FORM OF  CHANGE OF CONTROL AGREEMENT -TIER I

 

 

Mr.(First_Name)(MI)(Last_Name)

International Paper Company

(TITLE)

(ADDRESS)

 

(CITY),(STATE)(ZIP)

 

Dear(First):

 

     International Paper Company (the "Company") considers the establishment and

maintenance of a sound and vital management to be essential to protecting and

enhancing the best interests of the Company and its shareholders. In this

connection, the Company recognizes that, as is the case with many publicly held

corporations, the possibility of a change of control may exist and that such

possibility, and the uncertainty and questions which it may raise among senior

management, may result in the departure or distraction of senior management

personnel to the detriment of the Company and its shareholders. Accordingly, the

Company's Board of Directors has determined that appropriate steps should be

taken to reinforce and encourage the continued attention and dedication of

members of the Company's senior management, including yourself, to their

assigned duties without distraction in the face of the potentially disturbing

circumstances arising from the possibility of a change of control of the

Company.

 

     In order to induce you to remain in the employ of the Company, and to

continue to exercise your special skills and knowledge at the Company, this

letter agreement (this "Agreement") sets forth the benefits which the Company

agrees will be provided to you in the event your employment with the Company is

terminated subsequent to a Change of Control (as defined in Section 2) under the

circumstances described below.

 

     1.   TERM

 

     This Agreement shall commence on the date hereof and, unless there is a

Change of Control, shall continue until the earliest of (a) your termination of

employment as a "full-time employee" of the Company, (b) the date when you

attain the age of 65 years or (c) the date when this Agreement is terminated by

the Company in accordance with the next sentence. If a Change of Control has not

occurred, then the Company shall have the right at any time to terminate this

Agreement by giving you 6 months prior written notice of termination of this

Agreement.

 

<PAGE>

 

     If a Change of Control occurs at any time prior to the termination of this

Agreement pursuant to the preceding paragraph, then this Agreement shall

terminate on the second anniversary of such Change of Control.

 

     2.   CHANGE OF CONTROL

 

          (a)  For purposes of this Agreement, a "Change of Control" shall be

     deemed to have occurred if:

 

               (i)   any "person" (as such term is used in Section 13(d) of the

          Securities Exchange Act of 1934, as amended, other than employee

          benefit plans sponsored by the Company) is or becomes the beneficial

          owner, directly or indirectly, of securities of the Company

          representing 20% or more of the combined voting power of the Company's

          then outstanding securities;

 

               (ii)  during any period of 2 consecutive years, individuals who

          at the beginning of such period constitute the Board of Directors of

          the Company (the "Board") cease for any reason to constitute at least

          a majority thereof, unless the election, or the nomination for

          election, by the Company's shareholders of each new director was

          approved by a vote of at least two-thirds (2/3) of the directors then

          still in office who were directors at the beginning of the period;

 

               (iii) a reorganization, merger or consolidation of the Company is

          consummated, in each case, unless, immediately following such

          reorganization, merger or consolidation, (x) more than 50% of the then

          outstanding shares of common stock of the corporation resulting from

          such reorganization, merger or consolidation and the combined voting

          power of the then outstanding securities of such corporation entitled

          to vote generally in the election of directors is then beneficially

          owned, directly or indirectly, by all or substantially all of the

          persons who were the beneficial owners of the Company's securities

          outstanding immediately prior to such reorganization, merger or

          consolidation, (y) no person (other than employee benefit plans

          sponsored by the Company) beneficially owns, directly or indirectly,

          20% or more of the then outstanding shares of common stock of the

          corporation resulting from such reorganization, merger or

          consolidation or the combined voting power of the then outstanding

          securities of such corporation entitled to vote generally in the

          election of directors and (z) at least a majority of the members of

          the board of directors of the corporation resulting from such

          reorganization, merger or consolidation were members of the Board at

          the time of the execution of the initial agreement providing for such

          reorganization, merger or consolidation;

 

               (iv)  the sale or other disposition of all or substantially all

          of the assets of the Company is consummated, other than to any

          corporation with respect to which, immediately following such sale or

          other disposition, (x) more than 50% of the then outstanding shares of

          common stock of such corporation and the combined voting power of the

          then outstanding securities of such corporation entitled to vote

          generally in the

 

