Exhibit 21
FORM OF
TRUST AGREEMENT
This Agreement made this day of , 1999, by and between
Shorewood Packaging Corporation, a New York corporation (the "Company"), and
___________ (the "Trustee");
WHEREAS, Company has adopted the Shorewood Packaging
Corporation Employee Severance Plan (the "Plan"); and
WHEREAS, Company may incur liability under the terms of the
Plan upon a Change in Control (as defined in the Plan); and
WHEREAS, Company wishes to establish a trust (hereinafter
called "Trust") and to contribute to the Trust, subject to the terms hereof,
assets that shall be held therein, subject to the claims of Company's creditors
in the event of Company's Insolvency, as herein defined, until paid to Plan
participants and their beneficiaries in such manner and at such times as
specified in the Plan; and
WHEREAS, subject to the terms hereof, it is the intention of
Company to make contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities, if any, under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) Company hereby deposits with Trustee in trust the sum of
one hundred dollars ($100), which shall become the principal of the Trust to be
held, administered and disposed of by Trustee as provided in this Trust
Agreement.
(b) The Trust hereby established is revocable by Company;
provided, however, that it shall be irrevocable upon a Change in Control.
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(c) The Trust is intended to be a grantor trust, of which
Company is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the
"Code"), and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan participants and general creditors
as herein set forth. Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants and their beneficiaries
against Company. Any assets held by the Trust will be subject to the claims of
Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) Immediately prior to a Change in Control, the Chief
Executive Officer of Company (or his or her designee) (such individual, the
"CEO") shall authorize a cash contribution to be made to the Trust in an amount
equal to the amount that, in the determination of Company, is sufficient to pay
each Plan participant or beneficiary the benefits to which Plan participants or
their beneficiaries would be entitled pursuant to the terms of the Plan as of
the date of the Change in Control assuming each participant terminated
employment as of such date under circumstances giving rise to payment of
benefits under the Plan. In addition, Company shall also fund, an expense
reserve for Trustee in the amount of $100,000. After a Change in Control,
Trustee may compel any contribution that is required under the Trust.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR
BENEFICIARIES.
(a) Upon the occurrence of a Change in Control, the Company
shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the
amounts payable in respect of each Plan participant (and his or her
beneficiaries), that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in which such amount is
to be paid (as provided for or available under the Plan), and the time of
commencement for payment of such amounts. Except as otherwise provided herein,
Trustee shall make payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment
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of benefits pursuant to the terms of the Plan and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by Company.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined under the Plan, and
any claim for such benefits shall be considered and reviewed under the
procedures, if any, set out in the Plan.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. Company shall notify Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, Company shall make the balance of each such payment as it
falls due.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent. Company shall
be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is
unable to pay its debts as they become due, or (ii) Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the Trust shall be
subject to claims of general creditors of Company under federal and state law as
set forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in writing of
Company's Insolvency. If a person claiming to be a creditor of Company
alleges in writing to Trustee that Company has become Insolvent,
Trustee shall, in its sole discretion, determine whether Company is
Insolvent and, pending such determination, Trustee shall discontinue
payment of benefits to Plan participants or their beneficiaries.
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(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming to
be a creditor alleging that Company is Insolvent, Trustee shall have no
duty to inquire whether Company is Insolvent. Trustee may in all events
rely on such evidence concerning Company's solvency as may be furnished
to Trustee and that provides Trustee with a reasonable basis for making
a determination concerning Company's solvency.
(3) If at any time Trustee has determined that
Company is Insolvent, Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets of the
Trust for the benefit of Company's general creditors. Nothing in this
Trust Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as general
creditors of Company with respect to benefits due under the Plan or
otherwise.
(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with Section 2
of this Trust Agreement only after Trustee has determined that Company
is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance, plus interest on such
unpaid amount, determined for the period commencing on the date such amount
should have been paid and ending on the date of such payment, at an annual rate
equal to the prime rate (as in effect from time to time at[ ]Bank).
SECTION 4. PAYMENTS TO COMPANY.
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, Company shall have no right or power to direct Trustee to
return to Company or to divert to others any of the assets of the Trust before
(a) all payments
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of benefits have been made to Plan participants and their beneficiaries pursuant
to the terms of the Plan and (b) all expenses of the Trust have been paid.
