Severance Agreement With Key Management Group - Willamette Industries Inc.
Willamette Industries, Inc. (which, together with its Subsidiaries,
is referred to as the 'Company'), considers the stability of its key management
group to be essential to the best interests of the Company and its shareholders.
The Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may arise and that the
attendant uncertainty may result in the departure or distraction of key
management personnel to the detriment of the Company and its shareholders.
Accordingly, the Board of Directors of the Company (the 'Board') has
determined that appropriate steps should be taken to encourage members of the
Company's key management group to continue as employees notwithstanding the
future possibility of a change in control of the Company.
The Board also believes it important that, in the event of a
proposal for transfer of control of the Company, you be able to assess the
proposal and advise the Board without being influenced by the uncertainties of
your own situation.
In order to induce you to remain in the employ of the Company, this
Agreement, which has been approved by the Board, sets forth the severance
compensation which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to the occurrence of a
'change in control' of the Company as defined and under the circumstances
1. AGREEMENT TO PROVIDE SERVICES; RIGHT TO TERMINATE.
(a) TERMINATION OF EMPLOYMENT. Except as otherwise provided in
paragraph (b) below, or in any written employment agreement between you and the
Company, you are an 'at will' employee and the Company or you may terminate your
employment or this Agreement at any time. If, and only if, your employment
terminates after a change in control of the Company occurs (as defined in
Section 6), the provisions of this Agreement regarding the payment of severance
compensation and benefits shall apply. In all other events, this Agreement does
not provide any additional severance compensation or benefits to you.
(b) TERMINATION SUBSEQUENT TO CERTAIN OFFERS. In the event a tender
offer or exchange offer is made by a Person (as defined in Section 6) for more
than 30 percent of the combined voting power of the Company's outstanding
securities ordinarily having the right to vote at elections of directors
('Voting Securities'), including shares of common stock, $.50 par value, of the
Company (the 'Company Shares'), you agree that you will not leave the employ of
the Company (other than as a result of Disability as such term is defined in
Section 6) and will render services to the Company in the capacity in which you
then serve until such tender offer or exchange offer has been abandoned or
terminated or a change in control of the Company has occurred as a result of
such tender offer or exchange offer. If the offer described in the preceding
sentence is not recommended by the Board to the shareholders when initially made
or within ten days thereafter, the Company agrees that during the period
described in the preceding sentence it shall not terminate this Agreement unless
it shall also terminate your employment. If, during the period you are obligated
to continue in the employ of the Company pursuant to this Section 1(b), the
Company reduces your compensation, your obligations under this Section 1(b)
shall thereupon terminate.
(c) OBLIGATIONS AFTER CHANGE IN CONTROL. While employed by the
Company (or its successor) after a change of control occurs, you agree to devote
reasonable attention and time to the business and affairs of the Company and to
use your reasonable best efforts to perform your responsibilities faithfully and
efficiently, consistent with your past practice as an employee of the Company.
2. TERM OF AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect until April 16, 1994; PROVIDED, HOWEVER,
that commencing on __________________, and each ______________ thereafter, the
term of this Agreement
shall automatically be extended for one additional year unless at least 90 days
prior to such April 16, the Company or you shall have given notice that this
Agreement shall not be extended; and provided, however, that if a change in
control of the Company shall occur while this Agreement is in effect, this
Agreement shall automatically be extended for 36 months from the date the change
in control occurs. Notwithstanding the preceding sentence, this Agreement shall
not extend beyond your normal retirement date under the Company's retirement
plan. This Agreement shall terminate if you or the Company terminate your
employment prior to the date a change in control of the Company occurs but
without prejudice to any remedy the Company may have for breach of your
obligations, if any, under Section 1(b).
