-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vou5vMizyOkDghpUX3uelGn31diQbXkSKb/1V+PGoPGWYDEFtgdtzKYptqjhE4z/ K4oC/82eL+nQQVb1a5dZZA== 0000950130-99-006407.txt : 19991115 0000950130-99-006407.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950130-99-006407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHAMPION INTERNATIONAL CORP CENTRAL INDEX KEY: 0000019150 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 131427390 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03053 FILM NUMBER: 99749986 BUSINESS ADDRESS: STREET 1: ONE CHAMPION PLAZA CITY: STAMFORD STATE: CT ZIP: 06921 BUSINESS PHONE: 2033587000 FORMER COMPANY: FORMER CONFORMED NAME: UNITED STATES PLYWOOD CHAMPION PAPERS IN DATE OF NAME CHANGE: 19720821 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED @@@@ 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 September 30, 1999 ------------------------------------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------------------------------- Commission File Number 1-3053 --------------------------------------------------- Champion International Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) New York 13-1427390 - -------------------------------- ------------------------------------ State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization One Champion Plaza, Stamford, Connecticut 06921 ----------------------------------------------- (Address of principal executive offices) (Zip Code) 203-358-7000 ---------------------------------------------------- (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 October 31, 1999 - ---------------------------- ------------------------------- Common stock, $.50 par value 96,198,629 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (unaudited) (in millions, except per share)
Nine Months Ended Three Months Ended September 30, September 30, ------------------------- ------------------------- 1999 1998 1999 1998 --------- --------- --------- --------- Net Sales $ 3,920.2 $ 4,308.8 $ 1,344.4 $ 1,358.0 Costs and Expenses Cost of products sold 3,349.7 3,761.1 1,104.5 1,181.6 Selling, general and administrative expenses 264.0 271.3 89.9 81.2 Interest and debt expense 185.5 196.2 61.2 61.4 Other (income) expense - net (Note 2) (85.8) (29.8) (24.8) (8.1) --------- --------- --------- --------- Total costs and expenses 3,713.4 4,198.8 1,230.8 1,316.1 Income Before Income Taxes and Extraordinary Item 206.8 110.0 113.6 41.9 Income Taxes 48.5 27.6 36.2 10.6 --------- --------- --------- --------- Income Before Extraordinary Item 158.3 82.4 77.4 31.3 --------- --------- --------- --------- Extraordinary Item - Loss on Early Retirement of Debt, Net of Taxes (2.3) -- (2.3) -- --------- --------- --------- --------- Net Income $ 156.0 $ 82.4 $ 75.1 $ 31.3 ========= ========= ========= ========= Average Number of Common Shares Outstanding 95.8 96.0 96.1 95.7 ========= ========= ========= ========= Earnings Per Common Share (Exhibit 11): Basic Earnings Per Common Share: Income Before Extraordinary Item $ 1.65 $ .86 $ .80 $ .33 Extraordinary Item (.02) -- (.02) -- --------- --------- --------- --------- Net Income $ 1.63 $ .86 $ .78 $ .33 ========= ========= ========= ========= Diluted Earnings Per Common Share: Income Before Extraordinary Item $ 1.64 $ .85 $ .80 $ .32 Extraordinary Item (.02) -- (.02) -- --------- --------- --------- --------- Net Income $ 1.62 $ .85 $ .78 $ .32 ========= ========= ========= ========= Cash Dividends Declared $ .15 $ .15 $ .05 $ .05 ========= ========= ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement. 2 CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions of dollars)
September 30, December 31, 1999 1998 ASSETS: (unaudited) ------------- ------------ Current Assets: Cash and cash equivalents $ 595.5 $ 300.4 Short-term investments 9.6 -- Receivables - net 522.8 520.5 Inventories 398.6 503.5 Prepaid expenses 41.8 27.5 Deferred income taxes 82.4 86.6 -------- -------- Total Current Assets 1,650.7 1,438.5 -------- -------- Timber and timberlands, at cost - less cost of timber harvested 2,260.9 2,430.4 -------- -------- Property, plant and equipment, at cost 7,391.8 8,585.3 Less - Accumulated depreciation 3,532.3 4,356.5 -------- -------- 3,859.5 4,228.8 -------- -------- Other assets and deferred charges 648.2 742.2 -------- -------- Total Assets $8,419.3 $8,839.9 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Accounts payable and accrued liabilities $ 676.7 $ 720.3 Current installments of long-term debt 353.3 228.0 Short-term borrowings 69.6 89.8 Income taxes 25.3 10.4 -------- -------- Total Current Liabilities 1,124.9 1,048.5 -------- -------- Long-term debt 2,571.6 2,947.5 -------- -------- Other liabilities 799.1 786.8 -------- -------- Deferred income taxes 948.0 961.2 -------- -------- Shareholders' Equity: Capital Shares: Common (111,629,073 and 111,025,755, shares issued at September 30, 1999 and December 31, 1998, respectively) 55.8 55.5 Capital surplus 1,731.6 1,705.5 Retained Earnings 2,370.0 2,228.4 -------- -------- 4,157.4 3,989.4 Treasury shares, at cost (689.3) (689.7) Accumulated other comprehensive income (492.4) (203.8) -------- -------- Total Shareholders' Equity 2,975.7 3,095.9 -------- -------- Total Liabilities and Shareholders' Equity $8,419.3 $8,839.9 ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement. 3 CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED CASH FLOWS (unaudited) (in millions of dollars)
Nine Months Ended September 30, --------------------- 1999 1998 ------- ------- Cash flows from operating activities: Net income $ 156.0 $ 82.4 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 255.7 301.1 Cost of timber harvested 60.3 69.9 Net gain on sale of assets (7.7) (18.0) Foreign currency transaction (gain) loss (49.5) (8.8) Changes in assets and liabilities, net of acquisitions and divestitures: Receivables (90.1) 52.4 Inventories 26.5 (32.7) Prepaid expenses (18.9) 2.3 Accounts payable and accrued liabilities 28.0 (36.0) Income taxes payable 16.4 (1.4) Other liabilities 13.5 (3.8) Deferred income taxes 15.6 1.6 All other - net 11.2 6.7 ------- ------- Net cash provided by operating activities 417.0 415.7 ------- ------- Cash flows from investing activities: Expenditures for property, plant and equipment (152.1) (220.7) Timber and timberlands expenditures (75.5) (97.7) Acquisitions of timberlands and mills (Note 3) -- (103.7) Purchase of investments (9.6) (5.5) Proceeds from sales of divested operations 267.9 481.6 Proceeds from sales of property, plant and equipment and timber and timberlands 11.7 26.6 All other - net (3.8) (0.8) ------- ------- Net cash provided by investing activities 38.6 79.8 ------- ------- Cash flows from financing activities: Proceeds from issuance of long-term debt 70.5 501.1 Payments of current installments of long-term debt and long-term debt (223.9) (963.9) Cash dividends paid (14.3) (14.7) Payments to acquire treasury stock -- (34.3) All other - net 7.2 1.4 ------- ------- Net cash used in financing activities (160.5) (510.4) ------- ------- Increase (decrease) in cash and cash equivalents 295.1 (14.9) Cash and Cash Equivalents: Beginning of period 300.4 275.0 ------- ------- End of period $ 595.5 $ 260.1 ======= ======= Supplemental cash flow disclosures: Cash paid during the period for: Interest (net of capitalized amounts) $ 171.6 $ 190.5 Income taxes (net of refunds) 15.6 4.7
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement. 4 CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) September 30, 1999 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. Certain amounts for 1998 have been reclassified to conform to the current year's presentation. Note 2. Other income (expense) - net is comprised of the following:
Nine Months Ended Three Months Ended September 30, September 30, -------------------- -------------------- (in millions of dollars) 1999 1998 1999 1998 ------- ------- ------- ------- Interest income $ 27.5 $ 15.8 $ 13.2 $ 6.0 Foreign currency transaction gains 49.5 8.8 8.0 4.8 Other 8.8 5.2 3.6 (2.7) ------- ------- ------- ------- $ 85.8 $ 29.8 $ 24.8 $ 8.1 ======= ======= ======= =======
Note 3. In 1998, the company's Brazilian subsidiary acquired Inpacel and its forestry affiliate, and the company's Canadian subsidiary acquired Sunpine Forest Products, Ltd. The acquisitions, which were accounted for as purchases, included cash payments, net of cash and cash equivalents owned by the acquired companies, of $104 million, as well as outstanding debt of $333 million and $49 million of other liabilities. Note 4. Information about the company's operations in different businesses is as follows:
Nine Months Ended Three Months Ended September 30, September 30, ---------------------- ---------------------- (in millions of dollars) 1999 1998 1999 1998 -------- -------- -------- -------- Net Sales to Unaffiliated Customers Pulp and Paper North America $2,080.4 $2,610.1 $ 693.5 $ 772.3 Brazil 287.9 335.9 99.9 109.5 Distribution 614.2 631.9 217.7 208.4 -------- -------- -------- -------- Total Pulp and Paper 2,982.5 3,577.9 1,011.1 1,090.2 -------- -------- -------- -------- Wood Products 937.7 730.9 333.3 267.8 -------- -------- -------- -------- Total $3,920.2 $4,308.8 $1,344.4 $1,358.0 ======== ======== ======== ========
5 CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Nine Months Ended Three Months Ended September 30, September 30, --------------------- --------------------- (in millions of dollars) 1999 1998 1999 1998 ------- ------- ------- ------- Intersegment Sales Pulp and Paper North America $ 99.5 $ 112.3 $ 32.4 $ 40.5 Brazil 13.5 9.1 4.4 5.6 Distribution 12.8 16.8 4.0 4.6 ------- ------- ------- ------- Total Pulp and Paper 125.8 138.2 40.8 50.7 ------- ------- ------- ------- Wood Products 288.8 374.0 84.6 111.6 ------- ------- ------- ------- Total $ 414.6 $ 512.2 $ 125.4 $ 162.3 ======= ======= ======= ======= Income From Operations Pulp and Paper North America $ 38.2 $ 160.8 $ 48.0 $ 39.7 Brazil 103.9 75.4 36.4 26.5 Distribution 15.1 9.2 5.4 2.4 ------- ------- ------- ------- Total Pulp and Paper 157.2 245.4 89.8 68.6 ------- ------- ------- ------- Wood Products 181.7 61.4 70.6 33.8 ------- ------- ------- ------- General Corporate Expense (32.4) (30.4) (10.4) (7.2) ------- ------- ------- ------- Total $ 306.5 $ 276.4 $ 150.0 $ 95.2 ======= ======= ======= =======
Note 5. On October 7, 1997, the company approved a plan to maximize total shareholder return by focusing on strategic businesses, increasing profitability and improving financial discipline. As part of this plan, the company has divested several non-strategic product segments and approximately 300,000 acres of timberlands and will divest the Hamilton, Ohio mill. The profit-improvement program includes a reduction in the company's world-wide workforce in the businesses remaining after the divestitures by 11%, or approximately 2,000 positions, by the end of 1999. In the fourth quarter of 1997, the company recorded a pre-tax charge of $891 million ($552 million after-tax, or $5.76 per share) in connection with this plan. In the fourth quarter of 1998, the company recorded a pre-tax charge of $80 million ($49 million after-tax, or $.52 per share) to recognize additional costs associated with the divestiture of the non-strategic product segments. 6 CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) As of June 30, 1999, the company had achieved its targeted reduction in its world-wide workforce in the businesses which are not part of the planned divestitures (excluding positions added as the result of certain acquisitions in Canada, Brazil and Maine). In 1998, the company sold its newsprint business, its Texas recycling centers and its Belvidere, Illinois tray plant for a total of $481.5 million. In December 1998, the company agreed to sell approximately 300,000 acres of timberlands in the northeast to The Conservation Fund for $76.2 million. As part of the transaction, on June 30, 1999, the company completed the sale of approximately 143,000 acres in New York for approximately $46 million. In July and August 1999, the company completed the sale of the remaining approximately 151,000 acres of timberlands in New Hampshire and Vermont for a total of approximately $30.2 million. On May 14, 1999, the company sold its mill in Canton, North Carolina and its liquid packaging business for $200 million, consisting of $170 million in cash and a $30 million note. The contract also provides the opportunity for the company to receive an additional contingency payment in the future. On June 11, 1999, the company sold its mill in Deferiet, New York for $34.5 million, a substantial portion of which was paid in cash. The company is continuing to actively pursue the sale of its mill in Hamilton, Ohio. In addition, the company has offered for sale approximately 54,000 acres of timberlands in North Carolina and Tennessee. Results of operations for the product segments divested and to be divested, included in the accompanying consolidated statement of income, are as follows. Nine Months Ended September 30, ------------------------- (in millions of dollars) 1999 1998 ------- ------- Net sales $ 353.8 $ 822.4 Costs and expenses 372.3 828.9 ------- ------- Income (loss) from operations $ (18.5) $ (6.5) ======= ======= The consolidated balance sheet includes the following amounts related to the product segments to be divested, excluding the reserve for asset impairment: September 30, 1999 ------------- (in millions of dollars) Current assets $ 73.3 Long-term assets (primarily property, plant and equipment) 129.1 Current liabilities (9.0) ------- Net assets $ 193.4 ======= 7 CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Activity in the first nine months of 1999 of the remaining reserves and liabilities associated with the provision for restructuring is as follows: Asset Balance at Retirements Balance at December 31, and Cash September 30, (in millions of dollars) 1998 Payments 1999 ------------ ----------- ------------- Reserve for asset impairment $569.0 $(410.1) $158.9 Liabilities 92.5 (19.4) 73.1 ------ ------- ------ $661.5 $(429.5) $232.0 ====== ======= ====== Note 6. Comprehensive income reflects changes in equity that result from transactions and economic events from nonowner sources. Comprehensive income for the periods presented below includes foreign currency translation items associated with the company's Brazilian and Canadian operations. There was no tax expense or tax benefit associated with the foreign currency translation items, other than the cumulative tax effect described below. Comprehensive income (unaudited)
Nine Months Ended Three Months Ended September 30, September 30, --------------------- --------------------- (in millions of dollars) 1999 1998 1999 1998 ------- ------- ------- ------- Net income $ 156.0 $ 82.4 $ 75.1 $ 31.3 Foreign currency translation adjustments: Cumulative tax effect of changing the functional currency for Brazilian operations to the Brazilian Real -- (51.5) -- -- Other foreign currency translation adjustments (288.6) (82.3) (48.4) (40.8) ------- ------- ------- ------- Net foreign currency translation adjustment (288.6) (133.8) (48.4) (40.8) ------- ------- ------- ------- Comprehensive income (loss) $(132.6) $ (51.4) $ 26.7 $ (9.5) ======= ======= ======= =======
8 CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 7. The company occasionally enters into forward exchange contracts and interest rate swap agreements to hedge certain assets that are denominated in foreign currencies. In addition, the company occasionally enters into interest rate swap agreements which convert variable rate debt to fixed interest rate. At September 30, 1999, the company had no significant forward exchange contracts and interest rate swap agreements outstanding. The company does not hold financial instruments for trading purposes. Note 8. In September 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement, which will be effective for the company beginning in the fiscal year 2001, establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or a liability measured at its fair value. The Statement requires that changes in each derivative's fair value be recognized in earnings unless specific hedge accounting criteria are met. The company has not yet quantified the anticipated impact on the financial statements of adopting the Statement. However, given the current level of the company's derivative and hedging activities, the impact is not expected to be material. 9 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 net income in the third quarter of 1999 of $75 million or 78 cents per diluted share, compared to last year's third quarter net income of $31 million or 32 cents per share and last quarter's net income of $39 million or 41 cents per share. Third quarter 1999 results included an extraordinary charge of $2 million or two cents per share for the early retirement of debt. As discussed below, the improvement from the third quarter of last year was primarily due to significantly higher operating income in the wood products and pulp and paper segments. The improvement from last quarter was mainly due to significantly higher operating income in the North American pulp and paper segment. In addition, the improvement from both prior quarters reflected more favorable other (income) expense - net. Significant Income Statement Changes Net sales of $1.3 billion were approximately even with last year and last quarter. Gross profit of $240 million improved from $176 million last year and $187 million last quarter. Pre-tax income of $114 million, before the $2 million extraordinary charge, improved from $42 million a year ago and $52 million last quarter. The improvements in gross profit and pre-tax income from last year were principally due to significantly higher lumber and plywood prices and shipments, lower overall manufacturing costs and, with respect to pre-tax income, more favorable other (income) expense - net. The improvements in gross profit and pre-tax income from last quarter were primarily due to higher prices for domestic uncoated free sheet and coated groundwood papers and for pulp, higher pulp shipments and, with respect to pre-tax income, more favorable other (income) expense - net. The aggregate cost of products sold declined from last year and was down slightly from last quarter. The declines from both prior quarters were principally due to lower manufacturing costs in Brazil, and lower paper shipments resulting from (i) the May 1999 sale of the company's mill in Canton, North Carolina, the extruding and converting facility in Waynesville, North Carolina, and the liquid packaging business (the Canton System) and (ii) the June 1999 sale of the company's groundwood specialty mill in Deferiet, New York. Selling, general and administrative expenses increased from last year and were approximately even with last quarter. The increase from last year was mainly due to the impact of stock price fluctuations on the value of stock appreciation rights and other stock-based compensation. 10 Other (income) expense - net improved from both last year and last quarter principally due to higher interest income (primarily resulting from the investment of asset divestiture proceeds) and higher foreign currency transaction gains for the company's Brazilian subsidiary, Champion Papel e Celulose Ltda. ("CPC"). See Note 2 to the Consolidated Financial Statements. The company's effective tax rate reflects the mix of earnings from the company's operations in North America and Brazil; the tax rate applicable to North American operations is higher than the Brazilian tax rate. The effective tax rate for the third quarter of 1999 was higher than last year and last quarter due to a higher proportion of North American pre-tax income. Year-to-Date Results For the first nine months, the company reported net income of $156 million or $1.63 per diluted share compared to $82 million or $.85 per share a year ago. Pulp, Paper and Distribution Each of the company's North American and Brazilian pulp and paper segments and its distribution segment is discussed separately below. For these segments in the aggregate, third quarter operating income of $90 million increased from $69 million in the year-ago quarter and $40 million last quarter. The improvement from the year-ago quarter was mainly due to lower overall manufacturing costs and improved results at the company's Brazilian operations. The improvement from last quarter was primarily due to higher prices for domestic uncoated free sheet and coated groundwood papers and for pulp, and increased shipments of pulp. North American Pulp and Paper Segment The North American pulp and paper segment consists of the company's domestic pulp and paper operations, excluding its distribution business, as well as the softwood market pulp operations at the company's Canadian subsidiary, Weldwood of Canada Limited ("Weldwood"). Operating income for the company's North American pulp and paper segment of $48 million improved from $40 million a year ago and $1 million last quarter. Total North American paper, packaging and pulp shipments of approximately 1.1 million tons declined from 1.2 million tons last year and were approximately even with last quarter. The decline in shipments from last year was due to the divestiture of various facilities discussed above under "Significant Income Statement Changes", partially offset by increased pulp and paper shipments from ongoing operations. 11 A summary of shipments and prices of the company's major U.S. paper products is as follows:
Shipments (Thousands of Short Tons) Average Price Per Ton ------------------------------- --------------------------------- 3rd Qtr 2nd Qtr 3rd Qtr 3rd Qtr 2nd Qtr 3rd Qtr Product 1999 1999 1998 1999 1999 1998 ------- ------- ------- ------- ------- ------- Uncoated Free Sheet 337 339 387 $655 $610 $630 Coated Free Sheet 157 154 157 $847 $848 $921 Coated Groundwood 207 193 171 $836 $819 $923 Uncoated Groundwood 23 52 65 $617 $658 $728 Kraft Paper & Linerboard 127 130 124 $400 $374 $364
