Change In Control Agreement - Temple-Inland Inc. and Randall D. Levy
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, dated October 2, 2000 (the "Effective
Date"), is made by and between Temple-Inland Inc., a Delaware corporation
("Temple-Inland"), and Randall D. Levy (the "Executive").
WHEREAS, Temple-Inland considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of Temple-Inland and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, Temple-Inland and the Executive hereby agree
as follows:
1. Defined Terms. The definitions of capitalized terms used in
this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the Effective Date and shall continue in effect through the second
anniversary of the Effective Date; provided, however, that commencing on the
first anniversary of the Effective Date, and on each anniversary of the
Effective Date thereafter, the Term shall automatically be extended for one
additional year unless, not later than 90 days prior to each such date, the
Company or the Executive shall have given notice not to extend the Term; and
provided, further, that if a Change in Control shall have occurred during the
Term, the Term shall expire no earlier than 36 months beyond the month in which
such Change in Control occurred.
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3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments and
the other payments and benefits described herein. Except as provided in Section
9.1 hereof, no Severance Payments shall be payable under this Agreement unless
there shall have been (or, under the terms of the second sentence of Section 6.1
hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be retained in the
employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six months from
the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full salary to the Executive at the rate
in effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by the Company during such
period (other than any disability plan), until the Executive's employment is
terminated by the Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the Executive's full salary to the Executive through the Date of Termination
at the highest rate in effect during the three-year period ending immediately
prior
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to the Date of Termination together with all compensation and benefits payable
to the Executive through the Date of Termination under the terms of the
Company's compensation and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason.
6. Severance Payments.
6.1 If the Executive's employment is terminated following a
Change in Control and within two (2) years after a Change in Control, other than
(A) by the Company for Cause, (B) by reason of death or Disability, or (C) by
the Executive without Good Reason, then the Company shall pay the Executive the
amounts, and provide the Executive the benefits, described in this Section 6.1
("Severance Payments") and Section 6.2, in addition to any payments and benefits
to which the Executive is entitled under Section 5 hereof. For purposes of this
Agreement, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason, if (i) the Executive's employment is terminated by the Company
without Cause prior to a Change in Control (whether or not a Change in Control
ever occurs) and such termination was at the request or direction of a Person
who has entered into an agreement with the Company the consummation of which
would constitute a Change in Control, or (ii) the Executive terminates his
employment for Good Reason prior to a Change in Control (whether or not a Change
in Control ever occurs) and the circumstance or event which constitutes Good
Reason occurs at the request or direction of such Person. For purposes of any
determination regarding the applicability of the immediately preceding sentence,
any position taken by the
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Executive shall be presumed to be correct unless the Company establishes to the
Board by clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination, the Company shall
pay to the Executive a lump sum severance payment, in cash, equal to three (3)
times the sum of (i) the Executive's highest base salary as in effect during the
three-year period ending immediately prior to the Date of Termination and (ii)
the Executive's target annual bonus pursuant to any annual bonus or incentive
plan maintained by the Company in respect of the fiscal year in which occurs the
Date of Termination (or, if higher, in respect of any of the three preceding
fiscal years). The amount payable pursuant to this Section 6.1(A) shall be
reduced by the amount of any cash severance or salary continuation benefit paid
or payable to the Executive under any other plan, policy or program of the
Company or any written employment agreement between the Executive and the
Company.
(B) For the three-year period immediately following
the Date of Termination, the Company shall arrange to provide the Executive and
his dependents life, short-term disability, long-term disability, travel
accident, accidental death and dismemberment, medical, dental and other health
and welfare benefits substantially similar to those provided to the Executive
and his dependents immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive and his dependents
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, at no greater cost to the Executive than the cost to
the Executive immediately prior to such date or occurrence; provided, however,
that, unless the Executive consents to a different method (after taking into
account the effect of such method on the calculation of "parachute payments"
pursuant to Section 6.2 hereof), such health and welfare benefits shall be
provided through a third-party insurer. To the extent that health and welfare
benefits of the same type are received by or made available to the Executive
during the three-year period following the Executive's Date of Termination
(which such benefits received by or made available to the Executive shall be
reported by the Executive to the insurance company or other appropriate party in
accordance with any applicable coordination of benefits provisions), the
benefits otherwise receivable by the Executive pursuant to this Section 6.1(B)
shall be made secondary to such benefits; provided, however, that the Company
shall reimburse the Executive for the excess, if any, of the cost of such
benefits to the Executive over such cost
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immediately prior to the Date of Termination or, if more favorable to the
Executive, the first occurrence of an event or circumstance constituting Good
Reason.
