Directors
Attest:
/s/ Lawrence A. Fox
- --------------------------------
Secretary
/s/ Richard L. Porterfield
-------------------------------
Richard L. Porterfield
11
<PAGE>
Exhibit A
---------
[subparagraph 1(a)(ii)(y)]
Schedule of Certain Benefit Coverages during the
Severance Payment Period under Subparagraph 1(a)(i)
after a Termination following a Change in Control
---------------------------------------------------
` Disability: Same as for active employees.
` Medical: Same as for active employees
less retiree medical benefit,
if any.
` Dental: Same as for active employees.
For other benefit coverages after termination following a Change in
Control, see subparagraph 1(a)(ii)(x) and (z).
o0o
<PAGE>
Exhibit B
---------
[subparagraph 3(g)]
Schedule of Payments and Benefits upon
a Breach after Cessation of Employment
--------------------------------------
` Severance: 2 years termination payments (or the unpaid balance
thereof); however, payments not to cover the period, if
any, after the last day of the month next preceeding
the Executive's normal retirement date under the
Company's pension plan. Payments are based on highest
total of salary and annual bonus for any calendar year
of employment.
` Retirement: All unpaid amounts, if any, payable under the excess
benefit and supplemental retirement plans of the
Company.
` Disability: Same as for active employees, during the 2 year
termination payment period or balance thereof.
` Medical: Same as for active employees less retiree medical
benefit, if any, during the 2 year termination payment
period or balance thereof.
` Dental: Same as for active employees, during the 2 year
termination payment period or balance thereof.
o0o
<PAGE>
Exhibit C
---------
[subparagraph 9(d)]
FORM OF TRUST AGREEMENT
-----------------------
TRUST AGREEMENT (the "Trust"), dated as of February 19, 1987, by and
between Champion International Corporation, a New York corporation (the
"Company"), and Connecticut National Bank (the "Trustee").
WHEREAS, the Company is obligated under the individual agreements set
forth on Exhibit I (together with any additional agreements included on Exhibit
I pursuant to Section 2.01(c) hereof, the "Agreements") to make specified
payments to certain of the Company's executives (together with any additional
executives and retired executives included on Exhibit I pursuant to Section
2.01(c) hereof, the "Executives"); and
WHEREAS, the aforesaid obligations of the Company are not funded or
otherwise secured, and the Company has agreed, to the extent practicable, to
assure that the future payment of certain of said obligations will not be
improperly withheld in the event that a "Change in Control" (as defined herein)
of the Company should occur; and
WHEREAS, for purposes of assuring that such payments will not be
improperly withheld, the Company desires to deposit with the Trustee, subject
only to the claims of the Company's existing or future general creditors in the
event of bankruptcy or insolvency (as hereinafter provided), amounts of cash or
marketable securities sufficient to fund such payments;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the parties hereto agree
as follows:
ARTICLE I
THE AGREEMENTS
--------------
SECTION 1.01 Agreements. The agreements subject to this Trust
------------------------
consist of the Agreements listed from time to time on Exhibit I hereof
respectively. The Company shall continue to be liable to the Executives to make
all payments required under the terms of such Agreements to the extent such
payments have not been made pursuant to this Trust.
ARTICLE II
TRUST AND THE TRUST CORPUS
--------------------------
SECTION 2.01 Trust.
-----
(a) The Company will deliver to the Trustee to be held in trust
hereunder, concurrently with the execution of this Trust, the sum of $100 in
cash, and upon the occurrence of a "Potential Change in Control" (as defined in
Section 3.02), (i) an additional amount in cash (or in marketable securities
having a fair market value equal to such amount, or some combination thereof)
representing the sum of the amounts, determined as provided in Section 4.02,
which is estimated to be sufficient to fund the Company's obligations to pay to
the Executives certain amounts and benefits due to them pursuant to the
Agreements and (ii) an amount estimated by the Trustee to be sufficient to pay
all of the Trustee's fees and expenses hereunder with respect to the period of
time that this Trust Agreement shall be in effect.
(b) The payment by the Company pursuant to Section 2.01(a)(i) hereof
shall be accompanied by a Payment Schedule for each Executive as required by
Section 4.02(a) hereof.
(c) The Company may, subject to the provisions of Section 2.01(d),
from time to time prior to the occurrence of a Change in Control revise Exhibit
I in order to include thereon (A) additional Executives, and (B) additional
Agreements
1
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with respect to any Executive. If a revised Exhibit I is delivered to the
Trustee with respect to any Executive upon or after the occurrence of a
Potential Change in Control, the Company will deliver to the Trustee,
concurrently with such revised Exhibit I:
(x) a Payment Schedule or a revised Payment Schedule, as applicable,
with respect to such Executive which complies with Section
4.02(a) and which sets forth the additional amount delivered to
the Trustee with respect to such Executive, and
(y) an amount which is estimated to be sufficient when added to the
amount or amounts previously delivered to the Trustee to fund the
Company's obligations under the Payment Schedule or the revised
Payment Schedule, as applicable, pursuant to such Executive's
Agreements.
Such Payment Schedule or revised Payment Schedule shall be effective in
accordance with the provisions of Section 4.02(b). A revised Exhibit I shall be
effective upon the later of (C) receipt by Trustee of such revised Exhibit I and
(D) receipt by the Trustee of all amounts required under this Section 2.01(c),
if any, and such revised Exhibit I shall supersede any and all such Exhibits
previously delivered to the Trustee.
(d) In no event may Exhibit I be revised to eliminate any Executive
or any Agreements with respect to any Executive without such Executive's written
consent, except as provided in the following sentence. Prior to the occurrence
of a Change in Control, the Company shall deliver instructions to the Trustee to
delete the name of, and the Agreements with respect to, an Executive from
Exhibit I promptly following the termination of his employment with the Company
prior to the occurrence of a Change in Control. The Trustee shall make such
deletions and shall be able to rely upon such instructions and shall have no
duty to inquire with respect to the termination of such Executive's employment
with the Company. The deletions described in the immediately preceding sentence
may not be made with respect to instructions delivered to the Trustee on or
after the occurrence of a Change in Control of the Company. Notwithstanding the
foregoing, following a Potential Change in Control the Company may, in its
discretion, add retired Executives and their agreements with the Company to
Exhibit I in accordance with Section 2.01(c) to assure that the payment of
certain amounts payable by the Company to such retired Executives under such
agreements will not be improperly withheld following a Change in Control.
SECTION 2.02 Trust Corpus.
------------
(a) As used herein, the term "Trust Corpus" shall mean the amounts
delivered to the Trustee as described in Section 2.01 and 4.02(b) hereof in
whatever form held or invested as provided herein. The Trust Corpus shall be
held, invested and reinvested by the Trustee in cash or marketable securities
only in accordance with this Section 2.02. The Trustee shall use its good faith
efforts to invest or reinvest from time to time all or such part of the Trust
Corpus as it believes prudent under the circumstances in either one or a
combination of the following investments:
(i) investments in direct obligations of the United
States of America or agencies of the United States of America
or obligations unconditionally and fully guaranteed as to
principal and interest by the United States of America, in each
case maturing within one year or less from the date of
acquisition; or
2
<PAGE>
(ii) investments in negotiable certificates of deposit
(in each case maturing within one (1) year or less from the
date of acquisition) issued by a commercial bank organized and
existing under the laws of the United States of America or any
state thereof having a combined capital and surplus of at least
$1,000,000,000, including the Trustee's banking department;
provided, however, that the Trustee shall not be liable for any failure to
- -----------------
maximize the income earned on that portion of the Trust Corpus as is from time
to time invested or reinvested as set forth above, nor for any loss of income
due to liquidation of any investment which the Trustee, in its sole discretion,
believes necessary to make payments or to reimburse expenses under the terms of
this Trust.
(b) The Trust is intended to be grantor trust within the meaning of
Section 671 of the Internal Revenue Code of 1986, as amended (the "Code"),
except as hereinafter provided, all interest and other income earned on the
investment of the Trust Corpus shall be the property of the Company and shall
not constitute a part of the Trust Corpus. Except as provided in Section
4.02(a), the interest and other income earned in any calendar quarter shall be
paid over to the Company by the Trustee as promptly as practicable after the end
of such calendar quarter.
(c) All losses of principal in respect of, and expenses (including,
as provided in Section 5.01(g) hereof, any expenses of the Trustee) charged
against, the Trust Corpus shall be for the account of the Company and the
Company shall be obligated to promptly reimburse the Trust Corpus for any loss
in principal amount of, or expense charged against, the Trust Corpus except to
the extent that such amounts have been applied to reduce amounts payable to the
Company pursuant to Section 2.02(b) hereof. To the extent any such losses and
expenses are not reimbursed by the Company, the aggregate amount payable to an
Executive under the applicable Payment Schedule shall be reduced by a portion of
such losses and expenses, as determined on a pro rata basis.
ARTICLE III
CHANGE IN CONTROL
-----------------
SECTION 3.01 Definition of Change in Control.
-------------------------------
For purposes of this Trust, a Change in Control of the Company shall be deemed
to have occurred if
(a) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities;
(b) during any period within two (2) consecutive years (not including
any period prior to the Company's 1987 Annual Meeting of Shareholders) there
shall cease to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
3
<PAGE>
(c) the shareholders of the Company approve (i) a plan of complete
liquidation of the Company or (ii) the sale or other disposition of all or
substantially all the Company's assets.
SECTION 3.02 Definition of a Potential Change in Control. For
-------------------------------------------
purposes of this Trust, a Potential Change in Control shall be deemed to have
occurred if
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the Company;
(b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated would
constitute a Change in Control of the Company;
(c) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing ten percent (10%) or more of the combined voting power of the
Company's then outstanding securities; or
(d) the Board of Directors adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control of the Company has
occurred.
SECTION 3.03 Notification of the Trustee. The Company shall notify
---------------------------
the Trustee of the occurrence of a Potential Change in Control and the Company
shall or an Executive may notify the Trustee of the occurrence of a Change in
Control, and the Trustee may rely on such notice or on any other actual notice,
satisfactory to the Trustee, of such a change or potential change which the
Trustee may receive. The Trustee shall have no obligation to make an
independent determination as to the occurrence of a Potential Change in Control
or Change in Control.
ARTICLE IV
RELEASE OF THE TRUST CORPUS
---------------------------
The Trustee shall hold the Trust Corpus in its possession under the
provisions of this Trust Agreement until authorized to deliver the Trust Corpus
or any specified portion thereof as follows:
SECTION 4.01 Delivery to the Company.
-----------------------
(a) Any amount in excess of $100 delivered to the Trustee pursuant to
Section 2.01 hereof or otherwise constituting part of the Trust Corpus shall be
returned to the Company, unless within six (6) months of such delivery to the
Trustee a Change in Control shall have occurred. Such six month period shall be
renewed (i) for any Potential Change in Control which occurs during any initial
six month period or (ii) by a resolution adopted by the Board of Directors and
delivered to the Trustee by the Company to the effect that such an initial six
month period (or a six month period that is renewed in accordance with clause
(i) of this Section 4.01(a)) shall start anew.
(b) Any amount held by the Trustee for the benefit of an Executive
shall be paid to the Company immediately following the final payment of all
amounts payable to such Executive pursuant to the terms of the Executive's
Agreement, as certified to the Trustee by the Executive.
(c) Upon the termination of the Trust as provided in the first
sentence of Section 6.01(a), the Trustee shall pay to the Company the amount of
the Trust Corpus, less all payments, expenses, taxes and other charges under
this Trust Agreement as of such date of termination, provided that in the event
that the Trust shall continue with respect to one or more Executives in
accordance with the provisions of Section 6.01(b), the Trustee shall pay to the
Company the amount that would have been payable to the Company if the Trust had
terminated as provided in Section 6.01(a), less (i) the amounts subject to
litigation or arbitration for each such Executive, as certified to the Trustee
by each such Executive, and (ii) an amount
4
<PAGE>
estimated by the Trustee to be sufficient to pay all of the Trustee's fees and
expenses with respect to the additional period of time that the Trust shall
continue in effect pursuant to Section 6.01(b).
SECTION 4.02 Deliveries to Executives.
------------------------
(a) The Company shall deliver to the Trustee, upon the occurrence of
a Potential Change in Control, a separate schedule for each Executive (the
"Payment Schedule') indicating (x) the amounts delivered to the Trustee for the
benefit of each such Executive pursuant to Section 2.01(a)(i) in accordance with
such Executive's Agreements and (y) the amounts payable in respect of such
Executive, or providing a formula or instructions acceptable to the Trustee for
determining the amounts so payable. The Payment Schedule shall include
instructions as to the amount of interest, if any, accruing in respect of an
Executive and such instructions may be revised from time to time prior to the
occurrence of a Change in Control. Each Payment Schedule also shall be
delivered by the Company to such Executive. The aggregate payment to be made
hereunder to an Executive by the Trustee shall not exceed the aggregate amount
delivered to the Trustee for the benefit of such Executive as indicated in the
Payment Schedule applicable to such Executive. The Trustee shall make payments
to each Executive under the Payment Schedule applicable to such Executive upon
receipt by the Trustee of a written request for payment signed by the Executive
or, following his death, his beneficiary or beneficiaries. Such request shall
set forth each of the following items: (i) the specific amount of payment
requested, (ii) the specific Agreement or Agreements and the specific section or
sections of such Agreements under which such payment is to be made, (iii) the
existence or absence of any "excess parachute payment" (as defined in Section
280G of the Code) respecting the amount payable to such Executive in accordance
with the applicable Payment Schedule and (iv) the amount of any reduction in the
amount otherwise payable to such Executive in accordance with the applicable
Payment Schedule and the item or items to be reduced, if any. The Trustee shall
rely upon such written request in making payments under the Payment Schedule and
shall have no duty to inquire into the amounts, instructions or formulas set
forth in the Payment Schedule or the Executive's right to such payments.
(b) The Company may from time to time after the occurrence of a
Potential Change in Control deliver concurrently to the Trustee (i) a revised
Payment Schedule with respect to any Executive which sets forth the aggregate
amounts payable with respect to such Executive and (ii) an amount which is
estimated to be sufficient when added to the amount or amounts previously
delivered to the Trustee to fund the Company's obligations pursuant to such
Executive's Agreements. A revised Payment Schedule shall be effective upon the
later of (x) receipt by the Trustee of such revised Payment Schedule and (y)
receipt by the Trustee of all amounts required under Section 4.02(b)(ii) and
such revised Payment Schedule shall supersede any and all Payment Schedules
previously delivered by the Company to the Trustee with respect to such
Executive.
(c) Except as provided in this Section 4.02(c), a revised Payment
Schedule may not reduce the amounts payable with respect to an Executive
pursuant to the prior Payment Schedule for such Executive except with the
written consent of such Executive.
(i) After a Potential Change in Control and before a Change in Control,
the Company shall deliver to the Trustee, promptly following the
termination of an Executive's employment with the Company, a revised
Payment Schedule with respect to such Executive which deletes all of the
amounts set forth on the prior Payment Schedule for such Executive. The
Trustee may rely
5
<PAGE>
upon such revised Payment Schedule and shall have no duty to inquire with
respect to the termination of such Executive's employment with the Company.
The Trustee shall return to the Company all amounts previously delivered by
the Company to the Trustee for the benefit of such Executive.
Notwithstanding the foregoing, following a Potential Change in Control the
Company may, in its discretion, deliver Payment Schedules for retired
Executives in accordance with Section 4.02(a) hereof. (ii) After a
Potential Change in Control and before a Change in Control, the Company may
deliver a revised Payment Schedule with respect to an Executive which
reduces the amounts payable in respect of such Executive pursuant to his
prior Payment Schedule as the result of a more accurate calculation by the
Company of the amount of the benefits to which such Executive is entitled
pursuant to his Agreements. The Trustee may rely on such revised Payment
Schedule and shall have no duty to inquire with respect to said
calculation. The Trustee shall return to the Company an amount equal to
such reduction.
A revised Payment Schedule of the type described in this Section 4.02(c) may not
be delivered to, or honored by, the Trustee on or after the occurrence of a
Change in Control of the Company. A revised Payment Schedule shall be effective
upon its receipt by the Trustee and shall supersede any and all Payment
Schedules previously delivered by the Company to the Trustee with respect to
such Executive.
(d) The Trustee shall be permitted to withhold from any payment due
to an Executive hereunder the amount required by law to be so withheld under
federal, state and local withholding requirements or otherwise, and shall pay
over to the appropriate government authority the amounts so withheld. The
Trustee may rely on instructions from the Company as to any required withholding
and shall be fully protected under Section 5.01(g) hereof in relying on such
instructions.
(e) Except as otherwise provided herein, in the event of any final
determination by the Internal Revenue Service or a court of competent
jurisdiction, which determination is not appealable or the time for appeal or
protest of which has expired, or the receipt by the Trustee of a substantially
unqualified opinion of tax counsel selected by the Trustee with the written
consent of the Company, which determination determines, or which opinion
concludes, that the Executives or any particular Executive, is subject to
federal income taxation on amounts held in Trust hereunder prior to the
distribution to the Executives or Executive of such amounts, the Trustee shall,
on receipt by the Trustee of such opinion or notice of such determination, pay
to each Executive the portion of the Trust Corpus includible in such Executive's
federal gross income.
SECTION 4.03 Deliveries to Creditors of the Company. It is the
--------------------------------------
intent of the parties hereto that the Trust Corpus is and shall remain at all
times subject to the claims of the general creditors of the Company in the event
of bankruptcy or insolvency as hereinafter provided, but in no other event.
Accordingly, the Company shall not create a security interest in the Trust
Corpus in favor of the Executives or any creditor. If the Trustee receives the
notice provided for in Section 4.04 hereof, or otherwise receives actual notice
that the Company is insolvent or bankrupt as defined in Section 4.04 hereof, the
Trustee will make no further distributions of the Trust Corpus to any of the
Executives but will deliver the entire amount of the Trust Corpus only as a
court of competent jurisdiction, or duly appointed receiver or other person
authorized to act by such a court, may direct to make the Trust Corpus available
to satisfy the claims of the Company's general creditors. The Trustee shall
resume
6
<PAGE>
holding the Trust Corpus under the terms hereof and resume any distribution of
Trust Corpus to the Executives under the terms hereof, upon no less than thirty
(30) days advance notice to the Company, if it determines that the Company was
not, or is no longer, bankrupt or insolvent. Unless the Trustee has actual
knowledge of the Company's bankruptcy or insolvency, the Trustee shall have no
duty to inquire whether the Company is bankrupt or insolvent.
SECTION 4.04 Notification of Bankruptcy or Insolvency. The Company,
----------------------------------------
through its Board of Directors and Chief Executive Officer, shall advise the
Trustee promptly in writing of the Company's bankruptcy or insolvency. The
Company shall be deemed to be bankrupt or insolvent in the following
circumstances:
(a) The Company is subject to a pending proceeding as a debtor under
the Bankruptcy Reform Act of 1978, as amended; or
(b) The Company shall generally not pay its debts as such debts
become due or shall cease to pay its debts in the ordinary course of business.
ARTICLE V
TRUSTEE
-------
SECTION 5.01 Trustee.
-------
(a) The duties and responsibilities of the Trustee shall be limited
to those expressly set forth in this Trust, and no implied covenants or
obligations shall be read into this Trust against the Trustee.
(b) If all or any part of the Trust Corpus is at any time attached,
garnished, or levied upon by any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by a court affecting such property or any part thereof,
then and in any of such events the Trustee is authorized, in its sole
discretion, to rely upon and comply with any such order, judgment or decree, and
it shall not be liable to the Company or any Executive by reason of such
compliance even though such order, judgment or decree subsequently may be
reversed, modified, annulled, set aside or vacated.
(c) The Trustee shall maintain such books, records and accounts as
may be necessary for the proper administration of the Trust Corpus, including,
without limitation, as provided in Article II hereof, and shall render to the
Company, on or prior to each January 31 following the date of this Trust until
the termination of this Trust (and on the date of such termination), an
accounting with respect to the Trust Corpus as of the end of the then most
recent calendar year (and as of the date of such termination). The Trustee will
at all times maintain a separate bookkeeping account for each Executive to which
it will credit each amount delivered by the Company to the Trustee with respect
to such Executive. Upon the written request of an Executive or the Company, the
Trustee shall deliver to such Executive or the Company, as the case may be, a
written report setting forth the amount held in the Trust for such Executive (or
each Executive if such request is made by the Company) and a record of the
deposits made with respect thereto by the Company. Unless the Company or any
Executive shall have filed with the Trustee written exceptions or objections to
any such statement and account within one hundred eighty (180) days after
receipt thereof, the Company or the Executive shall be deemed to have approved
such statement and account, and in such case the Trustee shall be forever
released and discharged with respect to all matters and things reported in such
statement and account as though it had been settled by a decree of a court of
competent jurisdiction in an action or proceeding to which the Company and the
Executive were parties.
(d) The Trustee shall not be liable for any act taken or omitted to
be taken hereunder if taken or omitted to be taken by it in good faith, absent
the gross
7
<PAGE>
negligence or wilful misconduct of the Trustee. The Trustee shall also be fully
protected in relying upon any notice given hereunder which it in good faith
believes to be genuine and executed and delivered in accordance with this Trust.
(e) The Trustee may consult with legal counsel to be selected by it,
and the Trustee shall not be liable for any action taken or suffered by it in
accordance with the advice of such counsel.
(f) The Trustee shall be reimbursed by the Company for its reasonable
expenses incurred in connection with the performance of its duties hereunder and
shall be paid reasonable fees for the performance of such duties in the manner
provided by paragraph (g) of this Section 5.01.
(g) The Company agrees to indemnify and hold harmless the Trustee
from and against any and all damages, losses, claims or expenses as incurred
(including expenses of investigation and fees and disbursements of counsel to
the Trustee and any taxes imposed on the Trust Corpus or income of the Trust)
arising out of or in connection with the performance by the Trustee of its
duties hereunder, other than such damages, losses, claims or expenses arising
out of the Trustee's gross negligence or wilful misconduct. Any amount payable
to the Trustee under paragraph (f) of this Section 5.01 or this paragraph (g)
shall be paid by the Company promptly upon demand therefor by the Trustee or, in
the event that the Company fails to make such payment, from the Trust Corpus.
In the event that payment is made hereunder to the Trustee from the Trust
Corpus, the Trustee shall promptly notify the Company in writing of the amount
of such payment. The Company agrees that, upon receipt of such notice, it will
deliver to the Trustee to be held in the Trust an amount in cash (or in
marketable securities or in some combination thereof) equal to any payments made
from the Trust Corpus to the Trustee pursuant to paragraph (f) of this Section
5.01 or this paragraph (g). The failure of the Company to transfer any such
amount shall not in any way impair the Trustee's right to indemnification,
reimbursement and payment pursuant to paragraph (f) of this Section 5.01 or this
paragraph (g).
SECTION 5.02 Successor Trustee. The Trustee may resign and be
-----------------
discharged from its duties hereunder at any time by giving notice in writing of
such resignation to the Company and each Executive specifying a date (not less
than thirty (30) days after the giving of such notice) when such resignation
shall take effect. Promptly after such notice, the Company (or, if a Change in
Control shall previously have occurred, Executive(s) having at least 65%
percent of all amounts then held in the Trust credited to their accounts shall
appoint a successor trustee, such trustee to become Trustee hereunder upon the
resignation date specified in such notice. If the Company fails to appoint a
successor trustee or if such Executive(s) are unable to so agree upon a
successor trustee within thirty (30) days after such notice, the Trustee shall
be entitled, at the expense of the Company, to petition a United States
District Court or any of the courts of the State of New York having
jurisdiction to appoint its successor. The Trustee shall continue to serve
until its successor accepts the trust and receives delivery of the Trust
Corpus. The Company (or, if a Change in Control shall previously have
occurred, Executive(s) having at least 65% percent of all amounts then held in
the Trust credited to their accounts) may at any time substitute a new trustee
by giving fifteen (15) days notice thereof to the Trustee then acting. In the
event of such removal or resignation, the Trustee shall duly file with the
Company and, on and after a Change in Control, the Executives a written
statement or statements of accounts and proceedings as provided in Section
5.01(c) hereof for the period since the last previous annual accounting of the
Trust, and if written objection to such account is not filed as provided in
Section 5.01(c) hereof, the Trustee shall to the maximum extent
8
<PAGE>
permitted by applicable law be forever released and discharged from all
liability and accountability with respect to the propriety of its acts and
transactions shown in such account. The Trustee and any successor thereto
appointed hereunder shall be a commercial bank which is not an affiliate of the
Company, but which is a national banking association or established under the
laws of one of the states of the United States, and which has equity in excess
of $100 million.
SECTION 5.03 Settlement of Accounts. Notwithstanding any other
----------------------
provision of this Agreement, in the event of the termination of the Trust, or
the resignation or discharge of the Trustee, the Trustee shall have the right
to a settlement of its accounts, which accounting may be made, at the option of
the Trustee, either (a) by a judicial settlement in a court of competent
jurisdiction; or (b) by agreement of settlement, release and indemnity from the
Company to the Trustee.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 6.01 Termination.
-------------------------
(a) Except as provided in Section 6.01(b) of this Agreement, this
Trust shall terminate forty-two months after the occurrence of a Change in
Control, or, if earlier, upon the earliest of either of the following events:
(i) the exhaustion of the Trust Corpus; or (ii) the final payment of all
amounts payable to all of the Executives pursuant to the Agreements, as
certified to the Trustee by each Executive. Promptly upon termination of this
Trust, any remaining portion of the Trust Corpus, less all payments, expenses,
taxes and other charges under this Trust Agreement as of such date of
termination, shall be paid to the Company.
(b) Notwithstanding any other provision of this Agreement, in the
situation where the payments under an Executive's Agreements are the subject of
litigation or arbitration, and if the Trust Corpus has not been exhausted with
respect to such Executive, the Trust shall not terminate and the funds held in
the Trust with respect to such Executive shall continue to be held by the
Trustee until the final resolution of such litigation or arbitration. The
Trustee may assume that no Agreement of an Executive is the subject of such
litigation or arbitration unless the Trustee receives written notice from an
Executive or the Company with respect to such litigation or arbitration. The
Trustee may rely upon written notice from an Executive as to the final
resolution of such litigation or arbitration. Following such final resolution,
the Trust shall terminate with respect to each Executive described in this
Section 6.01(b) upon the earliest of either of the following events: (i) the
exhaustion of the Trust Corpus held by the Trustee with respect to such
Executive; or (ii) the final payment of all amounts payable to the Executive
pursuant to such Executive's Agreements, as certified to the Trustee by such
Executive. Promptly upon termination of this Trust with respect to an
Executive described in Section 6.01(b), any remaining portion of the Trust
Corpus held by the Trustee with respect to such Executive shall be paid to the
Company. At such time as the Trust shall be terminated with respect to all
such Executives, the Trust Corpus, less all payments, expenses, taxes and other
charges attributable to the extension of the Trust term beyond the termination
date described in Section 6.01(a), shall be paid promptly to the Company.
SECTION 6.02 Amendment and Waiver. Except as provided in Sections
--------------------
2.01(c),(d) and 4.02(b),(c), this Trust may not be amended except by an
instrument in writing signed on behalf of the parties hereto together with the
written consent of Executives having at least 65% of all amounts then held in
the Trust credited to their accounts. The parties hereto, together with the
consent of Executives having at least 65% of all amounts then held in the Trust
credited to their accounts,
9
<PAGE>
may at any time waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto or an Executive
to any such waiver shall
be valid if set forth in an instrument in writing signed on behalf of such party
or Executive. This Trust may not be amended nor may compliance with any
provisions hereunder be waived except by an instrument in writing signed on
behalf of the parties hereto and by at least seventy-five percent (75%) of the
Executives in the situation where, prior to such amendment or waiver, no payment
has been made by the Company pursuant to Section 2.01(a)(i) that is then held by
the Trustee. Notwithstanding the foregoing, any such amendment or waiver may be
made prior to a Change in Control by written agreement of the parties hereto
without obtaining the consent of the Executives if such amendment or waiver does
not adversely affect the rights of the Executives hereunder. Except as provided
in Sections 2.01(c),(d) and 4.02(b),(c), no amendment or waiver relating to this
Trust may be made (i) with respect to the amount of funds to be delivered by the
Company to the Trustee with respect to an Executive or by the Trustee to such
Executive, or the timing of such deliveries or (ii) which amends Section 6.01,
unless such Executive, in the case of clause (i) or, all Executives in the case
of clause (ii), agree in writing to such amendment or waiver.
ARTICLE VII
GENERAL PROVISIONS
------------------
SECTION 7.01 Further Assurances. The Company shall, at any time and
------------------
from time to time, upon the reasonable request of the Trustee, execute and
deliver such further instruments and do such further acts as may be necessary or
proper to effectuate the purposes of this Trust.
SECTION 7.02 Certain Provisions Relating to this Trust. (a) This
-----------------------------------------
Trust sets forth the entire understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior agreements, arrangements
and understandings relating thereto. This Trust shall be binding upon and inure
to the benefit of the parties and their respective successors and legal
representatives.
