<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
----
. EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-3053
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Champion International Corporation
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(Exact name of registrant as specified in its charter)
New York 13-1427390
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
One Champion Plaza, Stamford, Connecticut 06921
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(Address of principal executive offices)
(Zip Code)
203-358-7000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1997
---------------------------------- --------------------------------------
Common stock, $.50 par value 95,638,774
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
------------------------------
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
(in thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Net Sales $1,366,720 $1,533,182
Costs and Expenses
Cost of products sold 1,281,103 1,260,453
Selling, general and administrative expenses 93,864 97,015
Interest and debt expenses 60,799 54,959
Other (income) expense - net (Note 2) (9,502) (11,168)
----------------- -----------------
Total costs and expenses 1,426,264 1,401,259
Income (Loss) Before Income Taxes (59,544) 131,923
Income Taxes (Benefit) (22,461) 48,274
----------------- -----------------
Net Income (Loss) $ (37,083) $ 83,649
================= =================
Average Number of Common Shares Outstanding 95,590 95,505
================= =================
Earnings (Loss) Per Common Share (Exhibit 11) $ (.39) $ .88
================= =================
Cash dividends declared $ .05 $ .05
================= =================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.
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<PAGE>
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
ASSETS: (unaudited)
----------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 112,032 $ 174,638
Short-term investments 20,914 ---
Receivables - net 565,320 579,393
Inventories 458,056 458,043
Prepaid expenses 29,125 29,926
Deferred income taxes 74,400 73,732
----------------- -----------------
Total Current Assets 1,259,847 1,315,732
----------------- -----------------
Timber and timberlands, at cost - less cost of
timber harvested 2,354,038 2,364,858
----------------- -----------------
Property, plant and equipment, at cost 9,360,528 9,297,557
Less - Accumulated depreciation 3,738,275 3,644,088
----------------- -----------------
5,622,253 5,653,469
----------------- -----------------
Other assets and deferred charges 504,489 485,933
----------------- -----------------
Total Assets $9,740,627 $9,819,992
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Current installments of long-term debt $ 60,735 $ 80,900
Short-term bank borrowings 98,385 126,910
Accounts payable and accrued liabilities 648,992 713,132
Income taxes 8,359 23,098
----------------- -----------------
Total Current Liabilities 816,471 944,040
----------------- -----------------
Long-term debt 3,218,185 3,085,424
----------------- -----------------
Other liabilities 659,925 664,643
----------------- -----------------
Deferred income taxes 1,329,169 1,363,910
----------------- -----------------
Minority interest in subsidiaries 5,327 6,307
----------------- -----------------
Shareholders' Equity:
Capital Shares:
Common (110,395,585 and 110,323,099
shares issued at March 31, 1997 and
December 31, 1996, respectively) 55,198 55,162
Capital Surplus 1,654,948 1,651,454
Retained Earnings 2,698,329 2,740,196
----------------- -----------------
4,408,475 4,446,812
Treasury shares, at cost (657,855) (657,864)
Cumulative translation adjustment (39,070) (33,280)
----------------- -----------------
Total Shareholders' Equity 3,711,550 3,755,668
----------------- -----------------
Total Liabilities and Shareholders' Equity $9,740,627 $9,819,992
================= =================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.
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<PAGE>
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOWS (unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (1oss) $(37,083) $ 83,649
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 104,760 100,061
Cost of timber harvested 22,686 22,661
Net gain on sale of assets (2,692) (2,960)
(Increase) decrease in:
Receivables 13,464 82,848
Inventories (819) (60,136)
Prepaid expenses 736 (2,679)
Increase (decrease) in:
Accounts payable and accrued liabilities (58,987) (62,539)
Income taxes (14,640) (91,370)
Other liabilities (6,103) (14,303)
Deferred income taxes (33,394) 13,675
All other - net 12,372 17,335
----------------- -----------------
Net cash provided by operating activities 300 86,242
----------------- -----------------
Cash flows from investing activities:
Expenditures for property, plant and equipment (67,114) (73,417)
Timber and timberlands expenditures (25,293) (30,326)
Purchase of Lake Superior Land Company (Note 2) --- (71,775)
Purchase of investments (20,914) ---
Proceeds from redemption of investments --- 9,218
Proceeds from sales of property, plant and equipment
and timber and timberlands 3,425 8,139
All other - net 3,612 (13,292)
----------------- -----------------
Net cash used in investing activities (106,284) (171,453)
----------------- -----------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 77,525 342,039
Payments of current installments of long-term debt
and long-term debt (29,980) (313,287)
Cash dividends paid (4,780) (4,797)
Payments to acquire treasury stock --- (7,815)
All other - net 613 1,619
----------------- -----------------
Net cash provided by financing activities 43,378 17,759
----------------- -----------------
Decrease in cash and cash equivalents (62,606) (67,452)
Cash and Cash Equivalents:
Beginning of period 174,638 317,069
----------------- -----------------
End of period $112,032 $249,617
================= =================
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest (net of capitalized amounts) $ 56,048 $ 44,844
Income taxes (net of refunds) 18,279 122,776
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.
-4-
<PAGE>
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 1997
Note 1.
The unaudited information furnished in this report reflects all adjustments
which are, in the opinion of management, necessary to present fairly a
statement of the results for the interim periods reported. All such
adjustments made were of a normal recurring nature.
Note 2.
During the first quarter of 1996, the company acquired Lake Superior Land
Company for $76 million, before netting $4 million of cash owned by Lake
Superior Land Company, as well as an outstanding $44 million mortgage loan.
The acquisition was accounted for as a purchase. Liabilities recorded in
connection with the acquisition, including purchase accounting adjustments,
were the $44 million mortgage loan, $68 million of deferred taxes payable
and $13 million of other liabilities.
Note 3.
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("EPS"), which establishes standards for computing and presenting EPS, is
effective for reporting periods ending after December 15, 1997. Had EPS been
determined in accordance with this standard, the company's basic and diluted
EPS for the three months ended March 31, 1997 and 1996 would have been the
same as those currently reported for primary and fully diluted earnings per
share, respectively.
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<PAGE>
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations.
----------------------
Results of Operations
---------------------
Overall Quarterly Results
The company reported a net loss of $37 million or $.39 per share, fully
diluted, compared to last year's first quarter net income of $84 million or
$.88 per share and last quarter's net income of $10 million or $.11 per
share. The decline from last year and last quarter was primarily due to
lower operating income in the paper segment, as discussed below.
Significant Income Statement Line Item Changes For The Three Months Ended
March 31, 1997
Net sales of $1.37 billion declined from $1.53 billion a year ago and $1.43
billion last quarter. Gross profit was $86 million, compared to $273 million
last year and $128 million last quarter. A pre-tax loss of $60 million
represented a decline from pre-tax income of $132 million a year ago and $5
million last quarter. The declines in net sales, gross profit and pre-tax
income from last year were mainly due to sharply lower prices for all of the
company's major pulp and paper grades, which more than offset higher pulp
and paper shipments, higher prices for lumber in the U.S. and Canada and
higher plywood prices in Canada. The declines from last quarter were
principally due to lower prices for uncoated free sheet and coated
groundwood papers and pulp, as well as lower West Coast timber sales.
The aggregate cost of products sold increased from last year but declined
from last quarter. The increase from last year was mainly due to higher pulp
and paper shipments, which more than offset lower purchased pulp costs. The
decline from last quarter was primarily due to lower sales volumes for the
company's paper merchant business, Nationwide Papers, lower maintenance
outage expense and lower timber sales.
Selling, general and administrative expenses were approximately even with
last year but significantly higher than last quarter due to higher benefits
expense and the impact of stock price fluctuations on the value of stock
appreciation rights.
The income tax benefit in the first quarter of 1997 reflected an effective
tax rate approximately even with last year but higher than last quarter. The
increase from last quarter was mainly due to the impact on the fourth
quarter rate of adjustments to the 1996 Brazilian income tax provision.
Paper Segment
For the company's paper segment, the first quarter operating loss was $30
million. This compared to income of $167 million a year ago and $21 million
last quarter. Total paper, packaging and pulp shipments were 1,539,000 tons
in the first quarter, compared to 1,386,000 tons a year ago and 1,545,000
tons last quarter.
