Employment Agreement - Inland Paperboard and Packaging Inc. and J. Patrick Maley
Inland Paperboard and Packaging, Inc.
4030 Vincennes Road
Indianapolis, IN 46268-0937
Phone 317.879.4277 Fax 317.879.4370
e-mail dstahl@iccnet.com
Dale E. Stahl [INLAND LOGO]
President and
Chief Executive Officer
April 10, 2003
PRIVATE & CONFIDENTIAL
Mr. J. Patrick Maley
1782 Percy Place
Collierville, Tennessee 38017
Dear Pat:
I am extremely pleased to offer you the position of Executive
Vice President, Paperboard Group for Inland Paperboard and
Packaging, Inc. ("Inland") reporting to me. You will also serve
as a Group Vice President for Temple-Inland Inc. (together with
Inland, the "Company"). In this position, you will serve as an
elected officer of the corporation with all appropriate
responsibilities and privileges, pending approval of the Board of
Directors.
Following are the key elements of our offer, all subject to
continued employment, acceptable performance, and compliance with
the Company's standard policies:
1. Employment. Your employment will be subject to and
conditioned upon your furnishing employment documentation
required by law and completing our normal background procedures
required of salaried employees under the Company's normal hiring
practices. Your employment will commence on or about June 1,
2003. You agree to devote your full time, attention, skill and
energy to the business and affairs of the Company, and to use
your best efforts to promote the success of the Company. Except
for the Change in Control Agreement described in paragraph 7,
below, your employment with the Company will at all times be "at-
will" and may be terminated by you or the Company at any time
without regard to this Agreement.
2. Salary.
Your starting annual salary will be $300,000, paid in accord
with normal payroll procedures for Inland executive
managers. You will be eligible for a base pay review at the
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Mr. J. Patrick Maley
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April 10, 2003
February Board meeting each year. All payments are subject
to all applicable tax withholdings and deductions.
3. Management Incentive.
In this position, you will participate in the Inland
Incentive Bonus Plan. You are eligible for up to 100% of
your annual base salary in the event that Inland achieves an
18.5% return on investment. The Management Incentive
approach is a schedule of payouts based on Inland return on
investment. Once a minimum five percent ROI has been
achieved for this position the plan pays 5.4x the ROI, for
example:
5% ROI = 27.0% of base pay incentive award
10% ROI = 54.0% of base pay incentive award
18.5% ROI = 100% of base pay incentive award
20% ROI = 108% of base pay incentive award
The last example reflects the fact that the plan is
uncapped. The target incentive is defined as 100% of base
pay. For 2003, you shall participate on a pro-rata basis
dependent on your employment date, but in no event will you
receive a bonus for 2003 of less than $150,000. All
payments are subject to all applicable tax withholding and
deductions.
4. Stock Options.
We will recommend to the Board of Directors that you receive
20,000 shares of non-qualified options. The price of these
options will be established by averaging the daily high and
low trading price on the date of the grant. The grant will
vest over four years at a rate of 25% per year with a 10-
year period of exercise.
You will be eligible for future stock option grants in the
discretion of the Board's Compensation Committee
commensurate with your position and the overall long term
incentive approach. For example, the position this year
would have received 10,000 shares of non-qualified options.
5. Restricted Stock.
We will also recommend to the Board that you receive 5,000
shares of Restricted Stock. This grant will vest after six
years.
You will also be eligible for future restricted stock grants
as the Compensation Committee may approve in its discretion
as a key element of our overall long-term incentive
approach. For example, the position would have received a
grant of 3,500 shares of Restrict Stock this year.
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Mr. J. Patrick Maley
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April 10, 2003
6. Prior Obligations.
You have disclosed to the Company the "Agreement Concerning:
Confidential Information" you signed while employed by
International Paper Company ("IP"), dated May 4, 1992 (the
"IP Agreement"). You have not signed a covenant not to
compete or other non-compete agreement with IP, nor have you
signed such an agreement in favor of any other company that
is presently in effect. Neither Inland nor the Company has
in the past asked you to disclose any confidential
information covered under the scope of your IP Agreement,
nor will Inland or the Company do so in the future, and of
course, you would not do so under any circumstances. Should
IP make a threat or claim, or bring a lawsuit, against you
either during or after your employment with Inland, alleging
either a breach of your IP Agreement, or alleging misuse of
IP confidential information, in connection with your Inland
employment, the Company agrees to indemnify, defend, and
hold you harmless from any and all costs, expenses, claims
or damages, including your reasonable legal fees and
reasonable expenses in connection with any such action by
IP.
7. Severance.
At the time your employment starts, you and the Company will
enter into a written change in control agreement, in the
form of the attached EXHIBIT "A," which provides that in the
event of a change in control of the corporation and loss of
position (as defined therein) you will receive certain
payments as well as the vesting of all options and/or
restricted stock. If you are involuntarily terminated for
any reason during your first 24 months of employment for any
reason other than a change in control as defined in EXHIBIT
"A," you will receive your base salary and all benefits for
the greater of (i)12 months, or (ii) the balance of the 24-
month period.