(b) If by the end of the eight-month period following the date
hereof, or such later date as the Company and the Trustee shall agree, counsel
is unable to deliver to the Company a favorable opinion that is satisfactory to
the Company, substantially to the effect that
(i) the Company will be treated as the owner of the Trust under Section 677
of the Code and Section 1.677(a)-1(d) of the regulations. Under Section
671, the Company must include all of the income, deductions and credits
against tax of the Trust in computing its own taxable income and credits,
and
(ii) the transfer of assets to the Trust will not constitute a transfer
of property for purposes of Section 83 of the Code or Section 1.83-3(e) of
the regulations, and
(iii) under Section 451 of the Code, amounts will be includible in the
gross income of the Executives only in the taxable year or years in which
such amounts are actually distributed or made available by the Trustee,
the Trust shall immediately terminate and the amount of the Trust Corpus, less
all payments, expenses, taxes and other charges under this Trust Agreement, if
any, as of such date, shall be returned to the Company as soon as possible.
Upon termination of the Trust, the Executives shall have no rights under this
Trust Agreement.
(c) This Trust shall be governed by and construed in accordance with
the laws of the State of New York, other than and without reference to any
10
<PAGE>
provisions of such laws regarding choice of laws or conflict of laws.
(d) In the event that any provision of this Trust or the application
thereof to any person or circumstances shall be determined by a court of proper
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Trust, or the application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision of this Trust shall be valid and enforced
to the fullest extent permitted by law.
(e) The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.
SECTION 7.03 Alienation. The right of any Trust Beneficiary (as
----------
hereinafter defined) to any benefit or to any payment hereunder shall not be
subject to alienation or assignment.
SECTION 7.04 Arbitration. Any dispute between the Executives and
-----------
the Company or the Trustee as to the interpretation or application of the
provisions of this Trust and amounts payable hereunder may, at the election of
any party to such dispute (or, if more than one (1) Executive is such a party,
at the election of seventy-five percent (75%) of such Executives), be determined
by binding arbitration within the greater New York City metropolitan area or the
State of Connecticut in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court of competent jurisdiction. All fees and expenses of such
arbitration shall be paid by the Trustee and considered an expense of the Trust
under Section 5.01(g).
SECTION 7.05 Notices. Any notice, report, demand or waiver required
-------
or permitted hereunder shall be in writing and shall be given personally or by
prepaid registered or certified mail, return receipt requested, addressed as
follows:
If to the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
If to the Trustee: Connecticut National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Employee Benefits
Administration - MSN 215
If to an Executive, to the address of such Executive as listed next to his name
on Exhibit I hereto.
A notice shall be deemed received upon the date of delivery if given
personally or, if given by mail, upon the receipt thereof. A change of address
may be given by any party to another by similar notice.
SECTION 7.06 Trust Beneficiaries. Each Executive is an intended
-------------------
beneficiary ("Trust Beneficiary") under this Trust, and as a Trust Beneficiary
shall be entitled to enforce all terms and provisions hereof with the same force
and effect as if such person had been a party hereto. The term Trust
Beneficiary shall, to the extent provided in the Agreements respecting a
deceased Executive, also mean the legal representative of the estate of such
deceased Executive and the surviving spouse of the deceased Executive or
beneficiary designated by such Executive in accordance with the terms of such
Agreements.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Trust as of the
date first written above.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
----------------------------------------------
Andrew C. Sigler
Chairman and Chief Executive Officer
CONNECTICUT NATIONAL BANK
By /s/ Thomas F. Mullaney, Jr.
------------------------------------------
Thomas F. Mullaney, Jr.
Executive Vice-President
12
<PAGE>
Exhibit I
AGREEMENTS BETWEEN CHAMPION INTERNATIONAL
CORPORATION AND CERTAIN EXECUTIVES
<TABLE>
<CAPTION>
Agreement and
Name and Address Title Date of Agreement
- --------------------------- ------------------------- ------------------------
<S> <C> <C>
Mr. John A. Ball Senior Vice President February 19, 1987:
One Champion Plaza -Restated Agreement /1/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Gerald J. Beiser Senior Vice President- February 19, 1987:
One Champion Plaza Finance -Restated Agreement /1/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. William H. Burchfield Executive Vice President February 19, 1987:
One Champion Plaza -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Mark A. Fuller, Jr. Executive Vice President February 19, 1987:
One Champion Plaza -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Marvin H. Ginsky Senior Vice President February 19, 1987:
One Champion Plaza and General Counsel -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. L. C. Heist President and Chief August 18, 1988:
One Champion Plaza Operating Officer -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Kenwood C. Nichols Vice Chairman February 19, 1987:
One Champion Plaza -Agreement /2/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Richard E. Olson Executive Vice President August 18, 1988:
One Champion Plaza -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Andrew C. Sigler Chairman and Chief February 19, 1987:
One Champion Plaza Executive Officer -Restated Agreement /1/
Stamford, CT 06921 -Agreement Relating to
Legal Expenses /3/
- -------------------------
</TABLE>
/1/ As Amended April 21, 1988 and August 18, 1988
/2/ As Amended April 21, 1988
/3/ As Amended August 18, 1988
<PAGE>
AMENDMENT TO
TRUST AGREEMENT DATED AS OF
FEBRUARY 19, 1987 BETWEEN CHAMPION
INTERNATIONAL CORPORATION AND CONNECTICUT NATIONAL BANK
-------------------------------------------------------
This Amendment between Champion International Corporation, a New York
corporation (the "Company"), and Connecticut National Bank (the "Trustee") is
effective as of August 18, 1988 and amends the Trust Agreement dated as of
February 19, 1987 between the Company and the Trustee (the "Trust").
WHEREAS, the Company and the Trustee have entered into the Trust; and
WHEREAS, the Company and the Trustee wish to amend the Trust in order to
(1) ensure that it is in compliance with the rule against perpetuities and with
applicable restraints on alienation, and (2) clarify the circumstances in which
interest earned on the investment of Trust Corpus may be paid to the Executives;
and
WHEREAS. all of the Executives have agreed in writing to this Amendment as
required by Section 6.02 of the Trust;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Section 4.01 of the Trust is hereby amended by adding a new
subsection (d) thereto, as follows:
"(d) Notwithstanding any provision of this Agreement, upon termination
of the Trust as provided in Section 6.01(c) the Trustee shall pay to the Company
all amounts held hereunder."
2. The second, third and fourth sentences of Section 4.02(a) of the
Trust are hereby amended in their entirety to read as follows:
"Each Payment Schedule also shall be delivered by the Company to such
Executive. The Payment Schedule shall include instructions as to the
amount of interest (if any) to accrue for the benefit of an Executive, from
the date on which the Trustee receives a written request for payment signed
by the Executive (or his beneficiary or beneficiaries) as hereinafter
provided until the date on which such payment is made, in respect of such
payment; such instructions may be revised from time to time prior to the
occurrence of a Change in Control. The aggregate payment to be made
hereunder to an Executive by the Trustee shall not exceed the aggregate
amount delivered to the Trustee for the benefit of such Executive, plus
interest (if any) thereon as described in the immediately preceding
sentence, all as indicated in the Payment Schedule applicable to such
Executive."
3. Subsection (a) of Section 6.01 of the Trust is hereby amended to
delete the first nine words thereof (i.e., "Except as provided in Section
6.01(b) of this Agreement,") and to substitute the following therefor: "Except
as provided in Sections 6.01(b) and 6.01(c) of this Agreement,".
4. Subsection (b) of Section 6.01 of the Trust is hereby amended to
delete the first seven words thereof (i.e., "Notwithstanding any other
provision of this Agreement,") and to substitute the following therefor:
Notwithstanding any other provision of this Agreement except Section 6.01(c),".
<PAGE>
5. Section 6.01 of the Trust is hereby amended by adding a new
subsection (c) thereto, as follows:
"(c) Notwithstanding any other provision of this Agreement, this
Trust shall terminate in all events and under all circumstances not later
than twenty-one years after the death of the last survivor of the
Executives who were included on Exhibit I hereto at the time this Trust was
executed, such Executives being John A. Ball, Gerald J. Beiser, William H.
Burchfield, Aubrey L. Cole, Mark A. Fuller, Jr., Marvin H. Ginsky, Judson
Hannigan, L. C. Heist, Robert F. Longbine, Kenwood C. Nichols, Philip R.
O'Connell and Andrew C. Sigler. Promptly upon termination of this Trust
pursuant to this Section 6.01(c), the Trustee shall pay to the Company all
amounts held hereunder."
6. All capitalized terms used herein and not defined herein shall
have the meanings assigned to them in the Trust.
7. Except as amended hereby, all of the provisions of the Trust shall
continue in full force and effect without change.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
-------------------------------
Chairman and Chief Executive Officer
CONNECTICUT NATIONAL BANK
By /s/ Thomas J. Botticelli
-------------------------------
Thomas J. Botticelli
AGREED TO:
/s/ John A. Ball /s/ Judson Hannigan
- ----------------------------------------- -----------------------
John A. Ball Judson Hannigan
/s/ Gerald J. Beiser /s/ L. C. Heist
- ----------------------------------------- -----------------------
Gerald J. Beiser L.C. Heist
/s/ William H. Burchfield /s/ Kenwood C. Nichols
- ----------------------------------------- -----------------------
William H. Burchfield Kenwood C. Nichols
/s/ Aubrey L. Cole /s/ Philip R. O'Connell
- ----------------------------------------- -----------------------
Aubrey L. Cole Philip R. O'Connell
/s/ Mark A. Fuller, Jr. /s/ Richard E. Olson
- ----------------------------------------- -----------------------
Mark A. Fuller, Jr. Richard E. Olson
/s/ Marvin H. Ginsky /s/ Andrew C. Sigler
- ----------------------------------------- -----------------------
Marvin H. Ginsky Andrew C. Sigler
2
<PAGE>
Exhibit D
---------
[subparagraph 9(d)]
Schedule of Amounts to be Deposited in Trust
Upon a Potential Change in Control*
--------------------------------------------
` Severance: 2 years termination payments; 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. Payments are
based on highest total of salary and annual bonus for
any calendar year of employment.
` Retirement: All amounts, if any, payable under the excess benefit
and supplemental retirement plans of the Company.
` Disability: Same as for active employees, for the 2 year
termination payment period (or balance thereof).
` Medical: Same as for active employees less retiree medical
benefit, if any, for the 2 year termination payment
period (or balance thereof).
` Dental: Same as for active employees, for the 2 year
termination payment period (or balance thereof).
` Options: Fund for those options referred to in subparagraph
1(a)(iii) hereof. "Spread" to be calculated on the
basis of the closing price of Common Shares of the
Company as reported in "New York Stock Exchange
Composite Transactions" of the Eastern Edition of The
---
Wall Street Journal for the trading day immediately
---- ------ -------
after the Potential Change in Control.
` Contingently
Credited Shares: Fund for those contingently credited shares referred to
in subparagraph 1(a)(iii) hereof in an amount per share
equal to the closing price of Common Shares of the
Company as reported in "New York Stock Exchange
Composite Transactions" of the Eastern Edition of The
---
Wall Street Journal for the trading day immediately
---- ------ -------
after the Potential Change in Control.
` Legal Expenses: An amount equal to twelve times the monthly base salary
paid at time of deposit into trust.
________________
* This Exhibit D does not reflect the possible reduction provided for in
subparagraph 9(d)(v) hereof.
o0o
<PAGE>
EXHIBIT 10.35
Champion International Corporation
One Champion Plaza
Stamford, CT 06921
October 18, 1990
Mr. Richard L. Porterfield
One Champion Plaza
Stamford, CT 06921
Re: Agreement Relating to Legal Expenses
Dated October 18, 1990
------------------------------------
Dear Dick:
As an inducement for you to continue in the employ of Champion
International Corporation (the "Company"), the Board of Directors of the Company
has today authorized entering into an Agreement between you and the Company
effective October 18, 1990 (the "Agreement"). One of the principal purposes in
entering into the Agreement is to provide you with reasonable assurance in the
event of a change in control of the Company against loss of rights to benefits
that you could reasonably expect to receive in the absence of such a change in
control, and thereby provide an inducement for you to remain in the employ of
the Company notwithstanding the possibility of a change in its control.
As a separate and additional inducement for you to remain in the employment
of the Company, and to provide you with reasonable assurance that the purposes
of the Agreement and this Agreement Relating to Legal Expenses (the "Legal
Expense Agreement") (collectively, the "Secured Agreements") will not be
frustrated as a result of the cost of their enforcement should a claim or
dispute be instituted or arise upon or within forty-two months following a
Change in Control of the Company (as defined in the Agreement) and arise out of
or relate to any provision of the Secured Agreements, the Company agrees to pay,
in consideration of such continued employment, all legal expenses which you may
incur in any such claim or dispute. Such legal expenses shall be paid in the
amount provided in, and otherwise in accordance with the terms and conditions
of, the memorandum attached to, incorporated in and by this reference made part
of, this Legal Expense Agreement.
By virtue of the mutual promises set forth in this Agreement Relating to
Legal Expenses and the Agreement and other good and valuable consideration the
receipt and sufficiency of which you and the Company hereby acknowledge, your
signature at the foot of this letter will constitute this letter a binding
agreement and it shall thereupon be binding upon and inure to the benefit of
you, your spouse, any other beneficiaries and your estate, and the Company and
its successors and assigns, including any corporation with or into which the
Company may consolidate or merge or to which the Company may transfer all or
substantially all of its assets. If you are deceased and survived by a
beneficiary, then your beneficiary may act for herself or himself in enforcing
her or his rights under this Legal Expense Agreement as your survivor, and may
also act for you with respect to any rights to payments which became due and
remained unpaid during your lifetime.
<PAGE>
For the Company's files, please execute the enclosed copy of this Legal
Expense Agreement and return it in an envelope marked "Confidential" to Lionel
N. Zimmer.
Sincerely,
CHAMPION INTERNATIONAL CORPORATION
Attest: By /s/ Andrew C. Sigler
----------------------------------
Chairman of the Board of Directors
/s/ Lawrence A. Fox
- --------------------------
Secretary
Agreed: October 18, 1990
/s/ Richard L. Porterfield
- --------------------------
Richard L. Porterfield
-2-
<PAGE>
Memorandum of Terms and Conditions Referred to in
the Agreement Relating to Legal Expenses
dated October 18, 1990 between
Champion International Corporation and Richard L. Porterfield
-------------------------------------------------------------
1. Reference hereafter to the Agreement Relating to Legal Expenses (the
"Legal Expense Agreement") shall be deemed to refer also to this memorandum.
Terms used or referred to in the Legal Expense Agreement shall have the same
meaning or reference in this memorandum as in the Legal Expense Agreement.
2. The Company shall, upon presentation of appropriate commercial
invoices, pay all legal expenses, which includes reasonable legal fees, court
costs, arbitration costs, and ordinary and necessary out-of-pocket costs of
attorneys, billed to and payable by you or by anyone claiming under or through
you (such person being hereinafter referred to as your "beneficiary"), in
connection with bringing, prosecuting, defending, litigating, arbitrating,
negotiating or settling any claim or dispute by or against you or your
beneficiary, or any claim or dispute between you or your beneficiary and the
Company or any third party, that may be instituted or arise upon or within
forty-two months following a Change in Control of the Company, as defined in the
Agreement, and that may arise out of or relate to the Secured Agreements, or any
of them, or the validity, operation, interpretation, enforceability or breach
thereof, provided that:
(a) you and your beneficiary shall repay to the Company any such expenses
theretofore paid by or on behalf of the Company if and to the extent that a
judgment should be rendered against you or your beneficiary by the judicial or
arbitration forum that adjudicates such dispute beyond appeal, and such expenses
were not incurred by you or your beneficiary while acting in good faith, and
provided further, that
(b) in the case of any request that the Company pay attorneys' fees or
expenses, the Company shall have received a statement signed by the attorney or
firm of attorneys rendering the bill setting forth the services that had been,
and will be, performed, and provided further, that
(c) in the case of any claim or dispute by or against you or your
beneficiary, the claim for legal fees hereunder shall be made in writing, with
specific reference to the provisions of the Legal Expense Agreement, delivered
in the manner provided in subparagraph 4(c) below, in no event later than forty-
two months after a Change in Control of the Company.
3. (a) At any time after the date hereof but in no event later than a
Potential Change in Control of the Company as defined in the Agreement, if you
are in the employ of the Company at such time, the Company will, at its own
expense, set aside in trust, or establish, extend, renew and maintain an
irrevocable bank letter of credit in favor of you or, in the event of your
death, your beneficiary, in an amount equal to twelve (12) times the monthly
base salary being paid to you at such time.
(b) The Company has entered into a trust agreement substantially in the
form attached to the Agreement (the "Trust Agreement"), and agrees that, upon
the terms, conditions and procedures set forth therein, you will be named a
beneficiary of the Trust Agreement, and this Legal Expense Agreement will be
listed on Exhibit I of the Trust Agreement as one of the agreements which is
subject to the trust established by the Trust Agreement. If the Company shall
become liable for the payment of legal expenses under paragraph 2 above, you or,
in the event of your death, your beneficiary shall request the Company in
<PAGE>
writing, in accordance with the terms, conditions and procedures set forth in
such paragraph 2, to make such payment and, if the Company shall fail to do so
fully within a reasonable time after receipt of such written demand, you may
request the trustee of such trust, in accordance with the terms, conditions and
procedures set forth in the Trust Agreement, to make such payment to the extent
that the Company had failed to do so. The Company shall continue to be liable
to make all payments required under the terms of this Legal Expense Agreement to
the extent such payments have not been made pursuant to the Trust Agreement.
(c) If the Company establishes, extends, renews and maintains an
irrevocable bank letter of credit in favor of you or your beneficiary, you or,
in the event of your death, your beneficiary, shall be entitled to draw upon
such letter of credit only if and to the extent that the Company shall fail to
discharge its obligations under paragraph 2 above within a reasonable time after
receipt of written demand by you or your beneficiary. As and when any funds are
paid by the bank under such letter of credit, the Company shall renew such
letter of credit at its own expense to the extent of the funds so paid. The
Company need not establish or renew any such letter of credit for any period
subsequent to the date on which an attorney or a firm of attorneys selected by
mutual agreement of the Company and you or, in the event of your death, your
beneficiary, the fees and expenses of which attorney or firm of attorneys shall
be borne by the Company, shall determine, after consultation with the Company
and you or, in the event of your death, your beneficiary, that all obligations
of the parties under the Secured Agreements have been substantially satisfied.
(d) The bank that shall issue any such letter of credit shall be a
national or state bank having a combined capital, surplus and undivided profits
and reserves of not less than One Hundred Million Dollars ($100,000,000).
4. (a) Any dispute between you and the Company as to the interpretation
or application of the provisions of either of the Secured Agreements may at your
election be determined by binding arbitration within the greater New York City
metropolitan area or the State of Connecticut in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court of competent jurisdiction. All fees and
expenses of such arbitration shall be paid by the Company subject to repayment
in accordance with the terms and conditions set forth in clause (a) of paragraph
2 above.
(b) Anything to the contrary notwithstanding, all payments and other
provisions required to be made by the Company under this Legal Expense Agreement
to or on behalf of you or your beneficiaries shall be subject to the withholding
of such amounts, if any, relating to tax and other payroll deductions as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation. In lieu of withholding such amounts, the Company may accept
other provisions to the end that it has sufficient funds to pay all taxes
required by law to be withheld in respect of any or all of such payments.
(c) All notices, requests, demands and other communications provided for
by this Legal Expense Agreement shall be in writing and shall be sufficiently
given if and when mailed in the continental United States by registered or
certified mail, return receipt requested, or personally delivered to the party
entitled thereto at the address stated below, which address shall be such
address as the addressee may have given most recently by a similar notice. Any
such notice shall be deemed to have been received on the date of
2
<PAGE>
delivery.
To the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
To the Executive: Mr. Richard L. Porterfield
One Champion Plaza
Stamford, CT 06921
(d) No provision of this Legal Expense Agreement may be amended,
modified or waived unless such amendment, modification or waiver shall be
authorized by the Board of Directors of the Company or any authorized committee
of the Board of Directors and shall be agreed to in writing, signed by you and
by an officer of the Company thereunto duly authorized. Except as otherwise
specifically provided in this Legal Expense Agreement, no waiver by either party
hereto of any breach by the other party hereto of any condition or provision of
this Legal Expense Agreement to be performed by such other party shall be deemed
a waiver of a subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same time or at any prior or
subsequent time.
(e) Anything in this Legal Expense Agreement to the contrary
notwithstanding:
(i) In the event that any provision of this Legal Expense Agreement,
or portion thereof, shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Legal Expense
Agreement and parts of such provision not so invalid or unenforceable shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law;
(ii) Any provision of this Legal Expense Agreement, or portion
thereof, which may be invalid or unenforceable in any jurisdiction shall be
limited by construction thereof, to the end that such provision, or portion
thereof, shall be valid and enforceable in such jurisdiction; and
(iii) Any provision of this Legal Expense Agreement, or portion
thereof, which may for any reason be invalid or unenforceable in any
jurisdiction shall remain in effect and be enforceable in any jurisdiction in
which such provision, or portion thereof, shall be valid and enforceable.
(f) Except as otherwise provided herein, this Legal Expense Agreement
shall be binding upon and inure to the benefit of the Company and any successor
of the Company, including, without limitation, any corporation or corporations
acquiring directly or indirectly all or substantially all of the assets of the
Company whether by merger, consolidation, sale or otherwise (and such successor
shall thereafter be deemed embraced within the term "the Company" for the
purposes of this Legal Expense Agreement), but shall not otherwise be assignable
by the Company.
(g) The validity, interpretation, construction, performance and
enforcement of this Legal Expense Agreement shall be governed by the laws of the
State of New York without giving effect to the principles of conflicts of laws
thereof.
(h) There shall be no right of set-off or counterclaim in respect of
any claim, debt or obligation against any payments to you, your beneficiaries or
estate, provided for in this Legal Expense Agreement.
(i) The Company and you recognize that each party will have no adequate
remedy at law for breach by the other of any of the agreements
3
<PAGE>
contained in this Legal Expense Agreement and, in the event of any such breach,
the Company and you hereby agree and consent that the other shall be entitled to
a decree of specific performance, mandamus or other appropriate remedy to
enforce performance of such agreements.
(j) No right or interest to or in any payments shall be assignable by
you; provided, however, that this provision shall not preclude you from
designating one or more beneficiaries to receive any amount that may be payable
after your death and shall not preclude the legal representative of your estate
from assigning any right hereunder to the person or persons entitled thereto
under your will or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to your estate.
(k) No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
(l) In the event of your death or a judicial determination of your
incompetence, reference in this Legal Expense Agreement to you shall be deemed,
where appropriate, to refer to your legal representative or, where appropriate,
to your beneficiary or beneficiaries.
(m) If any event provided for in this Legal Expense Agreement is
scheduled to take place on a legal holiday, such event shall take place on the
next succeeding day that is not a legal holiday.
(n) This Legal Expense Agreement shall be binding upon and shall inure
to the benefit of you, your heirs and legal representatives, and the Company and
its successors as provided in subparagraph 4(f) hereof.
(o) This instrument and the Agreement contain the entire agreement of
the parties relating to the subject matter of this Legal Expense Agreement and
supersede and replace all prior agreements and understandings with respect to
such subject matter, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Legal
Expense Agreement which are not set forth herein.
5. The Legal Expense Agreement is not intended to confer upon you any
right to continue in the employ of the Company or to affect any rights of the
Company, subject to any agreement or agreements between you and the Company
relating to your employment by the Company, to terminate your employment at any
time with or without assigning a reason therefor.
oOo
4
<PAGE>
EXHIBIT 10.36
AMENDMENT EFFECTIVE AS OF SEPTEMBER 19, 1991
TO OCTOBER 18, 1990 AGREEMENT
--------------------------------------------
This Agreement between Champion International Corporation, a New York
corporation (the "Company"), and Richard L. Porterfield (the "Executive") is
effective as of September 19, 1991.
WHEREAS, the Company and the Executive entered into an Agreement dated
October 18, 1990 (the "Agreement") relating to the employment of the Executive
by the Company; and
WHEREAS, The Company and the Executive wish to amend the Agreement in order
to (1) provide that any benefits thereunder which constitute "parachute
payments" for Federal tax purposes be paid in an amount the net effect of which
is intended to result in the Executive receiving "parachute payments" from all
sources equal to the greater of (i) the total of the "parachute payments" from
all sources, less income taxes and any Federal excise tax thereon, and (ii) the
maximum amount of "parachute payments" that can be paid without triggering such
Federal excise tax, less income taxes thereon; and (2) expressly allow the
Executive to engage the Company's independent consulting actuary to assist in
"parachute payment" determinations;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Paragraph 14 of the Agreement is hereby amended in its entirety to read as
follows:
"14. Parachute Tax
-------------
(a) Except in the specific circumstance hereinafter described in this paragraph
14, the Company shall pay to the Executive the full amount to which he is
entitled under this Agreement.
(b)
(i) If any payments or benefits received or to be received by the
Executive under this Agreement, or any other payments or benefits received
or to be received by the Executive from the Company or any other person,
constitute "parachute payments" within the meaning of Section 280G(b)(2) or
any successor provision of the Code (such payments or benefits being
hereinafter referred to as the "Parachute Payments"), and
(ii) If the aggregate present value of the Parachute Payments from all
sources, minus (A) any excise tax imposed under Section 4999 of the Code
(or any similar tax that may hereafter be imposed) (the "Excise Tax") and
(B) the net amount of federal, state and local income tax on such aggregate
present value, would be less than the maximum amount of Parachute Payments
from all sources that can be paid without triggering the Excise Tax, after
deduction of the net amount of federal, state and local income tax on such
maximum amount, then
(iii) the Parachute Payments to be paid by the Company to the
Executive under this Agreement shall be reduced to a lump sum amount (if
any) such that the aggregate present value of the Parachute Payments from
all sources is equal to the maximum amount of Parachute Payments that can
be paid without triggering the Excise Tax.
<PAGE>
Anything in this subparagraph 14(b) to the contrary notwithstanding, it
is understood and agreed that the amount to be paid by the Company to the
Executive pursuant to this subparagraph 14(b) in the specific circumstance
described herein may be less, but never more, than the amount to which he would
otherwise be entitled under this Agreement.
(c) All matters to be determined pursuant to subparagraph 14(b) including,
without limitation, the existence or absence of any Parachute Payments, the
aggregate present value of any Parachute Payments, the amount of the Excise Tax
(if any), the net amount of federal, state and local income tax (assuming the
highest applicable marginal rate in each case), the maximum amount of Parachute
Payments that can be paid without triggering the Excise Tax, the amount of any
reduction in the Parachute Payments to be paid by the Company to the Executive
under this Agreement and the item or items (if any) to be reduced, shall be
determined by the Executive or, following his death, his beneficiary or
beneficiaries. The specifics of such determination shall be delivered in
writing to the Company and to the trustee of the Trust referred to in
subparagraph 9(d)(ii) above at the time of the Executive's termination within
three years after a Change in Control, or as soon as practicable thereafter, by
the Executive or, following his death, his beneficiary or beneficiaries. The
reasonable fees and expenses of such tax counsel and financial advisor as may
reasonably be called upon to assist the Executive or his beneficiary or
beneficiaries in the foregoing determinations shall be paid by the Company.
Without limiting the generality of the immediately preceding sentence, the
Executive or his beneficiary or beneficiaries may select as such financial
advisor Hewitt Associates or such other person or firm as may be serving at the
time as the Company's independent consulting actuary."
2. Except as amended hereby, all of the terms and conditions set forth in
the Agreement shall continue in full force and effect without change.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has executed this
Agreement, all as of September 19, 1991.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
-------------------------------
Chairman of the Board of Directors
Attest:
/s/ Lawrence A. Fox
- ----------------------------
Secretary
/s/ Richard L. Porterfield
----------------------------------
Richard L. Porterfield
-2-
<PAGE>
EXHIBIT 10.37
AGREEMENT
between
CHAMPION INTERNATIONAL CORPORATION
and
MARK A. FULLER
Effective February 19, 1987
<PAGE>
Table of Contents
-----------------
Paragraph
Number Title Page
- ----------- -------------------- ----
1 Termination 1
(a) Termination Payments 1
(i) Monthly Payments 1
(ii) Lump Sum Payment Upon Termination
Following a Change in Control 1
(iii) Cash-Out of Options and Contingently 1
Credited Shares
(iv) Payment of Value of Excess Benefit 2
and Supplemental Retirement Plan
Payments
(v) Participation in Benefit Plans 2
(b) Definition of Termination 3
(c) Definition of Cause 3
(d) Definition of Change in Control 4
2 Termination During Month 4
3 Post-termination Obligations 4
of Executive; Default by Company
(a) Assistance in Litigation 4
(b) Detrimental Conduct 4
(c) Discoveries and Inventions 5
(d) Reimbursement of Expenses 5
(e) Failure to Comply 5
(f) Competition 5
(g) Post-termination Default in 6
Payments or Benefits 4
Determination of Benefits 6
5 (a) Time of Payment 7
(b) Withholding of Taxes 7
6 Decisions by Company 7
7 Prior Agreements 7
8 Consolidation or Merger 7
9 (a) Non-assignability 7
(b) No Attachment 8
(c) Binding Agreement 8
(d) Unfunded Obligations; Trust 8
Agreement
10 (a) Amendment of Agreement 9
(b) No Waiver 9
11 Severability 9
12 Headings 10
13 Governing Law 10
14 Parachute Tax 10
15 Notices 10
16 Arbitration 10
i
<PAGE>
EXHIBITS
--------
Page
Exhibit Reference
- ---------- ------------
A Certain benefits to be provided after a 1
termination following a change in control
B Payments and benefits subject to 6
acceleration in event of default in
payments or benefits by Company after
cessation of employment
C Form of Trust Agreement 8
D Amounts to be deposited in trust upon a 8
potential change in control
DEFINED TERMS
-------------
Page
Defined Term Paragraph Reference
- ----------------------------- --------------- ---------
Agreement Introduction 1
Cause 1(c) 3
Code 1(a)(iii) 2
Company Introduction 1
Change in Control 1(d) 4
Executive Introduction 1
Fair Market Value 1(a)(iii) 2
Legal Expense Agreement 1(b)(ii) 3
Potential Change in Control 9(d)(vii) 9
Termination 1(b) 3
ii
<PAGE>
THIS AGREEMENT between CHAMPION INTERNATIONAL CORPORATION, a New York
corporation (the "Company"), and MARK A. FULLER, JR. (the "Executive"), is
effective as of February 19, 1987 (the "Agreement").