The mills in the domestic coated papers business are in Bucksport, Maine; Quinnesec, Michigan; and Sartell, Minnesota. Pulp sales at Quinnesec and uncoated groundwood papers produced at Sartell also are included in the results of this business. Operating income for the domestic coated papers business declined from last year but improved from last quarter. The decline from last year was principally due to lower prices for coated free sheet and coated groundwood papers. The improvement from last quarter was primarily due to higher prices and shipments for coated groundwood papers. Prices for coated papers and pulp continued to improve early in the fourth quarter. The mills in the domestic uncoated papers business are in Pensacola, Florida and Courtland, Alabama. Pulp sales at Pensacola and Courtland and coated free sheet papers sales at Courtland also are included in the results of this business. The small operating income for the domestic uncoated papers business improved from the operating losses of last year and last quarter. The improvements were mainly due to higher prices for uncoated free sheet papers and pulp. Prices for uncoated free sheet papers and pulp continued to improve early in the fourth quarter. Linerboard and kraft papers are produced at the Roanoke Rapids, North Carolina mill. Operating income for the kraft papers business improved from last year and was approximately even with last quarter. The improvement from the year-ago quarter was primarily due to higher prices for kraft papers and linerboard. Improved prices from last quarter were offset by slightly lower shipments due to a storm-related power outage. In the third quarter of 1999, the only remaining pulp and paper operation to be divested was the Hamilton, Ohio paper mill. The third quarter operating loss for this operation was smaller than the loss from divested operations for last year and last quarter, mainly due to the operating losses in the prior quarters for the Canton System and the Deferiet, New York mill, which were sold in May 1999 and June 1999, respectively. Weldwood's market pulp operations consist of its mill in Hinton, Alberta and a 50% interest in a joint venture pulp mill in Quesnel, British Columbia. Operating income for these operations was approximately even with last year but improved significantly from the operating loss last quarter. The 12 improvement from last quarter was due to higher shipments and prices for northern bleached softwood kraft ("NBSK") pulp and also reflected the higher manufacturing costs for NBSK pulp last quarter that resulted from scheduled maintenance outages at both pulp mills and a two-week strike at the Hinton mill which ended on April 5. Compared to the year-ago quarter, higher prices and shipments for NBSK pulp were offset by increased manufacturing costs. The average price for NBSK pulp was (U.S.) $374 per ton in the third quarter of 1999, compared to $360 per ton in the third quarter of 1998 and $342 per ton in the second quarter. Shipments of 157,000 tons increased from 148,000 tons last year and 117,000 tons last quarter. Prices for pulp continued to improve early in the fourth quarter. Brazilian Pulp and Paper Segment In January 1999, the government of Brazil ceased its efforts to control the rate of devaluation of the Brazilian currency, the Real, and allowed the exchange rate for the Real to float freely. As a result, the Real devalued 30% against the U.S. dollar in the first quarter of 1999. During the second and third quarters, the exchange rate began to stabilize, devaluing only an additional 8% against the U.S. dollar. This devaluation reduced the cost of manufacturing, thereby improving the competitive position, for exports by CPC. At any given time, exports account for between 30% and 60% of CPC's sales. However, the devaluation has reduced domestic selling prices on a U.S. dollar basis. Overall, the effect of the devaluation on CPC's operating income for the first three quarters of 1999 was slightly positive. The Brazilian pulp and paper segment consists primarily of the pulp and paper operations of CPC. In addition, the segment includes CPC's wood-related operations. Operating income of $36 million improved from $27 million last year and $35 million last quarter. The improvement from last year was mainly due to higher shipments for coated groundwood and uncoated free sheet papers and lower manufacturing costs, which more than offset lower prices. The slight improvement from last quarter was due to lower manufacturing costs which more than offset lower overall prices and shipments. The overall average price for uncoated free sheet papers was $591 per ton in the third quarter, compared to $715 per ton in the year-ago quarter and $588 per ton last quarter. The average price for coated groundwood papers was $707 per ton, compared to $847 per ton last year and $745 per ton last quarter. Uncoated free sheet papers shipments of 102,000 tons increased from 99,000 tons last year and were approximately even with last quarter. Coated groundwood papers shipments of 46,000 tons compared to 39,000 tons last year and 51,000 tons last quarter. Distribution Segment For the company's distribution segment, income from operations of $5 million improved from $2 million last year and $4 million last quarter. The improvement from last year and last quarter was mainly due to improved margins. 13 Wood Products Segment A summary of shipments and prices of the company's major wood products is as follows:
Shipments Price Per Unit ------------------------------- --------------------------------- 3rd Qtr 2nd Qtr 3rd Qtr 3rd Qtr 2nd Qtr 3rd Qtr Product 1999 1999 1998 1999 1999 1998 ---- ---- ---- ---- ---- ---- U.S. Lumber - MMBF 123 120 116 $346 $338 $316 Softwood Plywood - MMSF 3/8" 237 229 231 $290 $286 $239 Canada Lumber - MMBF 246 283 185 $342 $323 $281 Softwood Plywood - MMSF 3/8" 94 115 82 $299 $275 $232
For the company's wood products segment, which includes the wood-related operations of Weldwood, income from operations of $71 million improved from $34 million last year and $69 million in the second quarter of 1999. The improvement from the year-ago quarter was principally due to significantly higher lumber and plywood prices in Canada and the United States and increased shipments of lumber and plywood in Canada. The improvement from last quarter was mainly due to higher average Canadian lumber and plywood prices, which more than offset lower Canadian shipments. Lumber and plywood prices experienced seasonal declines early in the fourth quarter. 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 (including intracompany transfers) for CPC and Weldwood for the first nine months of 1999 were (U.S.) $301 million and (U.S.) $532 million, accounting for 8% and 14%, respectively, of consolidated net sales of the company. Pre-tax income and net income of CPC for the first nine months of 1999 were $137 million and $118 million, respectively, including foreign currency transaction gains of $49 million. Pre-tax income and net income of Weldwood for the first nine months of 1999 were $62 million and $38 million, respectively. The pre-tax income and net income of CPC and Weldwood for the first nine months of 1999 accounted for substantially all of the company's pre-tax income and all of its net income, respectively, Financial Condition General The company's current ratio was 1.5 to 1 at September 30, 1999, compared to 1.4 to 1 at June 30, 1999 and year-end 1998. Total debt to total capitalization declined to 43% at September 30, 1999 from 44% at June 30, 1999 and 45% at year-end 1998 as a result of lower outstanding domestic and foreign debt. 14 Significant Balance Sheet Changes The May 1999 sale of the Canton System, the June 1999 sale of the Deferiet, New York mill and the 38% devaluation of the Brazilian currency relative to the U.S. dollar were the main reasons for the decreases from December 31, 1998 in inventories, property, plant and equipment-net, other assets and deferred charges and accounts payable and accrued liabilities. The sale of approximately 300,000 acres of timberlands in the Northeast, described below, and the 38% devaluation of the Brazilian currency were the principal reasons for the decline from December 31, 1998 in timber and timberlands-net. The net effect of foreign currency fluctuations relative to the U.S. dollar was a $289 million increase in the cumulative translation adjustment since December 31, 1998 in the accumulated other comprehensive income component of shareholders' equity. For a discussion of changes in long-term debt (including current installments), short-term borrowings and cash and cash equivalents, see below. Cash Flows Statement - General 1999 In the first nine months of 1999, the company's net cash provided by operating activities and asset sales, principally the sales of the Canton System, the Deferiet, New York mill and approximately 300,000 acres of timberlands in the Northeast, exceeded the requirements of its investing activities (principally capital expenditures). The excess was used to pay dividends, to pay a portion of the company's long-term debt (including current installments) and to increase cash and cash equivalents. Cash and cash equivalents increased by $295 million in the first nine months to a total of $596 million, $185 million of which was held by the company's Brazilian and Canadian subsidiaries. In the first nine months, net debt payments were $153 million. Long-term debt (including current installments) and short-term borrowings in the aggregate decreased by $271 million, mainly due to the net debt payments and the impact of the devaluation of the Real on the debt of the company's Brazilian subsidiary. See "New Profit-Improvement and Shareholder-Value Plan" below for a description of the company's plans to further reduce debt, to increase the dividend rate and repurchase shares of common stock. 1998 In the first nine months of 1998, the company's net cash provided by operating activities and asset sales, primarily the June 1998 sale of the company's newsprint operations, exceeded the requirements of its investing activities (principally capital expenditures and the acquisitions of Industria de Papel Arapoti S.A. ("Inpacel") in Brazil and Sunpine Forest Products Ltd. ("Sunpine") in Canada). The excess, together with cash and cash equivalents, was mainly used to pay a portion of the company's long-term debt (including current installments). Cash and cash equivalents decreased by $15 million to a total of $260 million. 15 Cash Flows Statement - Operating Activities For the first nine months, net cash provided by operating activities of $417 million was approximately even with a year ago. The increase in net income, excluding foreign currency transaction gains, a decrease in inventories and an increase in current and long-term liabilities were offset by lower non-cash expenses for depreciation and cost of timber harvested, and increases in receivables and prepaid expenses. Cash Flows Statement - Investing Activities For the first nine months, net cash provided by investing activities of $39 million decreased from $80 million a year ago. The decline was primarily due to lower proceeds from the sales of divested operations this year. This was partially offset by lower capital expenditures this year, as well as the acquisitions of Inpacel and Sunpine last year. Cash Flows Statement - Financing Activities For the first nine months, net cash used in financing activities of $161 million decreased significantly from $510 million a year ago, mainly due to lower net payments of long-term debt. At September 30, 1999 and December 31, 1998, the company had no U.S. commercial paper, current maturities of long-term debt and other short-term obligations classified as long-term debt. At September 30, 1999 and December 31, 1998, no notes were outstanding under the company's U.S. bank lines of credit. Domestically, at September 30, 1999, the company had unused bank lines of credit of $1.1 billion. At September 30, 1999, Weldwood had unused bank lines of credit of (U.S.) $109 million. During the third quarter, the company borrowed $31 million through the issuance of long-term, tax-exempt bonds. The annual principal payment requirements under the terms of all long-term agreements for the period from October 1 through December 31, 1999 are $201 million and for the years 2000 through 2003 are $154 million, $205 million, $29 million and $27 million, respectively. The company presently anticipates that capital spending will be approximately $375 million in 1999, all of which is expected to be financed through internally generated funds and the use of cash and cash equivalents. New Profit-Improvement and Shareholder-Value Plan On October 14, 1999, the company announced that the goal of its Profit-Improvement Program announced in October 1997 -- to increase annual pre-tax earnings by $400 million -- will be achieved by year-end 1999, one year ahead of schedule. 16 The company also announced that the next steps it will take to improve profitability and maximize shareholder value include a program targeted to further increase the annual pre-tax earnings of the company at a rate of $285 million by the end of 2001, a total-debt-to-total-capitalization ratio target of 35% or less to be achieved by the end of 2001, an increase in the dividend paid on its common stock, and a share repurchase program. Value-Creation Program The company has identified a number of value-creation initiatives that are targeted to further improve annual pre-tax earnings at a rate of $285 million by the end of 2001. These initiatives, called "Target 285," include $100 million in productivity improvements, $140 million from new top-line improvements, and $45 million from projects currently under way but not yet completed or fully optimized. Total-Debt-to-Total-Capitalization Ratio Targeted at 35% The company has targeted a total-debt-to-total-capitalization ratio of 35% or less by the end of 2001. A significant portion of this balance sheet improvement will be achieved in 1999. During 1999, the company will reduce its long-term debt by approximately $400 million. This includes the repurchase before maturity of approximately $200 million of debt, $100 million of which was repurchased in the third quarter with the remainder being repurchased in the fourth quarter. An additional $200 million of debt that matures in December will be retired and will not be refinanced. Planned Increases in Dividend Rate The company has adopted a new dividend policy. For several years, the company's dividend rate has been $.05 per quarter. Under the new policy, the rate will increase by $.05 per quarter until it reaches a quarterly level of $.25 per share. The new policy will be effective with the regular quarterly dividend to be declared in November 1999 and paid in January 2000. Share Repurchase Program The company has adopted a policy to repurchase shares from time to time in an amount sufficient to offset the earnings dilution resulting from the company's various stock-based compensation plans, retroactive to October 1996. The company estimates that it may need to repurchase as many as 3.6 million shares by 2001 under this new policy. Divestiture Program In December 1998, the company agreed to sell approximately 300,000 acres of timberlands in the Northeast to The Conservation Fund for $76.2 million. As part of this transaction, on June 30, 1999, the company completed the sale of approximately 143,000 acres in New York for approximately $46 million. In July and August 1999, the company completed the sale of the remaining approximately 151,000 acres 17 of timberlands in New Hampshire and Vermont for a total of approximately $30.2 million. On May 14, 1999, the company sold its mill in Canton, North Carolina, its extruding and converting facility in Waynesville, North Carolina, and its liquid packaging business to Blue Ridge Paper Products, Inc. for $200 million, consisting of $170 million in cash and a $30 million note. The contract also provides the opportunity for the company to receive an additional contingency payment in the future. On June 11, 1999, the company sold its groundwood specialty mill in Deferiet, New York to The Deferiet Paper Company for $34.5 million, a substantial portion of which was paid in cash. The company is continuing to actively pursue the sale of its mill in Hamilton, Ohio. In addition, the company has offered for sale approximately 54,000 acres of timberlands in North Carolina and Tennessee. The Environment Environmental Legal Proceedings There is incorporated by reference herein the information under Item 1. Legal Proceedings in Part II of this report. Year 2000 Computer Issue The company, as well as its customers and suppliers and the financial institutions and governmental entities with which it deals (collectively, "Third Parties"), utilize information systems that will be affected by the date change to the year 2000. Many of these systems, if not modified or replaced, will be unable to properly recognize and process date-sensitive information before, on and after January 1, 2000. State of Readiness In early 1996, the company organized a Year 2000 project team to assess the impact of the Year 2000 issue on its operations, develop plans to address the issue and implement compliance. The project team developed a company-wide, Year 2000 remediation plan which consisted of a five-step process with respect to the company's own systems: (1) planning; (2) inventory (identification of systems that require reprogramming or replacement); (3) analysis (assessment of risks, identification of where failures may occur and development of solutions); (4) programming (remediation and/or replacement of non-compliant systems); and (5) testing. The project team also developed plans to seek information regarding and to assess the Year 2000 compliance status and remediation efforts of major Third Parties. The company's information systems consist of business-information systems and process-control systems. The business-information systems support financial and administrative processes such as order entry, payroll, accounts payable and accounts receivable. The process-control systems are used primarily in manufacturing operations; they include information-technology systems as well as embedded technology, such as chips embedded in various machine components. The company has 18 completed all stages of the remediation plan, including testing, for its critical business-information systems and its critical process-control systems. The Year 2000 issue also will impact the information systems of Third Parties. The company, through meetings in some cases and written requests in others, has ascertained and assessed the progress of major Third Parties in identifying and addressing problems with respect to the Year 2000 issue. These Third Parties have indicated that they expect to successfully address the issue in timely fashion. However, certain of these parties have not yet provided details, deemed satisfactory by the company, regarding their state of readiness. The company will continue to monitor information regarding Year 2000 compliance by major Third Parties. No significant information technology projects have been deferred as a result of the company's Year 2000 program. Estimated Cost of Remediation The company currently estimates total expenditures of approximately $20 million, substantially all of which had been expended as of September 30, 1999, to make the required Year 2000 modifications and replacements to its own systems. Approximately two-thirds of the estimated total cost was associated with the remediation and replacement of process-control systems. All modification and maintenance costs, including costs to replace embedded technology that does not significantly extend the life or improve the performance of the related asset, were expensed as incurred. Costs to purchase new hardware and software and to replace embedded technology that does significantly extend the life or improve the performance of the related asset were capitalized and will be depreciated over the assets' useful lives. All of these costs were funded through internal cash flow. The estimated total cost does not include any expenditures that may be incurred in connection with the implementation of contingency plans, discussed below. Most Reasonably Likely Worst-Case Scenarios The company believes that it has modified or replaced all of its own affected critical systems so as to minimize detrimental effects on its operations. The company has received written assurances regarding Year 2000 compliance from almost all Third Parties with respect to their own systems, but is not in a position to reliably predict whether Third Parties will experience remediation problems. If, despite remediation and testing of critical systems by the company and assurances from Third Parties, the information systems of the company or major Third Parties do not function properly as the result of the Year 2000 issue, there could be a material adverse impact on the business and results of operations of the company. For example, while the company self-generates approximately 55% of its electrical power requirements, it purchases the balance from outside sources. If the electrical power grid is disrupted as the result of Year 2000 systems failures, the company expects to curtail production until the grid is restored. 19 The company has determined the most reasonably likely worst-case scenarios that would result from any systems failures by the company or Third Parties as the result of the Year 2000 issue. Such scenarios include a temporary curtailment or cessation of manufacturing operations at one or more of the company's facilities, with a resulting loss of production; safety and environmental exposures; a temporary inability on the part of the company to process orders and deliver finished products to customers on a timely basis; and, in the event of Year 2000 disruptions in the operations of the company's customers, increased inventory and receivable levels. If these various events were to occur, they would result in lower sales, earnings and cash flows which, depending on the extent of the disruption, could be material. Contingency Plans The company has completed the development of contingency plans to address and mitigate the potential risks associated with the most reasonably likely worst-case scenarios. These plans focus principally on employee safety, environmental integrity, the protection of the company's physical assets and responses to potential business interruptions. Such plans include, among other things, verifying the functionality of chemical-release monitors; preparing for mill closures to avoid the risk of improper discharges; protecting manufacturing equipment from freezing in the event of a loss of power concurrent with severe cold weather; seeking alternative sources of raw materials, parts, other supplies and services; and monitoring vendor-managed inventory systems and placing orders by telephone in the event of the failure of such systems. The company currently does not plan to stockpile raw materials or other supplies. The company will maintain a Year 2000 problem management and information center leading up to, on and for a period of time after January 1, 2000. * * * The company's Year 2000 program is an ongoing process. Contingency plans will be updated as appropriate. Projections of the possible effects of any non-compliance are subject to change. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The company's financial market risk arises from fluctuations in interest rates and foreign currencies. Most of the company's debt obligations are at fixed interest rates. Consequently, a 10% change in market interest rates would not have a material effect on the company's pre-tax earnings or cash flows. The company has no material sensitivity to changes in foreign currency exchange rates on its derivative financial instrument position. The company does not hold financial instruments for trading purposes. 20 Forward-Looking Statements Certain statements in this report 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 are discussed in the company's Annual Report on Form 10-K. Without limiting the generality of the foregoing, the disclosure in this report concerning the Year 2000 computer issue includes estimates of remediation costs, a summary of most reasonably likely worst-case scenarios, projections of the possible effects of any non-compliance and other statements that are based on the company's current estimate of future events. All of these statements constitute forward-looking statements and are subject to risks and uncertainties including, but not limited to, the success of the company's remediation of the Year 2000 issues that affect its own systems and the ability of the company's suppliers and customers and other third parties with which it deals to identify and remediate on a timely basis Year 2000 issues that affect their systems. 21 PART II. OTHER INFORMATION CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES Item 1. Legal Proceedings. On October 14, 1999, the Florida Department of Environmental Protection proposed that the company enter into a Consent Order relating to alleged violations of the wastewater discharge permit at the company's Pensacola, Florida pulp and paper mill. The Consent Order would require the company to take additional steps to control the discharge of suspended solids, nutrients and oxygen-consuming material in the mill's wastewater and to pay a civil penalty of $137,730. The company is currently considering whether to enter into the proposed Consent Order. 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. 22 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: November 12, 1999 /s/ John M. Nimons ----------------------------- ---------------------------------------- (Signature) John M. Nimons Vice President and Controller Date: November 12, 1999 /s/ Kenwood C. Nichols ----------------------------- ---------------------------------------- (Signature) Kenwood C. Nichols Vice Chairman and Executive Officer 23 EXHIBIT INDEX Each exhibit is listed according to the number assigned to it in the Exhibit Table of Item 601 of Regulation S-K. Exhibit numbers 10.1 through 10.8, which are preceded by a plus sign (+), are management contracts or compensatory arrangements. + 10.1 - Amendment dated as of May 28, 1999 to Agreement dated as of September 18, 1997 between the Company and Richard E. Olson. + 10.2 - Amendment dated as of May 28, 1999 to Agreement dated as of October 18, 1990 between the Company and Kenwood C. Nichols. + 10.3 - Amendment dated as of May 28, 1999 to Agreement dated as of October 18, 1990 between the Company and Richard L. Porterfield. + 10.4 - Amendment dated as of May 28, 1999 to Agreement dated as of October 18, 1990 between the Company and L. Scott Barnard. + 10.5 - Agreement dated as of May 28, 1999 between the Company and Thomas L. Griffin providing certain severance arrangements. + 10.6 - Amendment dated as of May 28, 1999 to Agreement dated as of May 28, 1999 between the Company and Mr. Griffin. + 10.7 - Agreement Relating to Legal Expenses dated May 28, 1999 between the Company and Mr. Griffin providing reimbursement of certain legal expenses following a change in control of the Company. + 10.8 - Second Amendment dated as of October 1, 1999 to Trust Agreement dated as of February 19, 1987 between the Company and Fleet National Bank. 11 - Calculation of Basic Earnings Per Common Share and Diluted Earnings per Common Share (unaudited). 27 - Financial Data Schedule (unaudited) 24 EX-10.1 2 AMENDMENT AGREEMENT COMPANY & RICHARD E. OLSON EXHIBIT 10.1 AMENDMENT AGREEMENT ------------------- This Amendment Agreement made as of May 28, 1999 amends the Agreement between Champion International Corporation, a New York corporation (the "Company"), and Richard E. Olson (the "Executive") effective September 18, 1997 (the "Existing Agreement", and as amended hereby, the "Agreement"). The Company considers it essential and in the best interests of its shareholders to foster the continued employment of its senior management personnel. The Executive is an important member of the Company's senior management. The Company wishes to provide additional incentive for the Executive to continue to serve the Company by increasing the benefits provided to the Executive in certain events following a Change in Control to a level which is more in line with comparable benefits provided by other large publicly- owned U.S. forest products companies. The Company also wishes to amend the Existing Agreement to eliminate any provision that could be an impediment to the Company engaging in a transaction to be accounted for on a pooling-of-interests basis, if the Company's Board of Directors determines that such a transaction would be in the best interests of the Company's shareholders. NOW, THEREFORE, the parties agree that the Existing Agreement is hereby amended as follows: 1. Paragraph 5 of the Existing Agreement is amended by deleting the words "(whether or not any such period shall have been accelerated)," in the first sentence thereof and the words"(regardless of whether or not any such period shall have been accelerated)" in the third sentence thereof and, in each case, replacing such words with the following: "or, in the event of the termination of the Executive within three years following a Change in Control, during a period of two years in the event of a termination solely of the kind referred to in clauses (A), (B), (E) and (H) of subparagraph 8(b)(ii) or during a period of three years in the event of any other kind of termination (as defined in subparagraph 8(b))," Paragraph 5 is further amended to delete the words "under subparagraph 6(a) (during any period of long-term disability) or 8(a)(i) below" in the proviso at the end of the first sentence thereof. 1 2. Subparagraph 8(a)(i) of the Existing Agreement is amended by deletion of the proviso at the end of the last sentence thereof. 3. Clauses (x) and (y) of subparagraph 8(a)(ii) of the Existing Agreement are amended to read in their entirety as follows: "(x) a lump sum equal to twenty-four times the highest total monthly compensation (as defined in subparagraph 8(a)(i)) in the event of a termination solely of the kind referred to in clauses (A), (B), (E) and (H) of subparagraph 8(b)(ii), or a lump sum equal to thirty-six times such highest total monthly compensation in the event of any other kind of termination (as defined in subparagraph 8 (b)), shall be paid as soon as practicable after such termination; (y) the benefits required to be provided thereafter to the Executive, his spouse and family, set forth in attached Exhibit C, shall be valued at the cost of acquiring insurance ---------- policies which would provide such benefit coverage for a two-year period in the event of a termination solely of the kind referred to in clauses (A), (B), (E) and (H) of subparagraph 8(b)(ii) or for a three-year period in the event of any other kind of termination (as defined in subparagraph 8(b)), and such cost shall be paid in a lump sum as soon as practicable after termination;". 4. The definition of "Code" in subparagraph 8(a)(iii) of the Existing Agreement is amended to refer to the "Internal Revenue Code of 1986, as amended from time to time". Subparagraph 8(a)(iii) is further amended by adding the following sentence at the end of such subparagraph: "Notwithstanding the foregoing provisions of this subparagraph 8(a)(iii), if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of such provisions (or the provisions of any other Company agreement or plan or action of the Company's Board of Directors (the "Board") or committee thereof with respect to other equity awards, stock- based or stock-measured compensation or compensation which may be payable in stock) would preclude such transaction from so qualifying, the Board, acting prior to the Change in Control, unilaterally may require that options, other equity awards (including contingently credited shares, performance share units and restricted stock units), stock-based or stock- measured compensation or compensation which may be payable in stock held by the Executive (or to which the Executive may be entitled) be treated in connection with such transaction and thereafter in a way that does not preclude such transaction 2 from so qualifying and that the Board deems to be fair to the Executive (including, but not limited to, eliminating any acceleration of vesting or payment and requiring the conversion of such options and awards to options and awards of the corporation acquiring control of the Company or its assets in such transaction, or the settlement of such options and awards in shares of such corporation)." 5. Subparagraph 8(a)(iv) of the Existing Agreement is amended by inserting the following at the end of the first sentence thereof: "; provided, however, that, for purposes of this subparagraph 8(a)(iv), the ten-consecutive-year period referred to in the definition of 'Average Annual Compensation' set forth in subparagraph 9(b)(i) shall end on the second anniversary of the termination (and the total compensation for each of the last two years of such period shall equal one-half ( 1/2) of the lump sum payment set forth in clause (x) of subparagraph 8(a)(ii)) in the event of a termination solely of the kind referred to in clauses (A), (B), (E) and (H) of subparagraph 8(b)(ii) or such ten-consecutive-year period shall end on the third anniversary of the termination (and the total compensation for each of the last three years of such period shall equal one-third (1/3) of the lump sum payment set forth in clause (x) of subparagraph 8(a)(ii)) in the event of any other kind of termination (as defined in subparagraph 8(b))". 6. Subparagraph 8(b)(ii) of the Existing Agreement is amended by deleting the word "or" immediately before clause (E) thereof and by adding the following clauses (F), (G) and (H) immediately before the proviso at the end of such subparagraph: ", (F) reduction in the monthly base salary of the Executive below the highest monthly base salary paid from and after September 18, 1997, (G) within three years following a Change in Control, the relocation of the Executive's principal place of employment other than to (x) the Borough of Manhattan in the City of New York, New York, or (y) any other location that is not more than thirty-five (35) miles by automobile from the location of the Executive's principal place of employment immediately prior to the Change in Control, or (H) within three years following a Change in Control, the Executive is no longer eligible for benefits or incentive compensation at the same level as his peers in the Company". 7. Subparagraph 8(d) of the Existing Agreement is amended to read in its entirety as follows: 3 "(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 the event set forth in any one of the following paragraphs shall have occurred: (i) any Person (as defined in this subparagraph 8(d)) is or becomes the Beneficial Owner (within the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on the date hereof (the 'Exchange Act')), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates (as defined in this subparagraph 8(d)) representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on May 28, 1999, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on May 28, 1999 or whose appointment, election or nomination for election was previously so approved or recommended; or (iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or entity, other than a merger or consolidation if the number of members on the board of directors (or similar governing body) of the corporation or entity which is the surviving corporation or entity in such merger or consolidation (whether the Company or another corporation or entity) (or if the surviving corporation or entity is controlled by another corporation or entity, the board of directors (or similar governing body) of such controlling corporation or entity) immediately after such merger or consolidation (the "Surviving Board") who were directors of the Company immediately prior to such merger or consolidation constitutes a majority of the members on the Surviving Board immediately after such merger or consolidation; or (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substan- 4 tially all of the Company's assets to an entity unless the number of members of the board of directors (or similar governing body) of such entity (or if such entity is controlled by any other entity immediately after such sale or disposition, the board of directors or similar governing body of such other entity) immediately after such sale or disposition (the "Controlling Board") who were directors of the Company immediately prior to such sale or disposition constitutes a majority the members of the Controlling Board immediately after such sale or disposition. For purposes of this subparagraph 8(d): 'Person' shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. 'Affiliate' and 'controlled' shall have the meanings set forth in Rule 12b- 2 under the Exchange Act." 8. The first sentence of subparagraph 9(d)(i) of the Existing Agreement is amended to read in its entirety as follows: "Upon the retirement of the Executive pursuant to subparagraph 9(b) above, the Executive shall automatically be paid his excess retirement allowance (and any related excess survivor retirement allowance ) in a lump sum as soon as practicable after such retirement." 9. Subparagraph 9(d)(ii) is amended to read in its entirety as follows: "(ii) [Intentionally Omitted]". 10. The words "an election by the Executive" in the first sentence of subparagraph 9(d)(iii) of the Existing Agreement are amended to read in their entirety as follows: "a lump sum payment to the Executive". The third and fourth sentences of subparagraph 9(d)(iii) are deleted. Subparagraph 9(d)(iii) is further amended by the deletion therein of all references to subparagraph 9(d)(ii), sometimes referred to as clause (ii) of subparagraph 9(d). 11. Subparagraph 12(b) of the Existing Agreement is amended by adding the following language at the beginning thereof: "Subject to paragraph 21,". 5 12. The last sentence of paragraph 15 of the Existing Agreement is replaced by the following four sentences: "Upon such a consolidation, merger or transfer of assets and assumption, (i) the term 'Company' shall refer to the 'Continuing Corporation', that is, the corporation which survived such consolidation or merger (whether the prior-to-the-transaction 'Company' or another corporation) or to which such assets are transferred, and (ii) the term 'Board' shall refer to the board of directors (or similar governing body) of the Continuing Corporation (except that, in determining whether or not such merger, consolidation or transfer constitutes a Change in Control under subparagraph 8(d), the terms 'Company' and 'Board' shall refer to the prior-to-the-transaction 'Company' or 'Board'). Upon such a consolidation, merger or transfer of assets and assumption, this Agreement shall continue in full force and effect. Whether or not a consolidation, merger or transfer of assets (or any other transaction) constitutes a Change in Control under subparagraph 8(d), any subsequent transaction involving a Continuing Corporation (or involving any corporation or entity directly or indirectly controlling the Continuing Corporation) which meets the definition of Change in Control under subparagraph 8(d) shall constitute a Change in Control for all purposes of this Agreement. The provisions of this paragraph 15 shall apply to any subsequent consolidation or merger of any such corporation into or with, or any subsequent transfer by any such corporation of all or substantially all of its assets to, another corporation." 13. Clause (x) of subparagraph 16(d)(iii) of the Existing Agreement is amended by adding the words "and Excise Tax Gross-Up amount" immediately after the words "legal expenses payments" therein. Subparagraph 16(d)(iii) is further amended by deleting all of the words from "(z)" through the end of such subparagraph and replacing such words with the following: "(z) the retirement payments (as described in subparagraph 8(a)(iv)) set forth in Exhibit G." 14. Subparagraph 16(d)(v) of the Existing Agreement is amended in its entirety to read as follows: "(v) [Intentionally Omitted]". 15. Exhibit C to the Existing Agreement is amended by changing the reference to "subparagraph 8(a)(i)" therein to refer to "subparagraph 8(a)(ii)". 16. Exhibit D to the Existing Agreement is amended by deleting the words "; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive's normal retirement date under the Company's pension plan". 6 17. Exhibit G to the Existing Agreement is amended by (i) changing each reference therein to "2 years" and "2 year" to "3 years" and "3 year", respectively, (ii) deleting the footnote, which states that "This Exhibit G does not reflect the possible reduction provided for in subparagraph 16(d)(v) hereof", (iii) deleting the words "; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive's normal retirement date under the Company's pension plan", (iv) deleting the reference to "For Active Employees" and the provision "For Retired Employees", and (v) adding the following language at the end thereof: " . Excise Tax Gross-Up An amount equal to the Company's estimate of the amount payable pursuant to paragraph 21. Notwithstanding the foregoing, no amounts shall be deposited in Trust with respect to options or contingently credited shares (or other equity awards) if the Potential Change in Control relates to a transaction approved by the Board and intended to qualify for pooling-of-interests accounting treatment and the Board, prior to the Change in Control, decides to exercise its power under the last sentence of subparagraph 8(a)(iii) with respect to such options and contingently credited shares (and other equity awards); provided, however, that if the Board, prior to the Change in Control, determines that such transaction will not be consummated and that an alternative Change in Control transaction not intended to qualify for pooling-of-interests accounting treatment will be consummated, such amounts shall promptly be deposited in Trust." 