                                       2

 

<PAGE>

 

                  election of directors is then beneficially owned, directly or

                  indirectly, by all or substantially all of the persons who

                  were the beneficial owners of the Company's securities

                  outstanding immediately prior to such sale or other

                  disposition, (y) no person (other than employee benefit plans

                  sponsored by the Company) beneficially owns, directly or

                  indirectly, 20% or more of the then outstanding shares of

                  common stock of such corporation or the combined voting power

                  of the then outstanding securities of such corporation

                  entitled to vote generally in the election of directors and

                  (z) at least a majority of the members of the board of

                  directors of such corporation were members of the Board at the

                  time of the execution of the initial agreement or action of

                  the Board providing for such sale or other disposition; or

 

                        (v)   the shareholders of the Company approve a complete

                  liquidation or dissolution of the Company;

 

          provided that a "Change of Control", as it affects any award specified

          in the International Paper Company Long-Term Incentive Compensation

          Plan in effect immediately prior to a Change of Control ("the LTICP"),

          shall have the meaning for a "Change of Control of the Company" set

          forth in such plan and, as it affects any benefits pursuant to the

          International Paper Company Unfunded Supplemental Retirement Plan for

          Senior Managers in effect immediately prior to a Change of Control

          (the "SERP"), shall have the meaning for a "Change of Control" set

          forth in the SERP.

 

                  (b)   Provided that you remain in the employment of the

          Company as of the date immediately preceding a Change of Control, then

          upon the occurrence of such Change of Control:

 

                        (i)   each stock option to purchase shares of the common

                  stock of the Company (or such other securities of the Company

                  that may be substituted for such stock of the Company) granted

                  to you by the Company under any plan, arrangement or agreement

                  before or after the date hereof (but prior to the Change of

                  Control), including the LTICP, and then held by you shall

                  become fully (100%) vested and exercisable;

 

                        (ii)  any and all forfeiture provisions, transfer

                  restrictions and any other restrictions applicable to each

                  award of restricted stock of the Company (or such other

                  securities of the Company that may be substituted for such

                  stock of the Company) granted to you by the Company under any

                  plan, arrangement or agreement before or after the date hereof

                  (but prior to the Change of Control), including the LTICP, and

                  then held by you shall immediately lapse in their entirety;

 

                        (iii) the performance goals applicable to any

                  performance-based awards granted to you by the Company under

                  any plan, arrangement or agreement (other than any short-term

                  annual incentive plan) before or after the date hereof (but

                  prior to the Change of Control), including the LTICP, and then

                  held by you will be deemed to have been fully satisfied (i.e.,

                  achieved at 100% of target, or, if higher and determinable,

                  achieved at the actual level) and all forfeiture provisions,

                  transfer restrictions and any other restrictions applicable to

                  any such

 

                                       3

 

<PAGE>

 

          performance-based awards shall immediately lapse in their entirety and

          all such awards shall be fully and immediately payable; and

 

               (iv) each executive continuity award and each other long-term

          award granted to you by the Company under any plan, arrangement or

          agreement before or after the date hereof (but prior to the Change of

          Control), including the LTICP, and then held by you shall become fully

          (100%) vested and, if applicable, exercisable.

 

     3.   TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL

 

     If a Change of Control occurs, you shall be entitled to the benefits

provided in Section 5 upon the subsequent termination of your employment during

the term of this Agreement, unless such termination is (x) because of your

death, Disability (as defined below) or Retirement (as defined below), (y) by

the Company for Cause (as defined below) or (z) by you, other than for Good

Reason (as defined below).

 

          (a) Disability; Retirement. If, as a result of your incapacity due to

              ----------------------

     physical or mental illness, you shall have been absent from the full-time

     performance of your duties with the Company for 6 consecutive months, and

     within 30 days after written notice of termination is given you shall not

     have returned to the full-time performance of your duties, the Company may

     terminate your employment for "Disability". Termination based on

     "Retirement" shall mean voluntary termination after your becoming eligible

     for "normal retirement" under the Company's pension plan in effect

     immediately prior to a Change of Control.