W I T N E S S E T H:
WHEREAS, the Company and the Executive executed an agreement effective June
16, 1983, providing for termination payments under the circumstances set forth
therein; and
WHEREAS, the Company and the Executive wish to terminate the aforesaid
agreement and replace it with this agreement; and
WHEREAS, the Company wishes to provide additional incentive for the
Executive to continue in the employ of the Company;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Termination
-----------
In the event of a termination, as defined in subparagraph 1(b) below, the
following provisions of this paragraph 1 shall apply.
(a) Termination Payments
--------------------
(i) Monthly payments. Subject to compliance with the applicable
----------------
provisions of paragraph 3 below, the Company shall pay the Executive or, in the
event of his subsequent death, his beneficiary or beneficiaries or his estate,
as the case may be, as severance pay or liquidated damages, or both, a monthly
sum equal to the highest total monthly compensation (highest total of annual
salary plus annual bonus for any calendar year of employment, divided by
twelve), paid to the Executive. Such payments shall commence on the last day of
the month next following the termination of employment of the Executive and
shall continue until the last day of the twenty-fourth full calendar month
following the termination of employment of the Executive, provided, however,
that such payments shall not continue beyond the earlier of (A) the last day of
the month next preceding his normal retirement date under the Company's pension
plan, and (B) the last day of the month next preceding the month in which he
shall, with his written consent, commence receiving his retirement allowance
under the Company's pension plan.
(ii) Lump Sum Payment upon Termination following a Change in Control.
---------------------------------------------------------------
Anything in subparagraph 1(a)(i) above or elsewhere in this Agreement to the
contrary notwithstanding, if termination of the Executive occurs within three
years following a Change in Control: (x) the total of the monthly payments
provided for in subparagraph 1(a)(i) above shall be accelerated and paid in a
lump sum as soon as practicable after such termination if termination occurs
before the last day of the month next preceding the Executive's normal
retirement date under the Company's pension plan; if termination occurs on or
after such last day, no payment pursuant to subparagraph 1(a)(i) or (ii) shall
be made to the Executive; (y) the benefits required to be provided thereafter to
the Executive, his spouse and family, set forth in attached Exhibit A, shall be
---------
valued at the cost of acquiring insurance policies which would provide such
benefit coverage over the period of time involved in subparagraph 1(a)(i) above,
and such cost shall be paid in a lump sum as soon as practicable after
termination; and (z) the Executive shall be paid the amount payable, if any,
pursuant to subparagraph 1(a)(iii) and the amount payable pursuant to
subparagraph 1(a)(iv).
(iii) Cash-Out of Options and Contingently Credited Shares. In the
----------------------------------------------------
event that the Executive shall, at the time of termination of his employment
within three years following a Change in Control, (A) hold an outstanding and
unexercised (whether or not exercisable at the time) option or options
theretofore granted by the Company to him prior to the Change in Control, (B)
have shares contingently credited to him prior to the Change in Control under
the Company's Contingent Compensation Plan or 1986 Contingent Compensation Plan
or a successor plan, or both hold such option and have such shares contingently
credited to him,
1
<PAGE>
unless the Executive shall have given the Company written notice to the contrary
within thirty (30) days following such termination of employment, the Company
shall pay him, in a lump sum, an amount equal to the excess above the option
price, of each such option that is not an Incentive Stock Option as defined in
Section 422A of the Internal Revenue Code of 1986 as amended (the "Code"), of
the Fair Market Value of Company shares at the time of termination, and the Fair
Market Value at the time of termination of the shares, if any, so contingently
credited. Solely for the purpose of this subparagraph 1(a)(iii), Fair Market
Value at the time of termination shall mean the higher of (i) the average of the
reported closing prices of the Common Shares of the Company, as reported in "New
York Stock Exchange Composite Transactions" of the Eastern Edition of The Wall
Street Journal, for the last trading day prior to the termination and for each
trading day of the preceding sixty calendar days, and (ii) in the event that a
Change in Control of the Company, as defined in subparagraph 1(d) below, shall
have taken place prior to termination as the result of a tender or exchange
offer, and such Change in Control was consummated within three years of
termination, an amount equal to the highest consideration paid for Common Shares
of the Company in the course of such tender or exchange offer.
(iv) Payment of Value of Excess Benefit and Supplement Retirement Plan
-----------------------------------------------------------------
Payments Benefits. Anything in this Agreement to the contrary notwithstanding,
- -----------------
in the event of a termination of the Executive's employment within three years
following a Change in Control, the Executive shall be entitled to a monthly
retirement allowance for life payable on a straight life annuity basis, equal to
the benefit payable, if any, under the Company's excess benefit and supplemental
retirement plans, utilizing the monthly payments set forth in subparagraph
1(a)(i) above for purposes of the pension calculation for the termination period
set forth in such subparagraph 1(a)(i). For the purpose of this clause (iv),
the excess benefit and supplemental retirement plans payments shall include the
pension enhancement resulting from service credit for pension benefit during the
termination period set forth in subparagraph 1(a)(i) above. Such retirement
allowance shall be valued and discounted in the manner set forth in subparagraph
3(g) below relating to default in payments or benefits and shall be paid in a
lump sum as soon as practicable after such termination.
(v) Participation in Benefit Plans. The Executive shall be eligible
-------------------------------
to receive, during any period that he shall be entitled to receive payments from
the Company under subparagraph 1(a)(i) above (whether or not any such period
shall have been accelerated), as if the Executive had continued to be employed
by the Company during such period, any benefits and emoluments for which key
executives are eligible under any hospitalization, health care or dental care
plan, life or other insurance or death benefit plan, travel and accident
insurance, executive or contingent compensation plan, restricted stock or stock
purchase plan, retirement income or pension plan, vacation plan, or other
present or future employee benefit plans or programs of the Company for which
key executives are eligible, in accordance with the provisions of any such plan
or program, provided, however, that during the period that the Executive is so
entitled to receive payments under subparagraph 1(a)(i) above, he shall not be
eligible to participate in the Company's Savings Plan for Salaried Employees or
to receive option grants under any stock option plan of the Company. Nothing in
this Agreement shall preclude the Company from terminating or amending any such
employee benefit plan or program so as to eliminate, reduce or otherwise change
any benefit payable thereunder. To the extent that such benefits or service
credits for benefits shall not be payable or provided under such plans or
programs by reason of the Executive no longer being an employee of the Company,
the Company shall itself pay or provide for payment of such benefits and service
credit for benefits.
2
<PAGE>
(b) Definition of Termination
-------------------------
The term "termination" for purposes of this Agreement shall mean:
(i) The termination by the Company of the Executive's full-time
employment with the Company for any reason other than Cause; or
(ii) Any (A) failure to elect or re-elect the Executive to an office
and position at least equal to the office and position he held immediately prior
to such failure, or removal of the Executive from such office or position, (B)
material change by the Company of the Executive's functions, duties or
responsibilities without his express written consent as a result of which change
the Executive's position with the Company shall be or become of less dignity,
responsibility, importance or scope than the position he held at the time of
such material change, and any such material change shall be deemed a continuing
breach of this Agreement, (C) reduction in the monthly base salary of the
Executive below the highest monthly base salary paid from and after February 19,
1987, (D) liquidation, dissolution, consolidation or merger of the Company, or
transfer of all or substantially all of its assets, other than in compliance
with the provisions of paragraph 8 below, or (E) breach of this Agreement by the
Company, or breach of the Agreement Relating to Legal Expenses between the
Company and the Executive dated February 19, 1987 (the "Legal Expense
Agreement"); provided that in any such event the Executive elects to terminate
his employment under this Agreement upon not less than sixty days' advance
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four calendar months after the event giving rise to
the election.
(c) Definition of Cause
-------------------
For the purpose of any provision of this Agreement, the termination of the
Executive's employment shall be deemed to have been for Cause only if
termination of his employment shall have been the result of an act or acts of
dishonesty on the part of the Executive constituting a felony and resulting or
intended to result directly or indirectly in gain or personal enrichment at the
expense of the Company; provided that there shall have been delivered to the
Executive a certified copy of a resolution of the Board of Directors of the
Company adopted by the affirmative vote of not less than three-fourths of the
entire membership of the Board of Directors at a meeting called and held for
that purpose and at which the Executive was given an opportunity to be heard,
finding that the Executive was guilty of such conduct, specifying the
particulars thereof in detail.
Anything in this subparagraph 1(c) or elsewhere in this Agreement to the
contrary notwithstanding, the employment of the Executive shall in no event be
considered to have been terminated by the Company for Cause if termination of
his employment took place (A) as the result of bad judgment or negligence on the
part of the Executive, or (B) as the result of an act or omission without intent
of gaining therefrom directly or indirectly a profit to which the Executive was
not legally entitled, or (C) because of an act or omission believed by the
Executive in good faith to have been in or not opposed to the interests of the
Company, or (D) for any act or omission in respect of which a determination
could properly be made that the Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses under (I)
the By-laws of the Company, or (II) the laws of the State of New York, or (III)
the directors' and officer's liability insurance of the Company, in each case
either as in effect at the time of this Agreement or in effect at the time of
such act or omission, or (E) as the result of an act or omission which occurred
more than twelve calendar months prior to the Executive's having been given
notice of the termination of his employment for such act or omission unless the
commission of such act or such omission could not at the time of such commission
or omission have been known to a member of the Board of Directors of the Company
(other than the Executive, if he is then a
3
<PAGE>
member of the Board of Directors), in which case more than twelve calendar
months from the date that the commission of such act or such omission was or
could reasonably have been so known, or (F) as the result of a continuing course
of action which commenced and was or could reasonably have been known to a
member of the Board of Directors of the Company (other than the Executive, if he
is then a member of the Board of Directors) more than twelve calendar months
prior to notice having been given to the Executive of the termination of his
employment.
(d) Definition of Change in Control
-------------------------------
For the purpose of this Agreement, a Change in Control of the Company
shall be deemed to have occurred if
(i) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities;
(ii) during any period within two (2) consecutive years (not including
any period prior to the Company's 1987 Annual Meeting of Shareholders) there
shall cease to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
(iii) the shareholders of the Company approve (A) a plan of complete
liquidation of the Company or (B) the sale or other disposition of all or
substantially all the Company's assets.
2. Termination During Month
------------------------
In the event that the employment of the Executive shall terminate prior to
the end of a calendar month as a result of a termination described in paragraph
1 above, the Company shall pay the Executive, in addition to any other amounts
payable by the Company hereunder, a lump cash sum which shall in no event be
less than the salary plus any bonus to which the Executive would have been
entitled had he remained in full time employment until the end of the month in
which his employment shall so terminate.
3. Post-termination Obligations of Executive; Default by Company
-------------------------------------------------------------
All payments and benefits to the Executive under this Agreement after his
full-time employment with the Company shall have terminated shall be subject to
compliance with the following provisions, which compliance shall be subject to
the proviso in subparagraph 3(e) below. Anything in this paragraph 3 or
elsewhere in this Agreement to the contrary notwithstanding, the Executive may
continue to serve as a director, after his full-time employment with the Company
shall have terminated, of any corporation which he has served as a director for
the last six months of his full-time employment with the Company.
(a) Assistance In Litigation
------------------------
The Executive shall, upon reasonable notice, furnish such information and
proper assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is or may become a party.
(b) Detrimental Conduct
-------------------
The Executive shall not to the material detriment of the Company knowingly
disclose
4
<PAGE>
or reveal to any unauthorized person any manufacturing or trade secret or other
confidential information relating to the Company, its subsidiaries or
affiliates, or to any of the businesses operated by them and confirms that such
information constitutes the exclusive property of the Company. The Executive
shall not otherwise knowingly act or conduct himself to the material detriment
of the Company, its subsidiaries or affiliates, or in a manner which is
materially inimical or contrary to their interests, including, without
limitation, through competition materially detrimental to the Company, its
subsidiaries or affiliates, in any of the businesses in which they may be
engaged at the time of termination of his employment. The Executive recognizes
that the restrictions on his activities contained in this Agreement are required
for the reasonable protection of the Company and its investments.
(c) Discoveries and Inventions
--------------------------
If, while employed by the Company or during a period of one year after
termination of such employment, the Executive shall have made, either solely or
jointly with others, any discovery, improvements or invention which would
pertain or relate in any way to the business, products, publications or
processes of the Company, its subsidiaries or affiliates at the time of
termination of his employment, such discovery, improvement or invention (whether
or not of a patentable nature) shall be the exclusive property of the Company.
The Executive shall execute and deliver to the Company without further
compensation any documents which the Company may deem necessary or appropriate
to prepare or prosecute applications for patents upon such discovery,
improvement or invention, to assign and transfer to the Company his entire
right, title and interest in and to such discovery, improvement or invention,
and patents therefor, or otherwise more fully and perfectly to evidence the
Company's ownership thereof.
(d) Reimbursement of Expenses
-------------------------
The Company shall pay or reimburse the Executive for all reasonable travel
and other expenses incurred by the Executive in performing his obligations under
this paragraph 3.
(e) Failure to Comply
-----------------
If the Executive, for any reason other than death or disability, shall,
without the written consent of the Company, fail to comply with any provision of
this paragraph 3, his rights to any future payments or other benefits hereunder
shall terminate, and the Company's obligations to make such payments and provide
such benefits shall cease; provided, however, that no failure to comply with any
provision of this paragraph 3 shall be deemed to have occurred unless and until
the Executive shall have received written notice on behalf of the Board of
Directors of the Company, specifying the conduct alleged to constitute such
failure, and has thereafter continued to engage in such conduct after a
reasonable opportunity and a reasonable period, but in no event more than sixty
days after receipt of such notice, to refrain from such conduct. In no event
shall the Executive be under any obligation to repay to the Company any amounts
theretofore paid to him.
(f) Competition
-----------
If, following termination of the Executive's employment by the Company,
he should, without the written consent of the Company, engage in competition
with any of the businesses in which the Company, its subsidiaries or affiliates
may be engaged at the time of termination of his employment, and if such
competition should be materially detrimental to the Company, its subsidiaries or
affiliates, the Executive's rights to any future payments and benefits hereunder
will terminate and the Company's obligations to make such payments and provide
such benefits will cease; provided, however, that the Executive shall in no
event be deemed to have engaged in such competition unless and until he shall
have received written
5
<PAGE>
notice on behalf of the Board of Directors of the Company, specifying with
particularity the conduct alleged to constitute such competition, and shall have
thereafter continued to engage in such conduct after a reasonable opportunity
and a reasonable period to refrain from such conduct. In no event shall the
Executive be under any obligation to repay the Company any amounts theretofore
paid to him.
(g) Post-termination Default in Payments or Benefits
------------------------------------------------
If, after the Executive ceases to be an employee of the Company, the
Company should (i) default in payment of all or any part of the payments
required to be made hereunder or under the Legal Expense Agreement, or (ii) fail
to pay for or provide any benefits required to be provided hereunder, and if the
Company should not remedy such default or failure within thirty (30) days after
having received notice of such default or failure from the Executive, his
spouse, or such other person or entity who or which is entitled thereto, the
applicable payments or benefits set forth in Exhibit B shall, at the sole
---------
election of the Executive, his spouse, or such other person or entity then
entitled thereto, exercised in writing signed by the Executive, his spouse or
such other person or entity, and delivered to the Company within 90 days after
the expiration of such thirty-day period, be accelerated and become immediately
due and payable in a lump sum equal to the total of (x) the severance payment
set forth in Exhibit B, if applicable, (y) the cost of acquiring insurance
---------
policies which would provide the disability, medical and dental coverages set
forth in Exhibit B, if applicable, and (z) all amounts, if any, payable under
---------
the excess benefit and supplemental retirement plans set forth in Exhibit B in
---------
an actuarially equivalent lump sum calculated by utilizing the UP-1984 Table (or
such other pensioner annuity mortality table as the Company with the Executive's
written consent or, following his death, his spouse's consent, shall determine)
and the associated Uniform Seniority Table for the determination of joint life
expectancies, where appropriate, regarding the life expectancy of the Executive
and his spouse and discounted to a present value amount by applying a discount
rate, equal to the arithmetic average of (i.e., one-twelfth of the sum of) the
single employer interest rates for immediate annuities promulgated by the
Pension Benefit Guaranty Corporation each month during the calendar year
immediately preceding the date of payment as set forth in Appendix B to Part
2619 of 29 Code of Federal Regulations or such successor to such Appendix B as
may be in effect on such date, to all such retirement payments which otherwise
would become due thereafter. In the event the election referred to in the
preceding sentence has been made, then the total amount due and payable from the
Company pursuant to this subparagraph shall be the sum of all accelerated
amounts, together with any expenses incurred in enforcing payment thereof
(including all reasonable legal fees). In making the foregoing retirement
payment calculations, the intent is to compute a lump sum amount which will
provide the Executive and his spouse with the same amount, after deduction of
all federal, state and municipal income taxes, as he and she would have
retained, after all such income taxes, had payments and benefits been made and
provided as originally scheduled and without acceleration. It is understood and
agreed that this subparagraph 3(g) shall not apply to any default or failure to
pay, as described in the first sentence of this subparagraph 3(g), which occurs
during the Executive's period of employment; upon any such default or failure to
pay, the Executive shall be entitled to such payments as may be applicable
pursuant to subparagraph 1(a).
4. Determination of Benefits
-------------------------
Whenever under this Agreement it is necessary to determine whether one
benefit is less than, equal to or larger than another, whether or not such
benefits are provided under this Agreement, such determination shall be made by
the Company's independent consulting
6
<PAGE>
actuary, using mortality, interest and any other assumptions normally used at
the time by such actuary in determining actuarial equivalents for the purpose of
employee benefit plans of the Company.
5. (a) Time of Payment
---------------
Anything in this Agreement to the contrary notwithstanding, the Company
may, for its own administrative convenience or for any other reason deemed by it
sufficient, accelerate payment to the Executive of any sums due under this
Agreement following termination of his employment; provided, however, that
payments by the Company under this Agreement in any one calendar year shall not,
as a result of such acceleration, together with any payments required to be made
under the pension plan of the Company, exceed an amount equal to (i) 80 percent
of his monthly rate of salary paid for the last full calendar month of his
employment, multiplied by (ii) the number 12.
(b) Withholding of Taxes
--------------------
The Company may withhold from any benefits payable under this Agreement all
federal, state, city or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
6. Decisions by Company
--------------------
Except as otherwise expressly provided in this Agreement, any decision or
action by the Company relating to this Agreement, its operation or its
termination, shall be made by the Board of Directors. Any decision or action of
such Board shall, to the extent permitted by law, be by the affirmative vote of
not less than three-fourths of the members of the Board of Directors then in
office; provided, however, that in the event of any dispute as to any benefit
payable under this Agreement, the Executive shall have the same rights as a
Participant under the Company's pension plan in effect at the time with respect
to the method of determining such dispute and enforcing his rights with respect
thereto.
7. Prior Agreements
----------------
This Agreement shall supersede any prior employment and severance agreement
between the Company or any predecessor of the Company and the Executive, but
this Agreement shall not affect or operate to reduce any benefit or compensation
of a kind not expressly provided for in this Agreement, including, without
limitation, any employee stock option or stock appreciation right and any
agreements under the Company's Restricted Share Performance Plan.
8. Consolidation or Merger
-----------------------
Nothing in this Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all of its assets to,
another corporation which assumes this Agreement and all obligations of the
Company hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the term, "Company", shall refer to such other corporation and this
Agreement shall continue in full force and effect.
9. (a) Non-assignability
-----------------
Neither this Agreement nor any right or interest hereunder shall be
assignable by the Executive or the beneficiaries of the Executive or by his
legal representatives without the Company's prior written consent; provided,
however, that nothing in this subparagraph 9(a) shall preclude (i) the Executive
from designating a beneficiary to receive any benefit payable on his death, and
(ii) the legal representatives of the estate of the Executive from assigning any
rights hereunder to the person or persons entitled thereto under his will or, in
the case of intestacy, to the person or persons entitled thereto under the laws
of intestacy applicable to his estate.
7
<PAGE>
(b) No Attachment
-------------
Except as otherwise required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrances, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
(c) Binding Agreement
-----------------
This Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns.
(d) Unfunded Obligations; Trust Agreement
-------------------------------------
(i) All payments to be made hereunder shall be made from the general
funds of the Company. To the extent that any person or entity acquires a right
to receive any payment hereunder, such right shall be no greater than the right
of an unsecured general creditor of the Company except to the extent otherwise
provided by law. No person who is entitled to payments hereunder shall have any
right, title or interest in or to any assets or investments which may be
acquired or made by the Company to aid it in meeting its obligations hereunder.
(ii) Anything in this subparagraph 9(d) or elsewhere in this
Agreement to the contrary notwithstanding, the Company may provide the Executive
with collateral security, in the form of a bank letter of credit, an interest in
a trust or otherwise, to secure a portion of any or all of the Company's
obligations to the Executive under this Agreement and any other agreement. In
this connection, the Company agrees that as soon as practicable it will enter
into a Trust Agreement substantially in the form attached hereto as Exhibit C
----------
and, under the circumstances and upon the terms and conditions set forth
therein, the Executive will be a beneficiary under the Trust therein
established, this Agreement and the Legal Expense Agreement (and its related
memorandum) will be listed on Exhibit I of such Trust Agreement, the amounts to
be deposited with the trustee under the Trust Agreement shall be those set forth
on the Schedule of Amounts to be Deposited in Trust Upon a Potential Change in
Control, a copy of which is attached hereto as Exhibit D, and any other benefits
---------
which the Company, in its sole discretion, shall agree to secure by the Trust
Agreement.
(iii) If a Potential Change in Control should take place while the
Executive is in the employ of the Company, the value of the benefits set forth
in Exhibit D to be delivered by the Company to the trustee under such Trust
---------
Agreement shall be equal to the total of (x) the severance, options,
contingently credited shares and legal expenses payments set forth in Exhibit D,
---------
(y) the cost of acquiring insurance policies which would provide the disability,
medical and dental coverages set forth in Exhibit D, and (z) all amounts, if
---------
any, payable under the excess benefit and supplemental retirement plans payments
(as described in subparagraph 1(a)(iv) above) set forth in Exhibit D.
---------
(iv) The value of the excess benefit and supplemental retirement plans
payments shall be an actuarially equivalent amount calculated by utilizing the
UP-1984 Table (or such other pensioner annuity mortality table as the Company
with the Executive's written consent, or following his death, his spouse's
consent, shall determine) and the associated Uniform Seniority Table for the
determination of joint life expectancies, where appropriate, regarding the life
expectancy of the Executive and his spouse, and discounted to a present value
amount by applying a discount rate, equal to the single employer interest rate
for immediate annuities of the Pension Benefit Guaranty Corporation in effect on
the date of payment as set forth in Appendix B to Part 2619 of 29 Code of
Federal Regulations or such successor to such Appendix B as may be in effect on
such date, to all such retirement
8
<PAGE>
benefits which otherwise would become due thereafter. In making the foregoing
retirement payment calculations, the intent is to compute a lump sum payment
which will provide the Executive and his spouse with the same amount of
benefit, after deduction of all federal, state and municipal income taxes, as he
and she would have retained, after all such income taxes, had payments been made
as originally scheduled and without acceleration.
(v) Anything in this subparagraph 9(d) or elsewhere in this Agreement
to the contrary notwithstanding, the amount to be paid by the Company to the
trustee pursuant to the preceding provisions of this subparagraph 9(d) shall be
reduced by the amount, if any, that the Board of Directors of the Company
expressly determines, in its sole discretion on the advice of the Company's
independent public accountants or its tax counsel or other experts selected by
the Board of Directors, as a result of the application of the provisions of
paragraph 14 below, is not expected to be paid by the trustee to the Executive
and his beneficiary or beneficiaries.
(vi) The Company shall continue to be liable to make all payments and
provide all benefits required to be made and provided hereunder to the extent
such payments have not been made or such benefits have not been provided through
the above-mentioned trust. (vii) For purposes of this Agreement, a "Potential
Change in Control" shall be deemed to have occurred if
(A) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the Company;
(B) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a Change in Control of the Company;
(C) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes
the beneficial owner, directly or indirectly, of securities of the
Company representing ten percent (10%) or more of the combined voting
power of the Company's then outstanding securities; or
(D) the Board of Directors adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control of the
Company has occurred.
10. (a) Amendment of Agreement
----------------------
No amendment or modification of this Agreement shall be deemed effective
unless and until executed in writing.
(b) No Waiver
---------
No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel to enforce any provision of this Agreement,
except by written instrument of the party charged with such waiver or estoppel.
Any written waiver shall not be deemed a continuing waiver unless specifically
stated, shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
11. Severability
------------
If for any reason any provision of this Agreement shall be held invalid,
such invalidity shall not affect any other provision of this Agreement not held
so invalid, and all other such provisions shall to the full extent consistent
with law continue in full force and effect. If any such provision shall be held
invalid in part, such invalidity shall in no way affect the rest of such
provision not held so invalid, and the rest of such provision, together with all
other provisions of this Agreement, shall likewise to the full extent consistent
with law continue in full force and effect.
9
<PAGE>
12. Headings
--------
The headings of paragraphs are included solely for convenience of reference
and shall not control the meaning or interpretation of any of the provisions of
this Agreement.
13. Governing Law
-------------
The validity, interpretation, construction, performance and enforcement of
this Agreement shall be governed by the laws of the State of New York without
giving effect to the principles of conflict of laws thereof.
14. Parachute Tax
-------------
If the payments and benefits provided for the Executive under this
Agreement, together with any other payments and benefits that the Executive may
have a right to receive from the Company or any other person or entity, would
result in "excess parachute payments" (as defined in Section 280G of the Code),
the payments and benefits to be made and provided to the Executive and his
beneficiary or beneficiaries pursuant to this Agreement shall be reduced to the
largest whole-dollar amount that will result in there being no such "excess
parachute payment." The existence or absence of any such "excess parachute
payment," the amount of any such reduction, and the item or items to be reduced,
if any, shall be determined, in each case, by the Executive or, following his
death, his beneficiary or beneficiaries, and the specifics of such determination
shall be delivered in writing to the Company and to the trustee of the Trust
referred to in subparagraph 9(d)(ii) above, at the time of the Executive's
termination within three years after a Change in Control, or as soon as
practicable thereafter, by the Executive or, following his death, his
beneficiary or beneficiaries. The reasonable fees and expenses of such tax
counsel and financial advisor as may reasonably be called upon to assist the
Executive or his beneficiary or beneficiaries in the foregoing endeavors shall
be paid by the Company.
15. Notices
-------
All notices, requests, demands and other communications provided for by
this Agreement shall be in writing and shall be sufficiently given if and when
mailed in the continental United States by registered or certified mail, return
receipt requested, or personally delivered to the party entitled thereto at the
address stated below, which address shall be such address as the addressee may
have given most recently by a similar notice. Any such notice shall be deemed
to have been received on the date of delivery.
To the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
To the Executive: Mr. Mark A. Fuller, Jr.
One Champion Plaza
Stamford, CT 06921
16. Arbitration
-----------
Any dispute between the Executive and the Company as to the interpretation
or application of any of the provisions of this Agreement may, at the
Executive's election, be determined by binding arbitration within the greater
New York City metropolitan area or the State of Connecticut in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court of competent jurisdiction.
All fees and expenses of such arbitration shall be paid by the Company subject
to repayment by the Executive if and to the extent that a judgment should be
rendered against him beyond appeal and such fees and expenses were not incurred
by him while acting in good faith.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has signed this Agreement,
all as of February 19, 1987.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
----------------------------------
Chairman of the Board of Directors
Attest:
/s/ Lawrence A. Fox
- --------------------------------
Assistant Secretary
/s/ Mark A. Fuller, Jr.
-------------------------------
Mark A. Fuller, Jr.
11
<PAGE>
Exhibit A
---------
[subparagraph 1(a)(ii)(y)]
Schedule of Certain Benefit Coverages during the
Severance Payment Period under Subparagraph 1(a)(i)
after a Termination following a Change in Control
---------------------------------------------------
` Disability: Same as for active employees.
` Medical: Same as for active employees
less retiree medical benefit,
if any.