The operating loss for the domestic free sheet business represented a
decline from the operating income of a year ago and the smaller operating
loss last quarter. The decline from the year-ago quarter was principally due
to lower prices for coated and uncoated free sheet papers, which more than
offset higher shipments and lower manufacturing costs. The decline from last
quarter was mainly due to lower prices for uncoated free sheet papers. The
average price for domestic uncoated free sheet papers, the principal product
of the free sheet business, was $619 per ton in the first quarter of this
year, compared to $793 per ton in the first quarter of 1996 and $671 per ton
last quarter. The
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<PAGE>
average price for coated free sheet papers declined significantly from a
year ago and slightly from last quarter. Shipments of all grades for the
free sheet business were 554,000 tons, compared to 519,000 tons last year
and 556,000 tons last quarter. A price increase for most grades of uncoated
free sheet papers was implemented early in the second quarter.
Operating income at the Brazilian subsidiary, Champion Papel e Celulose
Ltda. ("Celulose"), declined significantly from last year and moderately
from last quarter primarily due to lower export and domestic prices for
uncoated free sheet papers, which more than offset lower manufacturing
costs. The overall average price for uncoated free sheet papers was $743 per
ton this quarter, compared to $961 per ton in the year-ago quarter and $795
per ton last quarter. Uncoated free sheet papers shipments of 97,000 tons
were approximately even with last year and last quarter.
An operating loss for the groundwood business represented a considerable
decline from the operating income of last year and last quarter. The decline
from last year was due to significantly lower prices for coated and uncoated
groundwood papers and newsprint, which more than offset higher shipments and
lower purchased pulp costs. The decline from last quarter was mainly due to
lower prices for coated groundwood papers. The average price for coated
groundwood papers was $772 per ton this quarter, compared to $1,152 per ton
last year and $810 per ton last quarter. The average price for newsprint was
$460 per ton this quarter, compared to $681 per ton last year and $460 per
ton last quarter. Shipments of all groundwood and newsprint grades were
444,000 tons, compared to 385,000 tons last year and 446,000 tons last
quarter. A domestic price increase for newsprint was implemented late in the
first quarter and, early in the second quarter, a discount reduction for
coated groundwood papers was also implemented.
An operating loss for the specialty business represented a decline from the
operating income of last year and last quarter. The decline from last year
was principally due to lower prices for coated and uncoated groundwood
papers and linerboard, which more than offset lower purchased pulp costs.
The decline from last quarter was mainly due to lower prices for coated
groundwood papers and linerboard and a decrease in the LIFO inventory
reserve last quarter. Prices for coated and uncoated groundwood papers,
linerboard and kraft papers declined from last year and last quarter. Prices
for coated premium free sheet papers declined from last year but improved
slightly from last quarter. Shipments of all grades were 220,000 tons,
compared to 211,000 tons last year and 225,000 tons last quarter.
Maintenance outages are scheduled at the company's Hamilton, Ohio, and
Roanoke Rapids, North Carolina, mills in the second quarter.
The operating loss for the company's U.S. and Canadian market pulp
operations represented a decline from the operating income of last year and
last quarter. The decline from the year-ago quarter was primarily due to
significantly lower prices for all grades, which more than offset increased
shipments and lower wood chip costs in Canada. The decline from last quarter
was principally due to lower prices for northern hardwood and Canadian
softwood pulps. The average price for Canadian softwood pulp was (U.S.) $403
per ton in the first quarter of this year, compared to $500 per ton last
year and $423 per ton last quarter. Prices for northern hardwood pulp also
decreased from last year and last quarter. Shipments of all pulp grades of
224,000 tons increased from 174,000 tons last year and 220,000 tons last
quarter. Price increases for all softwood pulp grades were implemented May
1. Maintenance outages are scheduled at all of the company's northern
hardwood and Canadian softwood market pulp mills in the second quarter.
Wood Products Segment
The company's wood products segment, which includes the wood-related
operations of Weldwood of Canada, Limited ("Weldwood") and Celulose,
reported first quarter income from operations of $31 million, compared to
$19 million a year ago and $36 million last quarter. The improvement from
last year was mainly due to higher lumber prices in the U.S. and Canada,
higher plywood prices in Canada and higher timber sales, which more than
offset increased wood costs. The decline from last quarter was primarily due
to lower West Coast timber sales and increased wood costs, which more than
offset higher lumber shipments.
-7-
<PAGE>
The average price for plywood overall was up slightly from both prior
quarters. The average price for lumber overall was 38% higher than last year
and approximately even with last quarter. Wood products shipments were down
significantly from last year but up from last quarter. The decrease in
shipments from last year was primarily due to the sale and closure of
various wood products facilities, while the increase from last quarter was
due to seasonal factors.
Foreign Operations
The company's major foreign operations, which are discussed above under
their respective business segment headings, are in Canada and Brazil. Net
sales to unaffiliated customers by the company's foreign subsidiaries for
the first quarter of 1997 were (U.S.) $217 million, accounting for 16% of
consolidated net sales of the company. Pre-tax income and net income of the
foreign subsidiaries for the first quarter of 1997 was (U.S.) $28 million
and (U.S.) $23 million, respectively, which were more than offset by the
pre-tax loss and net loss of the company's domestic operations.
Labor Contracts
At Weldwood, the labor agreement covering the joint venture pulp mill at
Quesnel, British Columbia, has run past its expiration date. This facility
presently is operating under the terms of its expired contract while efforts
to negotiate a new labor agreement continue. The labor agreement at the
Hinton, Alberta, pulp mill and wood products plant expires on May 31, 1997
and the labor agreements at several of Weldwood's wood products plants
expire on June 30, 1997.
Financial Condition
-------------------
The company's current ratio was 1.5 to 1 at March 31, 1997, compared to 1.4
to 1 at year-end 1996. Total debt to total capitalization was 40% at March
31, 1997, compared to 39% at year-end 1996.
Significant Balance Sheet Line Item Changes
Short-term investments increased by $21 million mainly due to the investment
of excess cash by the company's Brazilian subsidiary. Net property, plant
and equipment decreased by $31 million primarily due to depreciation expense
exceeding capital additions in the first quarter. Short-term borrowings, and
accounts payable and accrued liabilities, decreased by $29 million and $64
million, respectively, principally due to the timing of payments. Income
taxes payable decreased by $15 million, as $18 million in net payments were
made in the first quarter of 1997 for U.S. and foreign income taxes. The
deferred income tax liability and shareholders' equity decreased $35 million
and $44 million, respectively, mainly due to the company's first quarter net
loss. For a discussion of changes in long-term debt (including current
installments) and cash and cash equivalents, see below.
Cash Flows Statement - General
1997
----
In the first three months of 1997, 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 purchase of investments) and its financing activities (principally
debt payments and cash dividends). The difference was financed through
borrowings and the use of cash and cash equivalents. In the first three
months, net borrowings generated cash proceeds of $48 million; long-term
debt (including current installments) increased by $113 million. Cash and
cash equivalents decreased by $63 million in the first three months to a
total of $112 million, $67 million of which was held by the company's
Canadian and Brazilian subsidiaries.
-8-
<PAGE>
1996
----
In the first three months of 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 acquisition of Lake Superior Land Company) and its financing
activities (principally debt payments, cash dividends, and the purchase of
shares of the company's common stock). The difference was financed through
borrowings and the use of cash and cash equivalents. Net borrowings
generated cash proceeds of $29 million; long-term debt (including current
installments) increased by $83 million. Cash and cash equivalents decreased
by $67 million.
Cash Flows Statement - Operating Activities
For the first three months, net cash provided by operating activities of
$300,000 declined from $86 million a year ago. The decrease was primarily
due to a net loss this year and a smaller decrease in receivables, partially
offset by lower income tax payments and a smaller increase in inventories.
Cash Flows Statement - Investing Activities
For the first three months, net cash used in investing activities of $106
million declined from $171 million a year ago. The decrease was mainly due
to the acquisition of Lake Superior Land Company for $76 million (as well as
an outstanding $44 million mortgage loan) last year.