3. SEVERANCE PAYMENT AND BENEFITS IF TERMINATION OCCURS FOLLOWING
CHANGE IN CONTROL FOR DISABILITY, WITHOUT CAUSE, OR WITH GOOD REASON. If, within
36 months from the date a change in control of the Company occurs, your
employment with the Company is terminated (i) by the Company for Disability,
(ii) by the Company without Cause, or (iii) by you with Good Reason (each as
defined in Section 6), you shall be entitled to a severance payment and other
benefits as follows:
(a) DISABILITY. If your employment with the Company is terminated
for Disability, your benefits shall thereafter be determined in accordance with
the Company's long-term disability income plan. If the Company's long-term
disability income plan is modified or terminated following a change in control,
the Company shall substitute such a plan with benefits applicable to you
substantially similar to those provided by the plan prior to its modification or
termination. During any period that you fail to perform your duties hereunder as
a result of incapacity due to physical or mental illness, you shall nonetheless
continue to receive your full base salary and benefits at the rate then in
effect until your employment is terminated by the Company for Disability and you
begin to receive benefits under the Company's disability income plan.
(b) TERMINATION WITHOUT CAUSE OR WITH GOOD REASON. If your
employment with the Company is terminated without Cause by the Company or with
Good Reason by you, then the Company shall pay to you, upon demand, the
(i) Your full base salary and benefits through the Date of
Termination at the rate in effect on the date the change in control
(ii) As severance pay, subject in all cases to
reduction as provided in Section 3(c), an amount equal to the product of
(x) the sum of your annual base salary, at the rate in effect on the date
the change in control occurs, plus the average annual cash incentive
compensation (if any) paid to you or accrued for your benefit in respect
of the two fiscal years prior to the fiscal year in which the change in
control occurs, multiplied by (y) the number 2.99.
(iii) In addition, subject in all cases to reduction as provided in
Section 3(c), the Company shall maintain in full force and effect for one
year after the Date of Termination, all noncash employee benefit plans,
programs, or arrangements (including, without limitation, pension and
retirement plans and arrangements, life insurance and health and accident
plans, medical insurance plans, disability plans, and vacation plans) in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under
the general terms of such plans, programs, and arrangements, but excluding
stock option plans and other plans in which the benefits are measured by
the value of the Company's stock. If your participation in any plan,
program, or arrangement which the Company has agreed to continue is barred
or not possible, the Company shall arrange to provide you with benefits
substantially similar to those which you are entitled to receive under
such plans, programs, and arrangements. However, if you become eligible to
participate in a benefit plan, program, or arrangement of another employer
which confers substantial similar noncash benefits upon you, you shall
cease to receive noncash benefits under this subsection in respect of such
plan, program, or arrangement.
(c) CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(i) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for your benefit (whether pursuant to this Agreement or
otherwise) (a 'Payment') would be nondeductible by the Company for Federal
income tax purposes because of Section 280G of the Internal Revenue Code
of 1986, as amended, or the regulations thereunder (the 'Code'), then the
aggregate present value of amounts payable or distributable to or for your
benefit pursuant to this Agreement (such payments or distributions the
'Agreement Payments') shall be reduced to an amount which maximizes the
aggregate Agreement Payments without causing any Payment to be
nondeductible by the Company
because of Section 280G of the Code.
(ii) All determinations required to be made under this Section 3(c)
shall be made by the Company's usual outside auditors (the 'Accounting
Firm') which shall provide detailed supporting calculations both to the
Company and you within 15 business days of the Date of Termination. Absent
manifest error, the determination by the Accounting Firm shall be binding
upon the Company and on you. The Company shall reasonably determine which
and how much of the Agreement Payments shall be eliminated or reduced
consistent with the requirements of this Section 3(c) and shall notify you
promptly of its determination.