` Dental: Same as for active employees.
For other benefit coverages after termination following a Change in
Control, see subparagraph 1(a)(ii)(x) and (z).
o0o
<PAGE>
Exhibit B
---------
[subparagraph 3(g)]
Schedule of Payments and Benefits upon
a Breach after Cessation of Employment
--------------------------------------
` Severance: 2 years termination payments (or the unpaid balance
thereof); however, payments not to cover the period, if
any, after the last day of the month next preceeding the
Executive's normal retirement date under the Company's
pension plan. Payments are based on highest total of
salary and annual bonus for any calendar year of
employment.
` Retirement: All unpaid amounts, if any, payable under the excess
benefit and supplemental retirement plans of the
Company.
` Disability: Same as for active employees, during the 2 year
termination payment period or balance thereof.
` Medical: Same as for active employees less retiree medical
benefit, if any, during the 2 year termination payment
period or balance thereof.
` Dental: Same as for active employees, during the 2 year
termination payment period or balance thereof.
o0o
<PAGE>
Exhibit C
---------
[subparagraph 9(d)]
FORM OF TRUST AGREEMENT
-----------------------
TRUST AGREEMENT (the "Trust"), dated as of February 19, 1987, by and
between Champion International Corporation, a New York corporation (the
"Company"), and Connecticut National Bank (the "Trustee").
WHEREAS, the Company is obligated under the individual agreements set
forth on Exhibit I (together with any additional agreements included on Exhibit
I pursuant to Section 2.01(c) hereof, the "Agreements") to make specified
payments to certain of the Company's executives (together with any additional
executives and retired executives included on Exhibit I pursuant to Section
2.01(c) hereof, the "Executives"); and
WHEREAS, the aforesaid obligations of the Company are not funded or
otherwise secured, and the Company has agreed, to the extent practicable, to
assure that the future payment of certain of said obligations will not be
improperly withheld in the event that a "Change in Control" (as defined herein)
of the Company should occur; and
WHEREAS, for purposes of assuring that such payments will not be
improperly withheld, the Company desires to deposit with the Trustee, subject
only to the claims of the Company's existing or future general creditors in the
event of bankruptcy or insolvency (as hereinafter provided), amounts of cash or
marketable securities sufficient to fund such payments;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the parties hereto agree
as follows:
ARTICLE I
THE AGREEMENTS
--------------
SECTION 1.01 Agreements. The agreements subject to this Trust
------------------------
consist of the Agreements listed from time to time on Exhibit I hereof
respectively. The Company shall continue to be liable to the Executives to make
all payments required under the terms of such Agreements to the extent such
payments have not been made pursuant to this Trust.
ARTICLE II
TRUST AND THE TRUST CORPUS
--------------------------
SECTION 2.01 Trust.
-----
(a) The Company will deliver to the Trustee to be held in trust
hereunder, concurrently with the execution of this Trust, the sum of $100 in
cash, and upon the occurrence of a "Potential Change in Control" (as defined in
Section 3.02), (i) an additional amount in cash (or in marketable securities
having a fair market value equal to such amount, or some combination thereof)
representing the sum of the amounts, determined as provided in Section 4.02,
which is estimated to be sufficient to fund the Company's obligations to pay to
the Executives certain amounts and benefits due to them pursuant to the
Agreements and (ii) an amount estimated by the Trustee to be sufficient to pay
all of the Trustee's fees and expenses hereunder with respect to the period of
time that this Trust Agreement shall be in effect.
(b) The payment by the Company pursuant to Section 2.01(a)(i) hereof
shall be accompanied by a Payment Schedule for each Executive as required by
Section 4.02(a) hereof.
(c) The Company may, subject to the provisions of Section 2.01(d),
from time to time prior to the occurrence of a Change in Control revise Exhibit
I in order to include thereon (A) additional Executives, and (B) additional
Agreements
1
<PAGE>
with respect to any Executive. If a revised Exhibit I is delivered to the
Trustee with respect to any Executive upon or after the occurrence of a
Potential Change in Control, the Company will deliver to the Trustee,
concurrently with such revised Exhibit I:
(x) a Payment Schedule or a revised Payment Schedule, as applicable,
with respect to such Executive which complies with Section
4.02(a) and which sets forth the additional amount delivered to
the Trustee with respect to such Executive, and
(y) an amount which is estimated to be sufficient when added to the
amount or amounts previously delivered to the Trustee to fund the
Company's obligations under the Payment Schedule or the revised
Payment Schedule, as applicable, pursuant to such Executive's
Agreements.
Such Payment Schedule or revised Payment Schedule shall be effective in
accordance with the provisions of Section 4.02(b). A revised Exhibit I shall be
effective upon the later of (C) receipt by Trustee of such revised Exhibit I and
(D) receipt by the Trustee of all amounts required under this Section 2.01(c),
if any, and such revised Exhibit I shall supersede any and all such Exhibits
previously delivered to the Trustee.
(d) In no event may Exhibit I be revised to eliminate any Executive
or any Agreements with respect to any Executive without such Executive's written
consent, except as provided in the following sentence. Prior to the occurrence
of a Change in Control, the Company shall deliver instructions to the Trustee to
delete the name of, and the Agreements with respect to, an Executive from
Exhibit I promptly following the termination of his employment with the Company
prior to the occurrence of a Change in Control. The Trustee shall make such
deletions and shall be able to rely upon such instructions and shall have no
duty to inquire with respect to the termination of such Executive's employment
with the Company. The deletions described in the immediately preceding sentence
may not be made with respect to instructions delivered to the Trustee on or
after the occurrence of a Change in Control of the Company. Notwithstanding the
foregoing, following a Potential Change in Control the Company may, in its
discretion, add retired Executives and their agreements with the Company to
Exhibit I in accordance with Section 2.01(c) to assure that the payment of
certain amounts payable by the Company to such retired Executives under such
agreements will not be improperly withheld following a Change in Control.
SECTION 2.02 Trust Corpus.
------------
(a) As used herein, the term "Trust Corpus" shall mean the amounts
delivered to the Trustee as described in Section 2.01 and 4.02(b) hereof in
whatever form held or invested as provided herein. The Trust Corpus shall be
held, invested and reinvested by the Trustee in cash or marketable securities
only in accordance with this Section 2.02. The Trustee shall use its good faith
efforts to invest or reinvest from time to time all or such part of the Trust
Corpus as it believes prudent under the circumstances in either one or a
combination of the following investments:
(i) investments in direct obligations of the United
States of America or agencies of the United States of America
or obligations unconditionally and fully guaranteed as to
principal and interest by the United States of America, in each
case maturing within one year or less from the date of
acquisition; or
2
<PAGE>
(ii) investments in negotiable certificates of deposit
(in each case maturing within one (1) year or less from the
date of acquisition) issued by a commercial bank organized and
existing under the laws of the United States of America or any
state thereof having a combined capital and surplus of at least
$1,000,000,000, including the Trustee's banking department;
provided, however, that the Trustee shall not be liable for any failure to
- -----------------
maximize the income earned on that portion of the Trust Corpus as is from time
to time invested or reinvested as set forth above, nor for any loss of income
due to liquidation of any investment which the Trustee, in its sole discretion,
believes necessary to make payments or to reimburse expenses under the terms of
this Trust.
(b) The Trust is intended to be grantor trust within the meaning of
Section 671 of the Internal Revenue Code of 1986, as amended (the "Code"),
except as hereinafter provided, all interest and other income earned on the
investment of the Trust Corpus shall be the property of the Company and shall
not constitute a part of the Trust Corpus. Except as provided in Section
4.02(a), the interest and other income earned in any calendar quarter shall be
paid over to the Company by the Trustee as promptly as practicable after the end
of such calendar quarter.
(c) All losses of principal in respect of, and expenses (including,
as provided in Section 5.01(g) hereof, any expenses of the Trustee) charged
against, the Trust Corpus shall be for the account of the Company and the
Company shall be obligated to promptly reimburse the Trust Corpus for any loss
in principal amount of, or expense charged against, the Trust Corpus except to
the extent that such amounts have been applied to reduce amounts payable to the
Company pursuant to Section 2.02(b) hereof. To the extent any such losses and
expenses are not reimbursed by the Company, the aggregate amount payable to an
Executive under the applicable Payment Schedule shall be reduced by a portion of
such losses and expenses, as determined on a pro rata basis.
ARTICLE III
CHANGE IN CONTROL
-----------------
SECTION 3.01 Definition of Change in Control.
-------------------------------
For purposes of this Trust, a Change in Control of the Company shall be deemed
to have occurred if
(a) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities;
(b) during any period within two (2) consecutive years (not including
any period prior to the Company's 1987 Annual Meeting of Shareholders) there
shall cease to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
3
<PAGE>
(c) the shareholders of the Company approve (i) a plan of complete
liquidation of the Company or (ii) the sale or other disposition of all or
substantially all the Company's assets.
SECTION 3.02 Definition of a Potential Change in Control. For
-------------------------------------------
purposes of this Trust, a Potential Change in Control shall be deemed to have
occurred if
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the Company;
(b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated would
constitute a Change in Control of the Company;
(c) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing ten percent (10%) or more of the combined voting power of the
Company's then outstanding securities; or
(d) the Board of Directors adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control of the Company has
occurred.
SECTION 3.03 Notification of the Trustee. The Company shall notify
---------------------------
the Trustee of the occurrence of a Potential Change in Control and the Company
shall or an Executive may notify the Trustee of the occurrence of a Change in
Control, and the Trustee may rely on such notice or on any other actual notice,
satisfactory to the Trustee, of such a change or potential change which the
Trustee may receive. The Trustee shall have no obligation to make an
independent determination as to the occurrence of a Potential Change in Control
or Change in Control.
ARTICLE IV
RELEASE OF THE TRUST CORPUS
---------------------------
The Trustee shall hold the Trust Corpus in its possession under the
provisions of this Trust Agreement until authorized to deliver the Trust Corpus
or any specified portion thereof as follows:
SECTION 4.01 Delivery to the Company.
-----------------------
(a) Any amount in excess of $100 delivered to the Trustee pursuant to
Section 2.01 hereof or otherwise constituting part of the Trust Corpus shall be
returned to the Company, unless within six (6) months of such delivery to the
Trustee a Change in Control shall have occurred. Such six month period shall be
renewed (i) for any Potential Change in Control which occurs during any initial
six month period or (ii) by a resolution adopted by the Board of Directors and
delivered to the Trustee by the Company to the effect that such an initial six
month period (or a six month period that is renewed in accordance with clause
(i) of this Section 4.01(a)) shall start anew.
(b) Any amount held by the Trustee for the benefit of an Executive
shall be paid to the Company immediately following the final payment of all
amounts payable to such Executive pursuant to the terms of the Executive's
Agreement, as certified to the Trustee by the Executive.
(c) Upon the termination of the Trust as provided in the first
sentence of Section 6.01(a), the Trustee shall pay to the Company the amount of
the Trust Corpus, less all payments, expenses, taxes and other charges under
this Trust Agreement as of such date of termination, provided that in the event
that the Trust shall continue with respect to one or more Executives in
accordance with the provisions of Section 6.01(b), the Trustee shall pay to the
Company the amount that would have been payable to the Company if the Trust had
terminated as provided in Section 6.01(a), less (i) the amounts subject to
litigation or arbitration for each such Executive, as certified to the Trustee
by each such Executive, and (ii) an amount
4
<PAGE>
estimated by the Trustee to be sufficient to pay all of the Trustee's fees and
expenses with respect to the additional period of time that the Trust shall
continue in effect pursuant to Section 6.01(b).
SECTION 4.02 Deliveries to Executives.
------------------------
(a) The Company shall deliver to the Trustee, upon the occurrence of
a Potential Change in Control, a separate schedule for each Executive (the
"Payment Schedule') indicating (x) the amounts delivered to the Trustee for the
benefit of each such Executive pursuant to Section 2.01(a)(i) in accordance with
such Executive's Agreements and (y) the amounts payable in respect of such
Executive, or providing a formula or instructions acceptable to the Trustee for
determining the amounts so payable. The Payment Schedule shall include
instructions as to the amount of interest, if any, accruing in respect of an
Executive and such instructions may be revised from time to time prior to the
occurrence of a Change in Control. Each Payment Schedule also shall be
delivered by the Company to such Executive. The aggregate payment to be made
hereunder to an Executive by the Trustee shall not exceed the aggregate amount
delivered to the Trustee for the benefit of such Executive as indicated in the
Payment Schedule applicable to such Executive. The Trustee shall make payments
to each Executive under the Payment Schedule applicable to such Executive upon
receipt by the Trustee of a written request for payment signed by the Executive
or, following his death, his beneficiary or beneficiaries. Such request shall
set forth each of the following items: (i) the specific amount of payment
requested, (ii) the specific Agreement or Agreements and the specific section or
sections of such Agreements under which such payment is to be made, (iii) the
existence or absence of any "excess parachute payment" (as defined in Section
280G of the Code) respecting the amount payable to such Executive in accordance
with the applicable Payment Schedule and (iv) the amount of any reduction in the
amount otherwise payable to such Executive in accordance with the applicable
Payment Schedule and the item or items to be reduced, if any. The Trustee shall
rely upon such written request in making payments under the Payment Schedule and
shall have no duty to inquire into the amounts, instructions or formulas set
forth in the Payment Schedule or the Executive's right to such payments.
(b) The Company may from time to time after the occurrence of a
Potential Change in Control deliver concurrently to the Trustee (i) a revised
Payment Schedule with respect to any Executive which sets forth the aggregate
amounts payable with respect to such Executive and (ii) an amount which is
estimated to be sufficient when added to the amount or amounts previously
delivered to the Trustee to fund the Company's obligations pursuant to such
Executive's Agreements. A revised Payment Schedule shall be effective upon the
later of (x) receipt by the Trustee of such revised Payment Schedule and (y)
receipt by the Trustee of all amounts required under Section 4.02(b)(ii) and
such revised Payment Schedule shall supersede any and all Payment Schedules
previously delivered by the Company to the Trustee with respect to such
Executive.
(c) Except as provided in this Section 4.02(c), a revised Payment
Schedule may not reduce the amounts payable with respect to an Executive
pursuant to the prior Payment Schedule for such Executive except with the
written consent of such Executive.
(i) After a Potential Change in Control and before a Change in Control,
the Company shall deliver to the Trustee, promptly following the
termination of an Executive's employment with the Company, a revised
Payment Schedule with respect to such Executive which deletes all of the
amounts set forth on the prior Payment Schedule for such Executive. The
Trustee may rely
5
<PAGE>
upon such revised Payment Schedule and shall have no duty to inquire with
respect to the termination of such Executive's employment with the Company.
The Trustee shall return to the Company all amounts previously delivered by
the Company to the Trustee for the benefit of such Executive.
Notwithstanding the foregoing, following a Potential Change in Control the
Company may, in its discretion, deliver Payment Schedules for retired
Executives in accordance with Section 4.02(a) hereof.
(ii) After a Potential Change in Control and before a Change in Control,
the Company may deliver a revised Payment Schedule with respect to an
Executive which reduces the amounts payable in respect of such Executive
pursuant to his prior Payment Schedule as the result of a more accurate
calculation by the Company of the amount of the benefits to which such
Executive is entitled pursuant to his Agreements. The Trustee may rely on
such revised Payment Schedule and shall have no duty to inquire with
respect to said calculation. The Trustee shall return to the Company an
amount equal to such reduction.
A revised Payment Schedule of the type described in this Section 4.02(c) may not
be delivered to, or honored by, the Trustee on or after the occurrence of a
Change in Control of the Company. A revised Payment Schedule shall be effective
upon its receipt by the Trustee and shall supersede any and all Payment
Schedules previously delivered by the Company to the Trustee with respect to
such Executive.
(d) The Trustee shall be permitted to withhold from any payment due
to an Executive hereunder the amount required by law to be so withheld under
federal, state and local withholding requirements or otherwise, and shall pay
over to the appropriate government authority the amounts so withheld. The
Trustee may rely on instructions from the Company as to any required withholding
and shall be fully protected under Section 5.01(g) hereof in relying on such
instructions.
(e) Except as otherwise provided herein, in the event of any final
determination by the Internal Revenue Service or a court of competent
jurisdiction, which determination is not appealable or the time for appeal or
protest of which has expired, or the receipt by the Trustee of a substantially
unqualified opinion of tax counsel selected by the Trustee with the written
consent of the Company, which determination determines, or which opinion
concludes, that the Executives or any particular Executive, is subject to
federal income taxation on amounts held in Trust hereunder prior to the
distribution to the Executives or Executive of such amounts, the Trustee shall,
on receipt by the Trustee of such opinion or notice of such determination, pay
to each Executive the portion of the Trust Corpus includible in such Executive's
federal gross income.
SECTION 4.03 Deliveries to Creditors of the Company. It is the
--------------------------------------
intent of the parties hereto that the Trust Corpus is and shall remain at all
times subject to the claims of the general creditors of the Company in the event
of bankruptcy or insolvency as hereinafter provided, but in no other event.
Accordingly, the Company shall not create a security interest in the Trust
Corpus in favor of the Executives or any creditor. If the Trustee receives the
notice provided for in Section 4.04 hereof, or otherwise receives actual notice
that the Company is insolvent or bankrupt as defined in Section 4.04 hereof, the
Trustee will make no further distributions of the Trust Corpus to any of the
Executives but will deliver the entire amount of the Trust Corpus only as a
court of competent jurisdiction, or duly appointed receiver or other person
authorized to act by such a court, may direct to make the Trust Corpus available
to satisfy the claims of the Company's general creditors. The Trustee shall
resume
6
<PAGE>
holding the Trust Corpus under the terms hereof and resume any distribution of
Trust Corpus to the Executives under the terms hereof, upon no less than thirty
(30) days advance notice to the Company, if it determines that the Company was
not, or is no longer, bankrupt or insolvent. Unless the Trustee has actual
knowledge of the Company's bankruptcy or insolvency, the Trustee shall have no
duty to inquire whether the Company is bankrupt or insolvent.
SECTION 4.04 Notification of Bankruptcy or Insolvency. The Company,
----------------------------------------
through its Board of Directors and Chief Executive Officer, shall advise the
Trustee promptly in writing of the Company's bankruptcy or insolvency. The
Company shall be deemed to be bankrupt or insolvent in the following
circumstances:
(a) The Company is subject to a pending proceeding as a debtor under
the Bankruptcy Reform Act of 1978, as amended; or
(b) The Company shall generally not pay its debts as such debts
become due or shall cease to pay its debts in the ordinary course of business.
ARTICLE V
TRUSTEE
-------
SECTION 5.01 Trustee.
-------
(a) The duties and responsibilities of the Trustee shall be limited
to those expressly set forth in this Trust, and no implied covenants or
obligations shall be read into this Trust against the Trustee.
(b) If all or any part of the Trust Corpus is at any time attached,
garnished, or levied upon by any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by a court affecting such property or any part thereof,
then and in any of such events the Trustee is authorized, in its sole
discretion, to rely upon and comply with any such order, judgment or decree, and
it shall not be liable to the Company or any Executive by reason of such
compliance even though such order, judgment or decree subsequently may be
reversed, modified, annulled, set aside or vacated.
(c) The Trustee shall maintain such books, records and accounts as
may be necessary for the proper administration of the Trust Corpus, including,
without limitation, as provided in Article II hereof, and shall render to the
Company, on or prior to each January 31 following the date of this Trust until
the termination of this Trust (and on the date of such termination), an
accounting with respect to the Trust Corpus as of the end of the then most
recent calendar year (and as of the date of such termination). The Trustee will
at all times maintain a separate bookkeeping account for each Executive to which
it will credit each amount delivered by the Company to the Trustee with respect
to such Executive. Upon the written request of an Executive or the Company, the
Trustee shall deliver to such Executive or the Company, as the case may be, a
written report setting forth the amount held in the Trust for such Executive (or
each Executive if such request is made by the Company) and a record of the
deposits made with respect thereto by the Company. Unless the Company or any
Executive shall have filed with the Trustee written exceptions or objections to
any such statement and account within one hundred eighty (180) days after
receipt thereof, the Company or the Executive shall be deemed to have approved
such statement and account, and in such case the Trustee shall be forever
released and discharged with respect to all matters and things reported in such
statement and account as though it had been settled by a decree of a court of
competent jurisdiction in an action or proceeding to which the Company and the
Executive were parties.
(d) The Trustee shall not be liable for any act taken or omitted to
be taken hereunder if taken or omitted to be taken by it in good faith, absent
the gross
7
<PAGE>
negligence or wilful misconduct of the Trustee. The Trustee shall also be fully
protected in relying upon any notice given hereunder which it in good faith
believes to be genuine and executed and delivered in accordance with this Trust.
(e) The Trustee may consult with legal counsel to be selected by it,
and the Trustee shall not be liable for any action taken or suffered by it in
accordance with the advice of such counsel.
(f) The Trustee shall be reimbursed by the Company for its reasonable
expenses incurred in connection with the performance of its duties hereunder and
shall be paid reasonable fees for the performance of such duties in the manner
provided by paragraph (g) of this Section 5.01.
(g) The Company agrees to indemnify and hold harmless the Trustee
from and against any and all damages, losses, claims or expenses as incurred
(including expenses of investigation and fees and disbursements of counsel to
the Trustee and any taxes imposed on the Trust Corpus or income of the Trust)
arising out of or in connection with the performance by the Trustee of its
duties hereunder, other than such damages, losses, claims or expenses arising
out of the Trustee's gross negligence or wilful misconduct. Any amount payable
to the Trustee under paragraph (f) of this Section 5.01 or this paragraph (g)
shall be paid by the Company promptly upon demand therefor by the Trustee or, in
the event that the Company fails to make such payment, from the Trust Corpus.
In the event that payment is made hereunder to the Trustee from the Trust
Corpus, the Trustee shall promptly notify the Company in writing of the amount
of such payment. The Company agrees that, upon receipt of such notice, it will
deliver to the Trustee to be held in the Trust an amount in cash (or in
marketable securities or in some combination thereof) equal to any payments made
from the Trust Corpus to the Trustee pursuant to paragraph (f) of this Section
5.01 or this paragraph (g). The failure of the Company to transfer any such
amount shall not in any way impair the Trustee's right to indemnification,
reimbursement and payment pursuant to paragraph (f) of this Section 5.01 or this
paragraph (g).
SECTION 5.02 Successor Trustee. The Trustee may resign and be
-----------------
discharged from its duties hereunder at any time by giving notice in writing of
such resignation to the Company and each Executive specifying a date (not less
than thirty (30) days after the giving of such notice) when such resignation
shall take effect. Promptly after such notice, the Company (or, if a Change in
Control shall previously have occurred, Executive(s) having at least 65%
percent of all amounts then held in the Trust credited to their accounts shall
appoint a successor trustee, such trustee to become Trustee hereunder upon the
resignation date specified in such notice. If the Company fails to appoint a
successor trustee or if such Executive(s) are unable to so agree upon a
successor trustee within thirty (30) days after such notice, the Trustee shall
be entitled, at the expense of the Company, to petition a United States
District Court or any of the courts of the State of New York having
jurisdiction to appoint its successor. The Trustee shall continue to serve
until its successor accepts the trust and receives delivery of the Trust
Corpus. The Company (or, if a Change in Control shall previously have
occurred, Executive(s) having at least 65% percent of all amounts then held in
the Trust credited to their accounts) may at any time substitute a new trustee
by giving fifteen (15) days notice thereof to the Trustee then acting. In the
event of such removal or resignation, the Trustee shall duly file with the
Company and, on and after a Change in Control, the Executives a written
statement or statements of accounts and proceedings as provided in Section
5.01(c) hereof for the period since the last previous annual accounting of the
Trust, and if written objection to such account is not filed as provided in
Section 5.01(c) hereof, the Trustee shall to the maximum extent
8
<PAGE>
permitted by applicable law be forever released and discharged from all
liability and accountability with respect to the propriety of its acts and
transactions shown in such account. The Trustee and any successor thereto
appointed hereunder shall be a commercial bank which is not an affiliate of the
Company, but which is a national banking association or established under the
laws of one of the states of the United States, and which has equity in excess
of $100 million.
SECTION 5.03 Settlement of Accounts. Notwithstanding any other
----------------------
provision of this Agreement, in the event of the termination of the Trust, or
the resignation or discharge of the Trustee, the Trustee shall have the right
to a settlement of its accounts, which accounting may be made, at the option of
the Trustee, either (a) by a judicial settlement in a court of competent
jurisdiction; or (b) by agreement of settlement, release and indemnity from the
Company to the Trustee.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 6.01 Termination.
-------------------------
(a) Except as provided in Section 6.01(b) of this Agreement, this
Trust shall terminate forty-two months after the occurrence of a Change in
Control, or, if earlier, upon the earliest of either of the following events:
(i) the exhaustion of the Trust Corpus; or (ii) the final payment of all
amounts payable to all of the Executives pursuant to the Agreements, as
certified to the Trustee by each Executive. Promptly upon termination of this
Trust, any remaining portion of the Trust Corpus, less all payments, expenses,
taxes and other charges under this Trust Agreement as of such date of
termination, shall be paid to the Company.
(b) Notwithstanding any other provision of this Agreement, in the
situation where the payments under an Executive's Agreements are the subject of
litigation or arbitration, and if the Trust Corpus has not been exhausted with
respect to such Executive, the Trust shall not terminate and the funds held in
the Trust with respect to such Executive shall continue to be held by the
Trustee until the final resolution of such litigation or arbitration. The
Trustee may assume that no Agreement of an Executive is the subject of such
litigation or arbitration unless the Trustee receives written notice from an
Executive or the Company with respect to such litigation or arbitration. The
Trustee may rely upon written notice from an Executive as to the final
resolution of such litigation or arbitration. Following such final resolution,
the Trust shall terminate with respect to each Executive described in this
Section 6.01(b) upon the earliest of either of the following events: (i) the
exhaustion of the Trust Corpus held by the Trustee with respect to such
Executive; or (ii) the final payment of all amounts payable to the Executive
pursuant to such Executive's Agreements, as certified to the Trustee by such
Executive. Promptly upon termination of this Trust with respect to an
Executive described in Section 6.01(b), any remaining portion of the Trust
Corpus held by the Trustee with respect to such Executive shall be paid to the
Company. At such time as the Trust shall be terminated with respect to all
such Executives, the Trust Corpus, less all payments, expenses, taxes and other
charges attributable to the extension of the Trust term beyond the termination
date described in Section 6.01(a), shall be paid promptly to the Company.
SECTION 6.02 Amendment and Waiver. Except as provided in Sections
--------------------
2.01(c),(d) and 4.02(b),(c), this Trust may not be amended except by an
instrument in writing signed on behalf of the parties hereto together with the
written consent of Executives having at least 65% of all amounts then held in
the Trust credited to their accounts. The parties hereto, together with the
consent of Executives having at least 65% of all amounts then held in the Trust
credited to their accounts,
9
<PAGE>
may at any time waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto or an Executive
to any such waiver shall
be valid if set forth in an instrument in writing signed on behalf of such party
or Executive. This Trust may not be amended nor may compliance with any
provisions hereunder be waived except by an instrument in writing signed on
behalf of the parties hereto and by at least seventy-five percent (75%) of the
Executives in the situation where, prior to such amendment or waiver, no payment
has been made by the Company pursuant to Section 2.01(a)(i) that is then held by
the Trustee. Notwithstanding the foregoing, any such amendment or waiver may be
made prior to a Change in Control by written agreement of the parties hereto
without obtaining the consent of the Executives if such amendment or waiver does
not adversely affect the rights of the Executives hereunder. Except as provided
in Sections 2.01(c),(d) and 4.02(b),(c), no amendment or waiver relating to this
Trust may be made (i) with respect to the amount of funds to be delivered by the
Company to the Trustee with respect to an Executive or by the Trustee to such
Executive, or the timing of such deliveries or (ii) which amends Section 6.01,
unless such Executive, in the case of clause (i) or, all Executives in the case
of clause (ii), agree in writing to such amendment or waiver.
ARTICLE VII
GENERAL PROVISIONS
------------------
SECTION 7.01 Further Assurances. The Company shall, at any time and
------------------
from time to time, upon the reasonable request of the Trustee, execute and
deliver such further instruments and do such further acts as may be necessary or
proper to effectuate the purposes of this Trust.
SECTION 7.02 Certain Provisions Relating to this Trust. (a) This
-----------------------------------------
Trust sets forth the entire understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior agreements, arrangements
and understandings relating thereto. This Trust shall be binding upon and inure
to the benefit of the parties and their respective successors and legal
representatives.
(b) If by the end of the eight-month period following the date
hereof, or such later date as the Company and the Trustee shall agree, counsel
is unable to deliver to the Company a favorable opinion that is satisfactory to
the Company, substantially to the effect that
(i) the Company will be treated as the owner of the Trust under Section 677
of the Code and Section 1.677(a)-1(d) of the regulations. Under Section
671, the Company must include all of the income, deductions and credits
against tax of the Trust in computing its own taxable income and credits,
and
(ii) the transfer of assets to the Trust will not constitute a transfer
of property for purposes of Section 83 of the Code or Section 1.83-3(e) of
the regulations, and
(iii) under Section 451 of the Code, amounts will be includible in the
gross income of the Executives only in the taxable year or years in which
such amounts are actually distributed or made available by the Trustee,
the Trust shall immediately terminate and the amount of the Trust Corpus, less
all payments, expenses, taxes and other charges under this Trust Agreement, if
any, as of such date, shall be returned to the Company as soon as possible.
