EXHIBIT 10.6
September 22, 1999
Mr. John F. McGovern
4456 Paces Battle Drive
Atlanta, Georgia 30327
Dear Jack:
This letter will confirm our agreement regarding your resignation from
Georgia-Pacific Corporation ("Georgia-Pacific" or the "Company"). As we
discussed, the effective date of your resignation as Executive Vice President -
Finance and Chief Financial Officer will be November 1, l999, and you will
submit your formal resignation from that position and from any other officer or
director positions you may hold with any Georgia-Pacific subsidiary effective on
that date.
As a result of your resignation, you will be entitled to the same normal
benefits as any similarly situated employee of the Company. In addition, we have
agreed to the following arrangements:
1) You will be allowed to defer your resignation as a regular
employee until February 29, 2000 (your "deferred resignation
date"). During this extended employment period, we will
continue your pay at your current base rate of $475,000/annum.
Except as provided below, you will continue to be eligible for
all perquisites of officer status until December 31, 1999 and
for all benefits of employment as a regular salaried employee
until your deferred resignation date.
You will not be expected (nor will you be authorized) to
perform any duties for or on behalf of Georgia-Pacific after
November 1, 1999. However, during your extended employment
period, you will be expected to abide by the same employment
policies as other regular salaried employees, including but
not limited to the Code of Business Conduct. In the unlikely
event you violate those policies, you would, as any other
employee, be subject to such employment action and benefits as
the timing and circumstances would warrant.
Deferring the effective date of your resignation has the
following effect on your normal benefits:
a) You will continue to accrue benefits under the
Georgia-Pacific Corporation Salaried Employees
Retirement Plan ("SERP") and the Georgia-Pacific
Corporation Savings and Capital Growth Plan ("Savings
Plan") through your deferred resignation date. You
may request distribution of your vested account
balance under the Savings Plan and your Personal
Account balance under the SERP following your
deferred resignation date. You may also elect to
leave your funds in the plans (but no later than your
attainment of age 70 1/2) and withdraw them at some
future time of your choosing. Under the Savings Plan
and the SERP, you are eligible for a lump sum
distribution of your account balance or Personal
Account (as the case may be) at any time, or in the
alternative, an immediate or deferred annuity
commencing at a time of your choosing (but no later
than age 70 1/2). You should note that the "annuity
equivalent" of the portion of your account balance
under the Savings Plan attributable to Company
contributions and your Personal Account balance under
the SERP will reduce your
Mr. John F. McGovern
September 22, 1999
Page 2
benefits under your Officer Retirement Agreement,
regardless of whether you have received your
distribution of these amounts or not.
b) Your present executive (face amount $950,000) and
supplemental (face amount $200,000) life insurance
will terminate on your deferred resignation date.
However, you may then convert your executive and
supplemental life insurance coverages to individual
policies by contacting the Human Resources Service
Center. You will have 31 days from your deferred
resignation date to accomplish this conversion.
During this conversion period, you will continue to
be covered under the life insurance program. At the
end of the conversion period, your coverage will stop
if you have not elected to convert your coverage to
an individual policy.
c) Your present (active employee) medical/dental/vision
and long-term disability coverages will terminate on
your deferred resignation date. Under COBRA, however,
you will be entitled to continue your present
medical/dental/vision plan coverage for a maximum of
eighteen (18) months thereafter. You will receive
more detailed information regarding the procedures
for electing this coverage under separate cover.
2) We will pay you a lump sum of $673,147, less applicable tax
withholding, will be paid to you as soon as practicable after
January 1, 2000.
3) We will pay you $45,673 in lieu of all earned and accrued
vacation entitlements after November 1, 1999. This sum, less
applicable tax withholding, will be paid to you as soon as
practicable after your deferred resignation date.
4) You will receive a bonus under the Georgia-Pacific Corporation
Economic Value Incentive Plan (the "Incentive Plan") for 1999
in an amount determined by the Compensation Committee of the
Board of Directors of the Company, which shall not be less
than $299,300. This payment, less applicable tax withholding,
will be made to you at the time Incentive Plan payments are
made to regular participants. You will not be entitled to any
payment under the Incentive Plan for 2000.
