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EXHIBIT 10.31
EXECUTIVE EMPLOYMENT
AGREEMENT
BETWEEN
INTERNATIONAL PAPER
COMPANY
AND
PAUL HERBERT
This Executive Employment Agreement
(“ Agreement ”) is by and between INTERNATIONAL
PAPER COMPANY, a New York corporation (“ IP ”)
and PAUL HERBERT (the “ Executive ”) and is
dated October 4, 2007.
WHEREAS, Executive has been
employed by IP since August 1992, and has been nominated and
approved to serve as the chief executive officer of the joint
venture between IP and Ilim Holding, S.A. (the “ JV
Company ”), effective October 1, 2007 (the
“Effective Date”);
WHEREAS, Executive is a party
to an employment agreement with the JV Company (the “ JV
Employment Agreement ”); and
WHEREAS, IP and Executive
desire to enter into this Agreement to memorialize the rights and
obligations as set forth below of the IP and Executive as they
relate to one another and to the JV Employment
Agreement.
FIRST : This Agreement
shall be in effect for so long as Executive is employed by the JV
Company (the “ Term ”). Executive shall not be a
Senior Vice President of IP or a member of IP’s Senior Lead
Team as of the Effective Date.
SECOND : It is
contemplated that at the expiration of the Term, or upon a sooner
termination of Executive’s employment with the JV Company in
accordance with the JV Employment Agreement, Executive shall return
to full-time employment with IP in a position that is reasonably
commensurate with the position he held with IP immediately prior to
the Effective Date (a “ Comparable Position ”).
In the event that Executive is removed from the position of Chief
Executive Officer of the JV Company by the Board of Directors of
the JV Company (the “ JV Board ”) in accordance
with Section 6.2 of the Shareholders Agreement, the consent of
at least 66% of the JV Board shall be required in order for
Executive to return to full-time employment with IP. At completion
of the Term of his employment (including agreed upon extensions),
or following termination of his employment with the JV Company for
Good Reason (as defined below), or in the event of termination of
employment other than in accordance with Section 6.2 of the
Shareholders Agreement, Executive may, without the consent of the
JV Board, return to a Comparable Position at IP.
THIRD : Executive
shall be eligible to receive an award under IP’s Management
Incentive Plan (“ MIP ”) for the year 2007
(prorated for the period of January 1, 2007 through the
Effective date) to be payable in the year 2008. Executive
acknowledges and agrees that he shall not be eligible to receive an
award under IP’s MIP for 2008 or thereafter in respect of any
period while employed by the JV Company. Executive shall be
eligible to receive an annual incentive bonus from the JV Company
in accordance with Section 3.7 of the JV Employment
Agreement.
FOURTH : Executive
acknowledges and agrees that he shall not be eligible to receive a
grant under IP’s Performance Share Plan (“ PSP
”) for the year 2008 or thereafter in respect of any period
while employed by the JV Company. The Parties agree that, except as
provided in the following sentences, Executive’s outstanding
grants for years prior to and including the year 2007 under
IP’s PSP shall remain outstanding and administered in
accordance with the terms and conditions of the applicable plans
and awards, provided, however, that the Executive shall be credited
with service to IP through December 31, 2007 for purposes of
the 2007 portion of any outstanding PSP grant.
IP agrees to establish an
unfunded, unsecured deferred compensation book entry amount for the
benefit of Executive to which is shall credit a dollar amount equal
to (1) the closing price of IP's common stock on
September 24, 2007 ($35.59), multiplied by (2) the number
of restricted shares payable to an employee at Position Level 34
based on IP's achieving performance for each of the following PSP
segments: (a) the third segment and 1/3 of the fourth segment
for the 2006-2008 PSP and (b) the second and third segments
and 2/3 of the fourth segment for the 2007-2009 PSP.
1
The 2006 PSP agreed targeted
amounts referenced above shall be paid to Executive in a lump sum
in February 2009 less applicable taxes. The 2007 PSP agreed
targeted amounts shall be paid to Executive in a lump sum in
February 2010 less applicable taxes. Executive shall not be
permitted to elect to receive either such lump sum amounts at a
different time or in a different format.
Executive shall be eligible
to receive a long-term incentive bonus from the JV Company in
accordance with Section 3.8 of the JV Employment
Agreement.
FIFTH : During the
Term Executive and his spouse, as applicable, shall continue
participation in, or receive comparable benefits to, the following
IP health and welfare plans, all of which shall be provided to
Executive on equivalent terms as provided to similarly situated
senior executives of IP: (i) group health insurance for
medical, dental, and prescription drugs: (ii) long-term
disability; (iii) short-term disability; (iv) group life
insurance; (v) executive supplemental life insurance (which
coverage shall be based on Executive’s annual base salary in
2007 paid by IP); (vi) retiree medical savings plan matching
contribution; and (v) post-retirement medical
benefits.
SIXTH : As of the
Effective Date, Executive shall become vested in a retirement
benefit payable upon his retirement under IP’s Unfunded
Supplemental Retirement Plan for Senior Managers (the “
SERP ”). Executive’s benefit under the SERP
shall be determined under the formula set forth in
Section 5(A) of the SERP based on his total period of service
with IP and its affiliates (collectively, “ Company
Employers ”), including, without limitation,
Executive’s service for any Company Employer in Russia. For
purposes of this Agreement and the SERP, the parties agree that
Executive’s service with the Company Employers commenced on
August 1, 1992, and has continued without interruption through
the Effective Date. Service during his employment with the JV
Company shall be counted in determining Executive’s SERP and
Pension Restoration Plan benefit. The parties agree that
compensation for purposes of calculating a benefit under the
non-qualified retirement plans shall be limited to
Executive’s annual base salary in 2007 paid by IP, assuming
an annual merit increase equivalent to IP’s annual merit
increase budget for the period of Executive’s employment
during the Term, plus the target bonus for Position Level 34 under
IP’s MIP in 2007 (“ Covered Compensation
”) for the period beginning in 2008 and continuing thereafter
for so long as Executive is employed by the JV Company under this
Agreement. The parties agree that in the event Executive has a
termination of employment under the following situations, Executive
will receive the Additional Retirement Benefit described in
Paragraph SEVENTH: (i) Executive is terminated from the
JV Company without Cause as defined below; (ii) Executive is
terminated by the JV Company for any reason, that IP determines is
without Cause; (iii) Executive terminates his employment with
the JV Company for Good Reason; (iv) Executive completes two
years of service to the JV Company; (v) Executive is disabled,
as that term is defined under IP’s long-term disability plan;
or (vi) upon a change in control of the JV Company as defined
in the JV Employment Agreement resulting in termination of
Executive’s employment with the Company and Executive does
not return to a Comparable Position. For purposes of this
Agreement, in addition to the defined terms set forth in the
Agreement, the following definitions shall apply:
“ Cause ”
shall include only willful misconduct. Examples of misconduct are
willful insubordination, illegal activity or disorderly
conduct.
“ Good Reason
” shall include (i) the physical and mental health of
Executive and his spouse such that it would be unreasonable for him
to continue in his position with the JV Company; (ii) a
reduction in annual base salary, fringe benefits or other
compensation as in effect on the date hereof or as the same may be
increased from time to time, except if such reduction is mutually
agreed to in writing by the parties; (iii) a reduction of
Executive’s authority, duties and responsibilities, or the
assignment to Executive of duties materially inconsistent with
Executive’s position with the JV Company; (iv) failure
to pay amounts due that are required under the Agreement;
(v) failure by the JV Company to continue in effect any
material compensation or benefit plan in which Executive
participates, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect
to such plan or a substitute plan has been put in place for
Executiv
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