18. Paragraph 21 of the Existing Agreement is amended to read in its entirety as follows: "21. Excise Tax Gross-Up. Whether or not a termination occurs, ------------------- if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person (as defined in subparagraph 8(d)) whose actions result in a Change in Control or any person affiliated with either the Company or the person whose actions result in a Change in Control) (such payments or benefits, excluding the payment or payments to be made pursuant to this paragraph 21, being hereinafter referred to as the 'Initial Payments') will be subject to the excise tax (the 'Excise Tax') imposed under Section 4999 of the Code, the Company shall pay 7 to the Executive an additional amount (the 'Gross-Up Payment') such that the net amount retained by the Executive, after subtraction of any Excise Tax on the Initial Payments and any federal, state and local (and foreign, if any) income and employment taxes and Excise Tax upon the payment or payments provided by this paragraph 21, shall be equal to the Initial Payments. Notwithstanding any of the provisions of this paragraph 21, to the extent, if any, that, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of the provisions of this paragraph 21 would preclude such transaction from so qualifying, the term 'Initial Payments' shall not include any 'parachute payments' (within the meaning of section 280G(b)(2) of the Code) resulting from the treatment accorded (whether in connection with the transaction or thereafter) to stock options, other equity awards, stock-based or stock-measured compensation or compensation which may be payable in stock pursuant to subparagraph 8(a)(iii) or pursuant to any Company plan or other agreement or Board (or Board committee) action relating to such options, awards or compensation. "The determination of whether any of the Initial Payments will be subject to the Excise Tax and the amount of such Excise Tax will be made by tax counsel ('Tax Counsel') reasonably acceptable to the Executive and selected (and compensated) by the Company. For purposes of such determination, (x) all of the Initial Payments shall be treated as 'parachute payments' (within the meaning of section 280G(b)(2) of the Code) unless, in the written opinion of Tax Counsel, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (y) all 'excess parachute payments' (within the meaning of section 280G(b)(l) of the Code) shall be treated as subject to the Excise Tax unless, in the written opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (z) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local (and foreign, if any) income taxes at the 8 highest marginal rate of taxation in the state and locality of the Executive's residence on the date of termination of the Executive's employment (or if there has been no such termination, the date on which the Gross-Up Payment is calculated for purposes of this paragraph 21), net of the reduction in federal income taxes (if any) which is available from deduction of such state and local (and foreign, if any) taxes. "As soon as practicable following any such determination of the Gross-Up Payment by the Tax Counsel, the Company shall provide the specifics of the determination in writing to the Executive and to the trustee of the trust referred to in subparagraph 16(d)(ii). The Gross-Up Payment will be made in cash by the Company to the Executive not later than the fifth business day following the date on which the Executive's termination occurs (or, if no termination shall have occurred, not later than the thirtieth (30th) business day immediately following the event that resulted in the imposition of the Excise Tax)(in either case, the 'Payment Date'). If the amount of the Gross-Up Payment cannot be accurately determined on or before the Payment Date, the Company shall pay to the Executive on such day an estimate, as determined in good faith in accordance with this paragraph 21, of the minimum amount to which the Executive is clearly entitled and shall pay the remainder of the Gross-Up Payment (together with interest on the unpaid remainder (or on all of the Gross-Up Payment to the extent the Company fails to make such payment when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30/th/) day after a Payment Date. In the event that the amount of the estimated Gross-Up Payment made to the Executive exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5/th/) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). "In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within the five (5) business days immediately following the date that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the amount of such reduction (including the Excise Tax component and the federal, state and local (and foreign, if any) income and employment tax components of the Gross-Up Payment), to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local (and foreign, if any) income and employment taxes, plus 9 interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall pay to the Executive an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within the five (5) business days immediately following the date that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Initial Payments." 19. The parties agree that (i) if the Company wishes to engage in a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, and (ii) if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of such transaction, (x) the implementation of any provision of this Amendment Agreement or of any provision of the Existing Agreement or (y) the taking of any action by the Executive (including, without limitation, the sale of securities of the Company or the exercise of stock options or stock appreciation rights granted by the Company) (the "Disqualifying Action") would disqualify such transaction from pooling-of-interests accounting treatment, then: with respect to (x), such provision shall be null and void from the date hereof automatically and without any action on the part of the Company or the Executive, and all the provisions of the Existing Agreement not so nullified, as amended by all the provisions of this Amendment Agreement not so nullified, shall remain in full force and effect; and with respect to (y), the Executive agrees not to take any Disqualifying Action. 20. The Executive hereby consents to amendment by the Company (if the Company so elects and subject to the approval of the trustee then serving, if required) of the Trust Agreement dated as of February 19, 1987, by and between the Company and Fleet National Bank, as amended as of August 18, 1988 (the "Benefits Trust") which was established to assure the payment of benefits under the individual agreements listed on Exhibit I thereto (which include the Existing Agreement) as follows: amend Section 2.02(a) of the Benefits Trust to include, as a third alternative form of investment for the assets of the Benefits Trust, a letter of credit payable to the commercial bank serving as trustee of the Benefits Trust from time to time, with the proceeds thereof to be used in accordance with the provisions of the Benefits Trust. The parties hereto agree (and the Executive 10 consents) that the Company shall promptly amend (x) Section 3.01 of the Benefits Trust (subject to the approval of the trustee serving thereunder, if required) to define a "Change in Control" as such term is defined in subparagraph 8(d) of the Agreement, and (y) Section 4.02(a) of the Benefits Trust (subject to the approval of the trustee thereunder, if required) to delete clauses (iii) and (iv) in the next-to-last sentence thereof. The Executive agrees that, upon the Company's request, the Executive will sign any additional documents indicating the Executive's consent to the amendments described in this Section 20 which are needed to facilitate such amendments. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the date first above written. CHAMPION INTERNATIONAL CORPORATION By: /s/ Lawrence A. Bossidy -------------------------------------------- Chairman of the Compensation and Stock Option Committee Attest: /s/ Lawrence A. Fox - ---------------------- Secretary /s/ Richard E. Olson --------------------------------------------- Executive 11 EX-10.2 3 AMENDMENT AGREEMENT COMPANY & KENWOOD C. NICHOLS EXHIBIT 10.2 AMENDMENT AGREEMENT ------------------- This Amendment Agreement made as of May 28, 1999 amends the Agreement between Champion International Corporation, a New York corporation (the "Company"), and Kenwood C. Nichols (the "Executive") effective October 18, 1990 (as heretofore amended, the "Existing Agreement", and as amended hereby, the "Agreement"). The Company considers it essential and in the best interests of its shareholders to foster the continued employment of its senior management personnel. The Executive is an important member of the Company's senior management. The Company wishes to provide additional incentive for the Executive to continue to serve the Company by increasing the benefits provided to the Executive in certain events following a Change in Control to a level which is more in line with comparable benefits provided by other large publicly- owned U.S. forest products companies. The Company also wishes to amend the Existing Agreement to eliminate any provision that could be an impediment to the Company engaging in a transaction to be accounted for on a pooling-of-interests basis, if the Company's Board of Directors determines that such a transaction would be in the best interests of the Company's shareholders. NOW, THEREFORE, the parties agree that the Existing Agreement is hereby amended as follows: 1. The first sentence of Paragraph 4 of the Existing Agreement is amended by deleting the words "effective September 1, 1989, (a) a salary at a monthly rate which is the higher of (A) $31,250," and replacing those words with the following: "effective January 1, 1999, (a) a salary at a monthly rate which is the higher of (A) $58,334,". 2. Paragraph 5 of the Existing Agreement is amended by deleting the words "(whether or not any such period shall have been accelerated)," in the first sentence thereof and the words"(regardless of whether or not any such period shall have been accelerated)" in the third sentence thereof and, in each case, replacing such words with the following: "or, in the event of the termination of the Executive within three years following a Change in Control, during a period of two years in the event of a termination solely of the kind referred to in clauses (A), (B), (E) and (H) of subparagraph 8(b)(ii) or during a period of three years in the event of any other kind of termination (as defined in subparagraph 8(b))," Paragraph 5 is further amended to delete the words "under subparagraph 6(a) (during 1 any period of long-term disability) or 8(a)(i) below" in the proviso at the end of the first sentence thereof. 3. Subparagraph 8(a)(i) of the Existing Agreement is amended by deletion of the proviso at the end of the last sentence thereof. 4. Clauses (x) and (y) of subparagraph 8(a)(ii) of the Existing Agreement are amended to read in their entirety as follows: "(x) a lump sum equal to twenty-four times the highest total monthly compensation (as defined in subparagraph 8(a)(i)) in the event of a termination solely of the kind referred to in clauses (A), (B), (E) and (H) of subparagraph 8(b)(ii), or a lump sum equal to thirty-six times such highest total monthly compensation in the event of any other kind of termination (as defined in subparagraph 8 (b)), shall be paid as soon as practicable after such termination; (y) the benefits required to be provided thereafter to the Executive, his spouse and family, set forth in attached Exhibit C, shall be valued at the cost of acquiring insurance ---------- policies which would provide such benefit coverage for a two-year period in the event of a termination solely of the kind referred to in clauses (A), (B), (E) and (H) of subparagraph 8(b)(ii) or for a three-year period in the event of any other kind of termination (as defined in subparagraph 8(b)), and such cost shall be paid in a lump sum as soon as practicable after termination;". 5. The definition of "Code" in subparagraph 8(a)(iii) of the Existing Agreement is amended to refer to the "Internal Revenue Code of 1986, as amended from time to time". Subparagraph 8(a)(iii) is further amended by adding the following sentence at the end of such subparagraph: "Notwithstanding the foregoing provisions of this subparagraph 8(a)(iii), if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of such provisions (or the provisions of any other Company agreement or plan or action of the Company's Board of Directors (the "Board") or committee thereof with respect to other equity awards, stock- based or stock-measured compensation or compensation which may be payable in stock) would preclude such transaction from so qualifying, the Board, acting prior to the Change in Control, unilaterally may require that options, other equity awards (including contingently credited shares, performance share units and restricted stock units), stock-based or stock- measured compensation or compensation which may be payable in stock held by the Executive (or to which the Executive may be entitled) be treated in connection with such transaction and thereafter in a way that does not preclude such transaction from so qualifying and that the Board deems to be fair to the Executive 2 (including, but not limited to, eliminating any acceleration of vesting or payment and requiring the conversion of such options and awards to options and awards of the corporation acquiring control of the Company or its assets in such transaction, or the settlement of such options and awards in shares of such corporation)." 6. Subparagraph 8(a)(iv) of the Existing Agreement is amended by inserting the following at the end of the first sentence thereof: "; provided, however, that, for purposes of this subparagraph 8(a)(iv), the ten-consecutive-year period referred to in the definition of 'Average Annual Compensation' set forth in subparagraph 9(b)(i) shall end on the second anniversary of the termination (and the total compensation for each of the last two years of such period shall equal one-half (1/2) of the lump sum payment set forth in clause (x) of subparagraph 8(a)(ii)) in the event of a termination solely of the kind referred to in clauses (A), (B), (E) and (H) of subparagraph 8(b)(ii) or such ten-consecutive-year period shall end on the third anniversary of the termination (and the total compensation for each of the last three years of such period shall equal one-third (1/3) of the lump sum payment set forth in clause (x) of subparagraph 8(a)(ii)) in the event of any other kind of termination (as defined in subparagraph 8(b))". 7. Subparagraph 8(b)(ii) of the Existing Agreement is amended by deleting the word "or" immediately before clause (E) thereof and by adding the following clauses (F), (G) and (H) immediately before the proviso at the end of such subparagraph: ", (F) reduction in the monthly base salary of the Executive below the highest monthly base salary paid from and after October 18, 1990, (G) within three years following a Change in Control, the relocation of the Executive's principal place of employment other than to (x) the Borough of Manhattan in the City of New York, New York, or (y) any other location that is not more than thirty-five (35) miles by automobile from the location of the Executive's principal place of employment immediately prior to the Change in Control, or (H) within three years following a Change in Control, the Executive is no longer eligible for benefits or incentive compensation at the same level as his peers in the Company". 8. Subparagraph 8(d) of the Existing Agreement is amended to read in its entirety as follows: "(d) Definition of Change in Control ------------------------------- For the purpose of this Agreement, a "Change in Control" of the Company shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: 3 (i) any Person (as defined in this subparagraph 8(d)) is or becomes the Beneficial Owner (within the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on the date hereof (the `Exchange Act')), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates (as defined in this subparagraph 8(d)) representing 30% or more of the combined voting power of the Company"s then outstanding securities; or (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on May 28, 1999, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on May 28, 1999 or whose appointment, election or nomination for election was previously so approved or recommended; or (iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or entity, other than a merger or consolidation if the number of members on the board of directors (or similar governing body) of the corporation or entity which is the surviving corporation or entity in such merger or consolidation (whether the Company or another corporation or entity) (or if the surviving corporation or entity is controlled by another corporation or entity, the board of directors (or similar governing body) of such controlling corporation or entity) immediately after such merger or consolidation (the "Surviving Board") who were directors of the Company immediately prior to such merger or consolidation constitutes a majority of the members on the Surviving Board immediately after such merger or consolidation; or (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets to an entity unless the number of members of the board of directors (or similar governing body) of such entity (or if such entity is controlled by any other entity immediately after such sale or disposition, the board of directors or similar governing body of such other entity) immediately after such sale or disposition (the "Controlling Board") who were directors of the Company immediately prior to such sale or disposition constitutes a majority the members of the Controlling Board immediately after such sale or disposition. For purposes of this subparagraph 8(d): 4 `Person' shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. `Affiliate' and `controlled' shall have the meanings set forth in Rule 12b- 2 under the Exchange Act." 9. The first sentence of subparagraph 9(d)(i) of the Existing Agreement is amended to read in its entirety as follows: "Upon the retirement of the Executive pursuant to subparagraph 9(b) above, the Executive shall automatically be paid his excess retirement allowance (and any related excess survivor retirement allowance ) in a lump sum as soon as practicable after such retirement." 10. Subparagraph 9(d)(ii) is amended to read in its entirety as follows: "(ii) [Intentionally Omitted]". 11. The words "an election by the Executive" in the first sentence of subparagraph 9(d)(iii) of the Existing Agreement are amended to read in their entirety as follows: "a lump sum payment to the Executive". The third and fourth sentences of subparagraph 9(d)(iii) are deleted. Subparagraph 9(d)(iii) is further amended by the deletion therein of all references to subparagraph 9(d)(ii), sometimes referred to as clause (ii) of subparagraph 9(d). 12. Subparagraph 12(b) of the Existing Agreement is amended by adding the following language at the beginning thereof: "Subject to paragraph 21,". 13. The last sentence of paragraph 15 of the Existing Agreement is replaced by the following four sentences: `Upon such a consolidation, merger or transfer of assets and assumption, (i) the term `Company' shall refer to the `Continuing Corporation', that is, the corporation which survived such consolidation or merger (whether the prior-to-the-transaction `Company' or another corporation) or to which such assets are transferred, and (ii) the term `Board' shall refer to the board of directors (or similar governing body) of the Continuing Corporation (except that, in determining whether or not such merger, consolidation or transfer constitutes a Change in Control under subparagraph 8(d), the terms `Company' and `Board' shall refer to the prior-to-the-transaction `Company' or `Board'). Upon 5 such a consolidation, merger or transfer of assets and assumption, this Agreement shall continue in full force and effect. Whether or not a consolidation, merger or transfer of assets (or any other transaction) constitutes a Change in Control under subparagraph 8(d), any subsequent transaction involving a Continuing Corporation (or involving any corporation or entity directly or indirectly controlling the Continuing Corporation) which meets the definition of Change in Control under subparagraph 8(d) shall constitute a Change in Control for all purposes of this Agreement. The provisions of this paragraph 15 shall apply to any subsequent consolidation or merger of any such corporation into or with, or any subsequent transfer by any such corporation of all or substantially all of its assets to, another corporation." 14. Clause (x) of subparagraph 16(d)(iii) of the Existing Agreement is amended by adding the words "and Excise Tax Gross-Up amount" immediately after the words "legal expenses payments" therein. Subparagraph 16(d)(iii) is further amended by deleting all of the words from "(z)" through the end of such subparagraph and replacing such words with the following: "(z) the retirement payments (as described in subparagraph 8(a)(iv)) set forth in Exhibit G." 15. Subparagraph 16(d)(v) of the Existing Agreement is amended in its entirety to read as follows: "(v) [Intentionally Omitted]". 16. Exhibit C to the Existing Agreement is amended by changing the reference to "subparagraph 8(a)(i)" therein to refer to "subparagraph 8(a)(ii)". 17. Exhibit D to the Existing Agreement is amended by deleting the words "; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive's normal retirement date under the Company's pension plan". 18. Exhibit G to the Existing Agreement is amended by (i) changing each reference therein to "2 years" and "2 year" to "3 years" and "3 year", respectively, (ii) deleting the footnote, which states that "This Exhibit G does not reflect the possible reduction provided for in subparagraph 16(d)(v) hereof", (iii) deleting the words"; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive's normal retirement date under the Company's pension plan", (iv) deleting the reference to "For Active Employees" and the provision "For Retired Employees", and (v) adding the following language at the end thereof: " . Excise Tax Gross-Up An amount equal to the Company's estimate of the amount payable pursuant to paragraph 21. Notwithstanding the foregoing, no amounts shall be deposited in Trust with respect to options or contingently credited shares (or other equity awards) if 6 the Potential Change in Control relates to a transaction approved by the Board and intended to qualify for pooling-of-interests accounting treatment and the Board, prior to the Change in Control, decides to exercise its power under the last sentence of subparagraph 8(a)(iii) with respect to such options and contingently credited shares (and other equity awards); provided, however, that if the Board, prior to the Change in Control, determines that such transaction will not be consummated and that an alternative Change in Control transaction not intended to qualify for pooling-of-interests accounting treatment will be consummated, such amounts shall promptly be deposited in Trust." 