5) We will amend your stock option agreements under the
Georgia-Pacific Corporation 1995 Shareholder Value Incentive
Plan ("SVIP"), the Georgia-Pacific Corporation/Georgia-Pacific
Group 1997 Long-Term Incentive Plan ("G-P LTIP"), and the
Georgia-Pacific Corporation/Timber Group 1997 Long-Term
Incentive Plan ("Timber LTIP") to provide for accelerated
vesting and/or extended exercise periods for certain of your
outstanding options (except for your 1997 grants under the
SVIP) so that, as of your deferred resignation date, your
outstanding options will be vested and exercisable as follows:
--------------------- ---------- ---------- ---------------------------
PLAN AWARD DATE VESTED EXERCISE PERIOD
PERCENTAGE
--------------------- ---------- ---------- ---------------------------
SVIP (G-P and Timber
Stock) 04/01/95 100% Through March 31, 2005
--------------------- ---------- ---------- ---------------------------
SVIP (G-P and
Timber Stock) 02/01/96 100% Through January 31, 2006
--------------------- ---------- ---------- ---------------------------
1997 Timber LTIP 12/17/97 100% Through December 31, 2005
--------------------- ---------- ---------- ---------------------------
Mr. John F. McGovern
September 22, 1999
Page 3
--------------------- ---------- ---------- ---------------------------
1997 G-P LTIP 01/29/98 100% Through December 31, 2005
--------------------- ---------- ---------- ---------------------------
1997 G-P LTIP 01/28/99 100% Through December 31, 2005
--------------------- ---------- ---------- ---------------------------
In the event that your February 3, 1997 grants under the SVIP
to purchase G-P Stock and/or Timber Stock vest on February 3,
2000 due to attainment of the SVIP's performance standards,
you will be able to exercise the vested options at any time
prior to February 3, 2007. If either of such grants do not
vest on February 3, 2000, then the Company, at its option, may
either i) amend the SVIP to provide for 100% vesting and an
extended exercise period for either of such options through
February 2, 2007, or ii) pay you a lump sum amount equal to
the excess of the closing price of G-P Stock or Timber Stock,
as applicable, on any date before February 3, 2007 selected by
you, over the stated exercise price for such options.
In addition, your Performance Share Grant Agreement under the
G-P LTIP dated January 28, 1999 will be amended to waive the
five year vesting requirement with respect to any Performance
Shares which are awarded for the Performance Period ending on
December 31, 1999.
6) We will amend your Officer Retirement Agreement so that you
will be eligible to receive "Early Retirement" benefits
beginning in March 2000, but otherwise subject to the terms
and conditions of the Agreement, including but not limited to
Section 9. Your monthly early retirement benefit at such time
will equal 72 percent of your accrued monthly normal
retirement benefit as of your deferred resignation date. Your
accrued monthly normal retirement benefit is 50 percent of
your average monthly cash salary reduced by the "annuity
equivalent" (as defined in the agreement) of your benefit
entitlements under any other retirement plans sponsored by
Georgia-Pacific or its subsidiaries (to the extent
attributable to Georgia-Pacific's contributions). Your monthly
"cash salary" will be calculated as of December 31, 1999 and
will take into account your base salary (including deferrals
in the Savings Plan) and incentive bonuses during your 48
months of employment immediately preceding that date. If
certain conditions are met, the agreement provides death
benefits for your surviving spouse.
7) The Company will pay the premiums for extended
medical/dental/vision coverage under COBRA for you and your
dependents for a maximum of eighteen months following your
deferred resignation date. In order to implement this
coverage, when you receive your COBRA notice, you must
promptly elect continuation coverage in accordance with the
instructions in the notice. The Company payment will be made
directly to the applicable health plan. At the end of the
COBRA continuation coverage period, the Company will provide
continued medical benefits for you and your dependents that
are substantially similar to the medical benefits provided
under Georgia-Pacific's retiree medical program as in effect
from time to time. You will be required to contribute 50% of
the premium costs for such benefits until you attain age 65
and 100% of the premium costs thereafter. Any such medical
benefits may, at the Company's option, be provided through the
purchase of an insurance policy. Regardless of whether your
medical benefits are provided through insurance or otherwise,
the amount of your premium costs shall be the same as the
premium charged to participants under Georgia-Pacific's
retiree medical program from time to time.
If you have any questions concerning your termination or welfare benefits
contact Patricia A. Barnard in the Compensation and Benefits Department in
Atlanta at 404/652-5584. Questions pertaining to the SVIP,
Mr. John F. McGovern
September 22, 1999
Page 4
the 1997 Timber LTIP, or the 1997 G-P LTIP should be directed to First Chicago
Trust at 1-888-700-3837. Of course, all benefits will be subject to applicable
taxes as well as to the terms and conditions of the applicable benefit plan,
policy or arrangement.