 

          (b) Cause. Termination by the Company of your employment for "Cause"

              -----

     shall mean termination upon:

 

 

              (i)  the willful and continued failure by you substantially to

          perform your duties with the Company (other than any such failure

          resulting from your incapacity due to physical or mental illness or

          any such actual or anticipated failure resulting from termination by

          you for Good Reason) after a written demand for substantial

          performance is delivered to you by the Board, which demand

          specifically identifies the manner in which the Board believes that

          you have not substantially performed your duties; or

 

              (ii) the willful engaging by you in conduct which is demonstrably

          and materially injurious to the Company, monetarily or otherwise.

 

     For purposes of this Section 3(b), no act, or failure to act, on your part

shall be deemed "willful" unless done, or omitted to be done, by you not in good

faith and without reasonable belief that your action or omission was in the best

interest of the Company.

 

     Notwithstanding the foregoing, you shall not be deemed to have been

terminated for Cause unless and until there shall have been delivered to you a

copy of a resolution

 

                                       4

 

<PAGE>

 

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 called and held for

such purpose (after reasonable notice to you and an opportunity for you,

together with your counsel, to be heard before the Board), finding that in the

good faith opinion of the Board you were guilty of conduct set forth above in

Sections 3(b)(i) or 3(b)(ii) and specifying the particulars thereof in detail.

 

               (c) Good Reason. You shall be entitled to terminate your

                   -----------

          employment for Good Reason. For purposes of this Agreement, "Good

          Reason" shall mean, without your express written consent, any of the

          following:

 

                   (i)   the assignment to you of any duties with the Company

          (or with a successor or affiliated company) inconsistent with your

          status as an executive, or a substantial adverse alteration in the

          nature or status of your responsibilities, from those in effect

          immediately prior to a Change of Control;

 

                   (ii)  a reduction in your annual base salary as in effect on

               the date hereof or as the same may be increased from time to time

               (except for across-the-board salary reductions similarly

               affecting all executives of the Company and all executives of any

               person in control of the Company);

 

                   (iii) the failure by the Company to continue in effect any

               material compensation plan in which you participate (including

               but not limited to the Company's performance share plan, stock

               option plan and management incentive plan, each as in effect

               immediately prior to a Change of Control) or any substitute plans

               adopted prior to the Change of Control, unless an equitable

               arrangement (embodied in an ongoing substitute or alternative

               plan) has been made with respect to such plan in connection with

               the Change of Control, or the failure by the Company to continue

               your participation therein on substantially the same basis, both

               in terms of the amount of benefits provided and the level of your

               participation relative to other participants, as existed

               immediately prior to the Change of Control;

 

                   (iv)  except for across-the-board reductions similarly

               affecting all executives of the Company and all executives of any

               person in control of the Company: (A) the failure by the Company

               to continue to provide you with benefits substantially similar to

               those enjoyed by you under any of the Company's pension, life

               insurance, medical, health and accident or disability plans in

               which you were participating at the time of a Change of Control,

               (B) the taking of any action by the Company which would directly

               or indirectly materially reduce any of such benefits or deprive

               you of any material fringe benefit enjoyed by you at the time of

               the Change of Control or (C) the failure by the Company to

               provide you with the number of paid vacation days to which you

               are entitled on the basis of years of service with the Company in

               accordance with the Company's normal vacation policy in effect

               immediately prior to the Change of Control;

 

                                       5

 

 

 

 

 

<PAGE>

 

                   (v)    the failure of the Company to obtain a satisfactory

               agreement from any successor to assume and agree to perform this

               Agreement;

 

                   (vi)   any purported termination of your employment which is

               not effected pursuant to a Notice of Termination satisfying the

               requirements of Section 3(d) (and, if applicable, the

               requirements of Section 3(b((; for purposes of this Agreement, no

               such purported termination shall be an effective termination by

               the Company;

 

                   (vii)  the individual holding the position of Chief Executive

               Officer prior to the time of occurrence of the event constituting

               the Change of Control shall have ceased to hold such position

               (except when such cessation is the result of the person's

               Disability or Retirement or was for Cause); or

 

                   (viii) the Company's requiring you to be based anywhere

               other than the Company's current principal executive offices,

               except for required travel on the Company's business to an extent

               substantially consistent with your present business travel

               obligations.