19. Paragraph 21 of the Existing Agreement is amended to read in its entirety as follows: "21. Excise Tax Gross-Up. Whether or not a termination occurs, ------------------- if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person (as defined in subparagraph 8(d)) whose actions result in a Change in Control or any person affiliated with either the Company or the person whose actions result in a Change in Control) (such payments or benefits, excluding the payment or payments to be made pursuant to this paragraph 21, being hereinafter referred to as the "Initial Payments") will be subject to the excise tax (the `Excise Tax') imposed under Section 4999 of the Code, the Company shall pay to the Executive an additional amount (the `Gross-Up Payment') such that the net amount retained by the Executive, after subtraction of any Excise Tax on the Initial Payments and any federal, state and local (and foreign, if any) income and employment taxes and Excise Tax upon the payment or payments provided by this paragraph 21, shall be equal to the Initial Payments. Notwithstanding any of the provisions of this paragraph 21, to the extent, if any, that, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of the provisions of this paragraph 21 would preclude such transaction from so qualifying, the term `Initial Payments' shall not include any `parachute payments' (within the meaning of section 280G(b)(2) of the Code) resulting from the treatment accorded (whether in connection with the transaction or thereafter) to stock options, other equity awards, stock-based or stock- measured compensation or compensation which may be payable in stock pursuant to subparagraph 8(a)(iii) or pursuant to any Company plan or other agreement or Board (or Board committee) action relating to such options, awards or compensation. "The determination of whether any of the Initial Payments will 7 be subject to the Excise Tax and the amount of such Excise Tax will be made by tax counsel (`Tax Counsel') reasonably acceptable to the Executive and selected (and compensated) by the Company. For purposes of such determination, (x) all of the Initial Payments shall be treated as `parachute payments' (within the meaning of section 280G(b)(2) of the Code) unless, in the written opinion of Tax Counsel, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (y) all `excess parachute payments' (within the meaning of section 280G(b)(l) of the Code) shall be treated as subject to the Excise Tax unless, in the written opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (z) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local (and foreign, if any) income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the date of termination of the Executive's employment (or if there has been no such termination, the date on which the Gross-Up Payment is calculated for purposes of this paragraph 21), net of the reduction in federal income taxes (if any) which is available from deduction of such state and local (and foreign, if any) taxes. "As soon as practicable following any such determination of the Gross-Up Payment by the Tax Counsel, the Company shall provide the specifics of the determination in writing to the Executive and to the trustee of the trust referred to in subparagraph 16(d)(ii). The Gross-Up Payment will be made in cash by the Company to the Executive not later than the fifth business day following the date on which the Executive's termination occurs (or, if no termination shall have occurred, not later than the thirtieth (30th) business day immediately following the event that resulted in the imposition of the Excise Tax)(in either case, the 'Payment Date'). If the amount of the Gross-Up Payment cannot be accurately determined on or before the Payment Date, the Company shall pay to the Executive on such day an estimate, as determined in good faith in accordance with this paragraph 21, of the minimum amount to which the Executive is clearly entitled and shall pay the remainder of the Gross-Up Payment (together with interest on the unpaid remainder (or on all of the Gross-Up Payment to the extent the Company fails to make such payment when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30/th/) day after a Payment Date. In the event that the 8 amount of the estimated Gross-Up Payment made to the Executive exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5/th/) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). "In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within the five (5) business days immediately following the date that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the amount of such reduction (including the Excise Tax component and the federal, state and local (and foreign, if any) income and employment tax components of the Gross-Up Payment), to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local (and foreign, if any) income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall pay to the Executive an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within the five (5) business days immediately following the date that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Initial Payments." 20. The parties agree that (i) if the Company wishes to engage in a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, and (ii) if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of such transaction, (x) the implementation of any provision of this Amendment Agreement or of any provision of the Existing Agreement or (y) the taking of any action by the Executive (including, without limitation, the sale of securities of the Company or the exercise of stock options or stock appreciation rights granted by the Company) (the "Disqualifying Action") would disqualify such transaction from pooling-of-interests accounting treatment, then: with respect to (x), such provision shall be null and void from the date hereof automatically and without any action on the part of the Company or the Executive, and all the provisions of the Existing Agreement not so nullified, as amended by all the provisions of this Amendment Agreement not so nullified, shall remain in full force and effect; and with respect to (y), the Executive agrees not to 9 take any Disqualifying Action. 21. The Executive hereby consents to amendment by the Company (if the Company so elects and subject to the approval of the trustee then serving, if required) of the Trust Agreement dated as of February 19, 1987, by and between the Company and Fleet National Bank, as amended as of August 18, 1988 (the "Benefits Trust") which was established to assure the payment of benefits under the individual agreements listed on Exhibit I thereto (which include the Existing Agreement) as follows: amend Section 2.02(a) of the Benefits Trust to include, as a third alternative form of investment for the assets of the Benefits Trust, a letter of credit payable to the commercial bank serving as trustee of the Benefits Trust from time to time, with the proceeds thereof to be used in accordance with the provisions of the Benefits Trust. The parties hereto agree (and the Executive consents) that the Company shall promptly amend (x) Section 3.01 of the Benefits Trust (subject to the approval of the trustee serving thereunder, if required) to define a "Change in Control" as such term is defined in subparagraph 8(d) of the Agreement, and (y) Section 4.02(a) of the Benefits Trust (subject to the approval of the trustee thereunder, if required) to delete clauses (iii) and (iv) in the next-to-last sentence thereof. The Executive agrees that, upon the Company"s request, the Executive will sign any additional documents indicating the Executive"s consent to the amendments described in this Section 21 which are needed to facilitate such amendments. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the date first above written. CHAMPION INTERNATIONAL CORPORATION By: /s/ Richard E. Olson ---------------------------------- Chairman of the Board Attest: /s/ Lawrence A. Fox - ------------------------- Secretary /s/ Kenwood C. Nichols ------------------------------------- Executive 10 EX-10.3 4 AMENDMENT AGREEMENT RICHARD L. POTTERFIELD EXHIBIT 10.3 AMENDMENT AGREEMENT ------------------- This Amendment Agreement made as of May 28, 1999 amends the Agreement between Champion International Corporation, a New York corporation (the "Company"), and Richard L. Porterfield (the "Executive") effective October 18, 1990 (as heretofore amended, the "Existing Agreement", and as amended hereby, the "Agreement"). The Company considers it essential and in the best interests of its shareholders to foster the continued employment of its senior management personnel. The Executive is an important member of the Company's senior management. The Company wishes to provide additional incentive for the Executive to continue to serve the Company by increasing the benefits provided to the Executive in certain events following a Change in Control to a level which is more in line with comparable benefits provided by other large publicly- owned U.S. forest products companies. The Company also wishes to amend the Existing Agreement to eliminate any provision that could be an impediment to the Company engaging in a transaction to be accounted for on a pooling-of-interests basis, if the Company's Board of Directors determines that such a transaction would be in the best interests of the Company's shareholders. NOW, THEREFORE, the parties agree that the Existing Agreement is hereby amended as follows: 1. Subparagraph 1(a)(i) of the Existing Agreement is amended by deletion of the proviso at the end of the last sentence thereof. 2. Clauses (x) and (y) of subparagraph 1(a)(ii) of the Existing Agreement are amended to read in their entirety as follows: "(x) a lump sum equal to twenty-four times the highest total monthly compensation (as defined in subparagraph 1(a)(i)) in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii), or a lump sum equal to thirty-six times such highest total monthly compensation in the event of any other kind of termination (as defined in subparagraph 1 (b)), shall be paid as soon as practicable after such termination; (y) the benefits required to be provided thereafter to the Executive, his spouse and family, set forth in attached Exhibit A, ---------- shall be valued at the cost of acquiring insurance policies which would provide such benefit coverage for a two-year period in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or for a three-year period in the event of any other kind of termination (as defined in subparagraph 1(b)), and 1 such cost shall be paid in a lump sum as soon as practicable after termination;". 3. The definition of "Code" in subparagraph 1(a)(iii) of the Existing Agreement is amended to refer to the "Internal Revenue Code of 1986, as amended from time to time". Subparagraph 1(a)(iii) is further amended by adding the following sentence at the end of such subparagraph: "Notwithstanding the foregoing provisions of this subparagraph 1(a)(iii), if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of such provisions (or the provisions of any other Company agreement or plan or action of the Company's Board of Directors (the "Board") or committee thereof with respect to other equity awards, stock- based or stock-measured compensation or compensation which may be payable in stock) would preclude such transaction from so qualifying, the Board, acting prior to the Change in Control, unilaterally may require that options, other equity awards (including contingently credited shares, performance share units and restricted stock units), stock-based or stock- measured compensation or compensation which may be payable in stock held by the Executive (or to which the Executive may be entitled) be treated in connection with such transaction and thereafter in a way that does not preclude such transaction from so qualifying and that the Board deems to be fair to the Executive (including, but not limited to, eliminating any acceleration of vesting or payment and requiring the conversion of such options and awards to options and awards of the corporation acquiring control of the Company or its assets in such transaction, or the settlement of such options and awards in shares of such corporation)." 4. Subparagraph 1(a)(iv) of the Existing Agreement is amended by deleting the words "for the termination period set forth in such subparagraph 1(a)(i)" at the end of the first sentence thereof and the words "during the termination period set forth in subparagraph 1(a)(i) above" at the end of the second sentence thereof and, in each case, replacing such words with the following: "for a period of two years in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or for a period of three years in the event of any other kind of termination (as defined in subparagraph 1(b))." 5. Subparagraph 1(a)(v) of the Existing Agreement is amended by deleting the words "(whether or not any such period shall be accelerated)," in 2 the first sentence thereof and replacing such words with the following: "or, in the event of the termination of the Executive within three years following a Change in Control, during a period of two years in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or during a period of three years in the event of any other kind of termination (as defined in subparagraph 1(b))," Subparagraph 1(a)(v) is further amended to delete the words "under subparagraph 1(a)(i) above" in the proviso at the end of the first sentence thereof. 6. Subparagraph 1(b)(ii) of the Existing Agreement is amended by deleting the word "or" immediately before clause (E) thereof and by adding the following clauses (F) and (G) immediately before the proviso at the end of such subparagraph: ", (F) within three years following a Change in Control, the relocation of the Executive's principal place of employment other than to (x) the Borough of Manhattan in the City of New York, New York, or (y) any other location that is not more than thirty-five (35) miles by automobile from the location of the Executive's principal place of employment immediately prior to the Change in Control, or (G) within three years following a Change in Control, the Executive is no longer eligible for benefits or incentive compensation at the same level as his peers in the Company". 7. Subparagraph 1(d) of the Existing Agreement is amended to read in its entirety as follows: "(d) Definition of Change in Control ------------------------------- For the purpose of this Agreement, a "Change in Control" of the Company shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (i) any Person (as defined in this subparagraph 1(d)) is or becomes the Beneficial Owner (within the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on the date hereof (the 'Exchange Act')), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates (as defined in this subparagraph 1(d)) representing 30% or more of the combined voting power of the Company's then outstanding securities; or 3 (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on May 28, 1999, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on May 28, 1999 or whose appointment, election or nomination for election was previously so approved or recommended; or (iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or entity, other than a merger or consolidation if the number of members on the board of directors (or similar governing body) of the corporation or entity which is the surviving corporation or entity in such merger or consolidation (whether the Company or another corporation or entity) (or if the surviving corporation or entity is controlled by another corporation or entity, the board of directors (or similar governing body) of such controlling corporation or entity) immediately after such merger or consolidation (the "Surviving Board") who were directors of the Company immediately prior to such merger or consolidation constitutes a majority of the members on the Surviving Board immediately after such merger or consolidation; or (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets to an entity unless the number of members of the board of directors (or similar governing body) of such entity (or if such entity is controlled by any other entity immediately after such sale or disposition, the board of directors or similar governing body of such other entity) immediately after such sale or disposition (the "Controlling Board") who were directors of the Company immediately prior to such sale or disposition constitutes a majority the members of the Controlling Board immediately after such sale or disposition. For purposes of this subparagraph 1(d): 'Person' shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substan- 4 tially the same proportions as their ownership of stock of the Company. 'Affiliate' and 'controlled' shall have the meanings set forth in Rule 12b- 2 under the Exchange Act." 8. Subparagraph 5(b) of the Existing Agreement is amended by adding the following language at the beginning thereof: "Subject to paragraph 14,". 9. The last sentence of paragraph 8 of the Existing Agreement is replaced by the following four sentences: "Upon such a consolidation, merger or transfer of assets and assumption, (i) the term 'Company' shall refer to the 'Continuing Corporation', that is, the corporation which survived such consolidation or merger (whether the prior-to-the-transaction 'Company' or another corporation) or to which such assets are transferred, and (ii) the term 'Board' shall refer to the board of directors (or similar governing body) of the Continuing Corporation (except that, in determining whether or not such merger, consolidation or transfer constitutes a Change in Control under subparagraph 1(d), the terms 'Company' and 'Board' shall refer to the prior-to-the-transaction 'Company' or 'Board'). Upon such a consolidation, merger or transfer of assets and assumption, this Agreement shall continue in full force and effect. Whether or not a consolidation, merger or transfer of assets (or any other transaction) constitutes a Change in Control under subparagraph 1(d), any subsequent transaction involving a Continuing Corporation (or involving any corporation or entity directly or indirectly controlling the Continuing Corporation) which meets the definition of Change in Control under subparagraph 1(d) shall constitute a Change in Control for all purposes of this Agreement. The provisions of this paragraph 8 shall apply to any subsequent consolidation or merger of any such corporation into or with, or any subsequent transfer by any such corporation of all or substantially all of its assets to, another corporation." 10. Clause (x) of subparagraph 9(d)(iii) of the Existing Agreement is amended by adding the words "and Excise Tax Gross-Up amount" immediately after the words "legal expenses payments" therein. 11. Subparagraph 9(d)(v) of the Existing Agreement is amended in its entirety to read as follows: "(v) [Intentionally Omitted]." 12. Exhibit A to the Existing Agreement is amended by changing the reference to "subparagraph 1(a)(i)" therein to refer to "subparagraph 1(a)(ii)". 13. Exhibit B to the Existing Agreement is amended by deleting the words "; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive's normal retirement date under the Com- 5 pany's pension plan". 14. Exhibit D to the Existing Agreement is amended by (i) changing each reference therein to "2 years" and "2 year" to "3 years" and "3 year", respectively, (ii) deleting the footnote, which states that "This Exhibit D does not reflect the possible reduction provided for in subparagraph 9(d)(v) hereof", (iii) deleting the words "; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive's normal retirement date under the Company's pension plan", and (iv) adding the following language at the end thereof: " . Excise Tax Gross-Up An amount equal to the Company's estimate of the amount payable pursuant to paragraph 14. Notwithstanding the foregoing, no amounts shall be deposited in Trust with respect to options or contingently credited shares (or other equity awards) if the Potential Change in Control relates to a transaction approved by the Board and intended to qualify for pooling-of-interests accounting treatment and the Board, prior to the Change in Control, decides to exercise its power under the last sentence of subparagraph 1(a)(iii) with respect to such options and contingently credited shares (and other equity awards); provided, however, that if the Board, prior to the Change in Control, determines that such transaction will not be consummated and that an alternative Change in Control transaction not intended to qualify for pooling-of-interests accounting treatment will be consummated, such amounts shall promptly be deposited in Trust." 15. Paragraph 14 of the Existing Agreement is amended to read in its entirety as follows: "14. Excise Tax Gross-Up. Whether or not a termination occurs, ------------------- if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person (as defined in subparagraph 1(d)) whose actions result in a Change in Control or any person affiliated with either the Company or the person whose actions result in a Change in Control) (such payments or benefits, excluding the payment or payments to be made pursuant to this paragraph 14, being hereinafter referred to as the 'Initial Payments') will be subject to the excise tax (the 'Excise Tax') imposed under Section 4999 of the Code, the Company shall pay to the Executive an additional amount (the 'Gross-Up Payment') such that the net amount retained by the Executive, after subtraction of any Excise Tax on the Initial Payments and any federal, state and local (and foreign, if any) income and employment taxes and Excise Tax upon the payment or payments 6 provided by this paragraph 14, shall be equal to the Initial Payments. Notwithstanding any of the provisions of this paragraph 14, to the extent, if any, that, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of the provisions of this paragraph 14 would preclude such transaction from so qualifying, the term 'Initial Payments' shall not include any 'parachute payments' (within the meaning of section 280G(b)(2) of the Code) resulting from the treatment accorded (whether in connection with the transaction or thereafter) to stock options, other equity awards, stock-based or stock-measured compensation or compensation which may be payable in stock pursuant to subparagraph 1(a)(iii) or pursuant to any Company plan or other agreement or Board (or Board committee) action relating to such options, awards or compensation. "The determination of whether any of the Initial Payments will be subject to the Excise Tax and the amount of such Excise Tax will be made by tax counsel ('Tax Counsel') reasonably acceptable to the Executive and selected (and compensated) by the Company. For purposes of such determination, (x) all of the Initial Payments shall be treated as 'parachute payments' (within the meaning of section 280G(b)(2) of the Code) unless, in the written opinion of Tax Counsel, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (y) all 'excess parachute payments' (within the meaning of section 280G(b)(l) of the Code) shall be treated as subject to the Excise Tax unless, in the written opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (z) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local (and foreign, if any) income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the date of termination of the Executive's employment (or if there has been no such termination, the date on which the Gross-Up Payment is calculated for purposes of this paragraph 14), net of the reduction in federal income taxes (if any) which is available from deduction of such state and local (and foreign, if any) taxes. 