Cash Flows Statement - Financing Activities
Net cash provided by financing activities of $43 million increased from $18
million a year ago. The change was principally due to higher net borrowings
this year, which in turn reflected the decrease in net cash provided by
operating activities, as discussed above.
At March 31, 1997, the company had $102 million U.S. commercial paper and
other short-term obligations outstanding, all of which is classified as
long-term debt, up from $7 million at year-end 1996. At March 31, 1997, the
company had $15 million of notes outstanding under its U.S. bank lines of
credit. At December 31, 1996, no notes were outstanding under these lines of
credit. Domestically, at March 31, 1997, $102 million of the company's
unused bank lines of credit of $1,235 million supported the classification
of commercial paper and other short-term obligations as long-term debt. At
March 31, 1997, Weldwood had unused bank lines of credit of (U.S.) $130
million.
The annual principal payment requirements under the terms of all long-term
agreements for the period from April 1 through December 31, 1997 are $84
million and for the years 1998 through 2001 are $439 million, $372 million,
$206 million and $206 million, respectively.
-9-
<PAGE>
PART II. OTHER INFORMATION
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K.
------------------------------------------
(a) See exhibit index following the signature page.
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the undersigned on behalf of the registrant as
duly authorized officers thereof and in their capacities as the chief
accounting officers of the registrant.
Champion International Corporation
-------------------------------------------
(Registrant)
Date: May 13, 1997 John M. Nimons
- --------------------------------- -------------------------------------------
(Signature)
John M. Nimons
Vice President and Controller
Date: May 13, 1997 Kenwood C. Nichols
- --------------------------------- -------------------------------------------
(Signature)
Kenwood C. Nichols
Vice Chairman and Executive Officer
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<PAGE>
EXHIBIT INDEX
Each exhibit is listed according to the number assigned to it in the Exhibit
Table of Item 601 of Regulation S-K.
10.1 -Form of Restricted Stock Unit Grant Letter dated February 18, 1997.
10.2 -Champion International Corporation 1997 Incentive Compensation Plan.
10.3 -Champion International Corporation 1997 Performance Share Plan.
10.4 -Compensation Plan for Non-Employee Directors.
10.5 -Amendment to Champion International Corporation Retirement Plan for
Outside Directors.
11 -Calculation of Primary Earnings Per Common Share and Fully Diluted
Earnings per Common Share (unaudited).
27 -Financial Data Schedule (unaudited).
-12-
<PAGE>
EXHIBIT 10.1
Champion International Corporation
One Champion Plaza
Stamford, CT 06921
PERSONAL AND STRICTLY CONFIDENTIAL
February 18, 1997
[Employee Name]
One Champion Plaza
Stamford, CT 06921
Re: Grant of Right to Receive Shares of Champion Common Stock
---------------------------------------------------------
Dear ______________:
The Compensation and Stock Option Committee (the "Committee") of the Board
of Directors of Champion International Corporation ("Champion" or the "Company")
has approved the grant to you (the "Grant") of the right to receive an aggregate
of _________ shares of Champion Common Stock ("Common Stock"). The Grant is
subject to the terms and conditions described below.
Terms and Conditions of Grant
- -----------------------------
The Grant entitles you to receive from the Company, on each Vesting Date
(as defined below), a percentage of the aggregate number of shares of Common
Stock subject to the Grant; provided, that you have remained continually
employed by the Company or one of its subsidiaries until the applicable Vesting
Date; and further, provided, as discussed below, that the issuance of any shares
of Common Stock otherwise issuable to you on a particular Vesting Date may be
deferred pursuant to a timely election made by you or pursuant to the
determination of the Committee in its sole and absolute discretion.
With respect to 30% of the shares of Common Stock subject to the Grant,
the Vesting Date shall be August 15, 1998; with respect to an additional 30% of
the shares of Common Stock subject to the Grant, the Vesting Date shall be
August 15, 2000; and with respect to the final 40% of the shares of Common Stock
subject to the Grant, the Vesting Date shall be August 15, 2002.
1
<PAGE>
On each Vesting Date, the Company will issue to you the applicable number
of shares of Common Stock described above, subject to tax withholding
requirements as discussed below, provided you have remained continually employed
by the Company or one of its subsidiaries until such Vesting Date, subject to
the following. (1) You shall have the right to defer the issuance of shares of
Common Stock in respect of the Grant until your termination of employment with
the Company and its subsidiaries. Such right may be exercised by filing with
the Company a timely election in accordance with applicable federal income tax
law. (2) If you do not make the deferral election contemplated by clause (1)
of this paragraph, the Committee shall have the right to defer issuing to you
shares of Common Stock (or any portion thereof) in respect of the Grant until
such date as the Committee may determine, but not later than your termination
of employment with the Company and its subsidiaries. Such right to defer may be
exercised by the Committee in its sole and absolute discretion for any reason,
including without limitation because such issuance on the applicable Vesting
Date might result in the disallowance of deductions by the Company for federal
income tax purposes. The Committee will notify you of any such determination,
of the number of shares the issuance of which is being deferred and of the
deferral date.
If the issuance of any shares of Common Stock otherwise issuable to you is
deferred, whether pursuant to your timely election or the determination of the
Committee, you will be credited with "dividend equivalents" on such shares
during the deferral period. Such dividend equivalents will be equal to the
value of cash dividends and other distributions in respect of the Common Stock,
and will be converted into additional shares which will be issued to you on the
deferral date. No dividend equivalents will be credited for any period prior to
the applicable Vesting Date.
If your employment with the Company and its subsidiaries terminates for any
reason, other than because of your death or your "Total Disability" as such term
is defined in the Company's Long Term Disability Benefits Plan For Salaried
Employees #506, all previously-unissued shares subject to the Grant (other than
any shares deferred in accordance with the two immediately preceding paragraphs
(the "Deferred Shares") ) will be forfeited immediately.
In the event of your death or Total Disability while employed by the
Company or one of its subsidiaries at any time prior to August 15, 2002, you or
your beneficiary or beneficiaries or your estate, as the case may be, shall be
entitled to receive from the Company as soon as practicable thereafter any
Deferred Shares plus a number of shares of Common Stock determined as follows:
the number of shares that would have been issued to you (without regard to
possible deferrals) if you were employed by the Company or one of its
subsidiaries on the next succeeding Vesting Date (i.e., August 15, 1998, August
15, 2000 or August 15, 2002) multiplied by a fraction, the numerator of which is
equal to the number of days that you were employed by the Company or one of
2
<PAGE>
its subsidiaries from and including the next preceding Vesting Date (or from
August 15, 1996, if no Vesting Date has occurred) to and including the date of
your death or Total Disability, and the denominator of which is 730. In such
event, all other previously-unissued shares subject to the Grant will be
forfeited immediately.
The Grant constitutes an unfunded obligation of the Company for incentive
and deferred compensation. Nothing contained hereunder shall confer on you any
rights that are greater than those of a general creditor of the Company or any
right to remain in the employ of the Company or any of its subsidiaries.
In the event of any stock dividend, split-up, spin-off, rights offering,
combination or exchange of shares, recapitalization, merger, consolidation,
acquisition or disposition of property or stock, separation, reorganization,
liquidation, or the like, the number and class of shares subject to the Grant
(including Deferred Shares) may be equitably adjusted, and any other appropriate
changes may be made, by the Committee, whose determinations shall be conclusive.
You will have no rights as a shareholder of the Company, including without
limitation voting and dividend rights, in respect of the shares of Common Stock
subject to the Grant unless and until shares of Common Stock have been issued to
you. Any compensation income earned or received by you in connection with the
Grant will not constitute "compensation" for purposes of any contract between
you and the Company, the Company's savings plans or any other employee benefit
plans now or hereafter in effect, including without limitation plans providing
pension and retirement benefits, life insurance and survivor benefits, and
disability benefits.
Neither the Grant nor any rights with respect thereto shall be assignable
or subject to any encumbrance, pledge or charge of any nature.