 

          Your right to terminate your employment pursuant to this Section 3(c)

shall not be affected by your incapacity due to physical or mental illness.

 

               (d) Notice of Termination. Any termination of your employment by

                   ---------------------

          the Company or by you shall be communicated by written Notice of

          Termination to the other party hereto in accordance with Section 7.

          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

          your employment under the provision so indicated, and shall specify a

          date for termination of employment ("Date of Termination") which shall

          not be less than 30 days or more than 60 days after the date of

          delivery of the Notice of Termination.

 

          4.   DEATH, DISABILITY OR ELIGIBILITY FOR NORMAL RETIREMENT

 

          This Agreement shall not be applicable in the event of termination of

your employment because of your death, Disability or Retirement.

 

          5.   COMPENSATION UPON TERMINATION

 

          If a Change of Control occurs and your employment is subsequently

terminated during the term of this Agreement under the circumstances described

in Section 3 (other than for Cause) which entitle you to benefits under this

Agreement, then:

 

               (a) The Company will continue to provide medical and dental

          insurance coverage to you and your dependents which is comparable in

          benefits and in participant contributions, deductibles, co-payments

          and other terms, to the coverage which you had (i) immediately prior

          to the Change of Control or (ii) as

 

                                       6

 

<PAGE>

 

     of the Date of Termination, whichever is better in your sole discretion,

     and this coverage will continue until such time as you become eligible to

     join a comparable plan sponsored by another employer, or attain age 65 and

     are eligible to enroll in the Medicare program.

 

          (b)  After you attain age 65, the Company will provide retiree medical

     coverage for you and your dependents which is comparable in benefits and in

     participant contributions, deductibles, co-payments and other terms to the

     coverage provided by the Company's retiree medical plan in effect (i)

     immediately prior to the Change of Control or (ii) as of the Date of

     Termination, whichever is better in your sole discretion (with a

     coordination of benefits clause comparable to the clause used in connection

     with the relevant retiree medical plan).

 

          (c)  The Company shall pay to you the following amounts in one

     lump-sum payment in cash within 30 days of the Date of Termination:

 

               (i)   your full base salary through the Date of Termination, at

          the rate in effect at the time Notice of Termination is given, plus an

          amount in cash equal to the value of any vacation earned but not taken

          (based upon such rate of base salary);

 

               (ii)  to the extent not paid, your full prior-year short-term

          annual incentive compensation (in the amount determined prior to the

          Date of Termination, or if such amount has not been determined as of

          the Date of Termination, an amount not less than the higher of (x)

          your actual short-term annual incentive compensation amount for the

          year before such prior-year or (y) your target short-term annual

          incentive compensation amount for such prior-year);

 

               (iii) your short-term annual incentive compensation for the year

          in which the Date of Termination occurs, as if the performance goals

          applicable to such amount have been fully satisfied (i.e., achieved at

          100% of target, or, if higher and determinable, achieved at the actual

          level); provided that such compensation will be prorated to reflect

          the number of days that have elapsed as of the Date of Termination

          since the beginning of such year; plus

 

               (iv)  a termination payment equal to the sum of:

 

                         (A) the product of "3" times a "Base Amount" consisting

                     of the sum of (I) your annualized base salary as of the

                     Date of Termination and (II) the greater of (x) your target

                     short-term annual incentive compensation amount for the

                     year in which the Date of Termination occurs or (y) your

                     average short-term annual incentive compensation amount

                     during the 3 years preceding the Date of Termination (it

                     being understood that in the case of the most recent year

                     preceding the Date of Termination, such amount may, if

                     applicable, be the amount to which you have become

 

                                       7

 

<PAGE>

 

                     entitled under Section 5(c)(ii) in respect of such year);

                     provided that Base Amount shall exclude any compensation

                     under long-term incentive compensation plans, performance

                     share plans, stock option plans or executive continuity

                     awards; plus

 