7 "As soon as practicable following any such determination of the Gross-Up Payment by the Tax Counsel, the Company shall provide the specifics of the determination in writing to the Executive and to the trustee of the trust referred to in subparagraph 9(d)(ii). The Gross-Up Payment will be made in cash by the Company to the Executive not later than the fifth business day following the date on which the Executive's termination occurs (or, if no termination shall have occurred, not later than the thirtieth (30th) business day immediately following the event that resulted in the imposition of the Excise Tax)(in either case, the 'Payment Date'). If the amount of the Gross-Up Payment cannot be accurately determined on or before the Payment Date, the Company shall pay to the Executive on such day an estimate, as determined in good faith in accordance with this paragraph 14, of the minimum amount to which the Executive is clearly entitled and shall pay the remainder of the Gross-Up Payment (together with interest on the unpaid remainder (or on all of the Gross-Up Payment to the extent the Company fails to make such payment when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30/th/) day after a Payment Date. In the event that the amount of the estimated Gross-Up Payment made to the Executive exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5/th/) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). "In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within the five (5) business days immediately following the date that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the amount of such reduction (including the Excise Tax component and the federal, state and local (and foreign, if any) income and employment tax components of the Gross-Up Payment), to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local (and foreign, if any) income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall pay to the Executive an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within the five (5) business days immediately following the date that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate 8 with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Initial Payments." 16. The parties agree that (i) if the Company wishes to engage in a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, and (ii) if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of such transaction, (x) the implementation of any provision of this Amendment Agreement or of any provision of the Existing Agreement or (y) the taking of any action by the Executive (including, without limitation, the sale of securities of the Company or the exercise of stock options or stock appreciation rights granted by the Company) (the "Disqualifying Action") would disqualify such transaction from pooling-of-interests accounting treatment, then: with respect to (x), such provision shall be null and void from the date hereof automatically and without any action on the part of the Company or the Executive, and all the provisions of the Existing Agreement not so nullified, as amended by all the provisions of this Amendment Agreement not so nullified, shall remain in full force and effect; and with respect to (y), the Executive agrees not to take any Disqualifying Action. 17. The Executive hereby consents to amendment by the Company (if the Company so elects and subject to the approval of the trustee then serving, if required) of the Trust Agreement dated as of February 19, 1987, by and between the Company and Fleet National Bank, as amended as of August 18, 1988 (the "Benefits Trust") which was established to assure the payment of benefits under the individual agreements listed on Exhibit I thereto (which include the Existing Agreement) as follows: amend Section 2.02(a) of the Benefits Trust to include, as a third alternative form of investment for the assets of the Benefits Trust, a letter of credit payable to the commercial bank serving as trustee of the Benefits Trust from time to time, with the proceeds thereof to be used in accordance with the provisions of the Benefits Trust. The parties hereto agree (and the Executive consents) that the Company shall promptly amend (x) Section 3.01 of the Benefits Trust (subject to the approval of the trustee serving thereunder, if required) to define a "Change in Control" as such term is defined in subparagraph 1(d) of the Agreement, and (y) Section 4.02(a) of the Benefits Trust (subject to the approval of the trustee thereunder, if required) to delete clauses (iii) and (iv) in the next-to-last sentence thereof. The Executive agrees that, upon the Company's request, the Executive will sign any additional documents indicating the Executive's consent to the amendments described in this Section 17 which are needed to facilitate such amendments. 9 IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the date first above written. CHAMPION INTERNATIONAL CORPORATION By: /s/ Richard E. Olson -------------------------------------------- Chairman of the Board of Directors Attest: /s/ Lawrence A. Fox - --------------------------- Secretary /s/ Richard L. Porterfield -------------------------------------------- Executive 10 EX-10.4 5 AMENDMENT AGREEMENT COMPANY & SCOTT BARNARD EXHIBIT 10.4 AMENDMENT AGREEMENT ------------------- This Amendment Agreement made as of May 28, 1999 amends the Agreement between Champion International Corporation, a New York corporation (the "Company"), and L. Scott Barnard (the "Executive") effective October 18, 1990 (as heretofore amended, the "Existing Agreement", and as amended hereby, the "Agreement"). The Company considers it essential and in the best interests of its shareholders to foster the continued employment of its senior management personnel. The Executive is an important member of the Company's senior management. The Company wishes to provide additional incentive for the Executive to continue to serve the Company by increasing the benefits provided to the Executive in certain events following a Change in Control to a level which is more in line with comparable benefits provided by other large publicly- owned U.S. forest products companies. The Company also wishes to amend the Existing Agreement to eliminate any provision that could be an impediment to the Company engaging in a transaction to be accounted for on a pooling-of-interests basis, if the Company"s Board of Directors determines that such a transaction would be in the best interests of the Company"s shareholders. NOW, THEREFORE, the parties agree that the Existing Agreement is hereby amended as follows: 1. Subparagraph 1(a)(i) of the Existing Agreement is amended by deletion of the proviso at the end of the last sentence thereof. 2. Clauses (x) and (y) of subparagraph 1(a)(ii) of the Existing Agreement are amended to read in their entirety as follows: "(x) a lump sum equal to twenty-four times the highest total monthly compensation (as defined in subparagraph 1(a)(i)) in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii), or a lump sum equal to thirty-six times such highest total monthly compensation in the event of any other kind of termination (as defined in subparagraph 1 (b)), shall be paid as soon as practicable after such termination; (y) the benefits required to be provided thereafter to the Executive, his spouse and family, set forth in attached Exhibit A, ---------- shall be valued at the cost of acquiring insurance policies which would provide such benefit coverage for a two-year period in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or for a three-year period in the event of any other kind of termination (as defined in subparagraph 1(b)), and 1 such cost shall be paid in a lump sum as soon as practicable after termination;". 3. The definition of "Code" in subparagraph 1(a)(iii) of the Existing Agreement is amended to refer to the "Internal Revenue Code of 1986, as amended from time to time". Subparagraph 1(a)(iii) is further amended by adding the following sentence at the end of such subparagraph: "Notwithstanding the foregoing provisions of this subparagraph 1(a)(iii), if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of such provisions (or the provisions of any other Company agreement or plan or action of the Company's Board of Directors (the "Board") or committee thereof with respect to other equity awards, stock- based or stock-measured compensation or compensation which may be payable in stock) would preclude such transaction from so qualifying, the Board, acting prior to the Change in Control, unilaterally may require that options, other equity awards (including contingently credited shares, performance share units and restricted stock units), stock-based or stock- measured compensation or compensation which may be payable in stock held by the Executive (or to which the Executive may be entitled) be treated in connection with such transaction and thereafter in a way that does not preclude such transaction from so qualifying and that the Board deems to be fair to the Executive (including, but not limited to, eliminating any acceleration of vesting or payment and requiring the conversion of such options and awards to options and awards of the corporation acquiring control of the Company or its assets in such transaction, or the settlement of such options and awards in shares of such corporation)." 4. Subparagraph 1(a)(iv) of the Existing Agreement is amended by deleting the words "for the termination period set forth in such subparagraph 1(a)(i)" at the end of the first sentence thereof and the words "during the termination period set forth in subparagraph 1(a)(i) above" at the end of the second sentence thereof and, in each case, replacing such words with the following: "for a period of two years in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or for a period of three years in the event of any other kind of termination (as defined in subparagraph 1(b))." 5. Subparagraph 1(a)(v) of the Existing Agreement is amended by deleting the words "(whether or not any such period shall be accelerated)," in 2 the first sentence thereof and replacing such words with the following: "or, in the event of the termination of the Executive within three years following a Change in Control, during a period of two years in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or during a period of three years in the event of any other kind of termination (as defined in subparagraph 1(b))," Subparagraph 1(a)(v) is further amended to delete the words "under subparagraph 1(a)(i) above" in the proviso at the end of the first sentence thereof. 6. Subparagraph 1(b)(ii) of the Existing Agreement is amended by deleting the word "or" immediately before clause (E) thereof and by adding the following clauses (F) and (G) immediately before the proviso at the end of such subparagraph: ", (F) within three years following a Change in Control, the relocation of the Executive's principal place of employment other than to (x) the Borough of Manhattan in the City of New York, New York, or (y) any other location that is not more than thirty-five (35) miles by automobile from the location of the Executive's principal place of employment immediately prior to the Change in Control, or (G) within three years following a Change in Control, the Executive is no longer eligible for benefits or incentive compensation at the same level as his peers in the Company". 7. Subparagraph 1(d) of the Existing Agreement is amended to read in its entirety as follows: "(d) Definition of Change in Control ------------------------------- For the purpose of this Agreement, a "Change in Control" of the Company shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (i) any Person (as defined in this subparagraph 1(d)) is or becomes the Beneficial Owner (within the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on the date hereof (the 'Exchange Act')), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates (as defined in this subparagraph 1(d)) representing 30% or more of the combined voting power of the Company"s then outstanding securities; or 3 (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on May 28, 1999, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company"s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on May 28, 1999 or whose appointment, election or nomination for election was previously so approved or recommended; or (iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or entity, other than a merger or consolidation if the number of members on the board of directors (or similar governing body) of the corporation or entity which is the surviving corporation or entity in such merger or consolidation (whether the Company or another corporation or entity) (or if the surviving corporation or entity is controlled by another corporation or entity, the board of directors (or similar governing body) of such controlling corporation or entity) immediately after such merger or consolidation (the "Surviving Board") who were directors of the Company immediately prior to such merger or consolidation constitutes a majority of the members on the Surviving Board immediately after such merger or consolidation; or (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company"s assets to an entity unless the number of members of the board of directors (or similar governing body) of such entity (or if such entity is controlled by any other entity immediately after such sale or disposition, the board of directors or similar governing body of such other entity) immediately after such sale or disposition (the "Controlling Board") who were directors of the Company immediately prior to such sale or disposition constitutes a majority the members of the Controlling Board immediately after such sale or disposition. For purposes of this subparagraph 1(d): 'Person' shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substan- 4 tially the same proportions as their ownership of stock of the Company. 'Affiliate' and 'controlled' shall have the meanings set forth in Rule 12b- 2 under the Exchange Act." 8. Subparagraph 5(b) of the Existing Agreement is amended by adding the following language at the beginning thereof: "Subject to paragraph 14,". 9. The last sentence of paragraph 8 of the Existing Agreement is replaced by the following four sentences: "Upon such a consolidation, merger or transfer of assets and assumption, (i) the term 'Company' shall refer to the 'Continuing Corporation', that is, the corporation which survived such consolidation or merger (whether the prior-to-the-transaction 'Company' or another corporation) or to which such assets are transferred, and (ii) the term 'Board' shall refer to the board of directors (or similar governing body) of the Continuing Corporation (except that, in determining whether or not such merger, consolidation or transfer constitutes a Change in Control under subparagraph 1(d), the terms 'Company' and 'Board' shall refer to the prior-to-the-transaction 'Company' or 'Board'). Upon such a consolidation, merger or transfer of assets and assumption, this Agreement shall continue in full force and effect. Whether or not a consolidation, merger or transfer of assets (or any other transaction) constitutes a Change in Control under subparagraph 1(d), any subsequent transaction involving a Continuing Corporation (or involving any corporation or entity directly or indirectly controlling the Continuing Corporation) which meets the definition of Change in Control under subparagraph 1(d) shall constitute a Change in Control for all purposes of this Agreement. The provisions of this paragraph 8 shall apply to any subsequent consolidation or merger of any such corporation into or with, or any subsequent transfer by any such corporation of all or substantially all of its assets to, another corporation." 10. Clause (x) of subparagraph 9(d)(iii) of the Existing Agreement is amended by adding the words "and Excise Tax Gross-Up amount" immediately after the words "legal expenses payments" therein. 11. Subparagraph 9(d)(v) of the Existing Agreement is amended in its entirety to read as follows: "(v) [Intentionally Omitted]." 12. Exhibit A to the Existing Agreement is amended by changing the reference to "subparagraph 1(a)(i)" therein to refer to "subparagraph 1(a)(ii)". 13. Exhibit B to the Existing Agreement is amended by deleting the words "; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive"s normal retirement date under the Com- 5 pany's pension plan". 14. Exhibit D to the Existing Agreement is amended by (i) changing each reference therein to "2 years" and "2 year" to "3 years" and "3 year", respectively, (ii) deleting the footnote, which states that "This Exhibit D does not reflect the possible reduction provided for in subparagraph 9(d)(v) hereof", (iii) deleting the words "; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive"s normal retirement date under the Company's pension plan", and (iv) adding the following language at the end thereof: " . Excise Tax Gross-Up An amount equal to the Company's estimate of the amount payable pursuant to paragraph 14. Notwithstanding the foregoing, no amounts shall be deposited in Trust with respect to options or contingently credited shares (or other equity awards) if the Potential Change in Control relates to a transaction approved by the Board and intended to qualify for pooling-of-interests accounting treatment and the Board, prior to the Change in Control, decides to exercise its power under the last sentence of subparagraph 1(a)(iii) with respect to such options and contingently credited shares (and other equity awards); provided, however, that if the Board, prior to the Change in Control, determines that such transaction will not be consummated and that an alternative Change in Control transaction not intended to qualify for pooling-of-interests accounting treatment will be consummated, such amounts shall promptly be deposited in Trust." 15. Paragraph 14 of the Existing Agreement is amended to read in its entirety as follows: "14. Excise Tax Gross-Up. Whether or not a termination occurs, ------------------- if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive"s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person (as defined in subparagraph 1(d)) whose actions result in a Change in Control or any person affiliated with either the Company or the person whose actions result in a Change in Control) (such payments or benefits, excluding the payment or payments to be made pursuant to this paragraph 14, being hereinafter referred to as the 'Initial Payments') will be subject to the excise tax (the 'Excise Tax') imposed under Section 4999 of the Code, the Company shall pay to the Executive an additional amount (the 'Gross-Up Payment') such that the net amount retained by the Executive, after subtraction of any Excise Tax on the Initial Payments and any federal, state and local (and foreign, if any) income and employment taxes and Excise Tax upon the payment or payments 6 provided by this paragraph 14, shall be equal to the Initial Payments. Notwithstanding any of the provisions of this paragraph 14, to the extent, if any, that, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of the provisions of this paragraph 14 would preclude such transaction from so qualifying, the term 'Initial Payments' shall not include any 'parachute payments' (within the meaning of section 280G(b)(2) of the Code) resulting from the treatment accorded (whether in connection with the transaction or thereafter) to stock options, other equity awards, stock-based or stock-measured compensation or compensation which may be payable in stock pursuant to subparagraph 1(a)(iii) or pursuant to any Company plan or other agreement or Board (or Board committee) action relating to such options, awards or compensation. "The determination of whether any of the Initial Payments will be subject to the Excise Tax and the amount of such Excise Tax will be made by tax counsel ('Tax Counsel') reasonably acceptable to the Executive and selected (and compensated) by the Company. For purposes of such determination, (x) all of the Initial Payments shall be treated as 'parachute payments' (within the meaning of section 280G(b)(2) of the Code) unless, in the written opinion of Tax Counsel, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (y) all 'excess parachute payments' (within the meaning of section 280G(b)(l) of the Code) shall be treated as subject to the Excise Tax unless, in the written opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (z) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local (and foreign, if any) income taxes at the highest marginal rate of taxation in the state and locality of the Executive"s residence on the date of termination of the Executive"s employment (or if there has been no such termination, the date on which the Gross-Up Payment is calculated for purposes of this paragraph 14), net of the reduction in federal income taxes (if any) which is available from deduction of such state and local (and foreign, if any) taxes. 7 "As soon as practicable following any such determination of the Gross-Up Payment by the Tax Counsel, the Company shall provide the specifics of the determination in writing to the Executive and to the trustee of the trust referred to in subparagraph 9(d)(ii). The Gross-Up Payment will be made in cash by the Company to the Executive not later than the fifth business day following the date on which the Executive's termination occurs (or, if no termination shall have occurred, not later than the thirtieth (30th) business day immediately following the event that resulted in the imposition of the Excise Tax)(in either case, the 'Payment Date'). If the amount of the Gross-Up Payment cannot be accurately determined on or before the Payment Date, the Company shall pay to the Executive on such day an estimate, as determined in good faith in accordance with this paragraph 14, of the minimum amount to which the Executive is clearly entitled and shall pay the remainder of the Gross-Up Payment (together with interest on the unpaid remainder (or on all of the Gross-Up Payment to the extent the Company fails to make such payment when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30/th/) day after a Payment Date. In the event that the amount of the estimated Gross-Up Payment made to the Executive exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5/th/) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). "In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within the five (5) business days immediately following the date that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the amount of such reduction (including the Excise Tax component and the federal, state and local (and foreign, if any) income and employment tax components of the Gross-Up Payment), to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local (and foreign, if any) income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall pay to the Executive an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within the five (5) business days immediately following the date that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate 8 with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Initial Payments." 