Special Circumstances: Discretionary Acceleration, and Mandatory Acceleration
- -------------------------------------------------------------------------------
Upon Termination Following a Change in Control
- ----------------------------------------------
Anything herein to the contrary notwithstanding, the Committee shall have
the authority to make a determination that a special situation relating to you
or the Company, including without limitation a change in control (as defined in
Exhibit A hereto) or potential change in control of the Company, exists. Upon
such a determination, the Committee, in its sole and absolute discretion, may
accelerate, to such date as shall be specified by the Committee, the vesting and
the issuance to you of all or a portion of the previously-unissued shares
(including Deferred Shares) subject to the Grant.
3
<PAGE>
Anything herein to the contrary notwithstanding, in the event of your
termination (as defined in Exhibit A hereto) within three years after a change
in control (as defined in Exhibit A hereto) of the Company, the Company shall
issue to you as soon as practicable thereafter all of the previously-unissued
shares (including Deferred Shares) subject to the Grant or, if the Common Stock
of the Company is no longer publicly traded, their equivalent value.
Federal Income Tax and FICA Tax Considerations
- ----------------------------------------------
Federal income tax: Under present law, you will not be subject to federal
income tax at the time of the Grant. If the issuance of any shares otherwise
issuable to you is deferred, whether pursuant to your timely election or the
determination of the Committee, you will not be subject to federal income tax at
the time of the deferral, nor will you be subject to federal income tax at the
time that dividend equivalents are credited on Deferred Shares. In each year
that shares of Common Stock in fact are issued to you in respect of the Grant,
the fair market value of the shares of Common Stock at the time of issuance will
be taxable as ordinary income and the Company will be required to withhold the
appropriate amount. In order to satisfy federal and all other income tax
withholding requirements, the Company will withhold shares of Common Stock
otherwise issuable to you.
FICA tax: Under present law, the Company will be required to withhold FICA
tax (the Medicare portion and, if your wages at that time have not exceeded the
applicable wage base, the Social Security portion) on each Vesting Date with
respect to the shares of Common Stock that vest on such date based upon their
fair market value at that time. FICA tax withholding on each Vesting Date is
required whether shares are issued to you on that date or their issuance is
deferred. If shares are issued to you on such Vesting Date, the Company will
withhold shares otherwise issuable to you in order to satisfy FICA tax
withholding requirements. If the issuance of shares is deferred, the Company
will withhold the appropriate amount from your wages.
This general discussion is not a complete description of the federal income
tax and FICA tax consequences of the Grant. For more detailed information, and
for information concerning any state, local and foreign tax consequences, the
Company recommends that you consult your tax adviser.
4
<PAGE>
SEC Considerations
- ------------------
This section is relevant to you only if you are an officer of the Company
elected by the Board of Directors.
Neither the Grant nor the issuance to you of shares of Common Stock
pursuant to the Grant will constitute a matchable "purchase" of Company
securities for purposes of the short-swing profit restrictions under Section
16(b) of the Securities Exchange Act of 1934, as amended. Therefore, you may
disregard the Grant and the receipt of shares of Common Stock in contemplating
sales of Common Stock. Similarly, the withholding of shares of Common Stock to
satisfy tax liabilities will not constitute a matchable "sale", and may be
disregarded in contemplating purchases of Common Stock. However, the sale of
shares of Common Stock issued in respect of the Grant will constitute a sale for
Section 16(b) purposes and will be matchable against any non-exempt purchase of
Common Stock within six months before or after the sale.
You must file a year-end Form 5 with the Securities and Exchange Commission
and the New York Stock Exchange reporting the Grant and the withholding of
shares to satisfy tax withholding requirements upon the issuance of shares to
you. The Corporate Secretary will arrange for such Form 5 reporting.
You must file a monthly Form 4 reporting any sale of shares issued pursuant
to the Grant. If you are a director of the Company, you also must comply with
SEC Rule 144 in connection with any sale of shares. Among other things, Rule
144 requires the filing of a Form 144 with the Securities and Exchange
Commission and the New York Stock Exchange. Please contact the Corporate
Secretary prior to any such sale.
Sign and Return
- ---------------
Please confirm your receipt of this letter and your acknowledgment of the
Grant by countersigning and retaining the original letter, and by countersigning
the duplicable original of this letter and returning it in the enclosed
envelope.
5
<PAGE>
Attached hereto is your beneficiary designation currently on file with the
Company that applies to the Grant. If you have any questions regarding the
Grant or if you would like to designate a different beneficiary for purposes of
the Grant, please call Michele Kenaga (ext. 6915) or Larry Fox (ext. 7305).
CHAMPION INTERNATIONAL CORPORATION
By: ______________________________________
Chairman and Chief Executive Officer
__________________________________________
[Employee]
6
<PAGE>
EXHIBIT A TO LETTER AGREEMENT DATED FEBRUARY 18, 1997
-----------------------------------------------------
For the purpose of the section captioned "Special Circumstances:
Discretionary Acceleration, and Mandatory Acceleration Upon Termination
Following a Change in Control" in the letter agreement dated February 18, 1997
(the "Letter Agreement"), the terms "change in control" and "termination" shall
have the meanings set forth below.
Definition of Change in Control
-------------------------------
A change in control shall mean the occurrence of any one of the following:
(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 of the Company 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 of the Company's assets.
Definition of Termination
-------------------------
A termination shall mean the occurrence of any one of the following:
(i) the termination by the Company (or, if applicable, one or more of its
subsidiaries) of your employment with the Company and its subsidiaries; or
A-1
<PAGE>
(ii) any (A) failure to elect or re-elect or appoint or re-appoint you to
an office and position at least equal to the office and position you held
immediately prior to such failure, or your removal from such office or position;
(B) material change of your functions, duties or responsibilities without your
express written consent as a result of which change your position shall be or
become of less dignity, responsibility, importance or scope than the position
you held at the time of such material change; (C) reduction in your monthly base
salary below the highest monthly base salary paid from and after the date of the
Letter Agreement; or (D) breach of the Letter Agreement by the Company; provided
that in any such event you elect to terminate your employment with the Company
and its subsidiaries upon not less than sixty days' advance written notice given
within a reasonable period of time, not to exceed four calendar months, after
the event giving rise to the election.
A-2
<PAGE>
EXHIBIT 10.2
CHAMPION INTERNATIONAL CORPORATION
----------------------------------
1997 INCENTIVE COMPENSATION PLAN
--------------------------------
1. Purposes.
---------
The purposes of the Plan are to attract and retain in the employ of the
Company and its subsidiaries and affiliates outstanding management employees and
to provide incentives and rewards for such employees to contribute meaningfully
to the success of the Company.
2. Definitions.
------------
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Award" means a commitment to pay incentive compensation to a Grantee
under the Plan.
(b) "Award Agreement" means any written agreement, contract or other
instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means the Compensation and Stock Option Committee of the
Board.
(e) "Company" means Champion International Corporation, a corporation
organized under the laws of the State of New York, or any successor corporation.
(f) "Deferred Shares" means shares of Stock issuable in connection with an
Award that have been deferred pursuant to Section 5(b) hereof.
(g) "Effective Date" means March 20, 1997, the date that the Plan was
adopted by the Board.
(h)"Grantee" means a person who has been granted an Award under the Plan.
(i) "Performance Goals" means performance goals or criteria relating to (1)
the performance of the Company, including, without limitation, goals or criteria
with
1
<PAGE>
respect to financial performance, operating performance and Stock performance;
(2) the performance of any subsidiary, affiliate, division or unit of the
Company or any group of employees of the Company or any subsidiary, affiliate,
division or unit thereof; (3) the performance of any Grantee; (4) any other
performance measures selected by the Committee; and (5) any combination of the
foregoing.
(j) "Plan" means this Champion International Corporation 1997 Incentive
Compensation Plan, as amended from time to time.
(k) "Plan Year" means a calendar year.
(l) "Stock" means shares of the common stock, par value $.50 per share, of
the Company.