(iii) As a result of the uncertainty in the application of Section
280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments will
have been made by the Company which should not have been made (an
'Overpayment') or that additional Agreement Payments which will not have
been made by the Company could have been made (an 'Underpayment'), in each
case, consistent with the calculations required to be made hereunder. In
the event a related deficiency is asserted by the Internal Revenue Service
against the Company or you which the Accounting Firm concludes has a high
probability of resolution in favor of the government, then an Overpayment
has been made. Any such Overpayment shall be treated for all purposes as a
loan AB INITIO to you from the Company which you shall repay to the
Company without interest prior to written notice from the Company to you
that repayment is due (and at a rate of 8 percent per annum thereafter);
provided, however, that no such loan shall be deemed to have been made and
no amount shall be payable by you unless and to the extent such deemed
loan and payment would reduce your obligation for excise taxes under
Section 4999 of the Code or generate a refund of such taxes. In the event
the Accounting Firm, based upon controlling precedent or other substantial
authority, determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for your benefit
together with interest at the rate of 8 percent per annum.
4. PAYMENT IF TERMINATION OCCURS FOLLOWING CHANGE IN CONTROL,
BECAUSE OF DEATH, FOR CAUSE, OR WITHOUT GOOD REASON. If your employment is
terminated after a change in control of the Company occurs because of your
death, or by the Company for Cause, or by you other than for Good Reason, the
pay you your full base salary and benefits through the Date of Termination at
the rate in effect on the date the change in control occurs. The Company shall
have no further obligations to you under this Agreement.
5. NO MITIGATION; NO SETOFF. You shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise, nor, except as expressly set forth herein, shall the
amount of any payment provided for in this Agreement be reduced by any
compensation earned by you as the result of employment by another employer after
the Date of Termination, or otherwise. The Company's obligation to make the
payments to you provided for in this Agreement shall not be affected by any
setoff, counterclaim, recoupment, or other defense or claim which the Company
may have against you, except as provided in Section 3(c) and Section 6(d).
6. DEFINITIONS OF CERTAIN TERMS. For the purposes of this Agreement,
the terms defined below and used in this Agreement shall have the following
(a) ACQUIRING PERSON. 'Acquiring Person' shall mean any Person or
related Persons that would constitute a 'group' for purposes of Section 13(d)
and Rule 13d-5 (as in effect on the date hereof) under the Exchange Act;
provided, however, that the term Acquiring Person shall not include (i) the
Company, any Subsidiary or any employee benefit plan of the Company or any
Subsidiary, (ii) an entity holding voting capital stock of the Company for or
pursuant to the terms of any such plan, (iii) any Person or group solely because
such Person or group has voting power with respect to capital stock of the
Company arising from a revocable proxy or consent given in response to a public
proxy or consent solicitation made pursuant to the Exchange Act (as in effect
from time to time) or (iv) any Person who is a party to an agreement (a 'New
Stand-Together Agreement') similar to the former Shareholder Stand-Together
Agreement dated as of January 21, 1985 (the 'Former Stand-Together Agreement'),
which New Stand-Together Agreement (1) provides for unified action by Persons
who, or whose families, have historically held substantial amounts of the
Company Shares in the event of a threatened change of control and (2) which has
as parties at least ten shareholders of the Company who were parties to the
Former Stand-Together Agreement, but only while such Person remains a party
(b) CAUSE. Termination of your employment by the Company for 'Cause'
shall mean termination because, and only because, you committed an act of fraud,
embezzlement, or theft
constituting a felony, or an act intentionally against the interest of the
Company which causes the Company material injury, or you have repeatedly failed,
after written notice, to perform your responsibilities under this Agreement.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for the purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct constituting Cause as
defined above and specifying the particulars thereof in detail.
(c) CHANGE IN CONTROL. A 'change in control' of the Company shall
(i) A change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (as in
effect on the date thereof) under the Exchange Act; provided that, without
limitation, such a change in control shall be deemed to have occurred at
such time as any Acquiring Person (as defined in Section 6) hereafter
becomes the 'beneficial owner' as defined in Rule 13d-3 (as in effect on
the date thereof) under the Exchange Act, directly or indirectly, of 20
percent or more of the combined voting power of the Company's Voting
(ii) During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof unless the election, or the
nomination for election by the Company's shareholders, of each new
director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period; or
(iii) There shall be consummated (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving
corporation or pursuant to which Voting Securities would be converted into
cash, securities, or other property, other than a merger of the Company in
which the holders of Voting Securities immediately prior to the merger own
more than 66-___ percent of the combined voting power of the outstanding
securities ordinarily having the right to vote at elections of directors
of the surviving
corporation immediately after the merger, or (y) any sale, lease,
exchange, or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company;
(iv) Approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company.