16. The parties agree that (i) if the Company wishes to engage in a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, and (ii) if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of such transaction, (x) the implementation of any provision of this Amendment Agreement or of any provision of the Existing Agreement or (y) the taking of any action by the Executive (including, without limitation, the sale of securities of the Company or the exercise of stock options or stock appreciation rights granted by the Company) (the "Disqualifying Action") would disqualify such transaction from pooling-of-interests accounting treatment, then: with respect to (x), such provision shall be null and void from the date hereof automatically and without any action on the part of the Company or the Executive, and all the provisions of the Existing Agreement not so nullified, as amended by all the provisions of this Amendment Agreement not so nullified, shall remain in full force and effect; and with respect to (y), the Executive agrees not to take any Disqualifying Action. 17. The Executive hereby consents to amendment by the Company (if the Company so elects and subject to the approval of the trustee then serving, if required) of the Trust Agreement dated as of February 19, 1987, by and between the Company and Fleet National Bank, as amended as of August 18, 1988 (the "Benefits Trust") which was established to assure the payment of benefits under the individual agreements listed on Exhibit I thereto (which include the Existing Agreement) as follows: amend Section 2.02(a) of the Benefits Trust to include, as a third alternative form of investment for the assets of the Benefits Trust, a letter of credit payable to the commercial bank serving as trustee of the Benefits Trust from time to time, with the proceeds thereof to be used in accordance with the provisions of the Benefits Trust. The parties hereto agree (and the Executive consents) that the Company shall promptly amend (x) Section 3.01 of the Benefits Trust (subject to the approval of the trustee serving thereunder, if required) to define a "Change in Control" as such term is defined in subparagraph 1(d) of the Agreement, and (y) Section 4.02(a) of the Benefits Trust (subject to the approval of the trustee thereunder, if required) to delete clauses (iii) and (iv) in the next-to-last sentence thereof. The Executive agrees that, upon the Company"s request, the Executive will sign any additional documents indicating the Executive"s consent tothe amendments described in this Section 17 which are needed to facilitate such amendments. 9 IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the date first above written. CHAMPION INTERNATIONAL CORPORATION By:/s/ Richard E. Olson ---------------------------------- Chairman of the Board of Directors Attest: /s/ Lawrence A. Fox - ----------------------- Secretary /s/ L. Scott Barnard ------------------------------------- Executive 10 EX-10.5 6 AGREEMENT COMPANY & THOMAS GRIFFIN EXHIBIT 10.5 THIS AGREEMENT between CHAMPION INTERNATIONAL CORPORATION, a New York corporation (the "Company"), and THOMAS L. GRIFFIN (the "Executive"), effective May 28, 1999 (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 April 16, 1998; 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 death, the 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 1 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, if any, 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, 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 422 of the Internal Revenue Code of 1986 as amended (the "Code"), of the Fair Market Value of Common Shares of the Company 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 Supplemental Retirement Income Plan Payments. ---------------------------------------------------------------- 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 Supplemental Retirement Income Plan or a successor plan or 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 Supplemental Retirement Income Plan or successor plan or 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 2 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 Nonqualified Supplemental Savings Plan 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. (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 May 28, 1999, (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 May 28, 1999 (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 3 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 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 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 4 (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(f) 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. 5 (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. 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, improvement 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 6 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. (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 Supplemental Retirement Income Plan or successor plan or 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 4044 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 7 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 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 ---------------- 8 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, any grant of restricted shares or share units and any grant of performance shares or share units. 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, 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, 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 9 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, as amended, 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 Supplemental Retirement Income Plan or a successor plan or plans (as described in subparagraph 1(a)(iv) above) set forth in Exhibit D. --------- (iv) The value of the payments under the Supplemental Retirement Income Plan or a successor plan or plans 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 4044 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. 10 (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 11 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 so held 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 so held 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. 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 12 (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. 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 13 Attention: Corporate Secretary To the Executive: Mr. Thomas L. Griffin 141 Fieldcrest Drive Ridgefield, CT 06877 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. 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 May 28, 1999. CHAMPION INTERNATIONAL CORPORATION By /s/ Richard E. Olson ---------------------------------------- Chairman of the Board of Directors Attest: /s/ Lawrence A. Fox - -------------------------- Secretary /s/ Thomas L. Griffin ---------------------------------------- Thomas L. Griffin 14 Exhibit A to Agreement between Champion International Corporation and Thomas L. Griffin dated as of May 28, 1999 ---------------------------------------------------------- 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 subparagraphs 1(a)(ii)(x) and (z). o0o 15 Exhibit B to Agreement between Champion International Corporation and Thomas L. Griffin dated as of May 28, 1999 ---------------------------------------------------------- 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 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 the Supplemental Retirement Income Plan or successor plan or 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. 16 Exhibit C to Agreement between Champion International Corporation and Thomas L. Griffin dated as of May 28, 1999 ---------------------------------------------------------- Exhibit C --------- [subparagraph 9(d)] FORM OF TRUST AGREEMENT 17 Exhibit D to Agreement between Champion International Corporation and Thomas L. Griffin dated as of May 28, 1999 ---------------------------------------------------------- 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 Supplemental Retirement Income Plan or successor plan or 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. _________________ * This Exhibit D does not reflect the possible reduction provided for in subparagraph 9(d)(v) hereof. 18 ~ 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. o0o 19 EX-10.6 7 AMENDMENT AGREEMENT COMPANY & THOMAS L. GRIFFIN EXHIBIT 10.6 AMENDMENT AGREEMENT ------------------- This Amendment Agreement made as of May 28, 1999 amends the Agreement between Champion International Corporation, a New York corporation (the "Company"), and Thomas L. Griffin (the "Executive") also effective as of May 28, 1999 (the "Existing Agreement", and as amended hereby, the "Agreement"). The Company considers it essential and in the best interests of its shareholders to foster the continued employment of its senior management personnel. The Executive is an important member of the Company's senior management. The Company wishes to provide additional incentive for the Executive to continue to serve the Company by increasing the benefits provided to the Executive in certain events following a Change in Control to a level which is more in line with comparable benefits provided by other large publicly-owned U.S. forest products companies. The Company also wishes to amend the Existing Agreement to eliminate any provision that could be an impediment to the Company engaging in a transaction to be accounted for on a pooling-of-interests basis, if the Company's Board of Directors determines that such a transaction would be in the best interests of the Company's shareholders. NOW, THEREFORE, the parties agree that the Existing Agreement is hereby amended as follows: 1. Subparagraph 1(a)(i) of the Existing Agreement is amended by deletion of the proviso at the end of the last sentence thereof. 2. Clauses (x) and (y) of subparagraph 1(a)(ii) of the Existing Agreement are amended to read in their entirety as follows: "(x) a lump sum equal to twenty-four times the highest total monthly compensation (as defined in subparagraph 1(a)(i)) in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii), or a lump sum equal to thirty-six times such highest total monthly compensation in the event of any other kind of termination (as defined in subparagraph 1 (b)), shall be paid as soon as practicable after such termination; (y) the benefits required to be provided thereafter to the Executive, his spouse and family, set forth in attached Exhibit A, ---------- shall be valued at the cost of acquiring insurance policies which would provide such benefit coverage for a two-year period in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or for a three-year period in the event of any other kind of termination (as defined in subparagraph 1(b)), and such cost shall be paid in a lump sum as soon as practicable after termination;". 1 3. The definition of "Code" in subparagraph 1(a)(iii) of the Existing Agreement is amended to refer to the "Internal Revenue Code of 1986, as amended from time to time". Subparagraph 1(a)(iii) is further amended by adding the following sentence at the end of such subparagraph: "Notwithstanding the foregoing provisions of this subparagraph 1(a)(iii), if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of such provisions (or the provisions of any other Company agreement or plan or action of the Company's Board of Directors (the "Board") or committee thereof with respect to other equity awards, stock- based or stock-measured compensation or compensation which may be payable in stock) would preclude such transaction from so qualifying, the Board, acting prior to the Change in Control, unilaterally may require that options, other equity awards (including contingently credited shares, performance share units and restricted stock units), stock-based or stock- measured compensation or compensation which may be payable in stock held by the Executive (or to which the Executive may be entitled) be treated in connection with such transaction and thereafter in a way that does not preclude such transaction from so qualifying and that the Board deems to be fair to the Executive (including, but not limited to, eliminating any acceleration of vesting or payment and requiring the conversion of such options and awards to options and awards of the corporation acquiring control of the Company or its assets in such transaction, or the settlement of such options and awards in shares of such corporation)." 4. Subparagraph 1(a)(iv) of the Existing Agreement is amended by deleting the words "for the termination period set forth in such subparagraph 1(a)(i)" at the end of the first sentence thereof and the words "during the termination period set forth in subparagraph 1(a)(i) above" at the end of the second sentence thereof and, in each case, replacing such words with the following: "for a period of two years in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or for a period of three years in the event of any other kind of termination (as defined in subparagraph 1(b))." 5. Subparagraph 1(a)(v) of the Existing Agreement is amended by deleting the words "(whether or not any such period shall be accelerated)," in the first sentence thereof and replacing such words with the following: "or, in the event of the termination of the Executive within three years 2 following a Change in Control, during a period of two years in the event of a termination solely of the kind referred to in clauses (A), (B) and (G) of subparagraph 1(b)(ii) or during a period of three years in the event of any other kind of termination (as defined in subparagraph 1(b))," Subparagraph 1(a)(v) is further amended to delete the words "under subparagraph 1(a)(i) above" in the proviso at the end of the first sentence thereof. 6. Subparagraph 1(b)(ii) of the Existing Agreement is amended by deleting the word "or" immediately before clause (E) thereof and by adding the following clauses (F) and (G) immediately before the proviso at the end of such subparagraph: ", (F) within three years following a Change in Control, the relocation of the Executive's principal place of employment other than to (x) the Borough of Manhattan in the City of New York, New York, or (y) any other location that is not more than thirty-five (35) miles by automobile from the location of the Executive's principal place of employment immediately prior to the Change in Control, or (G) within three years following a Change in Control, the Executive is no longer eligible for benefits or incentive compensation at the same level as his peers in the Company". 7. Subparagraph 1(d) of the Existing Agreement is amended to read in its entirety as follows: "(d) Definition of Change in Control ------------------------------- For the purpose of this Agreement, a "Change in Control" of the Company shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (i) any Person (as defined in this subparagraph 1(d)) is or becomes the Beneficial Owner (within the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on the date hereof (the 'Exchange Act')), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates (as defined in this subparagraph 1(d)) representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on May 28, 1999, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with 3 an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on May 28, 1999 or whose appointment, election or nomination for election was previously so approved or recommended; or (iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or entity, other than a merger or consolidation if the number of members on the board of directors (or similar governing body) of the corporation or entity which is the surviving corporation or entity in such merger or consolidation (whether the Company or another corporation or entity) (or if the surviving corporation or entity is controlled by another corporation or entity, the board of directors (or similar governing body) of such controlling corporation or entity) immediately after such merger or consolidation (the "Surviving Board") who were directors of the Company immediately prior to such merger or consolidation constitutes a majority of the members on the Surviving Board immediately after such merger or consolidation; or (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets to an entity unless the number of members of the board of directors (or similar governing body) of such entity (or if such entity is controlled by any other entity immediately after such sale or disposition, the board of directors or similar governing body of such other entity) immediately after such sale or disposition (the "Controlling Board") who were directors of the Company immediately prior to such sale or disposition constitutes a majority the members of the Controlling Board immediately after such sale or disposition. For purposes of this subparagraph 1(d): 'Person' shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. 'Affiliate' and 'controlled' shall have the meanings set forth in Rule 12b- 2 under the Exchange Act." 4 8. Subparagraph 5(b) of the Existing Agreement is amended by adding the following language at the beginning thereof: "Subject to paragraph 14,". 9. The last sentence of paragraph 8 of the Existing Agreement is replaced by the following four sentences: "Upon such a consolidation, merger or transfer of assets and assumption, (i) the term 'Company' shall refer to the 'Continuing Corporation', that is, the corporation which survived such consolidation or merger (whether the prior-to-the-transaction 'Company' or another corporation) or to which such assets are transferred, and (ii) the term 'Board' shall refer to the board of directors (or similar governing body) of the Continuing Corporation (except that, in determining whether or not such merger, consolidation or transfer constitutes a Change in Control under subparagraph 1(d), the terms 'Company' and 'Board' shall refer to the prior-to-the-transaction 'Company' or 'Board'). Upon such a consolidation, merger or transfer of assets and assumption, this Agreement shall continue in full force and effect. Whether or not a consolidation, merger or transfer of assets (or any other transaction) constitutes a Change in Control under subparagraph 1(d), any subsequent transaction involving a Continuing Corporation (or involving any corporation or entity directly or indirectly controlling the Continuing Corporation) which meets the definition of Change in Control under subparagraph 1(d) shall constitute a Change in Control for all purposes of this Agreement. The provisions of this paragraph 8 shall apply to any subsequent consolidation or merger of any such corporation into or with, or any subsequent transfer by any such corporation of all or substantially all of its assets to, another corporation." 10. Clause (x) of subparagraph 9(d)(iii) of the Existing Agreement is amended by adding the words "and Excise Tax Gross-Up amount" immediately after the words "legal expenses payments" therein. 11. Subparagraph 9(d)(v) of the Existing Agreement is amended in its entirety to read as follows: "(v) [Intentionally Omitted]." 12. Exhibit A to the Existing Agreement is amended by changing the reference to "subparagraph 1(a)(i)" therein to refer to "subparagraph 1(a)(ii)". 13. Exhibit B to the Existing Agreement is amended by deleting the words "; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive's normal retirement date under the Company's pension plan". 14. Exhibit D to the Existing Agreement is amended by (i) changing each reference therein to "2 years" and "2 year" to "3 years" and "3 year", respectively, (ii) deleting the footnote, which states that "This Exhibit D does not reflect the possible reduction provided for in subparagraph 9(d)(v) hereof", (iii) 5 deleting the words "; however, payments not to cover the period, if any, after the last day of the month next preceding the Executive's normal retirement date under the Company's pension plan", and (iv) adding the following language at the end thereof: " . Excise Tax Gross-Up An amount equal to the Company's estimate of the amount payable pursuant to paragraph 14. Notwithstanding the foregoing, no amounts shall be deposited in Trust with respect to options or contingently credited shares (or other equity awards) if the Potential Change in Control relates to a transaction approved by the Board and intended to qualify for pooling-of-interests accounting treatment and the Board, prior to the Change in Control, decides to exercise its power under the last sentence of subparagraph 1(a)(iii) with respect to such options and contingently credited shares (and other equity awards); provided, however, that if the Board, prior to the Change in Control, determines that such transaction will not be consummated and that an alternative Change in Control transaction not intended to qualify for pooling-of-interests accounting treatment will be consummated, such amounts shall promptly be deposited in Trust." 