                         (B)  in the event it shall be determined that any

                     compensation by or benefit from the Company to you or for

                     your benefit, whether pursuant to the terms of this

                     Agreement or otherwise (collectively, the "Payment"), would

                     be subject to the excise tax imposed by Section 4999 of the

                     Internal Revenue Code of 1986, as amended (the "Code"), or

                     any similar provision or any interest or penalties with

                     respect to such excise tax (such excise tax, together with

                     any such interest and penalties, are hereinafter

                     collectively referred to as the "Excise Tax"), an

                     additional lump-sum payment (a "Gross-Up Payment") in an

                     amount determined by the Company's outside auditors such

                     that after payment by you of all taxes (including any

                     interest or penalties imposed with respect to such taxes),

                     including any Excise Tax, imposed upon the Gross-Up

                     Payment, you retain an amount of the Gross-Up Payment equal

                     to the Excise Tax imposed upon the Payment; provided,

                     however, that if the aggregate value of the Payment is less

                     than 115% of the product of "3" times your "base amount"

                     (as defined in Section 280G(b)(3) of the Code) (such

                     product, the "Golden Parachute Threshold"), then you shall

                     not be entitled to any Gross-Up Payment and, instead, the

                     Payment shall be reduced to an amount equal to $1.00 less

                     than the Golden Parachute Threshold;

 

provided that such lump-sum payment under this Section 5(c) shall be deposited

in a "rabbi trust" upon the execution of any merger, stock purchase, asset

purchase or similar agreement that, upon the consummation of the transactions

contemplated thereunder, would result in a Change of Control.

 

          (d)  You shall be entitled to receive the highest, as determined by

     the Company's outside auditors, of:

 

               (i)   your benefits pursuant to the SERP, as if there had been a

          Change of Control;

 

               (ii)  your benefits pursuant to the SERP, as if there had not

          been a Change of Control and as if you were credited with 3 years of

          additional age and 3 years of additional service; or

 

               (iii) your benefits pursuant to the Retirement Plan of

          International Paper Company in effect immediately prior to the Change

          of Control, as if you were credited with 3 years of additional age and

          3 years of additional service.

 

                                       8

 

<PAGE>

 

     You shall be entitled to receive the benefits under this Section 5(d) as a

lump-sum payment within 30 days of the Date of Termination and you shall not be

required to receive any consent or other approval from the Company to receive

such benefits.

 

            (e) You shall be entitled to receive executive financial counseling

     services valued up to $20,000 in aggregate.

 

     You shall not be required to mitigate the amount of any payment provided

for in this Section 5 (by seeking other employment or otherwise), nor shall the

amount of any payment provided for in this Section 5 be reduced by any

compensation earned by you as a result of employment by another employer after

the Date of Termination.

 

     The compensation set forth above shall be in lieu of any severance or

termination payments which might otherwise be payable under any other severance

programs or policy or practice of the Company, other than those set out as part

of any of the Company's long-term incentive plans, performance share plans,

stock option plans, executive continuity awards and retirement or supplemental

retirement plans.

 

     In addition to the payments under this Agreement, you shall continue to be

eligible to receive all of your vested accrued benefits under employee pension

and welfare benefit plans sponsored by the Company.

 

     6.   SUCCESSORS; BINDING AGREEMENT

 

          (a)  Successor Companies. The Company 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 the

     Company, by agreement in form and substance satisfactory to you, expressly

     to assume and agree to perform this Agreement in the same manner and to the

     same extent that the Company would be required to perform it if no such

     succession had taken place. Failure by the Company to obtain such agreement

     prior to the effectiveness of any such succession shall be a breach of this

     Agreement and shall entitle you to terminate your employment and to receive

     compensation from the Company in the same amount and on the same terms as

     you would be entitled hereunder if you terminated your employment for Good

     Reason, except that the date on which any such succession becomes effective

     shall be deemed the Date of Termination. As used in this Agreement,

     "Company" shall mean the Company hereinbefore defined and any successor to

     its business and/or assets as aforesaid which executes and delivers the

     agreement provided for in this Section 6 or which otherwise becomes bound

     by all terms and provisions of this Agreement by operation of law.