(C) Each option held by the Executive to purchase
shares of common stock of Temple-Inland outstanding as of the Date of
Termination shall be treated in accordance with the applicable terms of any plan
(including any underlying agreement) pursuant to which it was granted.
(D) For purposes of determining the amount of any
benefit payable to the Executive and the Executive's right to any benefit other
wise payable under a Pension Plan, the Executive shall be treated as if he had
accumulated (after the Date of Termination) thirty-six (36) additional months of
service credit thereunder and had been credited during such period with
compensation at the highest rate in effect during the three-year period ending
immediately prior to the Date of Termination.
(E) Notwithstanding any provision of any Pension Plan
or deferred compensation plan to the contrary, and except to the extent other
wise provided in Section 6.1(F), in lieu of any other benefit under a
supplemental, excess benefit or deferred compensation plan, the Company shall
pay to the Executive a lump sum amount, in cash, equal to the sum of (i) the
actuarial equivalent of the aggregate benefit which the Executive had accrued
under the terms of all supplemental and excess benefit plans and (ii) the
actuarial equivalent of the deferred compensation otherwise payable to the
Executive, in either case without regard to any amendment to any such plan made
subsequent to a Change in Control and on or prior to the Date of Termination,
which amendment adversely affects in any manner the computation of benefits
thereunder. For purposes of this Section 6.1(E), "actuarial equivalent" shall be
determined (x) using the same assumptions utilized under the applicable plan (or
if there is no provision for such assumptions, under the Company's tax-qualified
Pension Plan in which the Executive participates) immediately prior to the Date
of Termination or, if more favorable to the Executive, immediately prior to the
first occurrence of an event or circumstance constituting Good Reason, (y)
taking into account any early retirement subsidies associated with the
applicable benefit, and (z) on the basis of a straight life annuity (or other
default form of benefit) commencing at the date (but in no event earlier than
the third anniversary of the Date of Termination) as of which the actuarial
equivalent of such annuity or other form of benefit is greatest.
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(F) In addition to the benefits to which the
Executive is entitled under any defined contribution Pension Plan, the Company
shall pay the Executive a lump sum amount, in cash, equal to the sum of (i) the
amount that would have been contributed thereto by the Company on the
Executive's behalf during the three (3) years immediately following the Date of
Termination, determined (x) as if the Executive made the maximum permissible
contributions thereto during such period, (y) as if the Executive earned
compensation during such period at a rate equal to the Executive's highest rate
of compensation (as defined in the Pension Plan) during the three-year period
ending immediately prior to the Date of Termination, and (z) without regard to
any amendment to the Pension Plan made subsequent to a Change in Control and on
or prior to the Date of Termination, which amendment adversely affects in any
manner the computation of benefits thereunder, and (ii) the excess, if any, of
(x) the Executive's account balance under the Pension Plan as of the Date of
Termination over (y) the portion of such account balance that is nonforfeitable
under the terms of the Pension Plan.
(G) Notwithstanding any provision of any annual or
long-term incentive plan to the contrary, the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of (i) any unpaid
incentive compensation which has been allocated or awarded to the Executive for
a completed annual bonus cycle preceding the Date of Termination under any such
plan and which, as of the Date of Termination, is contingent only upon the
continued employment of the Executive to a subsequent date, (ii) if the Date of
Termination occurs before the end of the first six months in the then-current
annual bonus cycle under the applicable plan, a pro rata portion to the Date of
Termination of the aggregate value of all contingent incentive compensation
awards to the Executive for the uncompleted period under any such plan,
calculated as to each such award by multiplying the award that the Executive
would have earned on the last day of the performance award period, assuming the
achievement, at the target level (or if higher, at the then projected actual
final level), of the individual and corporate performance goals established with
respect to such award, by the fraction obtained by dividing the number of full
months and any fractional portion of a month during such performance award
period through the Date of Termination by the total number of months contained
in such performance award period, and (iii) if the Date of Termination occurs
after the end of the first six months in the then-current annual bonus cycle but
before the end of such annual bonus cycle under the applicable plan, the full
aggregate value of all contingent incentive compensation awards to the Executive
for the uncompleted period
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under any such plan assuming the achievement, at the target level (or if higher,
at the then projected actual final level), of the individual and corporate
performance goals established with respect to such award.