15. Paragraph 14 of the Existing Agreement is amended to read in its entirety as follows: "14. Excise Tax Gross-Up. Whether or not a termination occurs, ------------------- if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person (as defined in subparagraph 1(d)) whose actions result in a Change in Control or any person affiliated with either the Company or the person whose actions result in a Change in Control) (such payments or benefits, excluding the payment or payments to be made pursuant to this paragraph 14, being hereinafter referred to as the 'Initial Payments') will be subject to the excise tax (the 'Excise Tax') imposed under Section 4999 of the Code, the Company shall pay to the Executive an additional amount (the 'Gross-Up Payment') such that the net amount retained by the Executive, after subtraction of any Excise Tax on the Initial Payments and any federal, state and local (and foreign, if any) income and employment taxes and Excise Tax upon the payment or payments provided by this paragraph 14, shall be equal to the Initial Payments. Notwithstanding any of the provisions of this paragraph 14, to the extent, if any, that, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, implementation of the provisions of this paragraph 14 would preclude such transaction from so 6 qualifying, the term 'Initial Payments' shall not include any 'parachute payments' (within the meaning of section 280G(b)(2) of the Code) resulting from the treatment accorded (whether in connection with the transaction or thereafter) to stock options, other equity awards, stock-based or stock- measured compensation or compensation which may be payable in stock pursuant to subparagraph 1(a)(iii) or pursuant to any Company plan or other agreement or Board (or Board committee) action relating to such options, awards or compensation. "The determination of whether any of the Initial Payments will be subject to the Excise Tax and the amount of such Excise Tax will be made by tax counsel ('Tax Counsel') reasonably acceptable to the Executive and selected (and compensated) by the Company. For purposes of such determination, (x) all of the Initial Payments shall be treated as 'parachute payments' (within the meaning of section 280G(b)(2) of the Code) unless, in the written opinion of Tax Counsel, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (y) all 'excess parachute payments' (within the meaning of section 280G(b)(l) of the Code) shall be treated as subject to the Excise Tax unless, in the written opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (z) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local (and foreign, if any) income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the date of termination of the Executive's employment (or if there has been no such termination, the date on which the Gross-Up Payment is calculated for purposes of this paragraph 14), net of the reduction in federal income taxes (if any) which is available from deduction of such state and local (and foreign, if any) taxes. "As soon as practicable following any such determination of the Gross-Up Payment by the Tax Counsel, the Company shall provide the specifics of the determination in writing to the Executive and to the trustee of the trust referred to in subparagraph 9(d)(ii). The Gross-Up Payment will be made in cash by the Company to the Executive not later than the fifth business day following the date on which the Executive's termination occurs (or, if no termination shall have occurred, not later than the thirtieth (30th) business day immediately following the event that resulted in the imposition of the Excise 7 Tax)(in either case, the 'Payment Date'). If the amount of the Gross-Up Payment cannot be accurately determined on or before the Payment Date, the Company shall pay to the Executive on such day an estimate, as determined in good faith in accordance with this paragraph 14, of the minimum amount to which the Executive is clearly entitled and shall pay the remainder of the Gross-Up Payment (together with interest on the unpaid remainder (or on all of the Gross-Up Payment to the extent the Company fails to make such payment when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30/th/) day after a Payment Date. In the event that the amount of the estimated Gross-Up Payment made to the Executive exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5/th/) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). "In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within the five (5) business days immediately following the date that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the amount of such reduction (including the Excise Tax component and the federal, state and local (and foreign, if any) income and employment tax components of the Gross-Up Payment), to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local (and foreign, if any) income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall pay to the Executive an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within the five (5) business days immediately following the date that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Initial Payments." 16. The parties agree that (i) if the Company wishes to engage in a Change in Control transaction intended to qualify for pooling-of-interests accounting treatment, and (ii) if, in the opinion of the accounting firm or firms whose opinion or opinions with respect to pooling-of-interests accounting is or are required as a condition to the consummation of such transaction, (x) the implemen- 8 tation of any provision of this Amendment Agreement or of any provision of the Existing Agreement or (y) the taking of any action by the Executive (including, without limitation, the sale of securities of the Company or the exercise of stock options or stock appreciation rights granted by the Company) (the "Disqualifying Action") would disqualify such transaction from pooling-of- interests accounting treatment, then: with respect to (x), such provision shall be null and void from the date hereof automatically and without any action on the part of the Company or the Executive, and all the provisions of the Existing Agreement not so nullified, as amended by all the provisions of this Amendment Agreement not so nullified, shall remain in full force and effect; and with respect to (y), the Executive agrees not to take any Disqualifying Action. 17. The Executive hereby consents to amendment by the Company (if the Company so elects and subject to the approval of the trustee then serving, if required) of the Trust Agreement dated as of February 19, 1987, by and between the Company and Fleet National Bank, as amended as of August 18, 1988 (the "Benefits Trust") which was established to assure the payment of benefits under the individual agreements listed on Exhibit I thereto (which include the Existing Agreement) as follows: amend Section 2.02(a) of the Benefits Trust to include, as a third alternative form of investment for the assets of the Benefits Trust, a letter of credit payable to the commercial bank serving as trustee of the Benefits Trust from time to time, with the proceeds thereof to be used in accordance with the provisions of the Benefits Trust. The parties hereto agree (and the Executive consents) that the Company shall promptly amend (x) Section 3.01 of the Benefits Trust (subject to the approval of the trustee serving thereunder, if required) to define a "Change in Control" as such term is defined in subparagraph 1(d) of the Agreement, and (y) Section 4.02(a) of the Benefits Trust (subject to the approval of the trustee thereunder, if required) to delete clauses (iii) and (iv) in the next-to-last sentence thereof. The Executive agrees that, upon the Company's request, the Executive will sign any additional documents indicating the Executive's consent to the amendments described in this Section 17 which are needed to facilitate such amendments. 9 IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the date first above written. CHAMPION INTERNATIONAL CORPORATION By: /s/ Richard E. Olson ------------------------------------------- Chairman of the Board of Directors Attest: /s/ Lawrence A. Fox - --------------------------------- Secretary /s/ Thomas L. Griffin ------------------------------------------- Executive 10 EX-10.7 8 AGREEMENT RELATING TO LEGAN EXPENSES EXHIBIT 10.7 Champion International Corporation One Champion Plaza Stamford, CT 06921 May 28, 1999 Mr. Thomas L. Griffin 141 Fieldcrest Drive Ridgefield, CT 06877 Re: Agreement Relating to Legal Expenses Dated May 28, 1999 ------------------------------------ Dear Tom: 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 May 28, 1999 (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. Mr. Thomas L. Griffin May 28, 1999 Page 2 By virtue of the mutual promises set forth in this Legal Expense Agreement 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 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. Sincerely, CHAMPION INTERNATIONAL CORPORATION By /s/ Richard E. Olson -------------------------------- Chairman of Board of Directors Attest: /s/ Lawrence A. Fox - --------------------------- Secretary Agreed: May 28, 1999 /s/ Thomas L. Griffin - --------------------------- Thomas L. Griffin Memorandum of Terms and Conditions Referred to in the Agreement Relating to Legal Expenses dated May 28, 1999 between Champion International Corporation and Thomas L. Griffin -------------------------------------------------------- 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 either 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 an amount, or establish, extend, renew and maintain an irrevocable bank letter of credit in an amount, in favor of you or in the event of your death your beneficiary, 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, as amended, 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, and if you or in the event of your death your beneficiary shall request the Company in 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 2 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 delivery. To the Company: Champion International Corporation One Champion Plaza Stamford, Connecticut 06921 Attention: Corporate Secretary To the Executive: Mr. Thomas L. Griffin 141 Fieldcrest Drive Ridgefield, CT 06877 (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. 3 (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 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. 4 (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 Legal Expense Agreement 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 or in the Agreement. 5. This 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. 5 EX-10.8 9 SECOND AMEND. DATED AS OF 10/1/99 EXHIBIT 10.8 SECOND AMENDMENT TO TRUST AGREEMENT DATED AS OF FEBRUARY 19, 1987 BETWEEN CHAMPION INTERNATIONAL CORPORATION AND FLEET NATIONAL BANK This Amendment between Champion International Corporation, a New York corporation (the "Company"), and Fleet National Bank (the "Trustee") is effective as of October 1, 1999 and amends the Trust Agreement dated as of February 19, 1987, as amended as of August 18, 1988, between the Company and the Trustee (the "Trust"). WHEREAS, the Company and the Trustee have entered into the Trust; and WHEREAS, the Agreements between the Company and the Executives were amended in certain respects as of May 28, 1999 (as so amended, the "Agreements"); and WHEREAS, the Company wishes to amend the Trust in order to (1) conform the definition of Change in Control in the Trust to the revised definition thereof set forth in the Agreements; (2) delete the references in the Trust to the possible reduction in the amount payable to the Executives thereunder as the result of any "excess parachute payment" in order to conform to the revised treatment of "excess parachute payments" under the Agreements; and (3) authorize the Company to elect to satisfy its obligation to deposit and maintain funds in the Trust by providing the Trustee with one or more irrevocable letters of credit in its favor; and WHEREAS, all of the Executives have agreed in writing to this Amendment; NOW, THEREFORE, it is agreed by and between the parties as follows: 1. Section 3.01 of the Trust is amended in its entirety to read as follows: "SECTION 3.01 Definition of Change in Control. For the purposes of this Trust, a Change in Control of the Company shall be deemed to have occurred if the event set forth in any one of the following subsections shall have occurred: (a) any Person (as defined in this Section 3.01) is or becomes the Beneficial Owner (within the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on the date hereof (the 'Exchange Act')), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates (as defined in this Section 3.01)) representing 30% or more of the combined voting power of the Company's then outstanding securities; or (b) the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board of Directors of the Company (the 'Board'): individuals who, on May 28, 1999, constituted the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on May 28, 1999 or whose appointment, election or nomination for election was previously so approved or recommended; or (c) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or entity, other than a merger or consolidation if the number of members on the board of directors (or similar governing body) of the corporation or entity which is the surviving corporation or entity in such merger or consolidation (whether the Company or another corporation or entity) (or if the surviving corporation or entity is controlled by another corporation or entity, the board of directors (or similar governing body) of such controlling corporation or entity) immediately after such merger or consolidation (the 'Surviving Board') who were directors of the Company immediately prior to such merger or consolidation constitutes a majority of the members on the Surviving Board immediately after such merger or consolidation; or (d) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets to an entity unless the number of members of the board of directors (or similar governing body) of such entity (or if such entity is controlled by any other entity immediately after such sale or disposition, the board of directors or similar governing body of such other entity) immediately after such sale or disposition (the 'Controlling Board') who were directors of the Company immediately prior to such sale or disposition constitutes a majority of the members of the Controlling Board immediately after such sale or disposition. For purposes of this Section 3.01: 'Person' shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. 'Affiliate' and 'controlled' shall have the meanings set forth in Rule 12b-2 under the Exchange Act." * * * 2. The next-to-last sentence of Section 4.02(a) of the Trust is amended in its entirety to read as follows: "Such request shall set forth (i) the specific amount of payment requested and (ii) the specific Agreement or Agreements and the specific section or sections of such Agreements under which such payment is to be made." * * * -2- 3. A new ARTICLE VIII is added to the Trust as follows: "ARTICLE VIII LETTERS OF CREDIT SECTION 8.01 Authority to Fund the Trust with Letters of Credit. Anything in the Trust to the contrary notwithstanding, including without limitation Sections 2.01(a) and 2.02(a), the Company may at its option, in lieu of depositing and maintaining cash or marketable securities in the Trust, provide the Trustee with one or more irrevocable letters of credit in the Trustee's favor from one or more banks (which may include the Trustee). Any such letters of credit (when added to any cash or marketable securities previously deposited in the Trust) shall be in an aggregate amount at least equal to the cash or marketable securities that otherwise would have to be deposited and maintained in the Trust and shall be delivered to the Trustee not later than the time such cash or marketable securities would otherwise have to be delivered to the Trustee, all in accordance with the terms of the Trust. In the event the Company elects to provide one or more such letters of credit, the Trustee shall draw on the letters of credit to obtain funds to make payments to Executives (and, in the circumstance set forth in Section 5.01(g), to the Trustee) at the times and in the amounts that such payments would be made if cash or marketable securities had been deposited and maintained in the Trust, all in accordance with the terms of the Trust. The Trustee shall not be required to examine any such letters of credit for their validity, to determine the suitability of any such letters of credit to fund the Company's obligations under the Agreements, or to perform any act with respect to any such letters of credit, other than to follow the directions of the Company or the Executives in accordance with the terms of the Trust. SECTION 8.02 Coordination of Other Provisions of the Trust with Section 8.01. If the Company elects to fund the Trust with one or more irrevocable letters of credit as authorized in Section 8.01, then the following provisions of the Trust shall be interpreted as set forth below: o Third WHEREAS clause: The 'amounts of cash or marketable securities' referred to shall include amounts provided in the letter(s) of credit. o Section 2.01(a): The 'amount' referred to in clause (i) and clause (ii) shall include amounts provided in the letter(s) of credit. o Section 2.01(c): The 'amount' and 'amounts' referred to in clauses (x) and (y) shall include amounts provided in the letter(s) of credit. o Section 2.02(a) and all other Sections of the Trust: The 'Trust Corpus' shall include amounts provided in the letter(s) of credit. o Section 4.02(a): The 'amounts' referred to in clause (x) of the first sentence shall include the portion of the letter(s) of credit allocable to such Executive. The 'aggregate amount delivered to the Trustee for the benefit of such Executive' referred to in the fourth sentence shall include the portion of the letter(s) of credit allocable to such Executive. o Section 4.02(b): The 'amount' and 'amounts' referred to in clause (ii) shall include amounts provided in the letter(s) of credit. o Section 4.02(c): The Company shall have the right to reduce the amount of any letter(s) of credit previously deposited in the Trust to reflect the termination of an Executive in the circumstance set forth in clause (i) or the more accurate calculation of benefits in the circumstance set forth in clause (ii). -3- o Section 4.02(e): The 'amounts' referred to shall include amounts provided in the letter(s) of credit. o Section 5.01(c): The 'amount delivered by the Company to the Trustee', the 'amount held in Trust' and the 'deposits made with respect thereto', as referred to in the second and third sentences, shall include amounts provided in the letter(s) of credit. o Section 5.01(g): The delivery to the Trustee referred to in the fourth sentence shall include any amounts provided in letter(s) of credit. o Section 5.02: The 'amounts then held in the Trust' referred to in the second and fifth sentences shall include amounts provided in the letter(s) of credit. o Section 6.01(b): The 'funds held in the Trust with respect to such Executive' referred to in the first sentence shall include the portion of the letter(s) of credit allocable to such Executive. o Section 6.02: The 'amounts then held in the Trust' referred to in the first and second sentences shall include amounts provided in the letter(s) of credit. Whether or not the Company has elected to fund the Trust with one or more irrevocable letters of credit, the 'amount of funds to be delivered by the Company to the Trustee' referred to in the last sentence of Section 6.02 shall include amounts that the Company may elect to deliver in the form of a letter of credit." * * * 4. All capitalized terms used herein and not defined herein shall have the meanings assigned to them in the Trust. 5. 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/ T. L. Hart ---------------------------------------- Vice President - Finance and Treasurer FLEET NATIONAL BANK By /s/ Susan H. James ---------------------------------------- Bank Officer -4- EX-11 10 CALCULATION OF BASIC EARNINGS EXHIBIT 11 CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES Calculation of Basic Earnings Per Common Share and Diluted Earnings Per Common Share (unaudited) (in millions, except per share)
Nine Months Ended Three Months Ended September 30, September 30, ----------------------- ----------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Basic earnings per common share (1): Net income applicable to common stock $ 156.0 $ 82.4 $ 75.1 $ 31.3 ======== ======== ======== ======== Average number of common shares outstanding 95.8 96.0 96.1 95.7 ======== ======== ======== ======== Basic earnings per common share: Income Before Extraordinary item $ 1.65 $ .86 $ .80 $ .33 Extraordinary Item (.02) -- (.02) -- -------- -------- -------- -------- Net Income $ 1.63 $ .86 $ .78 $ .33 ======== ======== ======== ======== Diluted earnings per common share: (1, 2): Net income applicable to common stock $ 156.0 $ 82.4 $ 75.1 $ 31.3 ======== ======== ======== ======== Average number of common shares outstanding 95.8 96.0 96.1 95.7 Add common share effect, assuming conversion of potentially dilutive securities .5 .8 .5 .7 -------- -------- -------- -------- Average number of common shares outstanding on a diluted basis 96.3 96.8 96.6 96.4 ======== ======== ======== ======== Diluted earnings per common share Income Before Extraordinary item $ 1.64 $ .85 $ .80 $ .32 Extraordinary Item (.02) -- (.02) -- -------- -------- -------- -------- Net Income $ 1.62 $ .85 $ .78 $ .32 ======== ======== ======== ========
- ---------- NOTES: (1) Basic earnings per common share is computed by dividing net income applicable to common stockholders by the average number of common shares outstanding. The computation of diluted earnings per common share assumes that the average number of common shares outstanding is increased by dilutive common share equivalents. (2) Potentially dilutive securities at September 30, 1999 included shares issuable pursuant to certain stock-based compensation arrangements. These securities included 320,000 shares issuable upon the vesting of the restricted share units as well as 147,000 shares issuable upon the exercise of stock options calculated using the treasury stock method. EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 596 10 541 18 399 1,651 9,653 3,532 8,419 1,125 2,572 0 0 56 2,920 8,419 3,920 3,920 3,350 3,350 0 0 186 207 49 158 0 (2) 0 156 1.63 1.62 Includes timber and timberlands.
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