 

          (b)  Heirs; Representatives. This Agreement shall inure to the benefit

               ----------------------

     of and be enforceable by your personal or legal representatives, executors,

     administrators, successors, heirs, distributees, devisees and legatees. If

     you should die while any amounts would still be payable to you hereunder if

     you had continued to live, all such amounts, unless otherwise provided

     herein, shall be paid in accordance with the terms of this Agreement to

     your devisee, legatee or other designee, or, if there be no such designee,

     to your estate.

 

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<PAGE>

 

     7.   NOTICE

 

     For the purposes 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 certified mail, return

receipt requested, postage prepaid, addressed to the respective addresses set

forth on the first page of this Agreement; provided that all notices to the

Company shall be directed to the attention of the Senior Vice President Human

Resources of the Company with a copy to the Secretary of the Company, or to such

address as either party may have furnished to the other in writing in accordance

herewith, except that notices of change of address shall be effective only upon

receipt.

 

     8.   MISCELLANEOUS

 

     This Agreement constitutes the entire agreement on this subject matter

between the parties and supersedes any prior oral or written agreements or

understandings on the subject matter covered by this Agreement and shall not be

amended or modified except by written agreement signed by both parties. No

significant provisions of this Agreement may be waived or discharged, unless

such waiver or discharge is in writing signed by the party who is making the

waiver or discharge. No waiver by either party hereto at any time of any breach

by the other party hereto of, or compliance with, any condition or provision of

this Agreement to be performed by such other party shall be deemed a waiver of

any similar or dissimilar provisions or conditions at the same or at any prior

or subsequent time. In the event that this Agreement provides benefits upon

termination of your employment which duplicate benefits contained in any

employment arrangement with you, such arrangement shall automatically be amended

in accordance with this Agreement so that your benefits under this Agreement

shall be sole and exclusive to the extent to which they are duplicative. The

validity, interpretation, construction and performance of this Agreement shall

be governed by the laws of the State of New York.

 

     9.   VALIDITY

 

     The invalidity or unenforceability of any provisions of this Agreement

shall not affect the validity or enforceability of any other provisions of this

Agreement, which shall remain in full force and effect.

 

     10.  ARBITRATION; LEGAL EXPENSES

 

     Any dispute or controversy arising under or in connection with this

Agreement shall be settled exclusively by arbitration in New York, New York, in

accordance with the rules of the American Arbitration Association then in

effect. Notwithstanding the pendency of any such dispute or controversy, the

Company will continue to pay you your base salary in effect when the notice

giving rise to the dispute was given, and will continue you as a participant in

all compensation, benefit and insurance plans in which you were participating

when the notice giving rise to the dispute was given, until the dispute is

finally resolved.

 

     The Company shall also pay all legal fees and expenses incurred by you as a

result of such termination (including all such fees and expenses, if any,

incurred in contesting or disputing any such termination or in seeking to obtain

or enforce any right or benefit provided by this Agreement), except such fees

and expenses incurred in

 

                                       10

 

<PAGE>

 

connection with any frivolous claim or suit. All amounts paid under this Section

10 are in addition to any other amounts due under this Agreement and shall not

be offset against or reduce any other amounts due under this Agreement.

 

     Judgment may be entered on the arbitrator's award in any court having

jurisdiction; provided, however, that you shall be entitled to seek specific

performance of your right to be paid until the Date of Termination during the

pendency of any dispute or controversy arising under or in connection with this

Agreement.

 

     11.  RELEASE.

 

     You will be required to execute and deliver a valid and irrevocable release

of employment-related claims in the form provided by the Company in order to

receive any of your compensation or benefits pursuant to the terms of this

Agreement.

 

                                       11

 

<PAGE>

 

     If this, letter correctly sets forth our agreement on the subject matter

hereof, kindly sign and return to the Company the enclosed copy of this letter

which will then constitute our agreement on this subject.

 

                                            Sincerely,

 

                                            INTERNATIONAL PAPER COMPANY

 

 

                                            By:_________________________________

                                               J. N. Carter

                                               SVP, Human Resources

 

Agreed:

 

________________________________________

((First_Name))((Last_Name))

((TITLE))

 

Social Security Number: ________________

 

 

 

 

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