(H) If the Executive would have become entitled to
benefits under the Company's post-retirement health care or life insurance
plans, as in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, had the
Executive's employment terminated at any time within three (3) years after the
Date of Termination, the Company shall provide such post-retirement health care
or life insurance benefits to the Executive and the Executive's dependents
commencing on the later of (i) the date on which such coverage would have first
become available and (ii) the date on which benefits described in subsection (B)
of this Section 6.1 terminate.
(I) The Company shall reimburse the Executive for
expenses incurred for outplacement services suitable to the Executive's position
for a period of one (1) year following the Date of Termination (or, if earlier,
until the first acceptance by the Executive of an offer of employment) in an
amount not exceeding 15% of the sum of the Executive's highest annual base rate
of salary as in effect during the three-year period ending immediately prior to
the Date of Termination, and the greatest target annual bonus pursuant to any
annual bonus or incentive plan maintained by the Company in respect of the
fiscal year in which occurs the Date of Termination (or, if higher, in respect
of any of the three preceding fiscal years).
(J) For the three-year period immediately following
the Date of Termination, the Company shall provide the Executive with his
customary perquisites (such as any use of a Company provided automobile, club
membership fee reimbursements, income tax preparation and financial advisory
services) in each case on the same terms and conditions that were applicable
immediately prior to the Date of Termination or, if more favorable, immediately
prior to the first occurrence of an event or circumstance constituting Good
Reason.
6.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any payment or benefit received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or
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any other plan, arrangement or agreement with the Company, any Person whose
actions result in a Change in Control or any Person affiliated with the Company
or such Person) (all such payments and benefits, including the Severance
Payments, being hereinafter called "Total Payments") will be subject (in whole
or part) to the Excise Tax, then, subject to the provisions of subsection (B) of
this Section 6.2, the Company shall pay to the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes
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 income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination (or if there is no Date of Termination,
then the date on which the Gross-up Payment is calculated for purposes of this
Section 6.2), net of the maximum reduction in federal income tax which could be
obtained from deduction of such state and local taxes.
(B) In the event that the amount of the Total Payments does
not exceed 110% of the largest amount that would result in no portion of the
Total Payments being subject to the Excise Tax (the "Safe Harbor"), then sub
section (A) of this Section 6.2 shall not apply and the noncash Severance
Payments shall first be reduced (if necessary, to zero), and the cash Severance
Benefits shall thereafter be reduced (if necessary, to zero) so that the amount
of the Total Payments is equal to the Safe Harbor; provided, however, that the
Executive may elect to have the cash Severance Payments reduced (or eliminated)
prior to any reduction of the noncash Severance Payments.
(C) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Total Payments shall be treated as "parachute payments" within
the meaning of section 280G(b)(2) of the Code, unless in the opinion of tax
counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by
the accounting firm which was, immediately prior to the Change in Control, the
Company's independent auditor (the "Auditor"), such other 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, (ii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall be treated as subject
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to the Excise Tax unless, in the 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 allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
Prior to the payment date set forth in Section 6.3 hereof, the Company shall
provide the Executive with its calculation of the amounts referred to in this
Section 6.2(C) and such supporting materials as are reasonably necessary for the
Executive to evaluate the Company's calculations. If the Executive disputes the
Company's calculations (in whole or in part), the reasonable opinion of Tax
Counsel with respect to the matter in dispute shall prevail.
(D) (I) In the event that (1) amounts are paid to the
Executive pursuant to Section 6.2(A), (2) there is a Final Determination that
the Excise Tax is less than the amount taken into account hereunder in
calculating the Gross-Up Payment, and (3) after giving effect to such Final
Determination, the Severance Payments are to be reduced pursuant to Section
6.2(B), the Executive shall repay to the Company, within five (5) business days
following the date of the Final Determination, the Gross-Up Payment, the amount
of the reduction in the Severance Payments, plus interest on the amount of such
repayments at 120% of the rate provided in section 1274(b)(2)(B) of the Code.
(II) In the event that (1) amounts are paid to the
Executive pursuant to Section 6.2(A), (2) there is a Final Determination that
the Excise Tax is less than the amount taken into account hereunder in
calculating the Gross-Up Payment, and (3) after giving effect to such Final
Determination, the Severance Payments are not to be reduced pursuant to Section
6.2(B), the Executive shall repay to the Company, within five (5) business days
following the date of the Final Determination, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the
Executive), 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 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.