A change of control 'occurs' on the date the change of control first occurs;
PROVIDED, HOWEVER, that if (A) your employment is terminated by the Company
after an offer described in the first sentence of Section 1(b) is made, which
offer is not recommended favorably by the Board to the Company's shareholders
when initially made or within ten days thereafter, and (B) it is reasonably
demonstrated that your termination was at the request of a third party who is
seeking to effect a change of control or otherwise occurred as a result of an
anticipated change of control, and (C) a change of control in fact occurs within
60 days after your termination, then for purposes of determining your right to
any severance compensation and benefits under this Agreement, your termination
shall be deemed to have occurred after a change of control.
(d) DATE OF TERMINATION. 'Date of Termination' shall mean (i) if
your employment is terminated by the Company for Disability, 30 days after
Notice of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such 30-day period), and
(ii) if your employment is terminated for any Good Reason, the date on which a
Notice of Termination is given; provided that if within 30 days after any Notice
of Termination is given the party receiving the Notice of Termination notifies
the other party that a dispute exists concerning the termination, your
employment shall nonetheless be terminated but you shall continue to receive an
amount equal to your base salary and your noncash benefits until the date on
which the dispute is finally determined, either by mutual written agreement of
the parties or by a final judgment, order, or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
If the dispute is resolved substantially in favor of the Company's
position, you shall repay the amount paid to you equal to your base salary
(without interest) and the Company may set your obligation to repay off against
any amounts owing to you or to be paid on your behalf. If the dispute is
resolved without either party prevailing or if you shall prevail, you shall have
no obligation to repay such amounts.
(e) DISABILITY. Termination of your employment by the Company for
'Disability' shall mean termination because of your absence from your duties
with the Company on a full-time basis for 180 consecutive days as a result of
your incapacity due to physical or mental illness and your failure to return to
the performance of your duties on a full-time basis during the 30-day period
after Notice of Termination is given.
(f) EXCHANGE ACT. 'Exchange Act' shall mean the Securities and
Exchange Act of 1934, as amended, as in effect on the date of this Agreement.
(g) GOOD REASON. Termination by you of your employment for 'Good
Reason' shall mean termination based on any of the following:
(i) A change in your status or position(s) with the Company, which,
in your reasonable judgment, does not represent a promotion from your
status or position(s) as in effect immediately prior to the change in
control, or a change in your duties or responsibilities which, in your
reasonable judgment, is inconsistent with such status or position(s), or
any removal of you from, or any failure to reappoint or reelect you to,
such position(s), except in connection with the termination of your
employment for Cause or Disability or as a result of your death or by you
other than for Good Reason.
(ii) A reduction by the Company in your base salary as in effect
immediately prior to the change in control.
(iii) The failure by the Company to continue in effect any Plan in
which you are participating at the time of the change in control of the
Company (or Plans providing you with at least substantially similar
benefits) other than as a result of the normal expiration of any such Plan
in accordance with its terms as in effect at the time of the change in
control, or the taking of any action, or the failure to act, by the
Company which would adversely affect your continued participation in any
of such Plans on at least as favorable a basis to you as is the case on
the date of the change in control or which would materially reduce your
benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control.
(iv) The failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance
with the Company's normal vacation policy as in effect immediately prior
to the change in control.
(v) The Company's requiring you to be based anywhere other than
where your office is located immediately prior to the change in control
except for required travel on the Company's business to an extent
substantially consistent with the business travel obligations which you
understood on behalf of the Company prior to the change in control.
(vi) The failure by the Company to obtain from any successor the
assent to this Agreement contemplated by Section 8 hereof.