At any time prior to the Trust becoming irrevocable, Company
shall have the right or power to direct Trustee to return to Company any of the
assets of the Trust.
SECTION 5. INVESTMENT AUTHORITY.
(a) All rights associated with assets of the Trust shall be
exercised by Trustee or the person designated by Trustee, and shall in no event
be exercisable by or rest with Plan participants.
(b) Trustee shall not be liable in discharging its duties
hereunder if it acts for the exclusive benefit of Plan participants and their
beneficiaries, in good faith and as a prudent person would act in accomplishing
a similar task and in accordance with the terms of this Trust Agreement and any
applicable federal or state laws, rules or regulations.
(c) Subject to investment guidelines agreed to in writing from
time to time by Company and Trustee prior to a Change in Control, Trustee shall
have the power in investing and reinvesting the assets of the Trust in its sole
discretion:
(1) To invest and reinvest in any readily marketable
common and preferred stocks, bonds, notes, debentures (including
convertible stocks and securities but not including any stock or
security of Trustee other than a de minimis amount held in a mutual
fund), certificates of deposit or demand or time deposits (including
any such deposits with Trustee) and shares of investment companies and
mutual funds, including any proprietary mutual funds of Trustee,
without being limited to the classes or property in which Trustee is
authorized to invest by any law or any rule of court of any state and
without regard to the proportion any such property may bear to the
entire amount of the assets of the Trust;
(2) To commingle for investment purposes all or any
portion of the assets of the Trust with assets of any other similar
trust or trusts established by Company with Trustee;
(3) To retain any property at any time received by
Trustee;
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(4) To sell or exchange any property held by it at
public or private sale, for cash or on credit, to grant and exercise
options for the purchase or exchange thereof, to exercise all
conversion or subscription rights pertaining to any such property and
to enter into any covenant or agreement to purchase any property in the
future;
(5) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar plan
relating to property held by it and to consent to or oppose any such
plan or any action thereunder or any contract, lease, mortgage,
purchase, sale or other action by any person;
(6) To deposit any property held by it with any
protective, reorganization or similar committee, to delegate
discretionary power thereto, and to pay part of the expenses and
compensation thereof any assessments levied with respect to any such
property to deposited;
(7) To extend the time of payment of any obligation
held by it;
(8) To hold uninvested any moneys received by it,
without liability for interest thereon, but only in anticipation of
payments due for investments, reinvestments, expenses or disbursements;
(9) To exercise all voting or other rights with
respect to any property held by it and to grant proxies, discretionary
or otherwise;
(10) For the purposes of the Trust, to borrow money
from a bank to issue its promissory note or notes therefor, and to
secure the repayment thereof by pledging any property (including but
not limited to any insurance policies) held by it;
(11) To employ and rely upon suitable contractors and
counsel, who may be counsel to Company or to Trustee, and to pay their
reasonable expenses and compensation from the assets of the Trust to
the extent not paid by the Company;
(12) To register investments in its own name or in
the name of a nominee; to hold any investment in bearer form; and to
combine certificates representing securities with certificates of the
same issue held by it in
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other fiduciary capacities or to deposit or to arrange for the deposit
of such securities with any depository, even though, when so deposited,
such securities may be held in the name of the nominee of such
depository with other securities deposited therewith by other persons,
or to deposit or to arrange for the deposit of any securities issued or
guaranteed by the United States government, or any agency or
instrumentality thereof, including securities evidenced by book entries
rather than by certificates, with the United States Department of the
Treasury or a Federal Reserve Bank, even though, when so deposited,
such securities may not be held separate from securities deposited
therein by other persons; provided, however, that no securities held in
the Trust shall be deposited with the United States Department of the
Treasury or a Federal Reserve Bank or other depository in the same
account as any individual property of Trustee, and provided, further,
that the books and records of Trustee shall at all times show that all
such securities are part of the assets of the Trust;
(13) To settle, compromise or submit to arbitration
any claims, debts or damages due or owing to or from the Trust,
respectively, to commence or defend suits or legal proceedings to
protect any interest of the Trust, and to represent the Trust in all
suits or legal proceedings in any court or before any other body or
tribunal; provided, however, that Trustee shall not be required to take
any such action unless it shall have been indemnified by Company to its
reasonable satisfaction against liability or expenses it might incur
therefrom;
(14) To hold and retain policies of life insurance,
annuity contracts, and other property of any kind which policies are
contributed to the Trust by Company or are purchased by Trustee;
(15) To hold any other class of assets which may be
contributed by Company and that is deemed reasonable by Trustee, unless
expressly prohibited herein; and
(16) Generally, to do all acts, whether or not
expressly authorized, that Trustee may deem necessary or desirable for
the protection of the assets of the Trust.