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(III) Except as otherwise provided in clause (IV)
below, in the event there is a Final Determination that the Excise Tax exceeds
the amount taken into account hereunder in determining 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, within five (5) business days following the date of the Final
Determination, the sum of (1) a Gross-Up Payment in respect of such excess and
in respect of any portion of the Excise Tax with respect to which the Company
had not previously made a Gross-Up Payment, including a Gross-Up Payment in
respect of any Excise Tax attributable to amounts payable under clauses (2) and
(3) of this paragraph (III) (plus any interest, penalties or additions payable
by the Executive with respect to such excess and such portion), (2) if Severance
Payments were reduced pursuant to Section 6.2(B) but after giving effect to such
Final Determination, the Severance Payments should not have been reduced
pursuant to Section 6.2(B), the amount by which the Severance Payments were
reduced pursuant to Section 6.2(B), and (3) interest on such amounts at 120% of
the rate provided in section 1274(b)(2)(B) of the Code.
(IV) In the event that (1) Severance Payments were
reduced pursuant to Section 6.2(B) and (2) the aggregate value of Total
Payments which are considered "parachute payments" within the meaning of section
280G(b)(2) of the Code is subsequently redetermined in a Final Determination,
but such redetermined value still does not exceed 110% of the Safe Harbor, then,
within five (5) business days following such Final Determination, (x) the
Company shall pay to the Executive the amount (if any) by which the
reduced Severance Payments (after taking the Final Determination into account)
exceeds the amount of the reduced Severance Payments actually paid to the
Executive, plus interest on the amount of such repayment at 120% of the rate
provided in section 1274(b)(2)(B) of the Code, or (y) the Executive shall pay to
the Company the amount (if any) by which the reduced Severance Payments actually
paid to the Executive exceeds the amount of the reduced Severance Payments
(after taking the Final Determination into account), plus interest on the amount
of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the
Code.
6.3 The payments provided in subsections (A), (E), (F) and (G)
of Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day,
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the Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments 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 30th day after the Date
of Termination. 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 the Executive, payable on the fifth 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). At the time that payments are
made under this Agreement, the Company shall provide the Executive with a
written statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without limitation,
any opinions or other advice the Company has received from Tax Counsel, the
Auditor or other advisors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five business
days after delivery of the Executive's written requests for payment accompanied
with such evidence of fees and expenses incurred as the Company reasonably may
require.
7. Termination Procedures and Compensation During Dispute.
7.1. Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
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circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. For purposes of this Agreement, any
purported termination of the Executive's employment shall be presumed to be
other than for Cause unless the Notice of Termination includes a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board which was
called and held for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, 30 days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such 30 day period), and (ii) if
the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than 30 days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive, shall not be less
than 15 days nor more than 60 days, respectively, from the date such Notice of
Termination is given).
7.3 Dispute Concerning Termination. If within 15 days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.
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7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Company pursuant to Section 6 hereof or Section
7.4 hereof. Further, the amount of any payment or benefit provided for in this
Agreement (other than Section 6.1(B) hereof) shall not be reduced by any
compensation earned by the Executive as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed
to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to Temple-Inland, Temple-Inland will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Temple-Inland to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that Temple-Inland would be required to perform it if no such succession
had taken place. Failure of Temple-Inland to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to compensation from the Company
in the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
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9.2 This Agreement shall inure to the benefit of and be
enforce able by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate.
10. Notices. For the purpose of this Agreement, notices 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 registered mail, return receipt requested, postage prepaid, addressed, if
to the Executive, to the address of the Executive as maintained from time to
time on the payroll system of the Company and, if to the Company, to the address
set forth below, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon actual receipt:
To the Company:
Temple-Inland Inc.
303 South Temple Drive
Diboll, Texas 75941
Attention: M. Richard Warner
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or of any lack 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. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by the Executive or
the Company; provided, however, that this Agreement shall supersede any
agreement setting forth the terms and conditions of the
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Executive's employment with the Company only in the event that the Executive's
employment with the Company is terminated on or following a Change in Control,
by the Company other than for Cause or by the Executive other than for Good
Reason. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Texas without regard to
its principles of conflicts of law. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any
additional withholding to which the Executive has agreed. The obligations of
the Company and the Executive under this Agreement which by their nature may
require either partial or total performance after the expiration of the Term
(including, without limitation, those under Sections 6 and 7 hereof) shall
survive such expiration.
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12. Validity.
12.1 Any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. Section 1828(k) and FDIC Regulation 12 C.F.R. Part 359, Golden
Parachute and Indemnification Payments.