3. Administration.
---------------
The Plan shall be administered by the Committee. The Committee shall have
the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or in its judgment advisable in the administration of the Plan,
including, without limitation, the authority to grant Awards; to determine the
persons or categories of persons to whom and the time or times at which Awards
shall be granted; to determine the form of Awards; to determine the terms,
conditions, restrictions and Performance Goals relating to Awards; to determine
whether, to what extent, and under what circumstances an Award may be paid,
cancelled, forfeited, exchanged or surrendered; to make adjustments in the terms
and conditions (including Performance Goals) applicable to Awards; to construe
and interpret the Plan and the Awards; to prescribe, amend and rescind rules and
regulations relating to the Plan; and to make all other determinations deemed
necessary or in its judgment advisable for the administration of the Plan. All
determinations made by the Committee in respect of the Plan shall be final and
binding on all Grantees and their beneficiaries.
4. Eligibility
-----------
Awards may be granted from time to time to such employees or categories of
employees of the Company and its subsidiaries and affiliates as shall be
selected by the Committee in its discretion.
5. Awards.
-------
(a) Grants; Performance Goals. The grant of an Award may be made at any
time prior to or simultaneously with the payment in respect of the Award.
Awards
2
<PAGE>
may be granted with respect to a Plan Year or any other shorter or longer
period that the Committee determines to be appropriate. Payment pursuant to
each Award will be contingent on the attainment of one or more Performance Goals
in respect of a performance period; or the continued employment of a Grantee
with the Company and its subsidiaries and affiliates; or any other criteria
selected by the Committee; or any combination of the foregoing. Where
applicable, the Performance Goals may be expressed in terms of attaining a
specified level of the particular criteria or a percentage increase or decrease
in the particular criteria, and may be applied to one or more of the Company, a
subsidiary, affiliate, division or unit of the Company, or any group of
employees of any of the foregoing, or may be applied to the performance of the
Company relative to a market index, a group of other companies or combination
thereof, all as determined by the Committee. With respect to any Award, the
Performance Goals may include a threshold level of performance below which no
payments will be made, levels of performance at which specified payments will be
made, and a maximum level of performance above which no additional payments will
be made. The Committee shall have the authority to make equitable adjustments
to the Performance Goals in its discretion, including, without limitation, in
recognition of unusual or non-recurring events affecting the Company or any
subsidiary, affiliate, division or unit thereof, including, without limitation,
any such events affecting the financial statements of the Company or any
subsidiary or affiliate thereof.
(b) Payments; Deferrals. Payments to be made by the Company in respect of
an Award may be made in such form as the Committee shall determine at the date
of grant or thereafter, including, without limitation, cash, Stock or other
property, and may be made in a single payment or transfer, in installments or on
a deferred basis. In this regard (1) the Committee may permit a Grantee to
defer the payment of cash, the delivery of property or the issuance of shares of
Stock in respect of any Award, subject to the Grantee exercising a valid
deferral election with the Company in accordance with procedures established by
the Committee from time to time; and (2) the Committee shall have the right to
defer the payment of cash, the delivery of property or issuance of shares of
Stock in respect of any Award until such date as the Committee shall determine
(but not later than the Grantee's termination of employment with the Company and
its subsidiaries and affiliates for any reason). Such right to defer may be
exercised by the Committee in its discretion for any reason, including as
appropriate in its judgment to preserve the tax deductibility of payments
hereunder. With respect to any mandatory deferral made pursuant to clause (2)
of this paragraph, the Committee shall notify the Grantee of any such
determination and of the respective deferral date.
If the issuance of any shares of Stock otherwise issuable pursuant to an
Award is deferred, whether pursuant to an election by a Grantee or the
determination of the Committee, the Committee may provide that such Deferred
Shares be credited with dividend equivalents during the deferral period. Any
such dividend equivalents will
3
<PAGE>
be equal to the value of cash dividends and other distributions in respect of
the Stock, and will be paid in cash, or will be converted into additional shares
of Stock the value of which will be paid in Stock, cash or other property, to
the Grantee on such date or dates as determined by the Committee.
If the payments of cash or other property otherwise payable or deliverable
pursuant to an Award is deferred, whether pursuant to an election by the Grantee
or the determination of the Committee, the Committee may provide that the
Grantee be credited with amounts in respect of such deferred Award on such basis
as the Committee deems appropriate, including, without limitation, as if the
value of such deferred Award had been invested in shares of Stock or in one or
more of the forms of investment available under the Company's Nonqualified
Supplemental Savings Plan or any successor thereto. The Committee in its
discretion may provide for elections or statements of preference by Grantees
with regard to the basis on which amounts may be credited in respect of deferred
Awards. The value of any such credited amounts will be paid to the Grantee on
such date or dates as determined by the Committee.
(c) Adjustments. In the event of any stock dividend, split-up, spin-off,
rights offering, combination or exchange of shares, recapitalization, merger,
consolidation, acquisition or disposition of property or stock, separation,
reorganization, liquidation, or the like, the number and class of any shares of
Stock or any Deferred Shares, the amount of any cash and the amount and kind of
any other property subject to any Award may be equitably adjusted, and any other
appropriate changes may be made, by the Committee, whose determinations shall be
conclusive.
(d) Termination of Award. If the employment of a Grantee terminates for
any reason while an Award is outstanding, or if any applicable Performance Goal
is not attained, the Award shall immediately terminate and be forfeited;
provided, however, that the Committee may provide, by rule or regulation or in
any Award Agreement, or may determine in any individual case, that any
conditions relating to payment in respect to an Award will be waived.
(e) Post-Termination Award. If the employment of an employee of the
Company or a subsidiary or affiliate thereof terminates for any reason during a
performance period, the Committee may in its discretion grant an Award to such
employee or, in the event of his or her death, the beneficiary of such employee
on such basis as the Committee determines.
(f) Acceleration of Payment. Anything herein to the contrary
notwithstanding, the Committee shall have authority to make a determination that
a special situation exists relating to either (1) a Grantee or (2) the Company,
including, without limitation, a change in control or potential change in
control of the Company. Upon such a determination, the Committee in its
discretion may waive any conditions relating to payment in respect of any or all
outstanding Awards (including amounts
4
<PAGE>
deferred in accordance with Section 5(b) hereof) granted to such Grantee, in the
case of clause (1) above, or to any or all Grantees, in the case of clause (2)
above. In the event of such a waiver, payment in respect of the applicable Award
or Awards (including amounts deferred in accordance with Section 5(b) hereof)
shall be made promptly by the Company.
6. General Provisions.
-------------------
(a) Nontransferability. Unless otherwise provided in an Award Agreement, Awards
shall not be transferable by a Grantee, except by will or the laws of
descent and distribution and except for the designation of a beneficiary.
(b) No Right to Continued Employment. Nothing in the Plan or in any Award or
any Award Agreement shall confer upon any Grantee the right to continue in
the employ of the Company or any subsidiary or affiliate thereof.
(c) Taxes. The Company or any subsidiary or affiliate thereof is authorized to
withhold from any Award, any payment in respect of any Award, including
from a payment in the form of Stock, or any other payments to a Grantee,
amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the
Committee in its judgment may deem advisable to enable the Company and
Grantees to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Grantee's tax obligations.
(d) Amendment and Termination. The Plan shall take effect on the Effective
Date. The Board may at any time and from time to time alter, amend,
suspend or terminate the Plan in whole or in part. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of any
Grantee, without such Grantee's consent, under any Award theretofore
granted under the Plan.
(e) No Rights to Awards; No Shareholder Rights. No employee of the Company or
any subsidiary or affiliate thereof shall have any claim to be granted any
Award under the Plan, and there is no obligation for uniformity of
treatment of Grantees. Except as provided specifically herein, a Grantee
or the beneficiary of a Grantee shall have no rights as a shareholder with
respect to any Stock covered by an Award until the date of the issuance of
a stock certificate for or other evidence of ownership of such Stock.
(f) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to
any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the
5
<PAGE>
Plan or any Award shall give any such Grantee any rights that are greater
than those of a general creditor of the Company.
(g) Shares to be Used. Shares of Stock to be used in payment of Awards may
be authorized but unissued shares, treasury shares or shares acquired for use
under the Plan. Such shares of Stock are hereby reserved for this purpose.
(h) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of New York
without giving effect to the conflict of laws principles thereof.
(i) Beneficiary. Upon death of a Grantee, all of his or her rights under
the Plan shall inure to his or her designated beneficiary or, if no beneficiary
has been designated, to his or her estate, subject to Section 5(d) hereof.
