Exhibit 10.2
FORM OF CHANGE OF CONTROL
AGREEMENT—TIER II
Mr./Ms. [Full Name]
International Paper Company
[TITLE]
[ADDRESS]
Dear [First Name]:
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.
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
first anniversary of such Change of Control.
2. CHANGE OF CONTROL
DEFINED
(a) For purposes of this Agreement,
a “ Change of Control ” means the occurrence of
any of the following:
(1) the consummation of any
transaction (including, without limitation, any merger or
consolidation) the result of which is that any “person”
or “group” (as those terms are used in
Section 13(d)(3) of the Securities Exchange Act of 1934,
hereinafter the “ Exchange Act ”) becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of the
Company’s voting stock representing 30% or more of the voting
power of the Company’s outstanding voting stock, provided,
however, that an employee of the Company or any of its
subsidiaries for whom shares are held under an employee stock
ownership, employee retirement, employee savings or similar plan
and whose shares are voted in accordance with the instructions of
such employee shall not be a member of a “group” (as
that term is used in Section 13(d)(3) of the Exchange Act)
solely because such employee’s shares are held by a trustee
under said plan;
(2) 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;
(3) the Company consolidates with,
or merges with or into, any person, or any person consolidates
with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the Company’s
outstanding voting stock or voting stock of such other person is
converted into or exchanged for cash, securities or other property,
other than any such transaction where the Company’s voting
stock outstanding immediately prior to such transaction
constitutes, or is converted into or exchanged for, voting stock
representing more than 50% of the voting power of the voting stock
of the surviving person immediately after giving effect to such
transaction;
(4) the direct or indirect
sale, lease, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the
Company and its subsidiaries taken as a whole to any
“person” or “group” (as those terms are
used in Section 13(d)(3)) of the Exchange Act other than to
the Company or one of its subsidiaries; or
(5) the shareholders of the Company
approve a complete liquidation or dissolution of the
Company.
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(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 time-vested 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 determinable, achieved at the
actual level) and all forfeiture provisions, transfer restrictions
and any other restrictions applicable to any such performance-based
awards shall immediately lapse in their entirety and all such
awards shall be fully and immediately payable in shares of Company
common stock, unless otherwise determined by the Board of Directors
or its designated committee.
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 shall mean
that, as a result of any medically determinable physical or mental
impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12
months, you are receiving income replacement benefits for a period
of not less than three months under an accident and health plan
covering employees of the Company.
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(b) Retirement shall mean
voluntary termination other than for Good Reason after your
becoming eligible for “normal retirement” under the
Company’s pension plan in effect immediately prior to a
Change of Control.
(c) 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(c), 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
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(c)(i) or 3(c)(ii), and specifying the
particulars thereof in detail.
(d) 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;
(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, Management Incentive Plan or Unfunded
Supplemental Retirement Plan for Senior Managers
(“SERP”)), 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
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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;
(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(e) (and,
if applicable, the requirements of Section 3(c)); for purposes
of this Agreement, no such purported termination shall be an
effective termination by the Company; or
(vii) the Company’s requiring
you to be based at a new place of work more than 50 miles from your
place of work immediately prior to the Change of Control, 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(d) shall not be affected
by your incapacity due to physical or mental illness.
(e) 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 11. For purposes of this
Agreement, a “ Notice of Termination ” shall
mean a notice which sha