Upon termination of the Trust, the Executives shall have no rights under this
Trust Agreement.
(c) This Trust shall be governed by and construed in accordance with
the laws of the State of New York, other than and without reference to any
10
<PAGE>
provisions of such laws regarding choice of laws or conflict of laws.
(d) In the event that any provision of this Trust or the application
thereof to any person or circumstances shall be determined by a court of proper
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Trust, or the application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision of this Trust shall be valid and enforced
to the fullest extent permitted by law.
(e) The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.
SECTION 7.03 Alienation. The right of any Trust Beneficiary (as
----------
hereinafter defined) to any benefit or to any payment hereunder shall not be
subject to alienation or assignment.
SECTION 7.04 Arbitration. Any dispute between the Executives and
-----------
the Company or the Trustee as to the interpretation or application of the
provisions of this Trust and amounts payable hereunder may, at the election of
any party to such dispute (or, if more than one (1) Executive is such a party,
at the election of seventy-five percent (75%) of such Executives), be determined
by binding arbitration within the greater New York City metropolitan area or the
State of Connecticut in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court of competent jurisdiction. All fees and expenses of such
arbitration shall be paid by the Trustee and considered an expense of the Trust
under Section 5.01(g).
SECTION 7.05 Notices. Any notice, report, demand or waiver required
-------
or permitted hereunder shall be in writing and shall be given personally or by
prepaid registered or certified mail, return receipt requested, addressed as
follows:
If to the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
If to the Trustee: Connecticut National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Employee Benefits
Administration - MSN 215
If to an Executive, to the address of such Executive as listed next to his name
on Exhibit I hereto.
A notice shall be deemed received upon the date of delivery if given
personally or, if given by mail, upon the receipt thereof. A change of address
may be given by any party to another by similar notice.
SECTION 7.06 Trust Beneficiaries. Each Executive is an intended
-------------------
beneficiary ("Trust Beneficiary") under this Trust, and as a Trust Beneficiary
shall be entitled to enforce all terms and provisions hereof with the same force
and effect as if such person had been a party hereto. The term Trust
Beneficiary shall, to the extent provided in the Agreements respecting a
deceased Executive, also mean the legal representative of the estate of such
deceased Executive and the surviving spouse of the deceased Executive or
beneficiary designated by such Executive in accordance with the terms of such
Agreements.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Trust as of the
date first written above.
CHAMPION INTERNATIONALCORPORATION
By /s/ Andrew C. Sigler
----------------------------------------------
Andrew C. Sigler
Chairman and Chief Executive Officer
CONNECTICUT NATIONAL BANK
By /s/ Thomas F. Mullaney, Jr.
------------------------------------------
Thomas F. Mullaney, Jr.
Executive Vice-President
12
<PAGE>
Exhibit I
AGREEMENTS BETWEEN CHAMPION INTERNATIONAL
CORPORATION AND CERTAIN EXECUTIVES
<TABLE>
<CAPTION>
Agreement and
Name and Address Title Date of Agreement
- --------------------------- ------------------------ -------------------------
<S> <C> <C>
Mr. John A. Ball Senior Vice President February 19, 1987:
One Champion Plaza -Restated Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Gerald J. Beiser Senior Vice President- February 19, 1987:
One Champion Plaza Finance -Restated Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. William H. Burchfield Executive Vice President February 19, 1987:
One Champion Plaza -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Aubrey L. Cole Vice Chairman February 19, 1987:
One Champion Plaza -Restated Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Mark A. Fuller, Jr. Executive Vice President February 19, 1987:
One Champion Plaza -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Marvin H. Ginsky Senior Vice President February 19, 1987:
One Champion Plaza and General Counsel -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Judson Hannigan Senior Vice President February 19, 1987:
One Champion Plaza -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. L. C. Heist Executive Vice President February 19, 1987:
One Champion Plaza -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Robert F. Longbine President and Chief February 19, 1987:
One Champion Plaza Operating Officer -Restated Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Kenwood C. Nichols Senior Vice President February 19, 1987:
One Champion Plaza -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
Mr. Philip R. O'Connell Senior Vice President February 19, 1987:
One Champion Plaza and Secretary -Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
</TABLE>
<PAGE>
Mr. Andrew C. Sigler Chairman and Chief February 19, 1987:
One Champion Plaza Executive Officer -Restated Agreement
Stamford, CT 06921 -Agreement Relating to
Legal Expenses
_________________________
/1/ As Amended April 21, 1988 and August 18, 1988
/2/ As Amended April 21, 1988
/3/ As Amended August 18, 1988
-2-
<PAGE>
AMENDMENT TO
TRUST AGREEMENT DATED AS OF
FEBRUARY 19, 1987 BETWEEN CHAMPION
INTERNATIONAL CORPORATION AND CONNECTICUT NATIONAL BANK
-------------------------------------------------------
This Amendment between Champion International Corporation, a New York
corporation (the "Company"), and Connecticut National Bank (the "Trustee") is
effective as of August 18, 1988 and amends the Trust Agreement dated as of
February 19, 1987 between the Company and the Trustee (the "Trust").
WHEREAS, the Company and the Trustee have entered into the Trust; and
WHEREAS, the Company and the Trustee wish to amend the Trust in order to
(1) ensure that it is in compliance with the rule against perpetuities and with
applicable restraints on alienation, and (2) clarify the circumstances in which
interest earned on the investment of Trust Corpus may be paid to the Executives;
and
WHEREAS. all of the Executives have agreed in writing to this Amendment as
required by Section 6.02 of the Trust;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Section 4.01 of the Trust is hereby amended by adding a new
subsection (d) thereto, as follows:
"(d) Notwithstanding any provision of this Agreement, upon termination
of the Trust as provided in Section 6.01(c) the Trustee shall pay to the Company
all amounts held hereunder."
2. The second, third and fourth sentences of Section 4.02(a) of the
Trust are hereby amended in their entirety to read as follows:
"Each Payment Schedule also shall be delivered by the Company to such
Executive. The Payment Schedule shall include instructions as to the
amount of interest (if any) to accrue for the benefit of an Executive, from
the date on which the Trustee receives a written request for payment signed
by the Executive (or his beneficiary or beneficiaries) as hereinafter
provided until the date on which such payment is made, in respect of such
payment; such instructions may be revised from time to time prior to the
occurrence of a Change in Control. The aggregate payment to be made
hereunder to an Executive by the Trustee shall not exceed the aggregate
amount delivered to the Trustee for the benefit of such Executive, plus
interest (if any) thereon as described in the immediately preceding
sentence, all as indicated in the Payment Schedule applicable to such
Executive."
3. Subsection (a) of Section 6.01 of the Trust is hereby amended to
delete the first nine words thereof (i.e., "Except as provided in Section
6.01(b) of this Agreement,") and to substitute the following therefor: "Except
as provided in Sections 6.01(b) and 6.01(c) of this Agreement,".
4. Subsection (b) of Section 6.01 of the Trust is hereby amended to
delete the first seven words thereof (i.e., "Notwithstanding any other
provision of this Agreement,") and to substitute the following therefor:
Notwithstanding any other provision of this Agreement except Section 6.01(c),".
<PAGE>
5. Section 6.01 of the Trust is hereby amended by adding a new
subsection (c) thereto, as follows:
"(c) Notwithstanding any other provision of this Agreement, this
Trust shall terminate in all events and under all circumstances not later
than twenty-one years after the death of the last survivor of the
Executives who were included on Exhibit I hereto at the time this Trust was
executed, such Executives being John A. Ball, Gerald J. Beiser, William H.
Burchfield, Aubrey L. Cole, Mark A. Fuller, Jr., Marvin H. Ginsky, Judson
Hannigan, L. C. Heist, Robert F. Longbine, Kenwood C. Nichols, Philip R.
O'Connell and Andrew C. Sigler. Promptly upon termination of this Trust
pursuant to this Section 6.01(c), the Trustee shall pay to the Company all
amounts held hereunder."
6. All capitalized terms used herein and not defined herein shall
have the meanings assigned to them in the Trust.
7. Except as amended hereby, all of the provisions of the Trust shall
continue in full force and effect without change.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
-------------------------------
Chairman and Chief Executive Officer
CONNECTICUT NATIONAL BANK
By /s/ Thomas J. Botticelli
-------------------------------
Thomas J. Botticelli
AGREED TO:
/s/ John A. Ball /s/ Judson Hannigan
- ----------------------------------------- -----------------------
John A. Ball Judson Hannigan
/s/ Gerald J. Beiser /s/ L. C. Heist
- ----------------------------------------- -----------------------
Gerald J. Beiser L.C. Heist
/s/ William H. Burchfield /s/ Kenwood C. Nichols
- ----------------------------------------- -----------------------
William H. Burchfield Kenwood C. Nichols
/s/ Aubrey L. Cole /s/ Philip R. O'Connell
- ----------------------------------------- -----------------------
Aubrey L. Cole Philip R. O'Connell
/s/ Mark A. Fuller, Jr. /s/ Richard E. Olson
- ----------------------------------------- -----------------------
Mark A. Fuller, Jr. Richard E. Olson
/s/ Marvin H. Ginsky /s/ Andrew C. Sigler
- ----------------------------------------- -----------------------
Marvin H. Ginsky Andrew C. Sigler
2
<PAGE>
Exhibit D
---------
[subparagraph 9(d)]
Schedule of Amounts to be Deposited in Trust
Upon a Potential Change in Control*
--------------------------------------------
` Severance: 2 years termination payments; 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. Payments are based on highest total
salary and of annual bonus for any calendar year of
employment.
` Retirement: All amounts, if any, payable under the excess benefit and
supplemental retirement plans of the Company.
` Disability: Same as for active employees, for 2 years.
` Medical: Same as for active employees less retiree medical benefit,
if any, for 2 years.
` Dental: Same as for active employees, for 2 years.
` Options: Fund for those options referred to in subparagraph 1(a)(iii)
hereof. "Spread" to be calculated on the basis of the
closing price of Common Shares of the Company as reported in
"New York Stock Exchange Composite Transactions" of the
Eastern Edition of The Wall Street Journal for the trading
-----------------------
day immediately after the Potential Change in Control.
` Contingently
Credited Shares: Fund for those contingently credited shares referred to in
subparagraph 1(a)(iii) hereof in an amount per share equal
to the closing price of Common Shares of the Company as
reported in "New York Stock Exchange Composite Transactions"
of the Eastern Edition of The Wall Street Journal for the
-----------------------
trading day immediately after the Potential Change in
Control.
` Legal Expenses: An amount equal to twelve times the monthly base salary paid
at time of deposit into trust.
________________
* This Exhibit D does not reflect the possible reduction provided for in
subparagraph 9(d)(v) hereof.
o0o
<PAGE>
EXHIBIT 10.38
Champion International Corporation
One Champion Plaza
Stamford, CT 06921
February 19, 1987
Mr. Mark A. Fuller, Jr.
One Champion Plaza
Stamford, CT 06921
Re: Agreement Relating to Legal Expenses
------------------------------------
Dear Mark:
As an inducement for you to continue in the employ of Champion
International Corporation (the "Company"), the Board of Directors of the Company
has today authorized entering into an Agreement between you and the Company
effective February 19, 1987 (the "Agreement"). One of the principal purposes in
entering into the Agreement is to provide you with reasonable assurance in the
event of a change in control of the Company against loss of rights to benefits
that you could reasonably expect to receive in the absence of such a change in
control, and thereby provide an inducement for you to remain in the employ of
the Company notwithstanding the possibility of a change in its control.
As a separate and additional inducement for you to remain in the employment
of the Company, and to provide you with reasonable assurance that the purposes
of the Agreement and this Agreement Relating to Legal Expenses (the "Legal
Expense Agreement") (collectively, the "Secured Agreements") will not be
frustrated as a result of the cost of their enforcement should a claim or
dispute be instituted or arise upon or within forty-two months following a
Change in Control of the Company (as defined in the Agreement) and arise out of
or relate to any provision of the Secured Agreements, the Company agrees to pay,
in consideration of such continued employment, all legal expenses which you may
incur in any such claim or dispute. Such legal expenses shall be paid in the
amount and in accordance with the terms and conditions of the memorandum
attached to, incorporated in and by this reference made part of, this Legal
Expense Agreement.
By virtue of the mutual promises set forth in this Agreement Relating to
Legal Expenses and the Agreement and other good and valuable consideration the
receipt and sufficiency of which you and the Company hereby acknowledge, your
signature at the foot of this letter will constitute this letter a binding
agreement and it shall thereupon be binding upon and inure to the benefit of
you, your spouse, your beneficiaries and estate, and the Company and its
successors and assigns, including any corporation with or into which the Company
may consolidate or merge or to which the Company may transfer all or
substantially all of its assets. If you are deceased and survived by your
spouse, then your spouse may act for herself in enforcing her rights under this
Legal Expense Agreement as your survivor, and may also act for you with respect
to any rights to payments which became due and remained unpaid during your
lifetime.
<PAGE>
For the Company's files, please execute the enclosed copy of this Legal
Expense Agreement and return it in an envelope marked "Confidential" to Lionel
N. Zimmer.
Sincerely,
CHAMPION INTERNATIONAL CORPORATION
Attest: By /s/ Andrew C. Sigler
----------------------------------
Chairman of the Board of Directors
/s/ Lawrence A. Fox
- ---------------------------
Assistant Secretary
Agreed: February 19, 1987
/s/ Mark A. Fuller, Jr.
- ---------------------------
Mark A. Fuller, Jr.
-2-
<PAGE>
Memorandum of Terms and Conditions Referred to in
the Agreement Relating to Legal Expenses
dated February 19, 1987 between
Champion International Corporation and Mark A. Fuller, Jr.
----------------------------------------------------------
1. Reference hereafter to the Agreement Relating to Legal Expenses (the
"Legal Expense Agreement") shall be deemed to refer also to this memorandum.
Terms used or referred to in the Legal Expense Agreement shall have the same
meaning or reference in this memorandum as in the Legal Expense Agreement.
2. The Company shall, upon presentation of appropriate commercial
invoices, pay all legal expenses, which includes reasonable legal fees, court
costs, arbitration costs, and ordinary and necessary out-of-pocket costs of
attorneys, billed to and payable by you or by anyone claiming under or through
you (such person being hereinafter referred to as your "beneficiary"), in
connection with bringing, prosecuting, defending, litigating, arbitrating,
negotiating or settling any claim or dispute by or against you or your
beneficiary, or any claim or dispute between you or your beneficiary and the
Company or any third party, that may be instituted or arise upon or within
forty-two months following a Change in Control of the Company, as defined in the
Agreement, and that may arise out of or relate to the Secured Agreements, or any
of them, or the validity, operation, interpretation, enforceability or breach
thereof, provided that:
(a) you and your beneficiary shall repay to the Company any such expenses
theretofore paid by or on behalf of the Company if and to the extent that a
judgment should be rendered against you or your beneficiary by the judicial or
arbitration forum that adjudicates such dispute beyond appeal, and such expenses
were not incurred by you or your beneficiary while acting in good faith, and
provided further, that
(b) in the case of any request that the Company pay attorneys' fees or
expenses, the Company shall have received a statement signed by the attorney or
firm of attorneys rendering the bill setting forth the services that had been,
and will be, performed, and provided further, that
(c) in the case of any claim or dispute by or against you or your
beneficiary, the claim for legal fees hereunder shall be made in writing, with
specific reference to the provisions of the Legal Expense Agreement, delivered
in the manner provided in subparagraph 4(c) below, in no event later than forty-
two months after a Change in Control of the Company.
3. (a) At any time after the date hereof but in no event later than a
Potential Change in Control of the Company as defined in the Agreement, if you
are in the employ of the Company at such time, the Company will, at its own
expense, set aside in trust, or establish, extend, renew and maintain an
irrevocable bank letter of credit in favor of you or, in the event of your
death, your beneficiary, in an amount equal to twelve (12) times the monthly
base salary being paid to you at such time.
(b) The Company agrees that, as soon as practicable, it will enter into
a trust agreement agreement substantially in the form attached to the Agreement
(the "Trust Agreement"), and agrees that, upon the terms, conditions and
procedures set forth therein, you will be named a beneficiary of the Trust
Agreement, and this Legal Expense Agreement will be listed on Exhibit I of the
Trust Agreement as one of the agreements which is subject to the trust
established by the Trust Agreement. If the Company shall become liable for the
payment of legal expenses under paragraph 2 above, you or, in the event of your
death, your beneficiary shall request the Company in
<PAGE>
writing, in accordance with the terms, conditions and procedures set forth in
such paragraph 2, to make such payment and, if the Company shall fail to do so
fully within a reasonable time after receipt of such written demand, you may
request the trustee of such trust, in accordance with the terms, conditions and
procedures set forth in the Trust Agreement, to make such payment to the extent
that the Company had failed to do so. The Company shall continue to be liable
to make all payments required under the terms of this Legal Expense Agreement to
the extent such payments have not been made pursuant to the Trust Agreement.
(c) If the Company establishes, extends, renews and maintains an
irrevocable bank letter of credit in favor of you or your beneficiary, you or,
in the event of your death, your beneficiary, shall be entitled to draw upon
such letter of credit only if and to the extent that the Company shall fail to
discharge its obligations under paragraph 2 above within a reasonable time after
receipt of written demand by you or your beneficiary. As and when any funds are
paid by the bank under such letter of credit, the Company shall renew such
letter of credit at its own expense to the extent of the funds so paid. The
Company need not establish or renew any such letter of credit for any period
subsequent to the date on which an attorney or a firm of attorneys selected by
mutual agreement of the Company and you or, in the event of your death, your
beneficiary, the fees and expenses of which attorney or firm of attorneys shall
be borne by the Company, shall determine, after consultation with the Company
and you or, in the event of your death, your beneficiary, that all obligations
of the parties under the Secured Agreements have been substantially satisfied.
(d) The bank that shall issue any such letter of credit shall be a
national or state bank having a combined capital, surplus and undivided profits
and reserves of not less than One Hundred Million Dollars ($100,000,000).
4. (a) Any dispute between you and the Company as to the interpretation
or application of the provisions of either of the Secured Agreements may at your
election be determined by binding arbitration within the greater New York City
metropolitan area or the State of Connecticut in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court of competent jurisdiction. All fees and
expenses of such arbitration shall be paid by the Company subject to repayment
in accordance with the terms and conditions set forth in clause (a) of paragraph
2 above.
(b) Anything to the contrary notwithstanding, all payments and other
provisions required to be made by the Company under this Legal Expense Agreement
to or on behalf of you or your beneficiaries shall be subject to the withholding
of such amounts, if any, relating to tax and other payroll deductions as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation. In lieu of withholding such amounts, the Company may accept
other provisions to the end that it has sufficient funds to pay all taxes
required by law to be withheld in respect of any or all of such payments.
(c) All notices, requests, demands and other communications provided for
by this Legal Expense Agreement shall be in writing and shall be sufficiently
given if and when mailed in the continental United States by registered or
certified mail, return receipt requested, or personally delivered to the party
entitled thereto at the address stated below, which address shall be such
address as the addressee may have given most recently by a similar notice. Any
such notice shall be deemed to have been received on the date of
2
<PAGE>
delivery.
To the Company: Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
Attention: Corporate Secretary
To the Executive: Mr. Mark A. Fuller, Jr.
One Champion Plaza
Stamford, CT 06921
(d) No provision of this Legal Expense Agreement may be amended,
modified or waived unless such amendment, modification or waiver shall be
authorized by the Board of Directors of the Company or any authorized committee
of the Board of Directors and shall be agreed to in writing, signed by you and
by an officer of the Company thereunto duly authorized. Except as otherwise
specifically provided in this Legal Expense Agreement, no waiver by either party
hereto of any breach by the other party hereto of any condition or provision of
this Legal Expense Agreement to be performed by such other party shall be deemed
a waiver of a subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same time or at any prior or
subsequent time.
(e) Anything in this Legal Expense Agreement to the contrary
notwithstanding:
(i) In the event that any provision of this Legal Expense Agreement,
or portion thereof, shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Legal Expense
Agreement and parts of such provision not so invalid or unenforceable shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law;
(ii) Any provision of this Legal Expense Agreement, or portion
thereof, which may be invalid or unenforceable in any jurisdiction shall be
limited by construction thereof, to the end that such provision, or portion
thereof, shall be valid and enforceable in such jurisdiction; and
(iii) Any provision of this Legal Expense Agreement, or portion
thereof, which may for any reason be invalid or unenforceable in any
jurisdiction shall remain in effect and be enforceable in any jurisdiction in
which such provision, or portion thereof, shall be valid and enforceable.
(f) Except as otherwise provided herein, this Legal Expense Agreement
shall be binding upon and inure to the benefit of the Company and any successor
of the Company, including, without limitation, any corporation or corporations
acquiring directly or indirectly all or substantially all of the assets of the
Company whether by merger, consolidation, sale or otherwise (and such successor
shall thereafter be deemed embraced within the term "the Company" for the
purposes of this Legal Expense Agreement), but shall not otherwise be assignable
by the Company.
(g) The validity, interpretation, construction, performance and
enforcement of this Legal Expense Agreement shall be governed by the laws of the
State of New York without giving effect to the principles of conflicts of laws
thereof.
(h) There shall be no right of set-off or counterclaim in respect of
any claim, debt or obligation against any payments to you, your beneficiaries or
estate, provided for in this Legal Expense Agreement.
(i) The Company and you recognize that each party will have no adequate
remedy at law for breach by the other of any of the agreements
3
<PAGE>
contained in this Legal Expense Agreement and, in the event of any such breach,
the Company and you hereby agree and consent that the other shall be entitled to
a decree of specific performance, mandamus or other appropriate remedy to
enforce performance of such agreements.
(j) No right or interest to or in any payments shall be assignable by
you; provided, however, that this provision shall not preclude you from
designating one or more beneficiaries to receive any amount that may be payable
after your death and shall not preclude the legal representative of your estate
from assigning any right hereunder to the person or persons entitled thereto
under your will or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to your estate.
(k) No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
(l) In the event of your death or a judicial determination of your
incompetence, reference in this Legal Expense Agreement to you shall be deemed,
where appropriate, to refer to your legal representative or, where appropriate,
to your beneficiary or beneficiaries.
(m) If any event provided for in this Legal Expense Agreement is
scheduled to take place on a legal holiday, such event shall take place on the
next succeeding day that is not a legal holiday.
(n) This Legal Expense Agreement shall be binding upon and shall inure
to the benefit of you, your heirs and legal representatives, and the Company and
its successors as provided in subparagraph 4(f) hereof.
(o) This instrument and the Agreement contain the entire agreement of
the parties relating to the subject matter of this Legal Expense Agreement and
supersedes and replaces all prior agreements and understandings with respect to
such subject matter, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Legal
Expense Agreement which are not set forth herein.
5. The Legal Expense Agreement is not intended to confer upon you any
right to continue in the employ of the Company or to affect any rights of the
Company, subject to any agreement or agreements between you and the Company
relating to your employment by the Company, to terminate your employment at any
time with or without assigning a reason therefor.
oOo
4
<PAGE>
EXHIBIT 10.39
AMENDMENT TO
FEBRUARY 19, 1987 AGREEMENT
---------------------------
This Agreement between Champion International Corporation, a New York
corporation (the "Company"), and Mark A. Fuller, Jr. (the "Executive") is
effective as April 21, 1988.
WHEREAS, the Company and the Executive entered into an Agreement effective
as of February 19, 1987 (the "Agreement") relating to the employment of the
Executive by the Company; and
WHEREAS, the Agreement provides for the calculation of the actuarially
equivalent present value of certain retirement benefits in connection with the
possible payment of such retirement benefits in a lump sum under certain
circumstances; and
WHEREAS, the Company and the Executive wish to replace the mortality table
used in such calculation with a more recent table which reflects more current
mortality experience; and
WHEREAS, the Company and the Executive wish to change the discount rate
used in such calculation, from the interest rate in effect on the date of any
lump sum payment to the average of the monthly rates announced over a full year
period in advance of any such payment, in order to lessen the effect of interest
rate volatility and to permit the discount rate to be determined in advance of
any such payment;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Clause (z) of the first sentence of subparagraph 3(g) of the Agreement
is hereby amended in its entirety to read as follows:
"(z) all amounts, if any, payable under the excess benefit and
supplemental retirement plans set forth in Exhibit B in an actuarially
---------
equivalent lump sum calculated by utilizing the 1983 GAM Table (or such
other pensioner annuity mortality table as the Company with the Executive's
written consent or, following his death, his spouse's consent, shall
determine) and discounted to a present value amount by applying a discount
rate, equal to the arithmetic average of (i.e., one-twelfth of the sum of)
the single employer interest rates for immediate annuities promulgated by
the Pension Benefit Guaranty Corporation each month during the calendar
year immediately preceding the date of payment as set forth in Appendix B
to Part 2619 of 29 Code of Federal Regulations or such successor to such
Appendix B as may be in effect during such calendar year, to all such
retirement payments which otherwise would become due thereafter."
2. The first sentence of subparagraph 9(d)(iv) of the Agreement is hereby
amended in its entirety to read as follows:
"(iv) The value of the excess benefit and supplemental retirement plans
payments shall be an actuarially equivalent amount calculated by utilizing
the 1983 GAM Table (or such other pensioner annuity mortality table as the
Company with the Executive's written consent or, following his death, his
spouse's consent, shall determine) and discounted to a present value amount
by applying a discount rate, equal to the arithmetic average of (i.e., one-
twelfth of the sum of) the single employer interest rates for immediate
annuities promulgated by the Pension Benefit Guaranty Corporation each
month during the calendar year immediately preceding the date of payment as
set forth in Appendix B to Part 2619 of 29 Code of Federal Regulations or
such successor to
<PAGE>
such Appendix B as may be in effect during such calendar year, to all such
retirement benefits which otherwise would become due thereafter."
3. The Company and the Executive understand and agree that the reference
to subparagraph 3(g) in subparagraph 1(a)(iv) of the Agreement shall be deemed
to be reference to subparagraph 3(g) as amended hereby.
4. Except as amended hereby, all of the terms and conditions set forth in
the Agreement shall continue in full force and effect without change.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has executed this
Agreement, all as of April 21, 1988.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
--------------------------------
Chairman of the Board of Directors
Attest:
/s/ Lawrence A. Fox
- ----------------------------
Assistant Secretary
/s/ Mark A. Fuller, Jr.
--------------------------------
Mark A. Fuller, Jr.
-2-
<PAGE>
EXHIBIT 10.40
AMENDMENT EFFECTIVE AS OF SEPTEMBER 19, 1991
TO FEBRUARY 19, 1987 AGREEMENT
--------------------------------------------------
This Agreement between Champion International Corporation, a New York
corporation (the "Company"), and Mark A. Fuller, Jr. (the "Executive") is
effective as of September 19, 1991.
WHEREAS, the Company and the Executive entered into an Agreement dated
February 19, 1987 as amended as of April 21, 1988 (the "Agreement") relating to
the employment of the Executive by the Company; and
WHEREAS, the Company and the Executive wish to amend the Agreement in order
to (1) reflect the fact that the Company's indemnification provisions are set
forth in its Restated Certificate of Incorporation; (2) provide that any
benefits thereunder which constitute "parachute payments" for Federal tax
purposes be paid in an amount the net effect of which is intended to result in
the Executive receiving "parachute payments" from all sources equal to the
greater of (i) the total of the "parachute payments" from all sources, less
income taxes and any Federal excise tax thereon, and (ii) the maximum amount of
"parachute payments" that can be paid without triggering such Federal excise
tax, less income taxes thereon; and (3) expressly allow the Executive to engage
the Company's independent consulting actuary to assist in "parachute payment"
determinations;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. Subparagraph 1(c) of the Agreement is hereby amended by adding the words
"Restated Certificate of Incorporation or" before the words "By-laws of the
Company."
2. Paragraph 14 of the Agreement is hereby amended in its entirety to read as
follows:
"14. Parachute Tax
-------------
(a) Except in the specific circumstance hereinafter described in this
paragraph 14, the Company shall pay to the Executive the full amount to which he
is entitled under this Agreement.
(b)
(i) If any payments or benefits received or to be received by the
Executive under this Agreement, or any other payments or benefits
received or to be received by the Executive from the Company or any other
person, constitute "parachute payments" within the meaning of Section
280G(b)(2) or any successor provision of the Code (such payments or
benefits being hereinafter referred to as the "Parachute Payments"), and
(ii) if the aggregate present value of the Parachute Payments from all
sources, minus (A) any excise tax imposed under Section 4999 of the Code
(or any similar tax that may hereafter be imposed) (the "Excise Tax") and
(B) the net amount of federal, state and local income tax on such
aggregate present value, would be less than the maximum amount of
Parachute Payments from all sources that can be paid without triggering
the Excise Tax, after deduction of the net amount of federal, state and
local income tax on such maximum amount, then
<PAGE>
(iii) the Parachute Payments to be paid by the Company to the Executive
under this Agreement shall be reduced to a lump sum amount (if any) such that
the aggregate present value of the Parachute Payments from all sources is equal
to the maximum amount of Parachute Payments that can be paid without triggering
the Excise Tax.