6
<PAGE>
EXHIBIT 10.3
CHAMPION INTERNATIONAL CORPORATION
----------------------------------
1997 PERFORMANCE SHARE PLAN
----------------------------
1. Purposes.
---------
The purposes of the Plan are to attract and retain in the employ of the
Company and its subsidiaries and affiliates outstanding management employees and
to provide incentives and rewards for such employees to contribute meaningfully
to the success of the Company.
2. Definitions.
------------
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Award" means a commitment to make a payment under the Plan in the form
of Stock or in the form of cash or other property which is valued by reference
to Stock.
(b) "Award Agreement" means any written agreement, contract or other
instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means
(1) 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;
(2) during any period within two (2) consecutive years there shall cease
to be a majority of the Board comprised as follows: individuals who at
the beginning of such period constitute the Board and any new director(s)
whose election by the Board 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
1
<PAGE>
the period or whose election or nomination for election was previously
so approved;
(3) 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 of the Company's assets; or
(4) any other similar or dissimilar event determined by the Committee
in its discretion to constitute a Change in Control.
(e) "Committee" means the Compensation and Stock Option Committee of the
Board.
(f) "Company" means Champion International Corporation, a corporation
organized under the laws of the State of New York, or any successor corporation.
(g) "Deferred Shares" means shares of Stock issuable in connection with
an Award that have been deferred pursuant to Section 5(b) hereof.
(h) "Effective Date" means March 20, 1997, the date that the Plan was
adopted by the Board.
(i) "Grantee" means a person who has been granted an Award under the
Plan.
(j) "Performance Cycle" means a period of performance determined by the
Committee .
(k) "Performance Goals" means performance goals or criteria relating to
(1) the performance of the Company, including, without limitation, goals or
criteria with respect to financial performance, operating performance and Stock
performance; (2) the performance of any subsidiary, affiliate, division or unit
of the Company or any group of employees of the Company or any subsidiary,
affiliate, division or unit thereof; (3) the performance of any Grantee; (4) any
other performance measures selected by the Committee; and (5) any combination of
the foregoing.
(l) "Plan" means this Champion International Corporation 1997 Performance
Share Plan, as amended from time to time.
(m) "Stock" means shares of the common stock, par value $.50 per share, of
the Company.
3. Administration.
---------------
The Plan shall be administered by the Committee. The Committee shall
have the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or in its judgment advisable in the administration of the Plan,
including, without limitation,
2
<PAGE>
the authority to grant Awards; to determine the persons or categories of persons
to whom and the time or times at which Awards shall be granted; to determine the
form of Awards; to determine the terms, conditions, restrictions and Performance
Goals relating to Awards; to determine whether, to what extent, and under what
circumstances an Award may be paid, cancelled, forfeited, exchanged or
surrendered; to make adjustments in the terms and conditions (including
Performance Goals) applicable to Awards; to construe and interpret the Plan and
the Awards; to prescribe, amend and rescind rules and regulations relating to
the Plan; and to make all other determinations deemed necessary or in its
judgment advisable for the administration of the Plan. All determinations made
by the Committee in respect of the Plan shall be final and binding on all
Grantees and their beneficiaries.
4. Eligibility
-----------
Awards may be granted from time to time to such employees or categories
of employees of the Company and its subsidiaries and affiliates as shall be
selected by the Committee in its discretion.
5. Awards.
-------
(a) Grants; Performance Goals. The grant of an Award may be made at any
time. Payment pursuant to each Award will be contingent on the attainment of
one or more Performance Goals in respect of a Performance Cycle; or the
continued employment of a Grantee with the Company and its subsidiaries and
affiliates; or any other criteria selected by the Committee; or any combination
of the foregoing. Where applicable, the Performance Goals may be expressed in
terms of attaining a specified level of the particular criteria or a percentage
increase or decrease in the particular criteria, and may be applied to one or
more of the Company, a subsidiary, affiliate, division or unit of the Company,
or any group of employees of any of the foregoing, or may be applied to the
performance of the Company relative to a market index, a group of other
companies or combination thereof, all as determined by the Committee. With
respect to any Award, the Performance Goals may include a threshold level of
performance below which no payments will be made, levels of performance at which
specified payments will be made, and a maximum level of performance above which
no additional payments will be made. The Committee shall have the authority to
make equitable adjustments to the Performance Goals in its discretion,
including, without limitation, in recognition of unusual or non-recurring events
affecting the Company or any subsidiary, affiliate, division or unit thereof,
including, without limitation, any such events affecting the financial
statements of the Company or any subsidiary or affiliate thereof.
(b) Payments; Deferrals. Payments to be made by the Company in respect
of an Award may be made in such form as the Committee shall determine at the
date of
3
<PAGE>
grant or thereafter, including, without limitation, cash, Stock or other
property, and may be made in a single payment or transfer, in installments or on
a deferred basis. In this regard (1) the Committee may permit a Grantee to
defer the payment of cash, the delivery of property or the issuance of shares of
Stock in respect of any Award, subject to the Grantee exercising a valid
deferral election with the Company in accordance with procedures established by
the Committee from time to time; and (2) the Committee shall have the right to
defer the payment of cash, the delivery of property or issuance of shares of
Stock in respect of any Award until such date as the Committee shall determine
(but not later than the Grantee's termination of employment with the Company and
its subsidiaries and affiliates for any reason). Such right to defer may be
exercised by the Committee in its discretion for any reason, including as
appropriate in its judgment to preserve the tax deductibility of payments
hereunder. With respect to any mandatory deferral made pursuant to clause (2)
of this paragraph, the Committee shall notify the Grantee of any such
determination and of the respective deferral date.
If the issuance of any shares of Stock otherwise issuable pursuant to an
Award is deferred, whether pursuant to an election by a Grantee or the
determination of the Committee, the Committee may provide that such Deferred
Shares be credited with dividend equivalents during the deferral period. Any
such dividend equivalents will be equal to the value of cash dividends and other
distributions in respect of the Stock, and will be paid in cash, or will be
converted into additional shares of Stock the value of which will be paid in
Stock, cash or other property, to the Grantee on such date or dates as
determined by the Committee.
If the payments of cash or other property otherwise payable or
deliverable pursuant to an Award is deferred, whether pursuant to an election by
the Grantee or the determination of the Committee, the Committee may provide
that the Grantee be credited with amounts in respect of such deferred Award on
such basis as the Committee deems appropriate, including, without limitation,
as if the value of such deferred Award had been invested in shares of Stock or
in one or more of the forms of investment available under the Company's
Nonqualified Supplemental Savings Plan or any successor thereto. The Committee
in its discretion may provide for elections or statements of preference by
Grantees with regard to the basis on which amounts may be credited in respect of
deferred Awards. The value of any such credited amounts will be paid to the
Grantee on such date or dates as determined by the Committee.
(c) Adjustments. In the event of any stock dividend, split-up, spin-off,
rights offering, combination or exchange of shares, recapitalization, merger,
consolidation, acquisition or disposition of property or stock, separation,
reorganization, liquidation, or the like, the number and class of any shares of
Stock or any Deferred Shares, the amount of any cash and the amount and kind of
any other property subject to any
4
<PAGE>
Award may be equitably adjusted, and any other appropriate changes may be made,
by the Committee, whose determinations shall be conclusive.
(d) Termination of Award. If the employment of a Grantee terminates for
any reason while an Award is outstanding, or if any applicable Performance Goal
is not attained, the Award shall immediately terminate and be forfeited;
provided, however, that the Committee may provide, by rule or regulation or in
any Award Agreement, or may determine in any individual case, that any
conditions relating to payment in respect to an Award will be waived.
6. Special Circumstances.
----------------------
(a) Discretionary Acceleration of Payment. Anything herein to the contrary
notwithstanding, the Committee shall have authority to make a determination
that a special situation exists relating to either (1) a Grantee or (2) the
Company, including, without limitation, a Change in Control or potential
Change in Control of the Company. Upon such a determination, the Committee
in its discretion may waive any conditions relating to payment in respect
of any or all outstanding Awards (including amounts deferred in accordance
with Section 5(b) hereof) granted to such Grantee, in the case of clause
(1) above, or to any or all Grantees, in the case of clause (2) above. In
the event of such a waiver, payment in respect of the applicable Award or
Awards (including amounts deferred in accordance with Section 5(b) hereof)
shall be made promptly by the Company.