To the extent not prohibited by law, the following payments
will not be refundable by you to the extent paid by the
Company, nor withheld from you to the extent due from the
Company, in the event of termination of your employment: (a)
any severance payments called for under this Paragraph 7;
(b) the moving allowance of $10,000.00 and the relocation
bonus of $150,000.00 referred to in Paragraph 12, below; and
(c) the first year bonus of $150,000.00 referred to in
Paragraph 3, above. The Company agrees not to assert any
counterclaims, cross-claims, or other legal attacks against
any of these payments.
In the event of termination of your employment, you will be
allowed to exercise any vested stock options after
termination in accord with the terms of the stock option
plan. The Company will pay your reasonable legal fees and
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Mr. J. Patrick Maley
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April 10, 2003
reasonable expenses arising out of any action by you for
breach of its obligations under this Paragraph 7.
8. Vacation.
You will be eligible for four weeks of paid vacation
annually.
9. Supplemental Retirement Plan.
As a designated key executive you shall participate in the
Temple-Inland supplemental retirement plan. The primary
purpose of the plan is to restore those benefits earned but
not payable under the Pension Plan because of governmental
limits. Details will be provided.
10. Directors and Officers Liability Insurance.
As an officer of the corporation, you will be covered by the
Directors and Officers liability insurance in effect.
11. Benefits.
You will be eligible to participate in all standard Inland
benefits including medical, dental, life and disability
coverage as well as the Pension Plan and the Savings Plan.
(Applicable information is enclosed.)
12. Relocation.
Your relocation to the Austin area will be addressed under
the terms of the Inland relocation policy.
Included in this comprehensive policy are all reasonable and
customary costs associated with the sale of your current
residence and the purchase of a new residence in the Austin
area. Pre-paid interest or "points" are not included.
We will also pay the reasonable costs associated with the
disposition of your additional five-acre property if you
choose to dispose of it in the reasonably near future.
A process will be completed that will provide you guaranteed
selling prices for both your residence and the property. An
additional feature provides a special bonus if you sell
either property on your own.
All household goods will be relocated.
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Mr. J. Patrick Maley
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April 10, 2003
We provide a lump sum moving allowance. This allowance is
to cover expenses related to your relocation such as interim
living, trips home, house hunting trips and family
relocation travel. Your lump sum moving allowance will be
$10,000.
In addition to the moving allowance, you will also receive a
relocation bonus in the amount of $150,000 (taxable),
immediately upon your employment.
12. Financial Planning.
Financial planning as well as income tax planning and
preparation is currently provided to senior officers of the
Company and you are eligible to participate on the same
terms as the other officers as long as such services are
provided.
Pat, if there are any questions or if we've missed something,
please give us a call immediately. Our intent is clearly to make
the transition to Inland and the Austin area a positive
experience for you and your family.
As we have discussed, Pat, I feel this is a great opportunity for
you and the right move for Inland. We feel the opportunities
which exist within this organization are superior to those in
most other companies as a result of the environment we provide
our executives. To indicate your acceptance of these employment
terms, please sign the enclosed copy of this letter and return it
to me.
Sincerely,
/s/ Dale E. Stahl /s/ J. Patrick Maley
--------------------- ------------------------
Dale E. Stahl J. Patrick Maley
President and CEO
April 15, 2003
------------------------
Date
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CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, dated June 1, 2003 (the
"Effective Date"), is made by and between Temple-
Inland Inc., a Delaware corporation ("Temple-
Inland"), and J. Patrick Maley (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
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the 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 two (2) 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 two-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 two-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
immediately prior to the Date of Termination or, if
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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 otherwise
payable under a Pension Plan, the Executive shall be
treated as if he had accumulated (after the Date of
Termination) twenty-four (24) 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 otherwise 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 two (2) 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
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Executive for the uncompleted period 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
two (2) 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 two-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
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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
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 subsection (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
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"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 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,
9
<Page>15
plus interest on the amount of such repayment at 120%
of the rate provided in section 1274(b)(2)(B) of the
Code.
(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.
10
<Page>16
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, 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.
11
<Page>17
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 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 an instrument executed by the
Chief Executive Officer of Temple-Inland Inc. (after
reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's
counsel, to be heard before the Chief Executive
Officer) finding that, in the good faith opinion of
the Chief Executive Officer, 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,
12
<Page>18
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.
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.
13
<Page>19
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.
9.2 This Agreement shall inure to the
benefit of and be enforceable 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:
14
<Page>20
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 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.
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
15
<Page>21
U.S.C. sec. 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.
(E) "Board" shall mean the Board of
Directors of Temple-Inland Inc.
16
<Page>22
(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
Chief Executive Officer of Temple-Inland, which
demand specifically identifies the manner in which
the Chief Executive Officer 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
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
17
<Page>23
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:
(A) substantially all of
the Company's assets, or
18
<Page>24
(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),
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
shareholders of the Company in substantially the same
proportions as their ownership 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.,
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
19
<Page>25
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 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:
20
<Page>26
(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 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
21
<Page>27
(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)
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.
22
<Page>28
(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.
(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.
23
<Page>29
IN WITNESS WHEREOF, the parties have duly
executed this Agreement to be effective as of the
Effective Date.
TEMPLE-INLAND INC.
By:/s/ Kenneth M. Jastrow, II
---------------------------
Name: Kenneth M. Jastrow, II
Title: Chairman and CEO
EXECUTIVE
/s/ J. Patrick Maley
------------------------------
J. Patrick Maley
24