Anything in this subparagraph 14(b) to the contrary notwithstanding, it is
understood and agreed that the amount to be paid by the Company to the Executive
pursuant to this subparagraph 14(b) in the specific circumstance described
herein may be less, but never more, than the amount to which he would otherwise
be entitled under this Agreement.
(c) All matters to be determined pursuant to subparagraph 14(b) including,
without limitation, the existence or absence of any Parachute Payments, the
aggregate present value of any Parachute Payments, the amount of the Excise Tax
(if any), the net amount of federal, state and local income tax (assuming the
highest applicable marginal rate in each case), the maximum amount of Parachute
Payments that can be paid without triggering the Excise Tax, the amount of any
reduction in the Parachute Payments to be paid by the Company to the Executive
under this Agreement and the item or items (if any) to be reduced, shall be
determined by the Executive or, following his death, his beneficiary or
beneficiaries. The specifics of such determination shall be delivered in
writing to the Company and to the trustee of the Trust referred to in
subparagraph 9(d)(ii) above at the time of the Executive's termination within
three years after a Change in Control, or as soon as practicable thereafter, by
the Executive or, following his death, his beneficiary or beneficiaries. The
reasonable fees and expenses of such tax counsel and financial advisor as may
reasonably be called upon to assist the Executive or his beneficiary or
beneficiaries in the foregoing determinations shall be paid by the Company.
Without limiting the generality of the immediately preceding sentence, the
Executive or his beneficiary or beneficiaries may select as such financial
advisor Hewitt Associates or such other person or firm as may be serving at the
time as the Company's independent consulting actuary."
3. Except as amended hereby, all of the terms and conditions set forth in
the Agreement shall continue in full force and effect without change.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has executed this
Agreement, all as of September 19, 1991.
CHAMPION INTERNATIONAL CORPORATION
By /s/ Andrew C. Sigler
-------------------------------
Chairman of the Board of Directors
Attest:
/s/ Lawrence A. Fox
- ----------------------------
Secretary
/s/ Mark A. Fuller, Jr.
-------------------------------
Mark A. Fuller, Jr.
-2-
<PAGE>
EXHIBIT 11
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
CALCULATION OF PRIMARY EARNINGS (LOSS) PER COMMON SHARE AND FULLY DILUTED
EARNINGS (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1996 1995 1994
------------- --------------- -------------
<S> <C> <C> <C>
Net income (loss) $ 141,306 $ 771,835 $ 63,305
Dividends on preference shares --- 13,258 27,750
------------- --------------- -------------
Net income (loss) applicable to common stock $ 141,306 $ 758,577 $ 35,555
============= =============== =============
Average number of common shares outstanding 95,524 94,725 93,061
============= =============== =============
Per share $ 1.48 $ 8.01 $ .38
============= =============== =============
Fully diluted earnings (loss) per common
share (2,3):
Net income (loss) applicable to common stock $ 141,306 $ 758,577 $ 35,555
Add income effect, assuming conversion of
dilutive convertible securities --- 15,106 ---
------------- --------------- -------------
Net income (loss) on a fully diluted basis $ 141,306 $ 773,683 $ 35,555
============= =============== =============
Average number of common shares outstanding 95,524 94,725 93,061
Add common share effect, assuming conversion
of dilutive convertible securities --- 6,171 ---
------------- --------------- -------------
Average number of common shares outstanding
on a fully diluted basis 95,524 100,896 93,061
============= =============== =============
Per share $ 1.48 $ 7.67 $ .38
============= =============== =============
</TABLE>
- ------------------------------------------
Notes:
(1) Common stock equivalents have not been included in the above calculation
since their effect is insignificant.
(2) The computation of fully diluted earnings per share assumes that the
average number of common shares outstanding during the year is increased
by the conversion of securities having a dilutive effect, and that net
income applicable to common stock is increased by dividends and after-
tax interest on such securities.
(3) Earnings per share was calculated for each three-month and twelve-month
period on a stand-alone basis. On June 22, 1995, the company purchased
all 7,894,737 shares of common stock that were issued on that date upon
conversion of the $92.50 Cumulative Convertible Preference Stock. On
June 27, 1995, the company called all $149,893,000 of its 6 1/2%
Convertible Subordinated Debentures due April 15, 2011 for redemption on
August 8, 1995. Virtually all of the Debentures were converted into an
aggregate of 4,309,070 shares of common stock during the third quarter.
The company purchased an additional 3,186,000 shares of common stock at
various times during 1995. As a result of all of these transactions, the
sum of the earnings per share for the four quarters of 1995 does not
equal the earnings per share for the twelve months ended December 31,
1995.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 13
Paper
- -------------------------------------------------------------------------------------------------------
Years Ended December 31
Net Sales (in millions of dollars) 1996 % 1995 % 1994 %
- ----------------------------------- ------ --- ------ --- ------ ---
Product Category:
<S> <C> <C> <C> <C> <C> <C>
Uncoated free sheet (U.S. & Brazil). $1,422 29 $1,857 31 $1,144 27
Coated free sheet................... 555 12 647 11 515 12
Coated groundwood................... 659 13 792 13 540 13
Uncoated groundwood................. 309 6 369 6 213 5
Newsprint........................... 395 8 439 7 298 7
Bleached board business............. 311 6 320 5 305 7
Kraft paper and linerboard.......... 199 4 267 4 195 5
Market pulp......................... 360 7 541 9 352 8
Resale of outside purchases......... 737 15 758 14 646 16
Other............................... 15 --- 17 --- 9 ---
------ --- ------ --- ------ ---
$4,962 100 $6,007 100 $4,217 100
====== === ====== === ====== ===
<CAPTION>
Wood Products
- -------------------------------------------------------------------------------------------------------
Years Ended December 31
Net Sales (in millions of dollars) 1996 % 1995 % 1994 %
- ----------------------------------- ------ --- ------ --- ------ ---
Product Category:
<S> <C> <C> <C> <C> <C> <C>
Lumber.............................. $ 382 42 $ 334 35 $ 481 44
Softwood plywood and waferboard..... 237 26 284 29 264 24
Logs and stumpage................... 224 24 247 26 253 23
Sidings and industrial plywood...... 54 6 49 5 47 4
Hardwood plywood.................... 9 1 33 3 32 3
Miscellaneous products.............. 13 1 18 2 24 2
------ --- ------ --- ------ ---
$ 919 100 $ 965 100 $1,101 100
====== === ====== === ====== ===
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Champion International Corporation and Subsidiaries
- -----------------------------------------------------------------------------------------------------------------
Consolidated Income (in thousands, except per share amounts)
Years Ended December 31 1996 1995 1994
- ------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net Sales.................................... $5,880,443 $6,972,038 $5,318,192
Costs and Expenses:
Cost of products sold...................... 5,134,428 5,156,423 4,752,926
Selling, general and administrative
expenses................................. 363,071 386,125 299,266
Interest and debt expense (Notes 3 and 6).. 222,214 226,016 235,086
Other (income) expense - net (Note 11)..... (44,240) (33,089) (57,342)
---------- ---------- ----------
Total Costs and Expenses..................... 5,675,473 5,735,475 5,229,936
Income before Income Taxes................... 204,970 1,236,563 88,256
Income Taxes (Note 12)....................... 63,664 464,728 24,951
---------- ---------- ----------
Net Income................................... $ 141,306 $ 771,835 $ 63,305
========== ========== ==========
Dividends on Preference Stock (Note 8)....... --- 13,258 27,750
---------- ---------- ----------
Net Income Applicable to Common Stock........ $ 141,306 $ 758,577 $ 35,555
========== ========== ==========
Average Number of Common Shares Outstanding.. 95,524 94,725 93,061
========== ========== ==========
Primary Earnings Per Common Share............ $ 1.48 $ 8.01 $ .38
========== ========== ==========
Fully Diluted Earnings Per Common Share...... $ 1.48 $ 7.67 $ .38
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
2
<PAGE>
<TABLE>
<CAPTION>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------------------------
Consolidated Balance Sheet (in thousands of dollars)
Assets December 31 1996 1995
- ------------------------------------------------------ ---------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................. $ 174,638 $ 317,069
Short-term investments................................ --- 98,275
Receivables........................................... 579,393 641,291
Inventories (Note 2).................................. 458,043 426,001
Prepaid expenses...................................... 29,926 24,841
Deferred income taxes (Note 12)....................... 73,732 75,329
---------- ----------
Total Current Assets................................. 1,315,732 1,582,806
---------- ----------
Timber and Timberlands, at cost - less
cost of timber harvested............................. 2,364,858 2,007,685
---------- ----------
Property, Plant and Equipment, at cost
(Notes 3, 6 and 7)................................... 9,297,557 8,850,519
Less - Accumulated depreciation....................... 3,644,088 3,335,945
---------- ----------
5,653,469 5,514,574
---------- ----------
Other Assets and Deferred Charges..................... 485,933 438,237
---------- ----------
$9,819,992 $9,543,302
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
<TABLE>
<CAPTION>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------------------------
Consolidated Balance Sheet (in thousands of dollars)
Liabilities and Shareholders' Equity December 31 1996 1995
- ------------------------------------------------------ ---------- -----------
<S> <C> <C>
Current Liabilities:
Current installments of long-term debt (Note 6)........ $ 80,900 $ 77,760
Short-term bank borrowings (Note 6).................... 126,910 150,067
Accounts payable and accrued liabilities (Note 5)...... 713,132 726,206
Income taxes (Note 12)................................. 23,098 125,840
---------- ----------
Total Current Liabilities............................. 944,040 1,079,873
---------- ----------
Long-Term Debt (Note 6)................................ 3,085,424 2,828,509
---------- ----------
Other Liabilities (Notes 13 and 16).................... 664,643 664,010
---------- ----------
Deferred Income Taxes (Note 12)........................ 1,363,910 1,218,978
---------- ----------
Minority Interest in Subsidiaries...................... 6,307 105,241
---------- ----------
Commitments and Contingent Liabilities
(Notes 7, 16 and 17)................................ --- ---
---------- ----------
Shareholders' Equity:
Capital Shares (Notes 8 and 9):
Preference stock, 8,531,431 shares authorized but
unissued.......................................... --- ---
Common stock, $.50 par value: 250,000,000 authorized
shares; 110,323,099 and 110,230,379 issued shares... 55,162 55,115
Capital surplus....................................... 1,651,454 1,653,456
Retained Earnings (Note 6)............................. 2,740,196 2,618,033
---------- ----------
4,446,812 4,326,604
Treasury Shares, at cost (Note 8)...................... (657,864) (650,049)
Cumulative Translation Adjustment...................... (33,280) (29,864)
---------- ----------
3,755,668 3,646,691
---------- ----------
$9,819,992 $9,543,302
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
<TABLE>
<CAPTION>
Champion International Corporation and Subsidiaries
- ----------------------------------------------------------------------------------------------
Consolidated Cash Flows (in thousands of dollars)
Years Ended December 31 1996 1995 1994
- --------------------------------------------------- ---------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income......................................... $ 141,306 $ 771,835 $ 63,305
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation expense.............................. 407,829 392,534 379,386
Cost of timber harvested.......................... 94,090 78,903 79,311
Gain on disposal of assets........................ (23,101) (46,536) (14,151)
Pension contributions............................. (70,188) (10,129) (4,517)
(Increase) decrease in receivables................ 65,033 (77,715) (70,938)
(Increase) decrease in Inventories................ (34,384) (72,598) 21,755
(Increase) in prepaid expenses.................... (4,626) (6,409) (989)
Increase (decrease) in accounts payable
and accrued liabilities......................... (38,216) 118,289 4,975
Increase (decrease) in income taxes payable....... (102,068) 81,431 38,707
(Decrease) in other liabilities................... (13,851) (20,658) (7,250)
Increase (decrease) in deferred income taxes...... 3,169 159,005 (26,746)
All other - net................................... 13,378 84,639 65,986
---------- ---------- ---------
Net cash provided by operating activities.......... 438,371 1,452,591 528,834
---------- ---------- ---------
Cash flows from investing activities:
Expenditures for property, plant
and equipment................................... (460,533) (367,632) (225,042)
Timber and timberlands expenditures............... (121,161) (256,584) (103,830)
Purchase of Lake Superior Land Company............ (71,990) --- ---
Purchase of AMCEL................................. (58,361) --- ---
Purchase of investments.......................... --- (98,275) (28,902)
Proceeds from redemptions of investments......... 98,275 --- 61,893
Proceeds from sales of property, plant and
equipment and timber and timberlands.......... 42,760 181,207 38,723
All other - net.................................. 16,551 (9,496) (279)
---------- ---------- ---------
Net cash used in investing activities.............. (554,459) (550,780) (257,437)
---------- ---------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-tern debt.......... 834,155 826,116 424,857
Payments of current installments of
long-term debt and long-term debt............... (645,060) (951,300) (621,769)
Purchase by Weldwood of minority interest......... (191,446) --- ---
Cash dividends paid............................... (19,161) (32,144) (46,351)
Payments to acquire treasury stock................ (7,815) (549,741) (75)
All other - net................................... 2,984 31,379 7,236
---------- ---------- ---------
Net cash used in financing activities.............. (26,343) (675,690) (236,102)
---------- ---------- ---------
Increase (decrease) in cash and cash
equivalents...................................... (142,431) 226,121 35,295
Cash and cash equivalents:
Beginning of period.............................. 317,069 90,948 55,653
---------- ---------- ---------
End of period.................................... $ 174,638 $ 317,069 $ 90,948
========== ========== =========
Supplemental cash flow disclosures:
Nonmonetary transactions (Notes 6 and 8)
Cash paid during the year for:
Interest (net of capitalized amounts).......... $ 210,022 $ 227,317 $ 236,481
Income taxes (net of refunds) (Note 12)........ 178,839 208,600 1,051
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
<TABLE>
<CAPTION>
Champion International Corporation and Subsidiaries
- ----------------------------------------------------------------------------------------------------
Consolidated Retained Earnings (in thousands,except per share amounts)
Years Ended December 31 1996 1995 1994
- -------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Beginning Balance........................... $2,618,033 $1,878,476 $1,861,535
Net Income.................................. 141,306 771,835 63,305
Cash Dividends Declared:
$92.50 Convertible Preference Stock - $44.19
per share in 1995, $92.50 per share in
1994...................................... --- (13,258) (27,750)
Common Stock- $.20 per share in 1996, 1995
and 1994................................... (19,143) (19,020) (18,614)
---------- ---------- ----------
Ending Balance.............................. $2,740,196 $2,618,033 $1,878,476
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
A. Consolidation
The consolidated financial statements include the accounts of the company and
all of its domestic and foreign subsidiaries. Affiliates which are 20% to 50%
owned are reflected using the equity method of accounting, with the related
investments included in Other Assets and Deferred Charges. All significant
intercompany transactions have been eliminated.
Certain amounts have been reclassified to conform to the current year's
presentation.
B. Use of Estimates
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 the 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.
C. Cash and Cash Equivalents
Cash and cash equivalents includes all highly liquid investments with original
maturities of three months or less. Short-term investments are investments which
mature within twelve months but which do not meet the criteria of cash
equivalents.
D. Inventories
Inventories are generally stated at the lower of average cost or market (market
approximates net realizable value), except for certain inventories of the paper
segment which are stated on the last-in, first-out (LIFO) method (Note 2).
E. Capitalization and Amortization of Certain Costs
Pre-operating expenses and start-up costs incurred in connection with the
construction of major properties are deferred until such properties become
operational. These expenses and costs are then amortized over a five-year
period. No start-up costs were deferred during 1996, 1995 and 1994.
F. Fixed Assets
Property, Plant and Equipment, which includes capitalized leases, is stated at
cost. Timber and Timberlands, which includes original costs, road construction
costs, and reforestation costs, such as site preparation and planting costs, is
stated at unamortized cost. Property taxes, surveying, fire control and other
forest management expenses are charged to expense as incurred. When fixed assets
are sold or retired, cost and accumulated depreciation are eliminated from the
accounts and gains or losses are recorded in income.
For financial reporting purposes, plant and equipment are depreciated using the
straight-line method over the estimated service lives of the individual assets.
7
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Machinery and equipment lives range from 3 to 35 years, buildings from 10 to 40
years and land improvements from 5 to 24 years. Leasehold improvements are
amortized over the shorter of the lives of the leases or estimated service
lives. Cost of timber harvested is based on the estimated quantity of timber
available during the growth cycle and is credited directly to the asset accounts
(Notes 3, 6 and 7).
G. Revenue Recognition
The company recognizes revenues as products are shipped.
H. Earnings Per Common Share
Primary earnings per common share are computed by dividing net income, after
deducting dividends on preference shares, by the average number of common shares
and dilutive common share equivalents outstanding during the year. The
computation of fully diluted earnings per common share assumes that the average
number of common shares and dilutive common share equivalents outstanding is
increased by the conversion of securities having a dilutive effect and that net
income applicable to common stock is increased by dividends and after-tax
interest on such securities.
I. Foreign Currency Translation
The assets and liabilities of the company's Canadian subsidiary are translated
into U.S. dollars using year-end exchange rates. The resulting translation gains
or losses are included with the cumulative translation adjustment in the
Shareholders' Equity section of the balance sheet.
Due to the high inflation rate in Brazil, the company's Brazilian subsidiary
uses the U.S. dollar as its functional currency. Except for certain items
translated at historical exchange rates, assets and liabilities are translated
using year-end exchange rates. Gains or losses from balance sheet translation
are included in net income.
Gains or losses resulting from foreign currency transactions are included in net
income.
J. Derivative Financial Instruments
The company occasionally enters into foreign exchange contracts to mitigate the
risks associated with its exposure to fluctuations in foreign currency exchange
rates. The foreign exchange contracts are held for purposes other than trading.
At December 31, 1996, the company had foreign exchange contracts covering
approximately $113 million of short-term investments and accounts receivable.
The fair value of these contracts approximated carrying value.
8
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 2. Inventories
December 31 (in thousands of dollars) 1996 1995
- ---------------------------------------------------- -------- --------
Paper, pulp and packaging products.................. $261,696 $237,005
Wood products....................................... 31,751 23,796
Logs................................................ 42,706 41,445
Pulpwood............................................ 24,277 22,764
Raw materials, parts and supplies................... 97,613 100,991
-------- --------
$458,043 $426,001
======== ========
At December 31, 1996 and 1995, inventories stated using the last-in, first-out
(LIFO) method, representing approximately 34% and 26% of total inventories, were
$154,264,000 and $111,073,000, respectively. If the lower of average cost or
market method (which approximates current cost) had been utilized for
inventories carried at LIFO, inventory balances would have been increased by
$69,505,000 and $73,286,000 at December 31, 1996 and 1995, respectively.
9
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 3. Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31 (in thousands of dollars) 1996 1995
- ------------------------------------------------------- ---------- ---------
<S> <C> <C>
Land and land improvements............................... $ 340,433 $ 321,002
Buildings and leasehold improvements..................... 936,367 908,627
Machinery and equipment.................................. 7,742,922 7,406,084
Construction in progress................................. 277,835 214,806
---------- ----------
9,297,557 8,850,519
Accumulated depreciation................................. (3,644,088) (3,335,945)
---------- ----------
$5,653,469 $5,514,574
========== ==========
</TABLE>
Interest capitalized into construction in progress during 1996, 1995 and 1994
was $10,642,000, $9,587,000 and $7,926,000, respectively.
Depreciation expense includes the following components:
<TABLE>
<CAPTION>
Years Ended December 31 (in thousands of dollars) 1996 1995 1994
- ---------------------------------------------------- -------- ---------- ----------
<S> <C> <C> <C>
Land improvements................................... $ 14,344 $ 13,431 $ 15,295
Buildings and leasehold improvements................ 27,769 28,040 26,773
Machinery and equipment............................. 365,716 351,063 337,318
-------- ---------- ----------
$407,829 $ 392,534 $ 379,386
======== ========== ==========
</TABLE>
10
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 4. Lines of Credit
At December 31, 1996, the company had unused U.S. lines of credit of $1.25
billion ($7 million of which supported short-term borrowings classified as long-
term debt as discussed in Note 6) and unused foreign lines of credit of
approximately $131 million. At December 31, 1996, interest rates on the U.S.
and foreign lines were no higher than the prime rate or its equivalent.
Commitment fees of .15% are required on the $1.25 billion U.S. lines of credit,
which are available to November 15, 1999 on a revolving basis, at which time
amounts owed, if any, become payable. Commitment fees of no more than .17% are
required on the $131 million foreign lines of credit. Commitments under the
credit agreements cannot be withdrawn provided the company continues to meet
required conditions.
Note 5. Accounts Payable and Accrued Liabilities
December 31 (in thousands of dollars) 1996 1995
- --------------------------------------------- ------- --------
Accounts payable.............................. $293,959 $306,372
-------- --------
Dividends payable............................. 4,783 4,802
-------- --------
Accrued liabilities:
Payrolls and commissions..................... 137,615 163,449
Employee benefits............................ 63,391 63,042
Interest..................................... 57,673 45,563
Taxes, other than income taxes............... 31,353 40,382
Other........................................ 124,358 102,596
--------- -------
Total accrued liabilities................ 414,390 415,032
-------- --------
$713,132 $726,206
======== ========
11
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 6. Indebtedness
<TABLE>
<CAPTION>
December 31 (in thousands of dollars) 1996 1995
- ------------------------------------------------------- ---------- ----------
<S> <C> <C>
Secured debt, 7.8% average rate, payable
through 2012 (a)...................................... $ 50,632 $ 2,730
Unsecured fixed rate debt, 7.9% average rate, payable
through 2030.......................................... 2,470,315 2,011,630
Unsecured variable rate debt, 6.6% average rate,
payable through 2012 (b).............................. 348,907 600,513
Lease obligations, 6.8% average rate, payable
through 2029.......................................... 289,992 285,636
Other contractual obligations, 6.9% average rate,
payable through 2001.................................. 6,478 5,760
---------- ----------
Total Debt.................................... 3,166,324 2,906,269
Less: Current installments of long-term debt......... 80,900 77,760
---------- ----------
Long-term debt (c)..................................... $3,085,424 $2,828,509
========== ==========
Short-term bank borrowings (d)......................... $ 126,910 $ 150,067
========== ==========
</TABLE>
(a) Such debt is secured by assets with a net book value at December 31,
1996 of approximately $203 million, primarily assets of Lake Superior Land
Company, a wholly-owned subsidiary of the company.
(b) Unsecured variable rate debt includes borrowings payable in less than one
year. The company has the ability to refinance these borrowings under the
credit agreements discussed in Note 4. At December 31, 1996, $7 million of
U.S. commercial paper has been classified as long-term debt since the
company intends to renew or refinance these obligations through 1997 and
into future periods.
(c) The annual principal payment requirements under the terms of all long-term
debt agreements for the years 1997 through 2001 are $81 million, $439
million, $262 million, $206 million and $206 million, respectively.
(d) Weighted average interest rates on outstanding balances, excluding book cash
overdrafts, for 1996 and 1995 were 7.8% and 8.2%, respectively. Book cash
overdrafts totaled $84 million and $97 million, respectively, at December
31, 1996 and 1995.
The indentures and agreements relating to long-term debt arrangements, as well
as the company's Certificate of Incorporation, contain restrictions on the
payment of cash dividends. Under the most restrictive of these provisions,
approximately $1.1 billion of consolidated retained earnings at December 31,
1996 is free of such restrictions.
At the time of their acquisition by the company in 1996, Lake Superior Land
Company had a $44 million mortgage loan outstanding, and Amapa Florestal e
Celulose (AMCEL) had $35 million of debt outstanding.
12
<PAGE>
Champion International Corporation and Subsidiaries
Notes to Financial Statements
Note 7. Commitments
<TABLE>
<CAPTION>
Future Minimum Lease Payments
--------------------------------
Capitalized Non-Cancelable
Period (in thousands of dollars) Leases Operating Leases
- ------------------------------------------------- ----------- ----------------
<S> <C> <C>
1997............................................. $ 19,777 $ 26,068
1998............................................. 19,777 24,310
1999............................................. 19,777 26,559
2000............................................. 19,777 25,312
2001............................................. 19,777 24,903
Thereafter....................................... 679,742 207,318
-------
Total payments................................... 778,627 334,470
Less: Sublease rental income.................... 66,400
--------
Net operating lease payments..................... $268,070
========
Less: Amount representing interest.............. 488,635
-------
Present value of capitalized lease payments
(all long-term)................................ $289,992
========
</TABLE>
The following schedule shows the composition of total rental expense for all
operating leases:
<TABLE>
<CAPTION>
Years Ended December 31 (in thousands of dollars) 1996 1995 1994
- ------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Minimum rentals.................................. $29,863 $24,542 $25,120
Less: Sublease rental income.................... 227 251 619
------- ------- -------
$29,636 $24,291 $24,501
======= ======= =======
</TABLE>
13
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 8. Capital Shares
Unissued Preference Stock
- -------------------------
At December 31, 1996 and 1995, 7,031,431 preference shares for which no series
has been designated were authorized and unissued. At December 31, 1996 and 1995,
1,500,000 additional authorized and unissued shares were designated and reserved
for the issuance of the company's Preference Stock, Participating Cumulative
Series or Participating Cumulative Series B, $1.00 par value.
Redeemable Preference Stock
- ---------------------------
On December 6, 1989, the company issued 300,000 shares of Preference Stock,
$92.50 Cumulative Convertible Series, $1.00 par value ("$92.50 Preference
Stock"). On June 22, 1995, all of the $92.50 Preference Stock was converted into
7,894,737 shares of common stock, which then were purchased by the company on
that date.
Common Stock
- ------------
Changes in common shares during the three years ended December 31, 1996 are as
follows:
(in shares and thousands of dollars)
<TABLE>
<CAPTION>
Treasury Shares
Issued Shares (at cost)
------------------------------- ---------------------
Par Capital
Shares Value Surplus Shares Amount
---------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994.... 96,367,755 $48,184 $1,163,555 (3,341,355) $(100,233)
Exercise of stock options..... 396,300 198 10,881 --- ---
Compensation plans............ 18,824 10 573 (150,925) (75)
Other......................... 3,160 1 (1) --- ---
---------- ------ ---------- --------- --------
Balance at December 31, 1994.. 96,786,039 48,393 1,175,008 (3,492,280) (100,308)
Conversions................... 12,205,192 6,102 441,731 --- ---
Exercise of stock options..... 1,224,750 613 36,379 --- ---
Compensation plans............ 11,805 6 339 --- ---
Repurchase of stock........... --- --- --- (11,080,731) (549,741)
Other......................... 2,593 1 (1) --- ---
---------- ------ ---------- --------- --------
Balance at December 31, 1995.. 110,230,379 55,115 1,653,456 (14,573,011) (650,049)
Exercise of stock options..... 79,800 40 2,428 --- ---
Compensation plans............ 9,184 5 1,499 --- ---
Repurchase of stock........... --- --- --- (195,300) (7,815)
Other......................... 3,736 2 (5,929) --- ---
----------- ------ ---------- --------- --------
Balance at December 31, 1996.. 110,323,099 $55,162 $1,651,454 (14,768,311) $(657,864)
=========== ====== ========== ========== ========
</TABLE>
14
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
At December 31, 1996, common shares of the company were reserved for issue as
follows:
Stock options granted or available for grant........ 5,406,200
Compensation plans.................................. 2,722,710
---------
8,128,910
=========
15
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 9. Stock Based Compensation
The company has granted to officers and key employees options to purchase common
shares at the market price of the shares on the date of grant. All options
granted to officers and certain options granted to key employees are accompanied
by stock appreciation rights. The options expire ten years or ten years and 31
days from the date of grant and generally become exercisable subsequent to a
period of 12 calendar months from date of grant.
Stock Option Transactions:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
--------- ----------------
<S> <C> <C>
Balance at January 1, 1994.................... 4,013,000 $29.35
Granted.................................. 582,400 30.13
Exercised................................ (565,000) 27.30
Surrendered or canceled.................. (65,600) 32.15
----------
Balance at December 31, 1994.................. 3,964,800 29.71
Granted.................................. 605,100 39.13
Exercised................................ (2,272,100) 29.46
Surrendered or canceled.................. (18,650) 35.02
---------
Balance at December 31, 1995.................. 2,279,150 32.42
Granted.................................. 556,350 46.63
Exercised................................ (215,400) 30.45
Surrendered or canceled.................. (24.300) 33.16
---------
Balance at December 31, 1996.................. 2,595,800 $35.62
=========
Options exercisable at December 31, 1996...... 2,043,550 $32.65
</TABLE>
At December 31, 1996, the stock options had an aggregate exercise price of
$92,468,000, with exercise prices ranging from $26.25 to $46.63 and a weighted
average remaining contractual life of 6.6 years.
In addition to stock options, the company granted 450,000 restricted stock units
on August 15, 1996 at the market price per share on that date ($44.25). Each
unit represents one share of common stock to be issued upon vesting (unless the
issuance is deferred), provided that the awardee remains in the company's employ
until the vesting date. The units vest over a six-year period as follows:
135,000 on August 15, 1998, 135,000 on August 15, 2000 and 180,000 on August 15,
2002.
Total compensation expense recognized for stock appreciation rights and other
stock based compensation for 1996, 1995 and 1994 was $3 million, $25 million and
$6 million, respectively.