12.2 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. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes. All claims by the Executive for
benefits under this Agreement shall be directed to and determined by the Board
and shall be in writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Board shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall further allow
the Executive to appeal to the Board a decision of the Board within 60 days
after notification by the Board that the Executive's claim has been denied.
15. Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in
Section 6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in
section 280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set
forth in Rule 13d-3 under the Exchange Act.
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(E) "Board" shall mean the Board of Directors of
Temple-Inland Inc.
(F) "Cause" for termination by the Company of the
Executive's employment shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties with the Company
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the Executive pursuant to
Section 7.1 hereof) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties, or (ii) the willful engaging by the Executive
in conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Board by
clear and convincing evidence that Cause exists.
(G) "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) any Person is or becomes the Beneficial
Owner, 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) representing 25% or more of the
combined voting power of the Company's then outstanding securities, excluding
any Person who becomes such a Beneficial Owner in connection with a transaction
described in clauses (a), (b) or (c) of paragraph (III) below;
(II) within any twenty-four (24) month
period, the following individuals cease for any reason to constitute a majority
of the number of directors then serving on the Board: individuals who, on the
Effective Date, constitute the Board and any new director (other than a
director whose initial
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assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, 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 the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended;
(III) there is consummated a merger,
consolidation of the Company or any direct or indirect subsidiary of the
Company with any other corporation or any recapitalization of the Company (for
purposes of this paragraph (III), a "Business Event") unless, immediately
following such Business Event (a) the directors of the Company immediately prior
to such Business Event continue to constitute at least a majority of the board
of directors of the Company, the surviving entity or any parent thereof, (b)
the voting securities of the Company outstanding immediately prior to such
Business Event continue to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, at least 60% of the combined voting power of the
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such Business Event, or (c) no Person is or
becomes the Beneficial Owner, directly or indirectly, of securities of the
Company or such surviving entity or any parent thereof (not including in the
securities Beneficially Owned by such Person any securities acquired directly
from the Company or its Affiliates) representing 25% or more of the combined
voting power of the then outstanding securities of the Company or such surviving
entity or any parent thereof (except to the extent such ownership existed prior
to the Business Event);
(IV) the shareholders of the Company approve
a plan of complete liquidation or dissolution of the Company;
(V) there is consummated an agreement for
the sale, disposition or long-term lease by the Company of:
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(A) substantially all of the
Company's assets,
(B) (i) substantially all of the
Company's ownership interest in Inland Paperboard and Packaging, Inc. (or any
successor thereto) or (ii) substantially all of the assets of Inland Paperboard
and Packaging, Inc. and its direct or indirect subsidiaries (or any successor
or successors thereto), or
(C) (i) substantially all of the
Company's ownership interest in Temple-Inland Forest Products Corporation or
Guaranty Federal Bank, F.S.B. (or any respective successor thereto) or (ii)
substantially all of the assets of Temple-Inland Forest Products Corporation or
Guaranty Federal Bank, F.S.B. and their respective direct or indirect
subsidiaries (or any respective successor or successors thereto),
other than such a sale, disposition or lease to an entity, at least 50% of the
combined voting power of the voting securities of which are owned by share
holders of the Company in substantially the same proportions as their owner ship
of the Company immediately prior to such sale or disposition; or
(VI) any other event that the Board, in its
sole discretion, determines to be a Change in Control for purposes of this
Agreement.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any transaction or
series of integrated transactions immediately following which the record holders
of the common stock of the Company immediately prior to such transaction or
series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of transactions.
(H) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(I) "Company" shall mean, unless the context clearly
requires otherwise, Temple-Inland Inc., a Delaware corporation, and any of its
Affiliates that actually employ the Executive; provided, that (I) for purposes
of Sections 15(G) and 15(U) hereof, Company shall mean Temple-Inland Inc.,
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except that in determining under Section 15(G) hereof whether or not any Change
in Control of the Company has occurred, Company shall include any successor to
Temple-Inland Inc.'s business and/or assets which assumes and agrees to perform
this Agreement by operation of law or otherwise, (II) unless the context clearly
requires otherwise, references to the Company in a capacity of employer shall
mean Temple-Inland Inc. or any of its Affiliates, whichever actually employs the
Executive, and (III) where the Agreement requires the Company to make a payment
to the Executive or to take some other action, either Temple-Inland, Inc. shall
do so or it shall cause any of its Affiliates that actually employ the Executive
to do so.