As you know, the arrangement detailed above adds substantially to those benefits
to which you are normally entitled upon your separation from Georgia-Pacific. In
consideration of these additional benefits, and so that there will be no
misunderstanding as to your entitlement to any additional money or benefits, you
must agree to release Georgia-Pacific, all related companies, and their
officers, directors, and employees, from all actions, claims and liabilities of
any kind arising out of either your employment with Georgia-Pacific or your
separation from employment. This release includes (but is not limited to) any
rights or claims you may have under the Age Discrimination in Employment Act,
which prohibits age discrimination in employment; Title VII of the Civil Rights
Act of 1964, which prohibits discrimination in employment based on race, color,
national origin, religion or sex; the Americans with Disabilities Act, which
prohibits discrimination in employment based on disability; the Equal Pay Act,
which prohibits paying men and women unequal pay for equal work; or any other
federal, state or local laws or regulations prohibiting employment
discrimination. This also includes a release of any claims for wrongful
discharge arising from your separation from employment and any claims under any
Georgia-Pacific severance plan. This release includes both claims that you know
about and those you may not know about. However, this release does not affect
your rights under this resignation agreement, any claim for indemnification
under the "Indemnification of Directors and Officers" article of the
Georgia-Pacific Corporation By-laws or any rights you have accrued under the
SERP, the Savings Plan, your Officer Retirement Agreement (as amended) or
insurance or other welfare benefit plans (other than any severance plans or
arrangements). Nor does this release waive or release any rights or claims that
you may have under the Age Discrimination in Employment Act which arise after
the date you sign this agreement. Of course, I know you understand that nothing
in this letter is to be construed as an admission of liability of wrongdoing of
any sort by Georgia-Pacific.
The special benefits package described above is also conditioned on your promise
never to file a lawsuit asserting any claims which are included in the release
set out in the preceding paragraph. If you break this promise, you agree to pay
for all costs incurred by Georgia-Pacific, any related company, or the directors
or employees of any of them, including reasonable attorneys' fees in defending
against your claim. Moreover, if you file any such lawsuit or other claim, you
agree that Georgia-Pacific has the right, in its sole discretion, not to pay any
special payment outlined above and/or to cease the payment of any further
benefits under the special arrangement outlined above, and you further agree to
tender back any and all payments previously paid under this agreement.
As another condition, you must agree to provide, to the extent necessary,
reasonable cooperation and consultation with the Company and its attorneys
regarding any litigation or claims arising our of matters that were under your
management or responsibility. Obviously, Georgia-Pacific will reimburse your
reasonable out-of-pocket expenses associated with such cooperation and
assistance.
As a final condition, you must agree to keep the terms of this agreement
confidential. You agree not to disclose any provision of this agreement to
anyone except as set forth below or as necessary in the filing of your tax
returns or with the express written consent of Georgia-Pacific.
I urge you to think over the terms of this proposed agreement carefully before
accepting it and to discuss it with your family, an attorney of your choice or
your financial advisor before making a decision. Our offer will remain open for
twenty-one days from the date of this letter. Once you have agreed to the terms
Mr. John F. McGovern
September 22, 1999
Page 5
set out in this letter (as evidenced by your signature below) you will have one
week in which to revoke your decision. This agreement will not become effective
or enforceable until one week from the date of your signature (assuming of
course, that you do not revoke it), and thus the special payments described
above cannot be paid prior to that time.
If you feel you need more time to make a decision or if you would like to
discuss this matter further, let me know. By signing below, you are indicating
that you have discussed the terms of our proposed agreement with whomever you
wished, that you have had as much time as you wished in which to consider it,
that you fully understand it, including its final and binding effect, and that
you fully and voluntarily agree to the terms and conditions set forth. By
signing below, you are also indicating that the terms and provisions set forth
in this letter constitute the entire agreement between you and Georgia-Pacific
and supersede all previous communications, negotiations, proposals,
representations, conditions, or other agreements, whether written or oral,
between you and Georgia-Pacific with respect to the subject matter of this
letter.
Finally, it is routine for the Company to remind all departing employees, but
especially departing officers, of their obligations under the Employee
Confidential Information and Invention Agreement. As you are no doubt aware,
this agreement requires you to maintain in perpetuity the confidentiality of
Company trade secrets and any other secret, confidential, or proprietary
information of the Company, including, but not limited to, secret, confidential
or proprietary information concerning:
--Company products, equipment, processes, formulas, methods and procedures;
--Company personnel, customers, suppliers, contractors, and agents;
--Company plans, strategies, records, communications, and procedures,
including but not limited to litigation strategies, information
developed in anticipation of litigation and information protected by
the attorney/client privilege; and
--computer software and documentation owned or licensed by the Company.
On behalf of Georgia-Pacific, I extend to you my best wishes for success in your
future endeavors.
Sincerely,
GEORGIA-PACIFIC CORPORATION
By: /s/ JAMES F. KELLEY
-------------------
James F. Kelley
Senior Vice President - Law
and General Counsel
Mr. John F. McGovern
September 22, 1999
Page 6
SO AGREED:
/s/ JOHN F. MCGOVERN
- -----------------------
John F. McGovern
Date: September 22, 1999