(b) Mandatory Acceleration of Payment Following a Change in Control. Anything
herein to the contrary notwithstanding, the Committee, by rule or regulation or
in any Award Agreement or otherwise, may provide that in the event of (1) a
Change in Control or (2) the actual or constructive termination of a Grantee
within a specified period after a Change in Control, all conditions relating to
payment in respect of any or all outstanding Awards (including amounts deferred
in accordance with Section 5(b) hereof) granted to any or all Grantees, in the
case of clause (1) above, or to such actually or constructively terminated
Grantee, in the case of clause (2) above, shall be waived. In the event of such
a waiver, payment in respect of the applicable Award or Awards (including
amounts deferred in accordance with Section 5(b) hereof) shall be made promptly
by the Company.
7. General Provisions.
-------------------
(a) Nontransferability. Unless otherwise provided in an Award Agreement, Awards
shall not be transferable by a Grantee, except by will or the laws of
descent and distribution and except for the designation of a beneficiary.
5
<PAGE>
(b) No Right to Continued Employment. Nothing in the Plan or in any Award or
any Award Agreement shall confer upon any Grantee the right to continue in the
employ of the Company or any subsidiary or affiliate thereof.
(c) Taxes. The Company or any subsidiary or affiliate thereof is authorized
to withhold from any Award, any payment in respect of any Award, including from
a payment in the form of Stock, or any other payments to a Grantee, amounts of
withholding and other taxes due in connection with any transaction involving an
Award, and to take such other action as the Committee in its judgment may deem
advisable to enable the Company and Grantees to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any Award.
This authority shall include authority to withhold or receive Stock or other
property and to make cash payments in respect thereof in satisfaction of a
Grantee's tax obligations.
(d) Amendment and Termination. The Plan shall take effect on the Effective
Date. The Board may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part. Notwithstanding the foregoing, no
amendment shall affect adversely any of the rights of any Grantee, without such
Grantee's consent, under any Award theretofore granted under the Plan.
(e) No Rights to Awards; No Shareholder Rights. No employee of the Company
or any subsidiary or affiliate thereof shall have any claim to be granted any
Award under the Plan, and there is no obligation for uniformity of treatment of
Grantees. Except as provided specifically herein, a Grantee or the beneficiary
of a Grantee shall have no rights as a shareholder with respect to any Stock
covered by an Award until the date of the issuance of a stock certificate for or
other evidence of ownership of such Stock.
(f) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to
any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Grantee any rights
that are greater than those of a general creditor of the Company.
(g) Shares to be Used. Shares of Stock to be used in payment of Awards may
be authorized but unissued shares, treasury shares or shares acquired for use
under the Plan. Such shares of Stock are hereby reserved for this purpose.
(h) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of New York
without giving effect to the conflict of laws principles thereof.
6
<PAGE>
(i) Beneficiary. Upon death of a Grantee, all of his or her rights under the
Plan shall inure to his or her designated beneficiary or, if no beneficiary has
been designated, to his or her estate, subject to Section 5(d) hereof.
(j) Regulations and Other Approvals. The obligation of the Company to issue
or deliver Stock in payment of any Award shall be subject to all applicable
laws, rules and regulations, including, without limitation, all applicable
federal and state securities laws, and the rules of securities exchanges on
which the Stock is listed and the obtaining of all such approvals by
governmental agencies and securities exchanges as may be deemed necessary or
appropriate by the Committee. The Company shall make reasonable efforts at its
own cost to satisfy all of the laws, rules and regulations and to obtain all of
the approvals referred to in this Section 7(j).
7
<PAGE>
EXHIBIT 10.4
COMPENSATION PLAN FOR NON-EMPLOYEE
----------------------------------
DIRECTORS OF CHAMPION INTERNATIONAL CORPORATION
-----------------------------------------------
(Effective January 1, 1997)
1. Eligibility.
------------
Each member of the Board of Directors (the "Board") of Champion
International Corporation (the "Company") who is not an employee of the Company
or any of its subsidiaries (a "Director") shall participate in the Compensation
Plan For Non-Employee Directors of Champion International Corporation (the
"Plan").
2. Retainers and Fees.
-------------------
Each Director shall be entitled to a $22,500 annual retainer for serving
as a Director, $1,500 for attendance at each meeting of the Board and $1,000 for
attendance at each meeting of any Committee of the Board. In addition, each
Director serving as Chairman of any Committee of the Board shall be entitled to
a $5,000 annual retainer for such service.
3. Quarterly Cash Payment or Elective Deferral of Retainers and Fees.
------------------------------------------------------------------
At each Director's election, the retainers and fees specified in Section 2
hereof (the "Retainers and Fees") shall be paid quarterly in cash or credited
quarterly in the form of units equivalent to shares of the Company's Common
Stock that are settled in cash after he or she ceases to be a Director (the
"Elective Share Units").
All Retainers and Fees will be paid quarterly in cash during any calendar
year to each Director who shall have filed with the Secretary of the Company,
prior to the commencement of such year, a written election to be paid in cash
during such year. Each such election shall apply only to Retainers and Fees
earned during such calendar year, and not to Retainers and Fees earned during
any calendar year thereafter. Unless a Director shall have filed an election to
be paid in cash in accordance with this paragraph prior to the commencement of a
calendar year, all Retainers and Fees earned by such Director during such
calendar year will be credited quarterly in the form of Elective Share Units.
Notwithstanding the foregoing, all Retainers and Fees earned by a Director
during a partial calendar year in which he or she shall first have been elected
a Director shall be paid quarterly in cash.
1
<PAGE>
4. Non-Elective Share Units.
-------------------------
In addition to the Retainers and Fees, each Director shall be credited
quarterly with units equivalent to shares of the Company's Common Stock that are
settled in cash after he or she ceases to be a Director, such units to have a
value at the time of each quarterly crediting of $5,625 (the "Non-Elective Share
Units").
5. Method of Crediting Share Units, including Dividend Equivalents.
----------------------------------------------------------------
At the end of each calendar quarter, each Director shall be credited with
a number of Elective Share Units (if any) and Non-Elective Share Units
(collectively, the "Share Units") equal to the number of shares of the Company's
Common Stock that could be purchased at fair market value with the dollar value
of all Share Units earned by such Director during such quarter. For this
purpose, fair market value means the closing sale price of the Company's Common
Stock for New York Stock Exchange Composite Transactions on the last day of such
quarter or, if such last day is not a trading day, then on the next succeeding
trading day.
At the end of each calendar quarter, each Director also shall be credited
with Share Units, computed in the manner specified in the immediately preceding
paragraph, based upon the sum of all cash dividends and other distributions
declared during such quarter on a number of shares of Common Stock equal to the
number of Share Units credited to such Director immediately prior to the end of
such quarter. Such Director shall continue to be so credited quarterly (before
and, if and to the extent relevant, after the date on which he or she shall have
ceased to be a Director) until payment in respect of all Share Units credited to
such Director shall be made.
6. Payment in Respect of Share Units.
----------------------------------
All Share Units credited to each Director shall be settled in cash
following the date on which he or she shall cease for any reason to be a
Director (the "Retirement Date"). Each Director may determine the time or times
of such cash settlement by filing with the Secretary of the Company, prior to
the commencement of the calendar year in which his or her Retirement Date
occurs, a written election to be paid in a lump sum or in installments as
provided in the two immediately succeeding paragraphs. Any such election shall
be irrevocable from and after the commencement of the calendar year in which
such Director's Retirement Date occurs.
Lump Sum Payment. A Director may elect to receive, in respect of all
Share Units credited to him or her, a lump sum cash payment as of any June 1
following his or her Retirement Date, but not later than the June 1 of the ninth
calendar year following such Retirement Date. Such payment shall be in an
amount per Share Unit equal to the average closing sale price of the Company's
Common Stock for New
2
<PAGE>
York Stock Exchange Composite Transactions during the two calendar months
preceding the June 1 as of which payment is to be made (the "Two Month Average
Stock Price"). Such payment shall be made on such June 1 or as soon thereafter
as practicable.