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SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing between
Company and Trustee. Within ninety (90) days following the close of each
calendar year and within thirty (30) days after the removal or resignation of
Trustee, Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Plan or this Trust and is given in writing
by Company. In the event of a dispute between Company and a party, Trustee may
apply to a court of competent jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees to indemnify Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments.
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(c) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties or obligations
hereunder.
(d) Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals and rely on
advice given by such professionals to assist it in performing any of its duties
or obligations hereunder.
(e) Trustee shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly provided otherwise
herein, provided, however, that if an insurance policy is held as an asset of
the Trust, Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor Trustee, or to loan to any
person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant to
this Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.
Company shall pay administrative and Trustee's fees and
expenses. If such payments are not made within a reasonable time, the Trustee
may charge the Trust for such fees and expenses.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to
Company, which shall be effective sixty (60) days after receipt of such notice
unless Company and Trustee agree other wise.
(b) Trustee may be removed by Company on sixty (60) days
notice or upon shorter notice accepted by Trustee; provided, however, that on
and after the occurrence of a Change in Control,Trustee may only be removed by
the
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affirmative vote of not less than three-fourths (3/4) of the participants in the
Plan (or their beneficiaries, as applicable).
(c) Upon resignation or removal of Trustee and appointment of
a successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed as soon as practicable, but
in any event within sixty (60) days after receipt of notice of resignation,
removal or transfer.
(d) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses of
Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with
Section 10 hereof, Company may appoint, subject to Section 11(b) below, any
third party national banking association with a market capitalization exceeding
$1,000,000,000 to replace Trustee upon resignation or removal. The successor
Trustee shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust. The former Trustee shall execute any instrument
necessary or reasonably requested by Company or the successor Trustee to
evidence the transfer.
(b) If Trustee resigns within two years after a Change in
Control, the appointment by Company of a successor trustee in accordance with
Section 11(a) above shall be subject to the approval of a two-thirds majority of
the Plan participants.
(c) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing assets of the
Trust, subject to Sections 7 and 8 hereof. The successor Trustee shall not be
responsible for and Company shall indemnify and defend the successor Trustee
from any claim or liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at the time it
becomes successor Trustee.
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SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written
instrument executed by Trustee and Company. Notwithstanding the foregoing, no
such amendment shall conflict with the terms of the Plan or shall make the Trust
revocable after it has become irrevocable in accordance with Section 1(b)
hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan and all expenses of the Trust have been paid unless
sooner revoked in accordance with Section 1(b) hereof. Upon termination of the
Trust, any assets remaining in the Trust shall be returned to Company.
(c) No provision of this Trust Agreement may be amended by
Company in any manner adverse to Plan participants and beneficiaries following a
Change in Control.
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without invalidating
the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(d) For purposes of this Trust, a "Change in Control" shall
have the meaning ascribed to such term in the Plan.
(f) For purposes of this Section 13, "Affiliate" shall have
the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange
Act.
(g) For purposes of this Section 13, "Beneficial Owner" shall
have the meaning set forth in Rule 13d-3 under the Exchange Act.
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(h) For purposes of this Section 13, "Exchange Act" shall mean
the Securities Exchange Act of 1934, as amended from time to time.
(i) For purposes of this Section 13, "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.
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be , 1999.
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IN WITNESS WHEREOF, this instrument has been executed as of
the day and year first above written.
SHOREWOOD PACKAGING CORPORATION
By:
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Title:
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[TRUSTEE]
By:
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Title:
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