(J) "Date of Termination" shall have the meaning set
forth in Section 7.2 hereof.
(K) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the Company for a period of six consecutive months, the Company shall have given
the Executive a Notice of Termination for Disability, and, within 30 days after
such Notice of Termination is given, the Executive shall not have returned to
the full-time performance of the Executive's duties.
(L) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(M) "Excise Tax" shall mean any excise tax imposed
under section 4999 of the Code.
(N) "Executive" shall mean the individual named in
the first paragraph of this Agreement.
(O) "Final Determination" means a final determination
by the Internal Revenue Service or, if such determination is appealed, a final
determination by any court of competent jurisdiction.
(P) "Good Reason" for termination by the Executive of
the Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in
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Control, or prior to a Change in Control under the circumstances described in
clauses (i) and (ii) of the second sentence of Section 6.1 hereof (treating all
references in paragraphs (I) through (VI) below to a "Change in Control" as
references to a "Potential Change in Control"), of any one of the following acts
by the Company, or failures by the Company to act, unless, in the case of any
act or failure to act described in paragraph (I), (IV), or (V) below, such act
or failure to act is corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any
duties substantially inconsistent with the Executive's status as a senior
executive officer of the Company or a material adverse alteration in the nature
or status of the Executive's responsibilities from those in effect immediately
prior to the Change in Control (including, as applicable and without limitation,
the Executive ceasing to be an executive officer of a public company);
(II) a substantial reduction by the Company
in the Executive's annual base salary as in effect on the date hereof or as the
same may be increased from time to time;
(III) the relocation of the Executive's
principal place of employment to a location more than 50 miles from the
Executive's principal place of employment immediately prior to the Change in
Control or the Company's requiring the Executive to be based anywhere other than
such principal place of employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent substantially consistent
with the Executive's present business travel obligations;
(IV) the failure by the Company to pay to
the Executive any portion of the Executive's current compensation, or to pay to
the Executive any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven days of the date
such compensation is due;
(V) the failure by the Company to continue
to provide the Executive with benefits substantially similar to the material
benefits enjoyed by the Executive under any of the Company's executive
compensation (including bonus, equity or incentive compensation), pension,
savings, life insurance, medical, health and accident, or disability plans in
which the
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Executive was participating immediately prior to the Change in Control, the
taking of any other action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Executive of any material
fringe benefit enjoyed by the Executive at the time of the Change in Control, or
the failure by the Company to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect at the time of the Change in Control; or
(VI) any purported termination of the
Executive's employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1 hereof; for purposes of this
Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder. For purposes of any determination regarding
the existence of Good Reason, any claim by the Executive that Good Reason exists
shall be presumed to be correct unless the Company establishes to the Board by
clear and convincing evidence that Good Reason does not exist.
(Q) "Gross-Up Payment" shall have the meaning set
forth in Section 6.2 hereof.
(R) "Notice of Termination" shall have the meaning
set forth in Section 7.1 hereof.
(S) "Pension Plan" shall mean any tax-qualified,
supplemental or excess benefit pension plan maintained by the Company and any
other plan or agreement entered into between the Executive and the Company which
is designed to provide the Executive with supplemental retirement benefits, and
any tax-qualified, supplemental or excess defined contribution plan maintained
by the Company and any other defined contribution plan or agreement entered into
between the Executive and the Company.
(T) "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)
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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 Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
(U) "Potential Change in Control" shall be deemed to
have occurred if the event set forth in any one of the following paragraphs
shall have occurred:
(I) the Company enters into an agreement,
the consummation of which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly
announces an intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial
Owner, directly or indirectly, of securities of the Company representing 20% or
more of either the then outstanding shares of common stock of the Company or the
combined voting power of the Company's then outstanding securities (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates); or
(IV) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential Change in Control has
occurred.
(V) "Retirement" shall be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's retirement policy, including
early retirement, generally applicable to its salaried employees.
(W) "Severance Payments" shall have the meaning set
forth in Section 6.1 hereof.
(X) "Tax Counsel" shall have the meaning set forth in
Section 6.2 hereof.
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(Y) "Term" shall mean the period of time described in
Section 2 hereof (including any extension, continuation or termination
described therein).
(Z) "Total Payments" shall mean those payments so
described in Section 6.2 hereof.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement to be effective as of the Effective Date.
TEMPLE-INLAND INC.
By:
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Name: Kenneth M. Jastrow, II
Title: Chairman and Chief Executive
Officer
EXECUTIVE
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Randall D. Levy
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