Installment Payments. A Director may elect that the number of Share Units
credited to him or her on such Director's Retirement Date be paid in
substantially equal annual cash installments over a period of two to ten years.
The initial annual installment shall be paid on the June 1 immediately following
his or her Retirement Date or as soon thereafter as practicable, and each
subsequent annual installment shall be paid on the June 1 of each succeeding
year selected by the Director or as soon thereafter as practicable. Each annual
installment shall be made in respect of the Share Units comprising such annual
installment plus the Share Units credited to such Director pursuant to dividend
equivalents since the immediately preceding annual installment. Each annual
installment shall be in an amount per Share Unit equal to the Two Month Average
Stock Price preceding the applicable June 1 payment date.
Payment if No Election is Filed. If a Director shall fail to file a
written election as provided above in this Section 6, he or she shall receive,
in respect of all Share Units credited to such Director, a lump sum cash payment
as of the June 1 immediately following his or her Retirement Date. Such payment
shall be in an amount per Share Unit equal to the Two Month Average Stock Price
preceding such June 1. Such payment shall be made on such June 1 or as soon
thereafter as practicable.
7. Miscellaneous.
--------------
Adjustments of Share Units. In the event of any stock dividend, stock
split or other recapitalization, merger, consolidation, acquisition,
disposition, reorganization, liquidation, or the like, the Share Units credited
to each Director shall be equitably adjusted.
Service For a Portion of a Calendar Quarter. Retainers (whether in the
form of cash or Elective Share Units) and Non-Elective Share Units shall be paid
or credited, as the case may be, quarterly in full with respect to each Director
who serves on the Board for any portion of such quarter.
Payment to a Director's Beneficiary. Upon the death of a Director,
payment shall be made or shall continue to be made in accordance with the
provisions of the Plan to the beneficiary or beneficiaries designated in writing
by the Director or, in the absence of such a designation, to the estate of such
Director.
3
<PAGE>
Unfunded Obligation. No funds, shares or other property shall be
segregated or earmarked for any Director, beneficiary or other person, and no
Director, beneficiary or other person shall have any right, title or interest in
any fund or specific sum of money, in any asset or in any shares which may (but
need not) be acquired or reserved by the Company in connection with its
obligations hereunder, the sole right of the Director (or his or her beneficiary
or estate) being to receive payments, as set forth herein, as a general creditor
of the Company with an unsecured claim against the Company's general assets.
Non-Assignability. The right of a Director to receive any amount
hereunder shall not be assignable or transferable, except by will or the laws of
descent and distribution and except for the designation of a beneficiary or
beneficiaries.
Amendment or Termination. The Board may at any time amend or terminate
the Plan, provided that no amendment or termination shall impair the rights of a
Director with respect to Share Units credited to such Director.
4
<PAGE>
EXHIBIT 10.5
AMENDMENT OF THE RETIREMENT PLAN FOR OUTSIDE DIRECTORS
OF CHAMPION INTERNATIONAL CORPORATION
(Adopted by the Board of Directors on March 20, 1997)
-----------------------------------------------------
The Retirement Plan For Outside Directors of Champion International
Corporation, as adopted by the Board of Directors on August 20, 1992, is amended
by adding Section 13 thereto, as follows, effective January 1, 1997.
13. Cessation of Accrual of Retirement Benefits for Service after January 1,
------------------------------------------------------------------------
1997
- ----
(a) Directors Who Retired Prior to January 1, 1997. Each Eligible Director
who retired from the Board prior to January 1, 1997 and was entitled to
benefits under the Plan shall continue to receive benefits in accordance with
the terms of the Plan.
(b) Directors Elected After January 1, 1997. Individuals elected to the
Board for the first time after January 1, 1997 will not be entitled to any
benefits under the Plan.
(c) Directors in Office on January 1, 1997. With regard to individuals
serving as non-employee members of the Board on January 1, 1997 (the "Incumbent
Directors"), the Years of Service provided for in the third sentence of Section
3 hereof shall not include any period after January 1, 1997. In addition, each
Incumbent Director will have the right to waive the payment of his or her
accrued benefit under the Plan for service until January 1, 1997. Upon such
waiver, such Incumbent Director will receive a one-time credit to a deferred
account in an amount representing the present value of his or her accrued
benefit under the Plan for service until January 1, 1997, whether or not such
Incumbent Director has satisfied the conditions set forth in Section 2 hereof.
At such Incumbent Director's election, the deferred account will be valued as if
it were invested on January 1, 1997 (i) in shares of the Company's Common Stock
("Champion Share Units"), based upon the average closing sale price of the
Common Stock between November 1, 1996 and December 31, 1996; (ii) in one or more
of the phantom funds available for investment under the Company's Nonqualified
Supplemental Savings Plan ("Phantom Savings Plan Funds"); or (iii) in a
combination of the foregoing.
Amounts deemed to be invested in Phantom Savings Plan Funds may, at the
election of the Incumbent Director, be transferred among such Funds from time to
1
<PAGE>
time in accordance with the terms of the Nonqualified Supplemental Savings Plan.
However, amounts deemed to be invested in Phantom Savings Plan Funds may not be
converted into Champion Share Units and vice-versa.
Champion Share Units will accrue dividend equivalents, which will be deemed
to be invested in additional Champion Share Units, based upon the cash dividends
and other distributions declared on a number of shares of Common Stock equal to
the number of Champion Share Units in such Incumbent Director's deferred
account.
The value of such Incumbent Director's deferred account will be paid in cash
after he or she ceases for any reason to be a member of the Board. The portion
of the deferred account deemed to be invested in Champion Share Units, if any,
will be paid at the same time, in a lump sum or in installments, and will be
valued in the same manner as all other Champion Share Units credited to such
Incumbent Director pursuant to the Compensation Plan For Non-Employee Directors
adopted by the Board on February 20, 1997. The portion of the deferred account
deemed to be invested in Phantom Savings Plan Funds, if any, will be paid at the
same time, in a lump sum or in installments, as the Champion Share Units
credited to such Incumbent Director under the Plan, if any, and under the
Compensation Plan For Non-Employee Directors adopted by the Board on February
20, 1997.
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 (unaudited)
(in thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Primary earnings (loss) per common share:
Net Income (Loss) Applicable to Common Stock $(37,083) $ 83,649
================ ================
Average number of common shares outstanding 95,590 95,505
================ ================
Per share ($0.39) $0.88
================ ================
Fully diluted earnings (loss) per common share: (1)
Net Income (Loss) Applicable to Common Stock $(37,083) $ 83,649
Add income effect, assuming conversion of
dilutive convertible securities --- ---
----------------- -----------------
Net income (loss) on a fully diluted basis $(37,083) $ 83,649
================ ================
Average number of common shares outstanding 95,590 95,505
Add common share effect, assuming conversion
of dilutive convertible securities --- ---
----------------- -----------------
Average number of common shares outstanding
on a fully diluted basis 95,590 95,505
================ ================
Per share $ (.39) $ .88
================ ================
</TABLE>
- ----------
NOTE:
(1) The computation of fully diluted earnings per common share assumes that the
average number of common shares outstanding during the period 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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND THE CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 112,032
<SECURITIES> 20,914
<RECEIVABLES> 583,716
<ALLOWANCES> 18,396
<INVENTORY> 458,056
<CURRENT-ASSETS> 1,259,847
<PP&E> 11,714,566 <F1>
<DEPRECIATION> 3,738,275
<TOTAL-ASSETS> 9,740,627
<CURRENT-LIABILITIES> 816,471
<BONDS> 3,218,185
0
0
<COMMON> 55,198
<OTHER-SE> 3,656,352
<TOTAL-LIABILITY-AND-EQUITY> 9,740,627
<SALES> 1,366,720
<TOTAL-REVENUES> 1,366,720
<CGS> 1,281,103
<TOTAL-COSTS> 1,281,103
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,799
<INCOME-PRETAX> (59,544)
<INCOME-TAX> (22,461)
<INCOME-CONTINUING> (37,083)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,083)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
<FN>
<F1> Includes timber and timberlands.
</FN>
</TABLE>