The company accounts for stock options under Accounting Principles Board Opinion
No. 25, pursuant to which no compensation cost has been recognized for the
options that are not accompanied by stock appreciation rights. Had compensation
cost for these options been determined consistent with Statement of Financial
Accounting Standards No. 123, the impact on net income and earnings per share
would have been insignificant.
16
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 10. Fair Value of Financial Instruments
<TABLE>
<CAPTION>
1996 1995
-------------------- -------------------
December 31 Carrying Fair Carrying Fair
(in thousands of dollars) Amount Value Amount Value
- -------------------------------- -------- ----- -------- -----
<S> <C> <C> <C> <C>
Assets (Liabilities):
Short-term investments........ $ --- $ --- $ 98,275 $ 98,275
Long-term debt, excluding
lease obligations............ (2,876,332) (2,936,664) (2,620,633) (2,808,965)
</TABLE>
The fair value of the company's short-term investments is based on quoted market
prices at the reporting date for those or similar investments. The fair value
of the company's long-term debt, which includes current installments, is
estimated using discounted cash flow analyses, based on the company's
incremental borrowing rates for similar types of borrowings.
The carrying amounts reported in the balance sheet for cash and cash
equivalents, receivables, short-term bank borrowings, and accounts payable and
accrued liabilities approximate fair values due to the short maturity of those
instruments.
Note 11. Other (Income) Expense -- Net
<TABLE>
<CAPTION>
Years Ended December 31
(in thousands of dollars) 1996 1995 1994
- ---------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Interest income......................... $(32,396) $(37,999) $(31,107)
Foreign currency losses -- net.......... 3,374 5,902 10,725
Minority interest in income of
subsidiaries (a)....................... 1,920 34,285 18,243
Equity in net income of affiliates...... (1,000) (337) (337)
Royalty, rental and commission
income................................. (13,912) (11,302) (13,031)
Net gain on disposal of fixed assets,
timberlands and investments (b)........ (23,101) (46,536) (14,151)
Miscellaneous -- net (c)................ 20,875 22,898 (27,684)
-------- -------- --------
$(44,240) $(33,089) $(57,342)
======== ======== ========
</TABLE>
(a) On July 3, 1996, Weldwood of Canada Limited acquired all of its publicly-
held shares for (U.S.) $191 million and became a wholly-owned subsidiary of
the company.
(b) 1995 included a gain of $89 million from the sale of certain operations in
Canada and charges of $68 million primarily for the writedown of certain
U.S. paper and wood products assets. 1994 included a gain of $16 million
from the sale of the company's interest in a Swedish linerboard mill.
(c) 1994 included income of $19 million from the recognition of a refund due on
countervailing duties on lumber exports from Canada into the United States.
17
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 12. Income Taxes
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
Years Ended December 31 (in thousands of dollars) 1996 1995 1994
- ------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Provision for income taxes currently
payable (receivable):
Federal........................................... $ 6,120 $128,805 $ (2,920)
State and local................................... 2,400 10,700 2,100
Foreign........................................... 51,975 166,218 52,517
------- -------- --------
60,495 305,723 51,697
------- -------- --------
Provision for deferred income taxes:
Federal........................................... 7,981 120,075 (36,274)
State and local................................... 1,284 31,508 (4,667)
Foreign........................................... (6,096) 7,422 14,195
------- -------- --------
3,169 159,005 (26,746)
------- -------- --------
$63,664 $464,728 $ 24,951
======= ======== ========
</TABLE>
Domestic and foreign income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended December 31 (in thousands of dollars) 1996 1995 1994
- ------------------------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
Domestic........................................... $ 30,548 $ 785,202 $(110,544)
Foreign............................................ 174,422 451,361 198,800
-------- ---------- ---------
Total income before income taxes................... $204,970 $1,236,563 $ 88,256
======== ========== =========
</TABLE>
18
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Principal reasons for the variation between the statutory rate and the effective
federal income tax rate are as follows:
<TABLE>
<CAPTION>
Years Ended December 31 1996 1995 1994
- ----------------------- -------- -------- --------
<S> <C> <C> <C>
Statutory rate -- provision........................ 35.0 % 35.0 % 35.0 %
Rate difference -- foreign subsidiaries............ (7.5) 1.7 (3.9)
Foreign dividends.................................. 4.3 0.3 8.2
State and local taxes, net of federal tax effect... 0.1 2.2 (1.9)
Adjustment to prior years' income taxes............ (2.4) --- (5.6)
Statutory rate change adjustments.................. --- (0.5) ---
All other -- net................................... 1.6 (1.1) (3.5)
-------- -------- --------
Effective income tax rate.......................... 31.1 % 37.6 % 28.3%
======== ======== ========
</TABLE>
Deferred tax liabilities (assets) are composed of the following:
<TABLE>
<CAPTION>
December 31 (in thousands of dollars) 1996 1995
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Depreciation and cost of timber harvested......... $1,783,163 $1,687,471
Capitalization of interest and deferral of
pre-operating and start-up costs (net)........... 32,653 37,450
Other............................................. 86,190 51,593
---------- ----------
Gross Liabilities........................ 1,902,006 1,776,514
---------- ----------
Loss and other carryforwards...................... (236,417) (211,742)
Accrued liabilities and reserves.................. (151,815) (201,744)
Postretirement benefits other than pensions....... (151,702) (151,284)
Other............................................. (87,129) (88,902)
---------- ----------
Gross Assets............................. (627,063) (653,672)
---------- ----------
Valuation allowance............................... 15,235 20,807
---------- ----------
$1,290,178 $1,143,649
========== ==========
</TABLE>
19
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
As of December 31, 1996, the company had available, for U.S. income tax return
purposes, general business credit carryforwards of $19,900,000, which expire
from 2001 through 2010, and alternative minimum tax credit carryforwards of
$195,800,000, which do not expire. In addition, the company had, for Brazilian
income tax return purposes, operating loss carryforwards of $31,600,000, which
do not expire.
It is the company's intention to reinvest undistributed earnings of certain of
its foreign subsidiaries and thereby indefinitely postpone their remittance.
Accordingly, no provision has been made for income taxes on undistributed
earnings of $1,168,800,000 at December 31, 1996. Computation of the potential
deferred tax liability associated with these undistributed earnings is not
practicable.
The valuation allowance primarily relates to general business credit and other
carryforwards. The decrease in the valuation allowance of $5,572,000 for 1996
and $13,200,000 for 1995 is primarily due to the resolution of issues with
respect to the utilization of such carryforwards.
During 1996, purchase accounting adjustments for various acquisitions resulted
in an increase to the company's deferred tax liabilities of approximately
$135,900,000.
Note 13. Pension and Other Benefit Plans
The company and its subsidiaries have a number of noncontributory pension plans
covering substantially all employees. The plans covering salaried employees
provide pension benefits that generally are based on the employee's compensation
during the 60 months before retirement. Plans covering hourly employees
generally provide benefits of stated amounts for each year of service. The
company bases domestic pension contributions on funding standards established by
the Employee Retirement Income Security Act of 1974.
The net periodic pension cost of these plans in 1996, 1995 and 1994 included the
following:
<TABLE>
<CAPTION>
Years ended December 31 (in thousands of dollars) 1996 1995 1994
- ------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the period.. $ 26,397 $ 23,855 $ 25,301
Interest cost on projected benefit obligation.... 106,432 102,739 95,461
Actual return on plan assets..................... (123,725) (253,431) (4,883)
Net amortization and deferral.................... 7,046 130,438 (128,456)
--------- --------- ---------
Net periodic pension cost (income)............... $ 16,150 $ 3,601 $ (12,577)
========= ========= =========
</TABLE>
Assumptions used in determining 1996, 1995 and
1994 net periodic pension cost were:
<TABLE>
<S> <C> <C> <C>
Expected long-term rate of return on assets...... 10.0% 10.0% 10.0%
Discount rate.................................... 7.5% 8.0% 7.3%
Long-term rate of increase in compensation levels 4.5% 5.0% 4.3%
</TABLE>
20
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
The accrued pension cost at December 31, 1996 and 1995 for defined benefit plans
is shown below. The measurement dates used to determine the funded status were
September 30, 1996 and 1995. Benefit obligations for 1996 and 1995 were
determined using an assumed discount rate of 7.75% and 7.5%, respectively, and
an assumed average long-term rate of increase in compensation levels of 4.75%
and 4.5%, respectively. Plan assets consist primarily of listed stocks and
bonds.
December 31 (in thousands of dollars) 1996 1995
- ----------------------------------------------- ---------- ----------
Actuarial present value of benefit obligations:
Vested benefit obligation.................. $1,364,311 $1,280,840
========== ==========
Accumulated benefit obligation............. $1,412,904 $1,326,902
========== ==========
Projected benefit obligation............... $1,509,669 $1,421,803
Plan assets at fair value...................... 1,549,365 1,459,631
---------- ----------
Plan assets in excess of the projected
benefit obligation........................... 39,696 37,828
Unrecognized net (gain)........................ (13,961) (40,886)
Prior service cost not yet recognized in net
periodic pension cost........................ 54,117 35,356
Unrecognized net transitional (asset).......... (5,289) (6,553)
---------- ----------
Pension asset.................................. $ 74,563 $ 25,745
========== ==========
The company sponsors several defined contribution plans that provide all
domestic salaried employees and certain domestic hourly employees of the company
an opportunity to accumulate funds for their retirement. The company matches the
contributions of participating employees on the basis of the percentages
specified in the respective plans. Company matching contributions to the plans,
which are invested in shares of the company's common stock, were approximately
$13 million in 1996, $12 million in 1995 and $10 million in 1994.
21
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Other Retiree Benefits
- ----------------------
The company provides certain health care and life insurance benefits to eligible
retired employees. Employees are generally eligible for benefits upon retirement
following a specified number of years of service. These benefit plans are
unfunded.
Summary information on the company's plans providing postretirement benefits
other than pensions is as follows:
December 31 (in thousands of dollars) 1996 1995
- ---------------------------------------------- -------- --------
Accumulated postretirement benefit obligation:
Retirees.................................... $284,600 $277,500
Fully eligible, active plan participants.... 19,100 21,400
Other active plan participants.............. 68,400 63,800
-------- --------
Accumulated postretirement benefit obligation. 372,100 362,700
Unrecognized prior service benefit............ 24,400 26,400
Unrecognized net (loss)....................... (17,300) (10,300)
-------- --------
Accrued postretirement benefit obligation..... $379,200 $378,800
======== ========
Net periodic postretirement benefit cost for 1996, 1995 and 1994 includes the
following components:
(in thousands of dollars) 1996 1995 1994
- -------------------------------------------- -------- -------- --------
Service cost................................ $ 3,800 $ 3,500 $ 4,300
Interest cost on accumulated postretirement
benefit obligation........................ 26,900 27,900 29,100
Net amortization and deferral............... (2,000) (2,000) (900)
-------- -------- --------
Net periodic postretirement benefit cost.... $ 28,700 $ 29,400 $ 32,500
======== ======== ========
The accumulated postretirement benefit obligation at December 31, 1996 and 1995
was determined using an assumed discount rate of 8.0% and 7.75%, respectively.
The assumed health care cost trend rate used for measurement purposes was 8.0%
for 1997, declining ratably to an ultimate rate of 5.0% over a period of five
years.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefit obligation as of December 31, 1996 would be
increased by approximately 9%. The effect of this change on the aggregate of
service and interest cost for 1996 would be an increase of approximately 12%.
22
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 14. Business Segments
The company's business segments are paper and wood products. The markets in
which the company sells its products are highly competitive. The company faces
numerous competitors within the forest products industry in each of its major
markets and also competes with suppliers of milk and juice cartons and kraft
paper substitutes made from plastics. Competition in all markets is based
primarily on price. The company is one of the largest domestic producers and
suppliers of coated and uncoated free sheet and groundwood papers, newsprint,
milk and juice cartons, and hardwood market pulp. Weldwood of Canada Limited, a
wholly-owned Canadian subsidiary, is one of the largest producers of lumber and
softwood market pulp in Canada. Champion Papel e Celulose Ltda., a 99%-owned
Brazilian subsidiary, is one of the largest producers and suppliers of uncoated
free sheet papers in Brazil.
The company believes that the risks associated with its foreign operations are
somewhat greater than those associated with its domestic operations. Weldwood
and Champion Papel export substantial portions of their products and, as a
result, are affected by currency fluctuations. In addition, Champion Papel is
subject to Brazil's continuing inflation, which has moderated substantially as
the result of various governmental actions in the last three years. Tight
monetary and fiscal policies, including high interest rates, imposed in recent
years in an attempt to control Brazil's high inflation rate, remain in effect.
23
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Information about the company's operations in different businesses for the three
years ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Timber,
Timberlands
and Wood Corporate Consolidated
(in thousands of dollars) Paper Products and Other Total
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net Sales to
Unaffiliated Customers:
1996................... $4,961,749 $ 918,694 $ --- $5,880,443
1995................... 6,007,158 964,880 --- 6,972,038
1994................... 4,216,795 1,101,397 --- 5,318,192
Income from Operations:
1996................... $ 290,020 $ 126,086 $(33,162) $ 382,944
1995................... 1,344,052 138,254 (52,816) 1,429,490
1994................... 50,282 244,721 (29,003) 266,000
Identifiable Assets:
1996................... $6,486,138 $2,863,419 $470,435 $9,819,992
1995................... 6,432,726 2,673,000 437,576 9,543,302
1994................... 6,244,111 2,303,941 415,576 8,963,628
Capital Expenditures:
1996................... $ 339,000 $ 214,094 $ 28,600 $ 581,694
1995................... 313,540 299,437 11,239 624,216
1994................... 188,220 133,504 7,148 328,872
Depreciation Expense and
Cost of Timber Harvested:
1996................... $ 427,129 $ 61,997 $ 12,793 $ 501,919
1995................... 404,251 54,408 12,778 471,437
1994................... 387,628 57,346 13,723 458,697
</TABLE>
The company's timber and timberlands assets and related capital expenditures
support both business segments but were not allocated to the paper segment
because identification of the specific timber and timberlands assets associated
with either segment is impossible. The timber that has been harvested has been
included at cost in the results of the business segments.
24
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Information about the company's operations in different geographic areas for the
three years ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Corporate Consolidated
(in thousands of dollars) U.S. Canada Brazil and Other Total
- ------------------------- ---------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales to
Unaffiliated Customers:
1996................... $5,006,170 $535,387 $338,886 $ --- $5,880,443
1995................... 5,912,360 655,595 404,083 --- 6,972,038
1994................... 4,370,317 694,104 253,771 --- 5,318,192
Income from Operations:
1996................... $ 271,631 $ 58,216 $ 86,259 $(33,162) $ 382,944
1995................... 1,116,163 205,595 160,548 (52,816) 1,429,490
1994................... 110,015 133,720 51,268 (29,003) 266,000
Identifiable Assets:
1996................... $7,515,319 $857,905 $976,333 $470,435 $9,819,992
1995................... 7,418,524 920,183 767,019 437,576 9,543,302
1994................... 7,254,363 747,225 546,464 415,576 8,963,628
Capital Expenditures:
1996................... $ 409,687 $ 69,979 $ 73,428 $ 28,600 $ 581,694
1995................... 434,252 15,956 162,769 11,239 624,216
1994................... 258,899 14,029 48,796 7,148 328,872
Depreciation Expense and
Cost of Timber Harvested:
1996................... $ 424,604 $ 34,002 $ 30,520 $ 12,793 $ 501,919
1995................... 401,226 29,789 27,644 12,778 471,437
1994................... 387,483 32,338 25,153 13,723 458,697
</TABLE>
As of December 31, 1996, net assets located outside of the United States
included in the consolidated financial statements were approximately $1.3
billion. Of this amount, $157 million of cash and cash equivalents is held by
the company's Canadian and Brazilian subsidiaries.
25
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 15. Quarterly Results of Operations (Unaudited)
(in millions of dollars, except per share amounts)
- --------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
- --------------------------------------------------------------------------------
Net Sales: 1996 $1,533.2 $1,444.6 $1,470.5 $1,432.1
1995 1,634.0 1,756.4 1,840.7 1,740.9
Gross Profit: 1996 $ 272.7 $ 158.1 $ 187.5 $ 127.7
1995 357.1 445.4 543.1 470.0
Income Taxes
(Benefit) (a): 1996 $ 48.3 $ 6.8 $ 13.5 $ (4.9)
1995 89.2 116.4 148.1 111.0
Net Income (b): 1996 $ 83.6 $ 15.6 $ 32.0 $ 10.1
1995 131.2 187.5 235.6 217.5
Primary Earnings
Per Common
Share (c): 1996 $ .88 $ .16 $ .33 $ .11
1995 1.33 1.93 2.47 2.26
Fully Diluted
Earnings Per
Common Share (c): 1996 $ .88 $ .16 $ .33 $ .11
1995 1.26 1.79 2.44 2.26
(a) The income tax benefit for the three months ended December 31, 1996
included a benefit of $2 million for certain one-time adjustments to
foreign income taxes.
(b) Other (income) expense - net for the three months ended December 31, 1996
included income of $14 million from an asset sale and an insurance refund,
and charges of $9 million primarily for the writedown of certain paper and
wood products assets. Other (income) expense - net for the three- month
periods ended March 31 and June 30, 1995 included gains of $50 million and
$39 million, respectively, from the sales of certain operations in Canada
and charges of $36 million and $32 million, respectively, primarily for the
writedown of certain U.S. paper and wood products assets.
(c) Earnings per share was calculated for each three-month and twelve-month
period on a stand-alone basis. On June 22, 1995, the company purchased all
7,894,737 shares of common stock that were issued on that date upon
conversion of the $92.50 Preference Stock. On June 27, 1995, the company
called all $149,893,000 of its 6 1/2% Convertible Subordinated Debentures
due April 15, 2011 for redemption on August 8, 1995. Virtually all of the
Debentures were converted into an aggregate of 4,309,070 shares of common
stock during the third quarter of 1995. The company purchased an additional
3,186,000 shares of common stock at various times during 1995. As a result
of all of these transactions, the sum of the earnings per share for the
four quarters of 1995 does not equal the earnings per share for the twelve
months ended December 31, 1995.
26
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 16. Environmental Liabilities
The company has been designated as a potentially responsible party by the U.S.
Environmental Protection Agency (the "EPA") under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, and by certain
states under applicable state laws, with respect to the cleanup of hazardous
substances at a number of sites. In the case of many of these sites, other
potentially responsible parties also have been so designated. In addition, the
company and, in certain instances, other responsible parties have entered into
agreements with the EPA and certain states regarding the cleanup of hazardous
substances at various other locations. Also, the company is involved in the
remediation of certain other sites which are not the subject of investigation by
federal or state agencies.
The company cannot predict with certainty the total cost of such cleanups, the
company's share of the total cost of multiparty cleanups or the extent to which
contribution will be available from other parties, or the amount of time
necessary to accomplish such cleanups. However, based upon, among other things,
its previous experience with respect to the cleanup of hazardous substances as
well as the regular detailed review of known hazardous waste sites by the
company, the company has accrued $71 million at December 31, 1996, which
represents its current estimate of the probable cleanup liabilities, including
remediation and legal costs, at all known sites. This accrual does not reflect
any possible future insurance recoveries, which are not expected to be
significant, but does reflect a reasonable estimate of cost-sharing at
multiparty sites.
Although the company's probable liabilities have been accrued for currently,
hazardous substance cleanup expenditures generally are paid over an extended
period of time, in some cases possibly more than 30 years. Annual cleanup
expenditures during the period from 1994 through 1996 were approximately $4
million, $5 million and $4 million, respectively.
Note 17. Legal Proceedings
The company is involved in legal and administrative proceedings and claims of
various types. While any litigation contains an element of uncertainty,
management, based upon the opinion of the company's General Counsel, presently
believes that the outcome of each such proceeding or claim which is pending or
known to be threatened will not have a material adverse effect on the company.
27
<PAGE>
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of Champion International Corporation:
We have audited the accompanying consolidated balance sheet of Champion
International Corporation (a New York corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of income,
retained earnings and cash flows for each of the three 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 Champion International
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/Arthur Andersen LLP
New York, N.Y.
January 17, 1997
28
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Overall Annual Results
Results for 1996 declined significantly from 1995 but improved from 1994. In
1996, net income was $141 million or $1.48 per share. This compared with net
income of $772 million or $7.67 per share, fully diluted, in 1995 and $63
million or 38 cents per share in 1994. The decline from 1995 reflected
substantially lower operating income in the paper segment, primarily due to
lower prices, and, to a lesser extent, lower operating income in the wood
products segment. The increase from 1994 reflected a significant improvement in
paper segment operating income, due to higher prices, which more than offset
lower operating income in the wood products segment.
Significant Income Statement Line Item Changes
Net sales for 1996 of $5.9 billion declined from $7 billion in 1995 but
increased from $5.3 billion in 1994. Gross profit was $746 million, compared to
$1.8 billion in 1995 and $565 million in 1994. Pre-tax income of $205 million
declined from $1.2 billion in 1995 but improved from $88 million in 1994. The
declines in net sales, gross profit and pre-tax income from 1995 were
principally due to lower prices for all of the company's major pulp and paper
grades and, to a lesser extent, lower shipments of groundwood papers and
plywood. The improvement from 1994 was due to higher prices for all major grades
of paper, which more than offset lower prices and shipments of wood products and
higher manufacturing costs. Overall pulp and paper shipments were approximately
even with 1994 and 1995. Wood products shipments declined from both 1995 and
1994, reflecting the sale and the closure of various wood products facilities.
The aggregate cost of products sold was approximately even with 1995 and higher
than 1994. The increase from 1994 was mainly due to higher costs for wood fiber
and materials, maintenance outages and increased sales volumes for the company's
paper-merchant business, Nationwide Papers.
Selling, general and administrative expenses of $363 million declined from $386
million in 1995 but increased from $299 million in 1994. The decline from 1995
was principally the result of lower compensation costs and the impact of stock
price fluctuations on the value of stock appreciation rights. The increase from
1994 was primarily due to higher selling expenses, warehousing costs,
compensation costs and professional fees.
Other (income) expense - net for 1996 improved from 1995 but declined from 1994.
The improvement from 1995 was mainly due to lower minority interest expense,
which more than offset lower net gains from the sale and disposition of assets.
The decrease in minority interest expense resulted from the purchase by the
company's Canadian subsidiary, Weldwood of Canada Limited ("Weldwood"), of all
of its publicly-held shares on July 3, 1996 for (U.S.) $191 million. Weldwood is
now a wholly-owned subsidiary of the company. Other (income) expense - net for
1995 included an $89 million gain from the sale by Weldwood of its coastal
British Columbia timberlands and wood products facilities, and charges of $68
million principally for the writedown of certain U.S. paper and wood products
assets. The decline from 1994 was primarily the result of the 1994 sale of the
company's interest in a Swedish linerboard mill and the recognition in 1994 of a
refund due on countervailing duties on lumber exports from Canada into the
United States in prior years.
The income tax provision for 1996 reflected an effective tax rate lower than
1995 but higher than 1994. The decrease from last year was mainly due to the
fact that a larger proportion of 1996 income
29
<PAGE>
- --------------------------------------------------------------------------------
derived from the company's operations in Brazil, whose tax rate is lower than
that applicable to the company's North American operations. The increase from
1994 was principally due to the favorable impact of a one-time adjustment to the
company's deferred tax liability in 1994.
All outstanding shares of the company's $92.50 Cumulative Convertible Preference
Stock were converted on June 22, 1995. As a result, there were no dividends on
preference stock in 1996, and dividends on preference stock were lower in 1995
than 1994.
Quarterly Results
Earnings per share of 11 cents for the fourth quarter of 1996 compared to $2.26
for the fourth quarter of 1995 and 33 cents for the third quarter of 1996. The
decline from the year-ago quarter was due to significantly lower prices for most
of the company's pulp and paper grades. The decline from the prior quarter was
primarily due to lower prices for most of the company's major paper grades, as
well as lower shipments of lumber and plywood. Fourth quarter 1996 earnings were
favorably impacted by a lower effective income tax rate compared to the year-ago
and prior quarters.
Paper Segment
For the company's paper segment, operating income of $290 million in 1996
declined substantially from $1.3 billion in 1995 but improved from $50 million
in 1994. Total paper, packaging and pulp shipments were approximately six
million tons in each of 1994, 1995 and 1996. Fourth quarter 1996 operating
income of $21 million compared with $361 million in the fourth quarter of 1995
and $58 million in the third quarter of 1996.
In general, the paper business tends to reflect overall economic trends as well
as industry production levels. Paper segment earnings improved substantially in
the second half of 1994 and the first nine months of 1995, reflecting increased
demand attributable to strengthening economies in much of the world. In
addition, on the supply side, there were relatively few capacity increases in
the industry, although domestic pulp and paper manufacturers increased
production from existing facilities and there were pulp capacity additions in
Indonesia. This favorable demand/supply relationship resulted in strong markets
and substantial price increases for all of the company's principal pulp and
paper grades during these periods.
Prior to the fourth quarter of 1995, many industry customers increased their
inventory levels. Consequently, order backlogs for most pulp and paper grades
declined during the fourth quarter of 1995 and into 1996, resulting in
substantially lower prices and an increase in company inventory levels. While
order backlogs and prices for pulp improved slightly during the second half of
1996, prices for most paper grades continued to weaken throughout 1996. In early
1997, prices for the company's major pulp and paper grades remained below fourth
quarter averages.
In late 1996, the company's domestic paper mills were reorganized into three
businesses: free sheet, groundwood and specialty. The mills in the free sheet
business consist of the Courtland, Alabama; Quinnesec, Michigan; Pensacola,
Florida; and Canton, North Carolina mills. The mills in the groundwood business
are the Sartell, Minnesota and Bucksport, Maine mills; and the Sheldon and
Lufkin, Texas newsprint mills. The specialty business mills consist of the
Hamilton, Ohio; Roanoke Rapids, North Carolina; and Deferiet, New York mills.
Operating income for the domestic free sheet business declined substantially
from 1995 but improved from the loss in 1994. The average price for domestic
uncoated free sheet papers, the principal product of the free sheet business,
was $708 per ton in 1996, compared to $960 per ton in 1995 and $595 per ton in
1994. The average price for coated free sheet papers and bleached board also
declined from l995 but improved from 1994. Shipments of all grades of 2,189,000
tons were approximately even with the two prior years. An operating loss for the
fourth quarter of 1996
30
<PAGE>
- --------------------------------------------------------------------------------
represented a decline from the substantial operating income of the year-ago
quarter and slight operating income of the third quarter of 1996. The decline
from the fourth quarter of 1995 was mainly due to substantially lower prices for
coated and uncoated free sheet papers. The decline from the prior quarter was
primarily due to lower prices for coated and uncoated free sheet papers, lower
shipments of uncoated free sheet papers and the receipt in the prior quarter of
$7.5 million of insurance proceeds for a previously-recognized loss resulting
from a weather-related outage. In early 1997, prices for uncoated free sheet
papers improved somewhat, but prices for both coated and uncoated grades
remained below fourth quarter averages. Market conditions for coated free sheet
papers, in particular, are expected to be adversely affected in the near term by
announced industry capacity additions.
Operating income at the company's Brazilian subsidiary declined from 1995 but
improved from 1994. The decline from 1995 was principally due to lower domestic
and export prices for uncoated free sheet papers. The improvement from 1994 was
mainly due to higher domestic and export prices and shipments of uncoated free
sheet papers. The average price for uncoated free sheet papers was $838 per ton
in 1996, compared to $1,028 per ton in 1995 and $615 per ton in 1994. Shipments
of uncoated free sheet papers of 389,000 tons increased somewhat from both 1994
and 1995. Approximately 48% of the company's 1996 consolidated pre-tax income
was attributable to the Brazilian subsidiary. Fourth quarter operating income
declined from the fourth quarter of 1995, but improved from the third quarter of
1996. The improvement from the prior quarter was primarily due to higher export
prices. Domestic and export prices declined slightly in early 1997.
Operating income for the groundwood business declined considerably from 1995 but
improved significantly from the operating loss in 1994. The average price for
coated groundwood papers was $963 per ton in 1996, compared to $1,047 per ton in
1995 and $723 per ton in 1994. Prices for uncoated groundwood papers also were
lower than in 1995 but improved from 1994. The average price for newsprint was
$564 per ton in 1996, compared to $618 per ton in 1995 and $409 per ton in 1994.
Shipments of all groundwood and newsprint grades were 1,659,000 tons in 1996,
compared to 1,747,000 tons in 1995 and 1,722,000 tons in 1994. Fourth quarter
1996 operating income declined significantly from the fourth quarter of 1995 and
the third quarter of 1996, due to lower prices for all grades.
Earnings for the specialty business declined significantly from 1995 and were
approximately even with 1994. The decline from 1995 was mainly due to lower
prices and, to a lesser extent, reduced shipments resulting from scheduled
maintenance outages. Compared to 1994, higher prices were offset by increased
purchased wood fiber and energy costs and lower shipments. Prices for most
grades, including coated and uncoated groundwood papers and kraft papers,
declined from 1995 but increased from 1994. Coated premium free sheet prices
increased from 1994 and were approximately even with 1995, while linerboard
prices declined significantly from 1995 and slightly from 1994. Shipments of all
grades were 859,000 tons in 1996, compared to 878,000 tons in 1995 and 873,000
tons in 1994. Fourth quarter operating income declined from the fourth quarter
of 1995 principally due to lower prices for all grades. However, results
improved from the operating loss in the third quarter of 1996 mainly due to
higher prices for kraft papers.