(vii) Any purported termination by the Company of your employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of this Agreement; and for purposes of this Agreement, no
such purported termination shall be effective.
(viii) Any refusal by the Company to continue to allow you to attend
to matters or engage in activities not directly related to the business of
the Company which, prior to the change in control, you were permitted by
the Board to attend to or engage in.
(h) NOTICE OF TERMINATION. A 'Notice of Termination' of your
employment given by Company shall mean a written notice given to you of the
termination of your employment which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated.
(i) PERSON. 'Person' shall mean and include any individual,
corporation, partnership, trust, group, association, or other 'person,' as such
term is used in Section 14(d) of the Exchange Act.
(j) PLAN. 'Plan' shall mean any compensation plan, program or
arrangement such as an incentive plan or an employee benefit plan, program or
arrangement such as a thrift plan, pension or retirement plan, life insurance or
health and accident plan, medical insurance plan, disability plan, vacation plan
or any other plan, program or arrangement of the Company intended to
benefit employees, but excluding any stock option plans or other plans in which
the benefits are measured by the value of the Company's stock.
(k) SUBSIDIARY. 'Subsidiary' shall mean a corporation more than 50
percent of the outstanding voting stock of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
'voting stock' means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.
7. NOTICE. For the purposes of this Agreement, notice and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, if to
the Company, addressed to it at 3800 First Interstate Tower, 1300 S.W. Fifth
Avenue, Portland, Oregon 97201, Attention: Chief Executive Officer, and if to
you, addressed to you at the address set forth below your signature hereto, or
to such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. SUCCESSORS; BINDING AGREEMENT.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of, and be binding upon, any corporate or other successor or assignee of
the Company which shall acquire, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all of the
business or assets of the Company. The Company shall require any such successor,
by an agreement in form and substance reasonably satisfactory to you, expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such succession had
(b) PERSONAL REPRESENTATIVES. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives, and any
amounts payable to you in accordance with the terms of this Agreement after your
death shall be paid to your estate.
9. TIME OF PAYMENT; ESTIMATED PAYMENT. The severance payment
provided for herein, shall be made not later than the
fifteenth business day following the Date of Termination; provided, however,
that if the amounts of such payments cannot be finally determined on or before
such day, the Company shall pay to you on such day an estimate, as determined in
good faith by the Company, of the minimum amount of such payments, and shall pay
the remainder of such payments (together with interest at the rate of 8 percent
per annum) as soon as the amount thereof can be determined. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to you,
payable on the fifth day after demand by the Company (together with interest at
the rate of 8 percent per annum).
10. MISCELLANEOUS. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is agreed
to in a writing signed by you and the Chief Executive Officer or President of
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto of, or of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same, or at any prior or
subsequent, time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the state of Oregon. All obligations of the Company to
make payments or to provide benefits shall be subject to all applicable
withholding and reporting requirements. Any amounts not paid when due hereunder
shall bear interest at the rate of 8 percent per annum.
11. LEGAL FEES AND EXPENSES. The Company shall pay or reimburse any
reasonable legal fees and expenses you may incur in connection with any legal
action to enforce your rights under, or to defend the validity of, this
Agreement. The Company will pay or reimburse such legal fees and expenses on a
regular, periodic basis upon presentation by you of a statement or statements
prepared by your counsel in accordance with its usual practices.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. PAYMENTS DURING CONTROVERSY. Notwithstanding the pendency of any
dispute or controversy, the Company will continue
to pay you your full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, base salary and installments
of incentive compensation) and continue you as a participant in all Plans in
which you were participating when the notice given rise to the dispute was
given, until the dispute is finally resolved in accordance with Section 6(d).
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement. You shall be entitled to seek specific performance of your
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
If you accept and agree to the terms of this Agreement, kindly sign
and return to the Company the enclosed copy of this letter, which will then
constitute our agreement on this subject.
WILLAMETTE INDUSTRIES, INC.
Agreed to this _____ day of ______________, 199__.