Operating income for the U.S. and Canadian market pulp operations represented a
considerable decline from earnings levels in the two prior years. The decline
from 1995 was principally due to substantially lower prices for all grades,
while the decline from 1994 was primarily due to lower prices for northern
hardwood pulp and higher wood fiber costs, which in each case more than offset
increased shipments. The average price for Canadian softwood pulp was $422 per
ton in 1996, compared to $693 per ton in 1995 and $410 per ton in 1994. The
average price for northern hardwood pulp was $392 per ton in 1996, compared to
$683 per ton in 1995 and $421 per ton in 1994. Shipments of all pulp grades were
894,000 tons in 1996, compared to 797,000 tons in 1995 and 860,000 tons in 1994.
Operating income in the fourth quarter of 1996 declined significantly from the
fourth quarter of 1995 and slightly from the third quarter of 1996. The decline
from the fourth quarter of 1995 was principally due to lower prices for all
grades, which more than offset higher shipments. The decline
31
<PAGE>
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from the prior quarter was due to lower shipments as a result of scheduled
maintenance outages during the fourth quarter. Since the company is a net seller
of pulp, overall profits are adversely affected by lower pulp prices; however,
the company's Bucksport, Canton, Deferiet, Hamilton and Sartell mills purchase
pulp from outside suppliers and benefit from lower pulp prices.
Wood Products Segment
For the company's wood products segment, which includes the wood-related
operations of Weldwood, income from operations of $126 million in 1996 declined
from $138 million in 1995 and $245 million in 1994. Fourth quarter 1996
operating income of $36 million compared with $29 million in the fourth quarter
of 1995 and $42 million in the third quarter of 1996.
Lower prices for plywood and timber stumpage, and lower overall wood products
shipments, mainly were responsible for the decline in earnings from both prior
years. The average price for plywood overall was 8% lower than in both 1994 and
1995 due to industry capacity additions. The average price for lumber overall
was up 21% from 1995 primarily due to the imposition by the United States of
tariffs on Canadian lumber, but down 3% from 1994. Wood products shipments
declined from both prior years due to the sale and the closure of various wood
products facilities.
Shipments of lumber and plywood declined somewhat in the fourth quarter of 1996,
mainly due to seasonal factors, while prices overall were substantially
unchanged.
Foreign Operations
The company's major foreign operations, which are discussed above under their
respective segment headings, are in Canada and Brazil. Net sales to unaffiliated
customers by the company's foreign subsidiaries for 1996 were (U.S.) $874
million, accounting for 15% of consolidated net sales of the company. Pre-tax
income of the foreign subsidiaries for 1996 was (U.S.) $174 million, accounting
for 85% of the consolidated pre-tax income of the company. Net income (after
minority interest) of the foreign subsidiaries for 1996 was (U.S.) $129 million,
accounting for 91% of the consolidated net income of the company.
Labor Contracts
The company has labor agreements, which expire between 1998 and 2002, at ten of
its eleven domestic paper mills. The Quinnesec, Michigan mill is a non-union
facility.
The labor agreement that covers the paper industry in Brazil, including the
company's Brazilian subsidiary, is renegotiated each year.
At Weldwood, labor agreements covering the Hinton, Alberta, pulp mill, the joint
venture pulp mill in Quesnel, British Columbia, and all of Weldwood's wood
products facilities, will expire in 1997.
Financial Condition
General
The company's current ratio was 1.4 to 1 at year-end 1996, as compared to 1.5 to
1 at year-end 1995 and 1.1 to 1 at year-end 1994. Total debt to total
capitalization was 39% at year-end 1996, compared to 38% at year-end 1995 and
43% at year-end 1994.
32
<PAGE>
- --------------------------------------------------------------------------------
Significant Balance Sheet Line Item Changes
Short-term investments declined by $98 million from December 31, 1995 to
partially fund the income tax payments and the purchase of the publicly-held
shares of Weldwood referred to below. Receivables decreased by $62 million
mainly due to substantial price decreases for all of the company's major pulp
and paper grades. Inventories increased by $32 million primarily due to lower
paper shipments. Timber and timberlands - net increased by $357 million
principally due to the acquisitions of Lake Superior Land Company and Amapa
Florestal e Celulose ("AMCEL"), and the revaluation of timber assets in
connection with the Weldwood share purchase. Property, plant and equipment
increased by $447 million mainly due to capital expenditures and the revaluation
of assets in connection with the Weldwood share purchase. Other assets and
deferred charges increased by $48 million reflecting pension contributions and
the acquisition of real estate land as part of the purchase of Lake Superior
Land Company. Income taxes payable decreased by $103 million due to payments
made in 1996 for U.S. and foreign income taxes. The deferred income tax
liability increased by $145 million, which included $65 million recorded in
connection with the Lake Superior Land Company acquisition and $49 million
recorded in connection with the Weldwood share purchase. Minority interest in
subsidiaries decreased by $99 million due to the Weldwood share purchase. For a
discussion of changes in long-term debt (including current installments) and
cash and cash equivalents, see below.
Cash Flows Statement - General
In 1996, the company's net cash provided by operating activities and asset sales
was not sufficient to meet the requirements of its investing activities
(principally capital expenditures and the acquisitions of Lake Superior Land
Company and AMCEL) and its financing activities (principally debt payments, cash
dividends, the purchase of shares of the company's common stock and the Weldwood
share purchase). The difference was financed through borrowings and the use of
cash and cash equivalents. In 1996, net borrowings generated cash proceeds of
$189 million; long term debt (including current installments) increased by $260
million, including a $44 million mortgage loan of Lake Superior Land Company and
$35 million of debt from AMCEL which were outstanding at the time of their
respective acquisitions. Cash and cash equivalents decreased by $142 million in
1996 to a total of $175 million, $157 million of which was held by the company's
Canadian and Brazilian subsidiaries. A substantial portion of the company's cash
deficit in 1996 was attributable to the Weldwood share purchase and the
acquisitions of Lake Superior Land Company and AMCEL.
In 1995, the company's net cash provided by operating activities and asset sales
substantially exceeded the requirements of its investing activities (principally
capital expenditures). The excess was used primarily to pay dividends, to pay a
portion of the company's long-term debt (including current installments), to
increase cash and cash equivalents, and to purchase shares of the company's
common stock. In 1995, long-term debt (including current installments) declined
by $292 million; a substantial portion of this reduction was effected through
the conversion of virtually all $149,893,000 of the company's 6 1/2% Convertible
Subordinated Debentures into an aggregate of 4,309,070 shares of common stock
rather than through the use of cash. Cash and cash equivalents increased by $226
million in 1995 to a total of $317 million. In 1995, the company purchased 11.1
million shares of common stock for $550 million.
In 1994, the company's net cash provided by operating activities and asset sales
exceeded the requirements of its investing activities (principally capital
expenditures). The excess was used primarily to pay dividends as well as a
portion of the company's long-term debt (including current installments) and to
increase cash and cash equivalents. In 1994, long-term debt (including current
installments) declined by $206 million, and cash and cash equivalents increased
by $35 million.
33
<PAGE>
- --------------------------------------------------------------------------------
Cash Flows Statement - Operating Activities
Net cash provided by operating activities of $438 million declined from $1.5
billion in 1995 and $529 million in 1994. The decrease from 1995 was primarily
due to lower earnings, income taxes payable, deferred income taxes, and accounts
payable and accrued liabilities, and higher pension payments, which were
partially offset by a decrease in receivables. The decrease from 1994 was mainly
the result of higher inventories, pension payments and income tax payments, and
lower accounts payable and accrued liabilities, which were partially offset by
higher earnings and a decrease in receivables.
Cash Flows Statement - Investing Activities
Net cash used in investing activities of $554 million was approximately the same
as 1995 and increased from $257 million in 1994. Compared to 1995, the
acquisitions of Lake Superior Land Company and AMCEL and lower net proceeds from
asset sales in 1996 were approximately offset by lower capital expenditures and
an increase in proceeds from the redemption of investments in 1996. The increase
from 1994 was principally due to the acquisitions of Lake Superior Land Company
and AMCEL and higher capital expenditures.
In 1996, the company acquired Lake Superior Land Company for $76 million (as
well as a $44 million mortgage loan which was outstanding at the time of its
acquisition) and AMCEL for $60 million (as well as $35 million of debt
outstanding). Lake Superior Land Company owns 290,000 acres of forest lands in
Michigan and Wisconsin. AMCEL is a Brazilian company that owns 438,000 acres of
land and a chip mill in the State of Amapa, Brazil. In 1996, the company
received $98 million of proceeds from redemptions of investments and $43 million
from sales of timberlands and fixed assets. In 1995, Weldwood received net
proceeds of (U.S.) $175 million from the sale of its coastal British Columbia
timberlands and wood operations, and the company purchased investments for $98
million. In 1994, the company received net proceeds of $39 million from sales of
timberlands and fixed assets. In addition, the company received net proceeds of
$33 million from sales of investments, including $25 million from the sale of
its interest in a Swedish linerboard mill.
Cash Flows Statement - Financing Activities
Net cash used in financing activities of $26 million decreased from $676 million
in 1995 and $236 million in 1994. The decrease from the two prior years mainly
reflects the purchase of shares of common stock in 1995 and the reduction in
long-term debt (including current installments) in 1995 and 1994, which more
than offset the Weldwood share purchase in 1996.
At December 31, 1996, the company had $7 million of U.S. commercial paper
outstanding, all of which is classified as long-term debt, down from U.S.
commercial paper and other short-term obligations outstanding of $58 million at
year-end 1995 and $382 million at year-end 1994. At December 31, 1996, no notes
were outstanding under the company's U.S. bank lines of credit, compared to $40
million at year-end 1995 and $65 million at year-end 1994. Domestically, at
December 31, 1996, $7 million of the company's unused bank lines of credit of
$1.25 billion supported the classification of commercial paper as long-term
debt. At December 31, 1996, Weldwood had unused bank lines of credit of
approximately (U.S.) $131 million.
During 1996, the company issued $400 million of debentures due in 2026, borrowed
$175 million through bank term loans due in 1998 and 1999, and borrowed $50
million through the issuance of long-term tax-exempt bonds.
The annual principal payment requirements under the terms of all long-term debt
agreements for the years 1997 through 2001 are $81 million, $439 million, $262
million, $206 million and $206 million, respectively.
34
<PAGE>
- --------------------------------------------------------------------------------
Capital Expenditures
Capital spending in 1996 was $519 million, compared to $518 million in 1995 and
$268 million in 1994. The company presently anticipates that capital spending
will be approximately $500 million in 1997, all of which is expected to be
financed through internally generated funds and the use of cash and cash
equivalents.
In late 1996 the company suspended, pending further review, the $127 million
recycling project at the Courtland, Alabama mill. Alternatives under
consideration include installing a recycling facility at a different mill.
In 1997, the company expects to complete the construction of a lumber mill and
the modernization of the existing plywood plant at Quesnel, British Columbia.
The total project cost is approximately (U.S.) $80 million, of which
approximately $37 million will be spent in 1997.
In addition to the pine plantations and chip mill acquired through the purchase
of AMCEL in 1996, the company plans to establish eucalyptus and pine plantations
and a new chipping operation in the State of Amapa, Brazil, in the next few
years. The company also has under consideration the possible construction of a
pulp and paper mill at Tres Lagoas, State of Mato Grosso do Sul, Brazil, in the
next few years. Approximately $47 million of the anticipated capital spending in
1997 will be devoted to these projects.
In addition, the company is considering a project to modernize the No. 5 paper
machine at the Bucksport, Maine mill. If a decision is made to proceed, the
project is expected to be completed in three years at a cost of approximately
$63 million, $25 million of which is included in the anticipated capital
spending for 1997.
The Environment
Environmental Capital Expenditures
The company is subject to various federal, state and local laws and regulations
relating to the discharge of materials into the environment and to the disposal
of solid waste. These laws and regulations require the company to obtain permits
and licenses from appropriate governmental authorities with respect to its
facilities and to operate its facilities in compliance with such permits and
licenses.
In order to meet the standards established by the various federal, state and
local environmental laws and regulations to which the company is subject, the
company is required to invest substantial amounts in pollution abatement
facilities. During the period from 1992 through 1996, the company spent
approximately $259 million in its domestic operations to purchase and install
systems to control the discharge of pollutants into air and water and to dispose
of solid wastes. In addition, from 1990 through 1994, the company spent
approximately $300 million on an environmental improvement and modernization
project at the Canton, North Carolina mill. In 1996, capital expenditures
incurred for environmental purposes were $35 million. In view of changing
environmental laws and regulations and their interpretation, as well as the
uncertainties and variables inherent in business planning, it is not possible
for the company to predict with certainty the amount of capital expenditures to
be incurred for environmental purposes in the future. However, the company
estimates that capital expenditures for air and water pollution control systems
and solid waste disposal systems in the United States will be approximately $35
million in 1997 and $131 million in 1998. In carrying forward its environmental
program, the company will commit additional amounts for environmental purposes
in years subsequent to 1998. Preliminary estimates indicate that for the period
from 1999 through 2001 capital expenditures for air and water pollution control
facilities and solid waste
35
<PAGE>
- --------------------------------------------------------------------------------
disposal facilities in the United States will aggregate approximately $104
million. The environmental capital expenditures described in this paragraph are
included in the respective past and estimated 1997 capital spending amounts set
forth above under "Capital Expenditures."
Although some pollution control and solid waste disposal facilities produce
improvements in operating efficiency, most increase product costs without
enhancing capacity or operating efficiency. However, since other paper and
forest products companies also are subject to environmental laws and
regulations, the company does not believe that compliance with such laws and
regulations will have a material adverse effect on its competitive position.
Proposed EPA Air and Water Regulations
In December 1993, the United States Environmental Protection Agency (the "EPA")
proposed regulations pursuant to the federal Clean Air Act Amendments of 1990
(the "Clean Air Act") and the federal Water Pollution Control Act (the "Clean
Water Act"). Additional Clean Air Act and Clean Water Act regulations were
proposed in 1996, and further regulations are expected to be proposed in the
future. It is anticipated that certain of these regulations will become final in
1997, and the balance will become final thereafter. Compliance with the
regulations is expected to be required within three years after each becomes
final.
As previously reported, trace amounts of dioxin were found in the pulp, sludge
and effluent at some bleached kraft mills in the United States and Canada,
including certain of the company's mills. The company expects that regulations
will be proposed under the Clean Water Act based upon the use of 100% chlorine
dioxide substitution to reduce the potential for the formation of dioxin in the
pulp bleaching process. This technology will be in place at all of the company's
fully bleached kraft mills by the end of 1998.
Assuming that the Clean Air Act and Clean Water Act regulations expected to be
proposed use a range of standards currently anticipated by the company and that
all of the regulations pursuant to the Clean Air Act and Clean Water Act are
adopted in the form anticipated by the company, the company presently expects
that it will incur capital expenditures to meet the requirements of the Clean
Water Act and Clean Air Act and state air toxics regulations, additional to
those set forth above under "Capital Expenditures" and "Environmental Capital
Expenditures," in the range of $80 million to $180 million over the period of
approximately 1997 through 2005.
Great Lakes Initiative
The company may incur capital expenditures, additional to those set forth above
under "Capital Expenditures" and "Environmental Capital Expenditures," in order
to meet the requirements of the Great Lakes Water Quality Agreement of 1978 and
the Great Lakes Critical Programs Act of 1990. Pursuant thereto, in March 1995,
the EPA issued guidance to the states regarding water quality standards for the
waters of the Great Lakes and their tributaries. The company is awaiting the
issuance of implementing regulations by the environmental agencies of the
affected states in order to determine the extent of any additional costs and the
period over which they will be incurred. As a result, the company is not yet in
a position to provide a meaningful estimate of any such costs.
Hazardous Substance Cleanup
The company has been designated as a potentially responsible party by the EPA
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, and by certain states under applicable state laws, with respect to the
cleanup of hazardous substances at a number of sites. In the case of many of
these sites, other potentially responsible parties also have been so designated.
In addition, the company and, in certain instances, other responsible parties
have entered into
36
<PAGE>
- --------------------------------------------------------------------------------
agreements with the EPA and certain states regarding the cleanup of hazardous
substances at various other locations. Also, the company is involved in the
remediation of certain other sites which are not the subject of investigation by
federal or state agencies. The cost of all such cleanups is not capitalized and,
accordingly, is not included in the capital expenditure information set forth
above under "Capital Expenditures" and "Environmental Capital Expenditures."
The company cannot predict with certainty the total cost of such cleanups, the
company's share of the total cost of multiparty cleanups or the extent to which
contribution will be available from other parties, or the amount of time
necessary to accomplish such cleanups. However, based upon, among other things,
its previous experience with respect to the cleanup of hazardous substances as
well as the regular detailed review of known hazardous waste sites by the
company, the company has developed an estimate of its probable cleanup
liabilities. This estimate includes remediation and legal costs with respect to
properties presently or formerly owned or operated by the company or its
predecessors as well as properties, such as municipal or county landfills, owned
and operated by third parties to which the company or its contractor sent waste
material. The company has accrued $71 million at December 31, 1996, on a
non-discounted basis, which represents its current estimate of the probable
cleanup liabilities at all known sites. This accrual does not reflect any
possible insurance recoveries, which are not expected to be significant, but
does reflect a reasonable estimate of cost-sharing at multiparty sites.
Although the company's probable liabilities have been accrued for currently,
hazardous substance cleanup expenditures generally are paid over an extended
period of time, in some cases possibly more than 30 years. Annual cleanup
expenditures during the period from 1994 through 1996 were approximately $4
million, $5 million and $4 million, respectively.
Other
The industry in which the company operates is capital intensive. Due to
inflation, the company's property, plant and equipment, and timber and
timberlands, could not be replaced for the historical cost value at which they
are reflected in the company's financial statements. On a current cost basis,
depreciation expense and cost of timber harvested would be greater than reported
on a historical cost basis.
37
<PAGE>
<TABLE>
<CAPTION>
Champion International Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------------------
Eleven-Year Selected Financial Data
(in millions, except per share amounts and ratio data)
1996 1995 1994 1993
- -------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Earnings:
Net sales.................................................... $5,880 $6,972 $5,318 $5,069
Depreciation expense and cost of timber harvested............ 502 471 459 443
Gross profit................................................. 746 1,816 565 359
Interest and debt expense.................................... 222 226 235 224
Other (income) expense -- net................................ (44) (33) (57) 7
Income (loss) before income taxes, extraordinary item and
cumulative effect of accounting changes.................... 205 1,237 88 (165)
Income taxes (benefit)....................................... 64 465 25 (31)
Income (loss) before extraordinary item and cumulative effect
of accounting changes...................................... 141 772 63 (134)
Extraordinary item, net of taxes............................. --- --- --- (14)
Cumulative effect of accounting changes, net of taxes........ --- --- --- (8)
Net income (loss)............................................ 141 772 63 (156)
Per Common Share:
Primary earnings (loss)...................................... $ 1.48 $ 8.01 $ .38 $(1.98)
Fully diluted earnings (loss)................................ 1.48 7.67 .38 (1.98)
Cash dividends declared...................................... .20 .20 .20 .20
Cash dividends paid.......................................... .20 .20 .20 .20
Shareholders' equity......................................... 39.30 38.12 31.25 31.23
Financial Position:
Current assets............................................... $1,316 $1,583 $1,179 $1,114
Timber and timberlands - net................................. 2,365 2,008 1,847 1,839
Property, plant and equipment -- net........................ 5,653 5,514 5,603 5,802
Other assets and deferred charges............................ 486 438 335 388
------ ------ ------ ------
Total assets................................................ $9,820 $9,543 $8,964 $9,143
====== ====== ====== ======
Current liabilities.......................................... $ 944 $1,080 $1,034 $ 772
Long-term debt and other liabilities......................... 3,750 3,492 3,560 3,990
Deferred income taxes........................................ 1,364 1,219 1,040 1,077
Minority interest in subsidiaries............................ 6 105 69 54
$92.50 convertible preference stock.......................... --- --- 300 300
Shareholders' equity......................................... 3,756 3,647 2,961 2,950
------ ------ ------ ------
Total liabilities and shareholders' equity.................. $9,820 $9,543 $8,964 $9,143
====== ====== ====== ======
Other Statistics:
Expenditures for property, plant and equipment............... $ 461 $ 368 $ 225 $ 476
Timber and timberlands expenditures.......................... $ 121 $ 257 $ 104 $ 130
U.S. timber acreage owned or controlled...................... 5.3 5.3 5.1 5.1
Common shares outstanding at year-end........................ 96 96 93 93
Dividends declared on preference shares...................... $ --- $ 13 $ 28 $ 28
Dividends declared on common shares.......................... $ 19 $ 19 $ 19 $ 19
Current ratio................................................ 1.4 1.5 1.1 1.4
Ratio of total debt to total capitalization.................. .39:1 .38:1 .43:1 .44:1
Return on average shareholders' equity and $92.50 convertible
preference stock before extraordinary item and cumulative
effect of accounting changes............................... 3.8% 22.6% 2.0% (4.0)%
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
$4,926 $4,786 $5,090 $5,163 $5,129 $4,615 $4,388
411 342 323 279 260 252 270
362 454 800 1,048 1,141 872 798
206 211 156 136 161 177 170
(143) (110) (85) (93) (30) (198) (45)
10 78 420 726 730 619 313
(4) 38 197 294 274 237 112
14 40 223 432 456 382 201
--- --- --- --- --- --- ---
(454) --- --- --- --- --- ---
(440) 40 223 432 456 382 201
$(5.05) $ .14 $ 2.11 $ 4.56 $ 4.80 $ 4.03 $ 2.08
(5.05) .14 2.08 4.43 4.65 3.92 2.05
.20 .20 1.10 1.10 .95 .72 .52
.20 .425 1.10 1.075 .90 .65 .52
33.53 39.02 39.10 38.12 35.06 30.82 27.52
$1,142 $1,162 $1,104 $1,074 $ 986 $ 896 $ 811
2,012 1,666 1,645 1,613 1,581 1,554 1,555
5,763 5,386 5,117 4,404 3,702 3,340 3,309
464 442 485 440 431 389 432
------ ------ ------ ------ ------ ------ ------
$9,381 $8,656 $8,351 $7,531 $6,700 $6,179 $6,107
====== ====== ====== ====== ====== ====== ======
$ 786 $ 794 $ 801 $ 804 $ 699 $ 657 $ 734
3,928 3,162 2,864 2,175 2,133 2,120 2,462
1,159 678 651 605 474 415 281
49 51 56 58 49 51 38
300 300 300 300 --- --- ---
3,159 3,671 3,679 3,589 3,345 2,936 2,592
------ ------ ------ ------ ------ ------ ------
$9,381 $8,656 $8,351 $7,531 $6,700 $6,179 $6,107
====== ====== ====== ====== ====== ====== ======
$ 623 $ 604 $ 959 $ 916 $ 585 $ 340 $ 446
$ 95 $ 58 $ 88 $ 78 $ 88 $ 62 $ 53
6.0 6.2 6.4 6.4 6.4 6.5 6.5
93 93 93 93 95 95 94
$ 28 $ 28 $ 28 $ 2 $ --- $ --- $ 6
$ 19 $ 19 $ 102 $ 104 $ 91 $ 69 $ 49
1.5 1.5 1.4 1.3 1.4 1.4 1.1
.42:1 .40:1 .38:1 .32:1 .34:1 .36:1 .44:1
0.4% 1.0% 5.6% 12.2% 14.5% 13.8% 7.8%
</TABLE>
39
<PAGE>
Common Stock
Prices and
Dividends Paid Quarterly sales prices for the company's common stock
as reported on the New York Stock Exchange composite tape,
and quarterly dividends paid, in 1996 and 1995 were:
- ----------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
1996
- ----
High $48 3/8 $51 1/8 $48 1/8 $46 1/2
Low 39 41 1/4 40 1/4 40 7/8
Dividends Paid .05 .05 .05 .05
- ----------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
1995
- ----
High $43 1/4 $54 1/2 $60 1/4 $55
Low 36 1/8 40 52 1/8 39 1/2
Dividends Paid .05 .05 .05 .05
- ----------------------------------------------------------------
40
<PAGE>
EXHIBIT 21
LIST OF SIGNIFICANT SUBSIDIARIES
--------------------------------
Subsidiary Jurisdiction of Incorporation
- ---------- -----------------------------
Champion Papel e Celulose Ltda....................................Brazil
Weldwood of Canada Limited..............................British Columbia
_________________________________
All subsidiaries of the Company other than those listed above, considered in
the aggregate as a single subsidiary, do not constitute a significant subsidiary
as of December 31, 1996.
<PAGE>
EXHIBIT 23.1
CHAMPION INTERNATIONAL CORPORATION
One Champion Plaza
Stamford, CT 06921
March 27, 1997
Champion International Corporation
One Champion Plaza
Stamford, CT 06921
Dear Sirs:
As Senior Vice President and General Counsel of Champion International
Corporation (the "Company"), I advise you as follows in connection with legal
and administrative claims and proceedings which are pending or known to be
threatened against the Company.
I call your attention to the fact that, as Senior Vice President and
General Counsel of the Company, I have general supervision of the Company's
legal affairs. In such capacity, I have reviewed litigation and claims
threatened or asserted involving the Company and have consulted with outside
legal counsel with respect thereto where I have deemed it appropriate.
There are currently no material legal or administrative claims or
proceedings pending or known to be threatened against the Company.
I hereby consent to the reference to this opinion in the Company's Annual
Report to Shareholders for the fiscal year ended December 31, 1996, and in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(the "Form 10-K"), and to the filing of this opinion as an exhibit to the Form
10-K.
Very truly yours,
/s/ Stephen B. Brown
Senior Vice President
and General Counsel
SBB/col
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated January 17, 1997 incorporated by reference in this Form 10-K
into the Company's previously filed Registration Statements on Form S-3
(Registration No. 33-62819 and No. 333-19929) and on Form S-8 (Registration No.
33-63126).
/s/Arthur Andersen LLP
New York, N.Y.
March 27, 1997
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
Each of the undersigned Directors and Officers of CHAMPION INTERNATIONAL
CORPORATION (the "Company") hereby constitutes and appoints STEPHEN B. BROWN,
LAWRENCE A. FOX and RICHARD E. OLSON his or her true and lawful attorneys-in-
fact and agents, each of them with full power to act without the others, for him
or her and in his or her name, place and stead, in any and all capacities, to
sign the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996 and any and all amendments and other documents relating thereto, and to
file such Annual Report on Form 10-K and such amendments with all exhibits
thereto, and any and all other information and documents in connection
therewith, with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended, hereby granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform any and all acts and things requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
27th day of March, 1997.
/s/ RICHARD E. OLSON /s/ KENWOOD C. NICHOLS
- -------------------- ------------------------
Richard E. Olson Kenwood C. Nichols
Chairman of the Board, Chief Vice Chairman and Executive Officer
Executive Officer and Director and Director
(Principal Executive Officer) (Principal Accounting Officer)
/s/FRANK KNEISEL
----------------------
Frank Kneisel
Senior Vice President - Finance
(Principal Financial Officer)
<PAGE>
/s/LAWRENCE A. BOSSIDY /s/SYBIL C. MOBLEY
- --------------------------------------- ------------------------------
Lawrence A. Bossidy, Director Sybil C. Mobley, Director
/s/ROBERT A. CHARPIE /s/LAWRENCE G. RAWL
- ------------------------------------------- -------------------------------
Robert A. Charpie, Director Lawrence G. Rawl, Director
/s/H. CORBIN DAY /s/WALTER V. SHIPLEY
- ------------------------------------- --------------------------------
H. Corbin Day Walter V. Shipley
/S/ALICE F. EMERSON /s/RICHARD E. WALTON
- ------------------------------------ -------------------------------
Alice F. Emerson, Director Richard E. Walton, Director
/s/ALLAN E. GOTLIEB /s/JOHN L. WEINBERG
- --------------------------------------------- ------------------------------
Allan E. Gotlieb, Director John L. Weinberg, Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 174,638
<SECURITIES> 0
<RECEIVABLES> 598,059
<ALLOWANCES> 18,666
<INVENTORY> 458,043
<CURRENT-ASSETS> 1,315,732
<PP&E> 11,662,414 <F1>
<DEPRECIATION> 3,644,088
<TOTAL-ASSETS> 9,819,992
<CURRENT-LIABILITIES> 944,040
<BONDS> 3,085,424
0
0
<COMMON> 55,162
<OTHER-SE> 3,700,506
<TOTAL-LIABILITY-AND-EQUITY> 9,819,992
<SALES> 5,880,443
<TOTAL-REVENUES> 5,880,443
<CGS> 5,134,428
<TOTAL-COSTS> 5,134,428
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 222,214
<INCOME-PRETAX> 204,970
<INCOME-TAX> 63,664
<INCOME-CONTINUING> 141,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141,306
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.48
<FN>
<F1> Includes timber and timberlands.
</FN>
</TABLE>
